A situation arises when individual self-interest conflicts with the collective well-being of a group. In this scenario, pursuing personal gain leads to a suboptimal outcome for everyone involved. As a classic illustration, consider the shared pasture: each herdsman benefits by adding more cattle, but the pasture’s capacity is finite. Overgrazing, driven by individual incentives, ultimately degrades the pasture and harms the entire community.
The prevalence of these circumstances highlights the significance of understanding human behavior and crafting effective strategies to promote cooperation. These problems are not new. Historical examples abound, such as the depletion of natural resources or the challenges faced by communities managing common lands. Recognizing the underlying structures that lead to these situations allows for the design of interventions, ranging from regulations to incentives, that encourage individuals to consider the broader consequences of their actions.
