5. The Real Tragedy of the Commons

The world is largely privatised in an uneven manner. See the Credit Suisse 2021 wealth report: https://www.credit-suisse.com/about-us/en/reports-research/global-wealth-report.html.

In economic terms, a full world of this sort would have no more externalities, as each agent could be affected by potential negative feedback loops directly or indirectly, anytime and anywhere. This affects private property and associated liabilities as well as common goods and their potential overuse.

There are several reasons why we should be in favour of commons. They can ensure greater societal stability (e.g. democracy, third sector), help pool private risks like healthcare and increase society’s overall allocative performance (e.g. national security, sanitation, motorways). Fresh air, basic access to healthcare and protecting biodiversity always stay the same, whatever form our economic activity may take. It is the economics and the financing of the commons that makes the difference.

There is one special case where there is a moral hazard: any time a private interest is competing with a public interest. For example, if a farmer wanted to have their goats graze on public ground, it will be overused or neglected. But the general rule is that commons have a ceiling effect. In contrast to private or positional goods, which do not have any ceiling, commons are saturated at some point. In economic terms, the marginal cost curve of commons becomes close to zero.

There are three approaches we can take to our commons. We can finance them by taxing private goods and services, we can change the property rights, entitlements and liabilities associated with them or we can adapt the monetary system. From a political perspective, we need a mix of all three.

Independent Panel for Pandemic Preparedness and Response (IPPPR); Infection Prevention and Control Foundation (IPAC); Global Preparedness Monitoring Board (GPMB): https://​www.​gpmb.​org/​#tab=​tab_​1; Financing Health for All: https://​cdn.​who.​int/​media/​docs/​default-source/​council-on-the-economics-of-health-for-all/​who_​councileh4a_​councilbrieffina​l-no2.​pdf?​sfvrsn=​bd61dcfe_​5&​download=​true

Since 2008, central banks have worked on multiple purchasing and accounting programmes. These have included quantitative easing (QE), pandemic emergency purchasing programmes (PEPPs), emergency liquidity assistance (ELA), short-term European papers (STEPs), the Agreement on Net Financial Assets (ANFA), long-term repurchasing operations (LTROs), the European Stability Mechanism (ESM), outright monetary transactions (OMTs), securities markets programmes (SMPs), asset purchasing programmes (APPs), asset-backed securities (ABSs), non-refundable loans (NRLs), target accounts and differential interest spreads between member states.

Measured in over 140 countries on a scale from 1 to 10, the willingness to pay (6–8 out of 10) for commons is high globally. These empirical findings prove that communities all over the world value common goods and are more than willing to pay for them. The question, however, remains: where is the money supposed to come from? See https://​trustyourplace.​com; https://​sustain-abledevelopment.​un.​org/​content/​documents/​commitments/​6686_​11706_​commitment_​World%20​Social%20​Capital%20​Monitor%20​2019.​pdf; https://​globalcommonsall​iance.​org/​wp-content/​uploads/​2021/​08/​Global-Commons-G20-Survey-full-report.​pdf

At the same time, the USA, with 4% of the global population, accounts for 42% of global healthcare spending. In absolute terms, low-income countries spend 40 USD per capita, while high-income countries spend 3,135 USD per capita, or nearly 80 times as much. See http://​documents.​worldbank.​org/​curated/​en/​6414515610435856​15/​Driving-Sustainable-Inclusive-Growth-in-the-21st-Century

Two-thirds of their R&D budget is spent on repurchasing programmes. See https://​cdn.​who.​int/​media/​docs/​default-source/​council-on-the-economics-of-health-for-all/​who_​councileh4a_​councilbrieffina​l-no2.​pdf?​sfvrsn=​bd61dcfe_​5&​download=​true

Technically speaking, it requires CBDCs, which are digital currencies running in parallel to the existing value chain. A CBDC can provide targeted additional liquidity to fund our common healthcare challenges. This can allow almost unlimited additional financial engineering to hedge and fund future healthcare risks. See Brunnhuber (2021).

For example, universal access to contraception (1:120); illicit financial flows (making ownership information public) (1:49); high blood pressure medication (1:47); allowing greater migration (1:45); halving malaria infections (1:36); reducing child malnutrition (1:45); research on increasing agricultural yields (1:34); tripling preschooling in sub-Saharan Africa (1:33); mobile broadband for developing countries (1:17); reducing domestic violence (1:17); phasing out subsidies for fossil fuels (1:15); modern cooking appliances for 750 million people (1:15); increased skilled worker migration (1:15); cutting down indoor air pollution through better stoves (1:10); eliminating open defecation (1:6). See http://​www.​copenhagenconsen​sus.​com/​post-2015-consensus/​economist. Because common goods are inherently non-rival, society as a whole can benefit. Once the commons are in place, none of these strategies can be singled out for each individual. Crucially, the payment system has to adapt to the commons and not the other way round.

Post-2015 Consensus. https://​www.​copenhagenconsen​sus.​com/​post-2015-consensus; The Economist: Special Online Supplement. https://​www.​copenhagenconsen​sus.​com/​post-2015-consensus/​economist

We might then have to talk about a ‘commonwealth’, rather than private capital, which goes beyond simply shifting from private to public law. See Purdy (2019).

It is not about ‘the winner takes it all’, which is the wrong narrative to begin with, but rather how to organise, manage and finance the basic needs of a society with the most efficient and resilient market mechanism available. See Nair (2018).

In economic terms, is there a social optimum beyond the existing equilibrium within the utility function that allows us to achieve a Pareto superior optimum, including all spillovers and externalities? Currently, we are seeking to achieve this optimum using disruptive technology, moral imperatives, better governance and demographic development, simple lifestyle changes and nudging, but we are failing to effect the required change.