Submitted by Patrick Barron via Mises Canada [9],
The economic phenomenon known as the “Tragedy of the Commons” instructs us that commonly held resources that are insufficiently protected will be plundered to extinction. The phenomenon was recognized in the early nineteenth century to explain why the commons in England quickly came to be denuded by sheep. All sheepherders had an equal right to graze sheep on the commons. There often was no agreement as to how many sheep each could graze, so it was sheer rational self-interest for each to graze as many sheep on the common ground as possible. In short order the commons came to be overgrazed. What later came to be called “the tragedy of the commons” was a simple and imminently understandable explanation.
Is security an economic resource?
One can easily accept that grassland is an economic resource that must be protected, but what about security and, if security is held collectively, can collective security agreements also be vulnerable to the tragedy of the commons? Security is a service that usually requires economic resources. We secure our personal possessions when we take precautions such as padlocking our bicycles, locking our car doors and the house, buying monitored security systems, purchasing heavy safes, and the like. These are all economic goods to secure our personal property. But what about protecting our physical selves? It is on a somewhat different plane but the purpose is the same. We may carry concealed weapons, take personal self-defense courses, or hire personal body guards. All these things require the expenditure of time and money to acquire economic goods to make us more secure. On a more subtle level, we modify our behavior to avoid giving offense to complete strangers about whom we know nothing. We especially do not deliberately seek confrontations over minor things like the last parking spot in the lot. Similarly we avoid dangerous parts of town or parts of town that are dangerous at night or on special occasions. For example, my wife and I were in downtown Chicago in the late 1990’s when the Chicago Bulls professional basketball team was winning the NBA championship. We were not fans and gave little thought to the fact that there might be what we shall call “excessive celebrations” after the final victory. As we strolled downtown Chicago after dinner we were advised by a Chicago policeman to leave, because the “excessive celebrations” often became excuses for certain people to behave criminally. Rather than assert our right to window shop whenever and wherever we darned-well pleased and discretion being the better part of valor, we went home. This aspect of security–i.e., avoiding unnecessary confrontation– is often overlooked.
Collective security brings in economic problems
Ah, but would we have reacted the same way had we been in a group? Perhaps we would have felt more secure to window shop by assuming that others in the group would protect us. Our behavior would have changed to become a bit more willing to take risk due to an implicit assumption of collective security. This willingness to take more risk because others may bear some or even all of the cost is known as moral hazard.
So we see that providing our own personal security of our physical bodies and our possessions requires that we expend resources that perhaps we would rather employ elsewhere. We pay for these ourselves and we modify our behavior to avoid the necessity of employing them with uncertain result and to minimize the cost.
But all this changes under collective security agreements.
Moral hazard and socialism cause a tragedy of the commons in collective security
Under a collective security agreement, all who join are obligated to provide security to all others in the alliance. Each member must expend resources to provide such security, which naturally means sacrificing the satisfaction of other preferences.
However, since all contribute to the security pot, all know that their individual sacrifice may be claimed by others. Therefore, there will be a reluctance to spend resources on security that may be used by others, while encouraging, at least to some extent, claims upon security that one would not have made in the absence of the security agreement.
The latter phenomenon, the increased willingness to call upon alliance members, is moral hazard at work and the former phenomenon, the reluctance to expend resources that may be claimed by others, is a well-known consequence of socialism.
Mises explained that socialism discourages production while it increases demand. Why produce only to be forced to share with others when one can demand to share in the production of others without regard to having previously produced something of value to those same others? Eventually all altruism vanishes in a sea of cynicism and nothing is produced for anyone to share. The result is a tragedy of the commons fed by moral hazard and socialism.
The tragedy of NATO
Today we see the above destructive economic forces at work in NATO expansion. When the Soviet Union disintegrated in 1990, the reason for NATO’s existence vanished. But rather than declare NATO to have been a success in deterring war in Europe, possibly disbanding the alliance and building a new Concert of Europe [10] that would include Russia, NATO bureaucrats set about to expand the alliance to the east. Whereas the Concert of Europe after the Napoleonic Wars had quickly embraced France as an important member, NATO expanded to isolate Russia by absorbing its former satellite nations.
The last NATO expansion prior to the disintegration of the Soviet Union had occurred in 1982 when Spain joined the alliance. At that point in time NATO was composed of sixteen nations. Starting in 1999 twelve countries have joined NATO, ten of them former members of the Warsaw Pact. The other two, Slovenia and Croatia, were previously part of Yugoslavia, officially a non-aligned nation, but a communist dictatorship all the same. With the possible exception of Poland, none of these new members contribute much to the alliance’s military capability, meaning that the older members are shouldering their security burden. Naturally expanding NATO to the east has resulted in isolating and antagonizing Russia, who feels its security threatened. So, NATO has succumbed to the socialist phenomenon by adding new members who demand security without much of an obligation and to the moral hazard phenomenon by adding new members whose territories could be used to house American nuclear weapons, a situation that may yet provoke a major world crisis with Russia, which is precisely what NATO was formed to avoid.
Ukraine and Finland as examples of moral hazard and socialist demands
Both Ukraine and Finland are lobbying NATO for membership. President Poroshenko of Ukraine is lobbying for membership in both the European Union and NATO. The fact that Russia already has taken the Crimea following anti-Russian riots apparently means nothing as long as Ukraine believes that mighty NATO will intervene on its behalf. If NATO did admit Ukraine, one wonders if Ukraine would invoke the collective security clause and demand that NATO go to war with Russia. Finland is already a member of the EU and now is openly lobbying for NATO membership. In a recent interview with der Spiegel [11], Finnish president Alexander Stubb was dismissive of Russia’s stated concerns about Finland joining NATO. His interview has to be read to be believed. Both presidents’ behavior illustrate the moral hazard nature of collective security agreements. And neither country would contribute anything to the security of current NATO members. On the contrary, Ukrainian and/or Finnish membership would cause an escalation in tensions in Europe and take us right back to the Cold War…or worse! Neither country considers the possibility that NATO might not honor its military commitment. It is one thing for NATO bureaucrats to admit new members. It is another thing for current members to expend blood and treasure, especially when the possibility of nuclear war is wafting through the air. Does anyone remember the Cuban Missile Crisis?
In conclusion, due to the inherent problems with collective security alliances–tragedy of the commons fed by socialism and moral hazard–nations should enter into them with great caution. George Washington’s farewell address has never sounded more prescient: Beware foreign entanglements.
