The intrinsic fallacy of market mechanism and private property rights in alleviating the tragedy of the commons

ABSTRACT

Economists’ solution to the tragedy of the commons relies on well-defined property rights and competitive market mechanism for limiting individuals’ self-serving, short-sighted actions that result in a dramatic depletion of the common resources. However, this solution implicates a serious threat in terms of sustainability. Recently, deterioration of genetic diversity reached alarming levels, mainly attributed to escalating economic pressure that obliges farmers to shift from local breeds towards more profitable and more productive industrial breeds. This study empirically examines the efficiency of the free market mechanism as a solution to the tragedy of the commons through a unique natural experiment in which a huge demand shock arises regarding sheep. Results robustly show that the free market mechanism can cope with even a very challenging demand shock through the adjustment of prices without any shortage of the commodity. However, this finding does not guarantee that such an outcome is sustainable over the very long term. Analysis of the growth rate of the local sheep breeds population and cross-breed sheep population shows that the trend is overwhelmingly in favour of cross-breeds, thus supporting concerns for a free market mechanism, intrinsically driving the extinction of local sheep breeds, an invaluable genetic resource.

KEYWORDS:

• Excess demand
• price adjustment
• sustainability
• genetic diversity

JEL CLASSIFICATION:

• Q11
• Q57

Disclosure statement

No potential conflict of interest was reported by the authors.

Data availability statement

The data described in this article are openly available in the Open Science Framework at DOI:10.17605/OSF.IO/TPA6U.

Notes

¹ Number of sheep slaughtered during the Eid period is based on data from a news bulletin of the Ministry of Agriculture and Forestry of Turkey on Eid al-Adha in 2017.

² Prices of ewes, rams, fodder, and GDP per capita are deflated to 2003 TL with CPI. The year 2006 includes two Eid periods: one in January and the other in December, so we have 14 Eid periods in 13 years. Lag lengths of the prices of ewes and rams are determined by modelling these prices in a panel vector autoregressive framework. Modified Bayesian information criterion suggested two lags for prices of ewes and rams. We also estimated the model with one lag of the prices and the results were similar.

³ For the EidL2 dummy, we exclude five Eid periods in the years 2006 (Eid in January), 2008, 2011, 2014, and 2017. For the EidF2 dummy, we exclude nine Eid periods in the years 2005, 2006 (Eid in December), 2007, 2009, 2010, 2012, 2013, 2015, and 2016.

⁴ Number of breeding sheep is approximated by subtracting number of dairy sheep and number of sheep slaughtered within the year from total number of sheep using data provided by TUIK.

Additional information

Funding

This research received no external funding.