Tragedy of the Commons and Market Failure

The “tragedy of the commons” is a metaphor used to illustrate the potential conflict between individual self-interests of producers and consumers and the common or public good.In the original version of the term, the example is used of a stock of common grazing land used by all livestock farmers in a small village. Each farmer keeps adding more livestock to graze on the Commons, because the marginal cost of doing so is zero. But because the commonly own resource is then over-used or over-exploited, the result is a depletion of the soil and a fall in the value of the resource for all users. The resource may become irretrievably damaged.The cause of any tragedy of the commons is that when individuals use a public good, they do not bear the entire social cost of their actions. If each seeks to maximize individual benefit, he ignores the external costs borne by others.