A small group of New Jersey winemakers has a problem. No one knows that they blend a gourmet product.
After all, say, “New Jersey” and no one thinks vineyard. Most New Jersey wine, with strong hints of blueberries, raspberries or cranberries is best on ice cream. How then to distinguish the good stuff from everyone else’s?
An economist would say that your plight resembles the tragedy of the commons. Wonderfully described by economics Nobel Prize laureate Elinor Ostrom, the tragedy of the commons prevails when people destroy a common resource by overusing it. In a pasture, pursuing their individual interest, farmers tend to overgraze their animals. In a workplace refrigerator, we create a mess. What’s good for one is catastrophic when everyone does it.
Ostrom explained, though, that people can transform the tragedy of the commons into a solvable problem of the commons. Realizing it is in their best interest to create “collective action,” farmers voluntarily implement rules that preserve the pasture.
Although usually, the tragedy of the commons is associated with abusing common resources like our air, our water and the refrigerator we share at work, NJ fine wine makers face a similar situation. Voluntarily, they too need to cooperate because their common reputation has been abused. Through “collective action” they can disassociate themselves from the NJ commons that is associated with low quality. And that is precisely what they have done. Rebranding their region, fine wine makers in NJ have established the Outer Coastal Plain Vineyard Association. If they can get consumers to associate O.C.P. with fine wine, then, they can enter the field in which Napa Valley and French wines dwell.
Sources and Resources: I first started thinking about NJ wines and the tragedy of the commons after reading a NY Times Magazine article from Planet Money’s Adam Davidson. It returned me to Elinor Ostrom and this great podcast interview after she won her Nobel. I especially recommend the podcast because Dr. Ostom recently died and she was a very interesting lady.
By Amy Tourgee, guest blogger, Kent Place School alumna and Environmental Studies undergraduate at Princeton University
This past summer, I was fortunate enough to travel throughout China for a few weeks. I ate dim sum, climbed the Great Wall and was a subject of lots of staring by the Chinese people on the subway (apparently blondes aren’t very common there). I thought I might experience some cultural shock in my experiences, but I surprisingly felt fairly comfortable in a foreign country in a continent I had never been to before… The real shock came when I visited Beijing.
I had heard about the smog in Beijing, but I was certainly not expecting to be walking down a sidewalk in the city, unable to see the building across the street. In fact, a friend who went to international school in Beijing said that sometimes his rugby games were canceled because of, not bad weather, but too much smog.
So, it came as no surprise to me that on a scale of 1-500 for air quality (with 500 being the worst air quality), Beijing scored a 755. The score is almost as funny as it is serious – but it has implications for the rest of the world. Air pollution cannot be contained and travels to other parts of the world – even as far as other continents. To me, it has always seemed unfair that China’s industry can cause so much pollution, yet other countries may have to pay for it.
China’s air pollution is an example of the tragedy of the commons. The atmosphere is shared by many individuals, yet one small group of these individuals can overuse the commons, causing negative consequences for every individual. The burden of China’s pollution is not solely carried by China, but by the rest of the world.
Located 30 miles from Cape Cod, Massachusetts, the island of Nantucket has no traffic lights. Instead, drivers respond to stop signs, rotaries and courtesy. More often than not, if a walker or a biker needs to cross the street, cars stop. When someone is making a left turn or leaving a parking lot, cars wait.
Nantucket’s lack of traffic lights started me thinking about Nobel laureate Elinor Ostrom who researched how we abuse the free goods that we share. Called the tragedy of the commons, in a communal pasture, we overgraze our cows. In a workplace refrigerator, we create a mess. Dr. Ostrom believed though, that when people care about their common pasture or refrigerator, the tragedy of the commons becomes a solvable problem of the commons.
Telling about a communal pasture in Switzerland, Dr. Ostrom explained how farmers avoided overgrazing by creating voluntary rules. “What we have ignored,” she said after her Nobel Prize was announced, “is what citizens can do . . . as opposed to just having someone in Washington or at a far, far distance make a rule.”
Perhaps Dr. Ostrom would have seen another example of her work in Nantucket. There have been no meetings in Nantucket for everyone to discuss our commonly “owned” roads and yet abuse is rare. Is it because we have a fundamental drive to cooperate that sometimes overrides our short-term self-interest?
Elinor Ostrom died on June 12. As the first woman to receive the Nobel Prize in economics, a political scientist, and someone who paused during a radio interview to go to her backyard to observe a beautiful deer, she sounds fascinating. You might want to read more about her work and life here. And, in a classic 1968 article, Garrett Hardin describes the tragedy if the commons.
Stuck in traffic, alone in the car, and you’ve got to get to work soon. Will you pay to move into the High Occupancy Toll (HOT) lane?
Here is how it works: Traditionally reserved for High Occupancy Vehicles, the HOV lane has been the exclusive territory of vehicles with 3 or more people, buses, certain fuel efficient vehicles and motorcycles. Now, close to Atlanta and in other participating areas, a commuter with a transponder on his or her car to record HOT lane mileage can also move into the express lane.
How much does it cost? It depends on the congestion. The worse the traffic the higher the price. It could be a penny a mile or as high as 99 cents. However, when Atlanta charged $5.05 for traveling in the HOT lane during peak travel time, so few motorists chose it and so many objected that the governor lowered the price to $3.05.
Still though people are objecting but for a different reason. Reserving a HOT/HOV lane means more cars elsewhere. One driver said that his commuting time doubled when the lane became available. Some traffic experts believe, though, that when managed appropriately, congestion can be diminished by a special use lane while others do not.
The Economic Lesson
Called the tragedy of the commons, when a resource such as public roads is owned by the community rather than privately, it tends to be overused and abused. Some say the solution is making roads more costly. Others point out that the solution is regressive because those who have the least would pay, proportionally, the most. Pointing to the regressive character of HOT lanes, opponents have called them Lexus Lanes.
An Economic Question: How might you illustrate HOT pricing on a demand and supply graph?
- It is good to pay fire fighters and police officers generously.
- It is good not to raise taxes.
- It is good to give voters what they want and get re-elected.
As Michael Lewis describes in Vanity Fair, San Jose, California did everything that was “good.” As a result, libraries are closed several days each week, parks offer fewer services, a civic center cannot open and less money is available for education. Still though, soaring employee obligations are engulfing municipal finance.
Similarly, the state of California is spending 65% more on employee pay and benefits than 10 years ago. But its higher education outlays are 5% less, state pension funds are not getting the 8% return they expected, health plans are underfunded and tax revenue and federal funds have decreased. Meanwhile, University of California tuition has soared from $776 in 1980 to more than $13,000. ($776 in 1980 is equal to $2133.48 in 2011.)
Commenting on his financial plight, the mayor of San Jose said, “We’re not as bad as Greece, I don’t think.”
More econlife info here and here on California’s financial challenges.
The Economic Lesson
Called the tragedy of the commons, when a resource is shared by many rather than privately owned, it tends to be “misused” or “overused”. For a pasture, “misuse” is over grazing; in the ocean, fish populations are depleted; in the air, factories pollute. And, with municipal finance too much money is spent.
An Economic Question: After checking here, discuss whether your state has a finance problem.