Human cooperation from an economic perspective

Abstract

Many important economic and social situations are characterized by a conflict of interest between individual and group benefits. The 'tragedy of the commons' (Hardin 1968) is probably one of the best known examples of this problem. Each individual farmer has an incentive to put as many cattle on the common meadow as possible. The tragic consequence may be overgrazing from which all farmers suffer. Collectively, all farmers would be better off if they were able to constrain the number of cattle that simultaneously graze on the commons. Yet, each individual farmer is better off by letting his cattle graze. A similar tension between individual and collective rationality is typical in such diverse areas like warfare, cooperative hunting and foraging, environmental protection, tax compliance, voting, the participation in collective actions like demonstrations and strikes, the voluntary provision of public goods, donations to charities, teamwork, collusion between firms, embargos and consumer boycotts, and so on.