The New Tragedy of the Commons

Everyone who's taken elementary economics (or environmental science) knows about the 'tragedy of the commons'. When a resource is not owned by anyone but can be used by everyone, it tends to be depleted amidst great waste. The slaughter of the plains Buffalo was a good example. Many Buffalo were shot for fun and left to rot.

There's a tragedy of the commons that hasn't been recognized as such: The commons is this nation's future wealth and prosperity. The tragedy is the enormous on and off book liabilities that we are incurring on behalf of future generations. Normally, when debt is undertaken, there is a debtor and a lender. For the transaction to happen, both sides need to believe that they will benefit from the exchange and must explicitly consent to it. This is why children aren't allowed to enter into financial contracts. Pretty standard stuff.

However the Federal budget doesn't follow this pattern. The liabilities that the Feds are incurring are being incurred without the consent of those who must make them good. Thus today's Americans can shoot as many 'fiscal' Buffaloes as we want secure in the knowledge that "Somebody Else" in the future (aka: our children) will pay.

And as my Great Grandmother Nellie Savage knew instinctively: when you get things that somebody you don't know is paying for, you waste more and pay more. After all, the bill is 'somebody else's problem'.

This helps explain why education and healthcare inflation have been so virulent in the post war period. But more about that later.