The Tragedy of the Commons is a term typically used to describe how a communal resource can ultimately be ruined by overuse and the depletion of its value for all. This concept was developed by the British economist William Forster Lloyd in 1833, who used this theory to describe the misuse of a shared pasture land.

The tragedy of the commons occurs when individuals act rationally and independently but with a collective negative outcome. Each person acts in their own self-interest to maximize their own gains, but as individuals continue to use the resource it begins to decline which leads to negative effects for everyone.

The most essential factor of a tragedy of the commons is the limited nature of the resource. It must be scarce, rivalrous in consumption, and non-excludable, meaning all the individuals have access to it, making it a public good, or a shared resource.

Examples of tragedy of the commons range across a variety of resources, from overfishing in fisheries, to excessive hunting, or the degradation of air and water quality due to water pollution or uncontrolled recycling. Each individual, who has access to the resource and uses it, is motivated by short-term gain while disregarding the long-term effects to themselves and the entire public.

To address the problem of a tragedy of the commons, several solutions have been proposed, including the imposition of private property rights, government regulation and the development of a collective action arrangement where a group of stakeholders agree to act together voluntarily, or with incentives to achieve a desired outcome for all.

Private property rights are nations are in place to give each single individual the exclusive rights to use, manage and transfer the use of that resource. In that way, the privatising of resources to an individual will reduce the over-exploitation of a resource.

Government regulations protect resources by setting standards, restrictions or limitations on the use of a resource, allowing for less control on how it is used. This could include setting areas with limitations of fishing or hunting, as well as laws regarding water pollution.

Another solution to the tragedy of the commons is collective action arrangements. This encourages people to work together through alliances and group agreements which each person voluntarily chooses to accept. Collectives and cooperatives can be setup around a shared goal of sustainability, and they can be either external or internal. An external cooperative includes people from different backgrounds who have a shared goal, and an internal cooperative consists of a group of people who work together to achieve goals often with a collective inside the firm.

Ultimately, it is up to individuals to be aware of the potential mismanagement of shared resources and understand the consequences of the Tragedy of the Commons. Solutions such as the imposition of private property rights, government regulations, or the development of a collective action arrangement can help maintain the value of common resources. It is simply important to realise the importance of sustainable use of shared resources.