When Maximizing Individual Interests Can Make Us All Lose (usually some losing more than others)

Many experts, but not enough people, are well aware that markets can fail to achieve the goal of maximizing long-term wealth, and indeed they do fail, in ways that threaten us all in the years and decades to come (the most vulnerable or unlucky being likely to suffer more). For example, we have a shared resource, which is the health of our atmosphere, and it is going down the drain because of human-induced greenhouse gases. These gases cost nothing (or not enough) to put out in the air but enable a profit for market actors and a social benefit for those of us using fossil fuels for transportation or eating meat. So long as individuals and companies are not incentivized to behave differently or internalize the environmental costs of their activities, we will very likely continue to race towards a climate and biodiversity catastrophe.

The ongoing conflict between individual and collective rationality when it comes to the earth’s atmosphere is a perfect example of a tragedy of the commons — a concept first identified in 1833 by the British economist William Forster Lloyd that is still applicable today. He considered what would happen if every farmer, acting in their own self-interest, allowed their cattle to graze on a common (i.e., public) patch of grassland in a municipality. Without collectively agreed upon rules (which is the reason we need governments), the patch of land would quickly be overused and ruined to the detriment of those in the community. Despite being a loss for all the farmers, from the point of view of their individual advantage and competing interests, any one of them would be tempted to continue sending their cattle to the commons until the resource is completely depleted. This is exactly what we are currently doing with the overexploitation of fish in the seas and oceans of our planet. Countries are racing to extract as much as possible from these common-pool resources, resulting in the exponentially fast depletion of the fish stock, which in turn can lead to ecological catastrophes. Many fisheries have closed because there is nothing left to fish in some areas. Competition for public resources is leading to the destruction of both marine and land ecosystems, as well as biodiversity, at an increasingly alarming rate. The tragedy of the commons is also occurring with pollution in general, as it costs nothing to individuals, or not enough yet, to pollute (including with greenhouse gases). An individual industrialist may think it is profitable to continue polluting. Let’s consider the collective perspective of all industrialists and their long-term goals. It becomes evident that destroying the very resources needed to sustain humankind will inevitably lead to substantial economic, human, and ecological losses, ultimately proving disadvantageous to everyone, including those who continue polluting for financial gain.

We are also seeing this at play during this pandemic with vaccine nationalism and vaccine inequality but at the level of individual countries: most rich countries have been overbidding each other to buy more vaccines than they actually need (just in case) and get them as quickly as possible, while preventing others to have access to the knowledge required to produce more vaccines faster. Yet the vast majority of the planet is not on course to receive any significant vaccination any time soon. From the myopic self-interest standpoint of these more prosperous countries, government accumulating vaccine delivery contracts may seem like the right thing to do in the interest of their citizens, especially when each country often views itself as being in competition with other countries. However, we all stand to lose, not against each other but against the virus. This is because it mutates, yielding new variants which can be more transmissible or deadly than the previous ones. The larger the pool of unvaccinated humans who transmit the virus, the more chances the virus has to mutate into something which could strike back and hurt everyone, including the rich countries. These variants can even be resistant to vaccines, particularly when there are large populations that are only partially vaccinated over a long period of time: the mutations which yield strains that are resistant to the vaccine are more likely to survive there, and then spread everywhere. There is consensus among epidemiologists and the WHO that the most vulnerable people and healthcare workers worldwide should have been vaccinated first to minimize the total number of deaths, maintain healthcare systems and the spread of the virus. In fact, many countries knew this and therefore chose this approach for their national vaccination rollout based on a rational collective decision taken by their government, but still leave much to be desired to really help replicating this globally.

Another public health issue plagued by a similar problem is that of antimicrobial resistance. From the point of view of a doctor or their patient, it is advantageous to use antibiotics to prevent possible infections. The same goes for the farmer who administers antibiotics to their cattle herd to protect them against some infections and make their business more profitable. Yet this generalized use of antibiotics means that the pathogenic mutations which confer resistance to those antibiotics survive better and prosper, leading to more and more drug-resistant strains. As a consequence, we all lose. The number of antimicrobial resistant pathogens is rapidly climbing and spreading across the planet, replacing the old strains which were killed by our drugs. We now stand at around 700,000 deaths per year caused by antimicrobial resistance. It is projected that, if no serious intervention is made, antimicrobial resistance will cause 10 million deaths per year by 2050 and the economic costs will be over 100 trillion dollars by then (see the O’Neill UK government study).

Then why aren’t we working on discovering new antibiotics? It turns out there is another game theoretic tragedy at play. From the point of view of an individual pharmaceutical company, it is not lucrative to invest in discovering new antibiotics (or for that matter in drugs against diseases which mostly affect developing countries) because it is not sufficiently profitable: the new antibiotics should only be used as a last resort tool in case the front line antibiotics fail, and thus sale volumes would be low for the new antibiotics. However, if nobody invests in that research, we all lose (not to mention die, if a really deadly and transmissible strain emerges). Healthcare systems everywhere — not just in developing countries — would likely crumble, since antibiotics are crucial elements of our current medical infrastructure (e.g., used for any surgery and also in cancer therapies). Antimicrobial resistance, as well as climate change may be existential risks, in the sense that we do not know how bad things could turn out if we don’t take a sharp turn, with the survival of our species being potentially at stake. Like for the pandemic, rich and poor will be affected, but it is likely that the most vulnerable will lose the most.

It is interesting that so many of our current global challenges are thus characterized by the same kind of game theoretical scenario: if each individual person or company or country maximizes their self-interest, we may all lose — some of us suffering greater losses than others. The problem lies with these collective resources, a form of externalities, which are of value to us all. We need air and water and an appropriate climate, but they do not enter into our individual objectives, into the calculation of our short-term gains and losses, or at least not sufficiently so. Markets, or more precisely the individual actors in the market, are blind to the amount of greenhouse gases in the atmosphere. This is particularly true when the leading market actors are companies whose main mission is to survive and thrive economically, i.e., make profits.

How do we escape from the tragedy of the commons? The primary solution has been well known to economists and game theory experts for a long time. We “simply” have to change the rules of the game. Who imposes the rules of the game? In modern societies, it is often the responsibility of governments, while more ancestral societies and many smaller communities rely on collectively enforced norms. For example, Pigou (a British economist) proposed in 1920 that governments could use taxation to “internalize” the collective cost of a shared resource external to the markets. See also the work of Elinor Ostrom: she got a Nobel prize for her work on the commons and how communities whose members communicate and can learn to trust each other have self-organized to avoid the tragedy of the commons. If fishing industries had to pay a high enough tax for each ton of fish extracted (i.e., killed), or if the farmers had to pay a price per cow per hour for letting their cattle graze in the commons, the level of taxation would eventually cap the use of the resource and make it sustainable, with everyone benefiting over the long term. Similarly, there is a price for carbon just high enough for us to change our habits and modes of production and transportation. Taxation or other forms of incentives (it could also be grants or tax credits for acting sustainably, or hard rules about what is allowed or not) can internalize the cost of an externality (like a collective resource). In fact, governments already do this quite a lot and we collectively agree to be constrained by its actions. For example, we all agree to pay taxes so that collective resources like roads and hospitals and schools are funded. In many countries, there are taxes on goods, like tobacco, which are considered harmful to oneself and others. If taxes were voluntary (like charity), then the amount of taxes obtained would be insufficient to cover the costs of these collective infrastructures. But a majority of us (in a democracy) can agree to set the rules of the game so that the wealthier members of society pay taxes and thus, we all benefit from these infrastructures and laws. All this requires is government policy and intervention. That is one of the key reasons why we need governments and not a free-for-all law of the jungle. Another reason being that besides managing public resources, we generally expect our governments to take care of those of us who are most vulnerable.

So why haven’t governments fixed many of these tragedy-of-the-commons problems yet? This is a very good question I wish I could answer. For global challenges, part of the problem is that we do not yet have anything like a real world government which could impose a change in the rules of the planet-wide game. Another important question is, what do governments need to do to fix these problems, especially the most pressing ones? Even if scientists bring reason to the fore in the global discussions about these issues, it is challenging to go against the economic, cultural and political structures which influence our collective choices. This suggests we may need to change these norms and political structures as a condition of our collective survival!

Why am I interested in these questions? Because I am trying to be an informed and responsible citizen and because being a privileged person to whom society has given much influence gives me duties as well. I am concerned about what is going seriously wrong in our world, and especially what I can do as an individual to help. I recently became interested in government innovation policies (which are interventions) because of my involvement in the Canadian AI Strategy. It also turns out that AI may help with some of these global challenges, and my interest in AI for Social Good applications (e.g., healthcare, climate, education, human rights) got me thinking about that aspect. More discussion on this topic in future blog entries!