The Price of Blurred Borders: A Market-Liberal Critique of China’s 75-Year "Commons"

 

The Price of Blurred Borders: A Market-Liberal Critique of China’s 75-Year "Commons"

From the perspective of a synthesized school of Chicago School pragmatism (Friedman), Misesian praxeology, and Hayekian information theory, the history of the People's Republic of China is not just a series of policy errors—it is a 75-year laboratory proving that without clearly defined, transferable private property rights, "tragedy" is the inevitable default.

The Diagnostic: Why China Collapsed into the Commons

Whether it was the starvation of the Great Leap Forward or the "Cancer Villages" of the 1990s, the root cause was the "Illusion of Ownership."

1. The Calculation Problem (Mises): In the Mao era, by abolishing the market, the state destroyed the price mechanism. Without prices, there was no way to know the true value of grain or steel. The "Commons" was exploited because there was no economic calculation to signal scarcity.

2. The Incentive Gap (Chicago/Friedman): "If everyone owns it, nobody owns it." The 承包 (Contract) system failed environmentally because it decoupled use rights from residual claimancy. Farmers were "renters" of the state. As any Chicago economist knows, a renter has every incentive to extract maximum value today and zero incentive to invest in the soil's health for tomorrow.

3. Fatal Conceit (Hayek): The central planning of urban spaces and the "Bike Sharing" boom failed because planners suffered from the "Fatal Conceit"—the belief that they could manage the "Commons" better than the spontaneous order of the market. The result was massive capital malinvestment (Bicycle Graveyards).

Lessons for Global Economies: Avoiding the Trap

To avoid the Chinese cycle of depletion, other nations must adopt three fundamental pillars:

• Total Privatization of "Residual" Rights: Move beyond "contracts" or "leases." Only when an individual owns the future value of a resource (land, water, or air rights) will they preserve it.

• Pricing the Externalities: Where a "Commons" must exist (like the atmosphere), the Chicago approach suggests market-based pricing (Pigouvian taxes or tradable permits) to internalize costs that are currently being dumped on the public.

• Decentralized Knowledge: Trust the local "man on the spot" (Hayek). Environmental management should not be a top-down decree from a capital city but a result of local owners protecting their own asset values.

The Cycle of the Commons: China’s 75-Year Struggle with Shared Resources

 

The Cycle of the Commons: China’s 75-Year Struggle with Shared Resources

Since 1949, China has swung between extreme collective ownership and rapid privatization. While these phases look different on the surface, they share a common thread: the "Tragedy of the Commons," where individuals (or officials) exploit a shared resource until it collapses.

1. The Mao Era: The Tragedy of "No Ownership"

Under Mao Zedong, the state abolished private property, turning the entire nation into a "commons."

• The Great Leap Forward (1958-1962): When villagers were forced into People's Communes, the "Common Mess Halls" became a literal tragedy. Because food was free and "shared," people ate everything immediately. With no individual responsibility for the grain supply, the "commons" was depleted, contributing to the Great Famine.

• Backyard Furnaces: To meet steel quotas, people melted down their own tools and communal resources to produce useless pig iron. The shared environment—forests and timber—was stripped bare to fuel these furnaces, a classic destruction of a common resource for short-term political "gain."

2. The Deng & Jiang Era: The "Contract" Tragedy (承包制)

Deng Xiaoping’s Household Responsibility System (家庭聯產承包責任制) is credited with saving the economy, but it created a new version of the tragedy.

• Short-Termism: Farmers were given land on short-term contracts. Because they did not own the land permanently,they had no incentive to maintain soil health. They used massive amounts of chemical fertilizers to maximize yield before the contract ended, leading to widespread soil acidification and groundwater pollution.

• Village Enterprises (TVEs): In the 1990s, local factories popped up everywhere. Since the rivers were "common" property, every factory dumped toxic waste into them to save costs. The result was the "Cancer Village" phenomenon—the economic gain was private, but the environmental cost was shared by the public.

3. The Hu & Xi Era: The Tragedy of High-Tech and Urban Space

Even as China became a global superpower, the tragedy moved into new sectors.

• The Bike-Sharing Collapse (2017): Under Hu and then Xi, companies like Ofo and Mobike flooded city sidewalks with millions of bikes. Because the "sidewalk" was a common public space and the bikes were "shared," users treated them with no care, and companies over-saturated the market. This led to "Bicycle Graveyards" that choked public squares.

• The Real Estate Bubble: Local governments relied on selling land (a finite common resource) to fund their budgets. This led to "Ghost Cities"—over-exploitation of the land for short-term GDP growth, leaving a massive debt burden for the next generation.

 

The Tragedy of the Commons Is Not About Greed — It Is About Bad System Design

Why People Are Good, and Only Bad Measurements Make Them Do Bad Things

When people hear The Tragedy of the Commons, the dominant conclusion is almost automatic:

“People are greedy. If left alone, they will destroy shared resources.”

Dr. Yung-mei Tsai’s classroom simulation is often cited as proof of this belief. Students, acting rationally, over-harvest a shared resource until it collapses. The commons dies. Everyone loses.

But this conclusion is wrong — or at least dangerously incomplete.

The tragedy does not arise from greed.
It arises from how the system is designed, what is measured, and what is rewarded.

When viewed through the lens of the Theory of Constraints (TOC), Tsai’s simulation becomes powerful evidence of a very different truth:

People are fundamentally good. Systems that reward local optimization create destructive behavior.

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What Actually Happens in the Simulation

In the simulation, each participant is allowed to take up to two items from a shared resource pool per round. The pool regenerates based on what remains. Early rounds forbid communication.

Most groups rapidly destroy the resource.

The usual interpretation:

• Students are selfish

• Individuals prioritize themselves

• Cooperation is fragile

But observe more carefully what participants are actually doing.

Each player is:

• Acting rationally

• Responding to uncertainty

• Protecting themselves from loss

• Optimizing according to the rules and incentives provided

This is not moral failure.
This is logical behavior in a poorly designed system.

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The Core Mistake: Confusing Local Success with Global Success

The real problem in the simulation is not human nature — it is local optimization.

Each participant is implicitly measured on:

• “How many items did I collect this round?”

No one is measured on:

• Total system output over time

• Sustainability of the resource

• Collective success

In TOC terms:

• The system has a constraint (the regeneration capacity of the commons)

• The players are not measured on protecting it

• Therefore, they unknowingly destroy it

This is exactly what happens in organizations every day.

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Why This Is Not Greed

Greed implies excess beyond rational need.

But in the simulation:

• Players take more because not taking feels risky

• Players fear others will take instead

• Players respond to a measurement system that rewards immediate extraction

If greed were the cause, communication would not fix the problem.

Yet when communication is allowed:

• Groups quickly self-organize

• Fair rules emerge

• The resource stabilizes

• Everyone earns more over time

Greedy people do not suddenly stop being greedy.

Bad systems do stop producing bad outcomes when redesigned.

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The Role of Measurement: The Real Villain

TOC teaches a simple but uncomfortable truth:

Tell me how you measure me, and I will tell you how I behave.

In the simulation:

• Individuals are rewarded implicitly for short-term extraction

• There is no penalty for system collapse

• There is no metric for long-term throughput

This mirrors real-world KPIs:

• Departmental efficiency

• Individual bonuses

• Utilization rates

• Quarterly targets

Each looks reasonable in isolation.

Together, they destroy the system.

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Global Goal vs. Local KPIs

The tragedy disappears the moment the system is redesigned so that:

• The global goal is explicit

• Individual actions are subordinated to that goal

• The constraint is protected

• Success is measured at the system level

When participants align around:

“Maximize total benefit over time for everyone”

Their behavior changes — without changing who they are.

This is the most important lesson of the simulation.

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People Are Not the Problem

TOC insists on this principle:

Blaming people is lazy thinking. Improve the system.

The tragedy of the commons is not evidence that:

• People are selfish

• Cooperation is unnatural

• Control is required

It is evidence that:

• Poor measurements create destructive incentives

• Local KPIs generate global failure

• Systems shape behavior more powerfully than values

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Why This Matters Beyond the Classroom

Organizations collapse commons every day:

• Sales destroys operations

• Cost cutting destroys throughput

• Efficiency destroys flow

• Bonuses destroy collaboration

Leaders then blame:

• Culture

• Attitude

• Motivation

But the real cause is almost always the same:

We reward local optima and hope for global success.

Hope is not a strategy.

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The Real Lesson of the Tragedy of the Commons

The tragedy is not inevitable.

It is designed.

And anything designed can be redesigned.

When systems:

• Align measurements with the global goal

• Protect the constraint

• Reward collective success

People naturally behave in ways that look cooperative, ethical, and even generous.

Not because they changed —
but because the system finally allowed them to succeed together.

Shared Resources, Individual Greed: Dr. Yung-mei Tsai and the Tragedy of the Commons

 

Shared Resources, Individual Greed: Dr. Yung-mei Tsai and the Tragedy of the Commons

Imagine a beautiful community garden. If everyone picks only what they need, the garden flourishes. But if one person decides to take extra to sell, and then others follow suit to avoid "missing out," the garden is picked bare in days. This is the Tragedy of the Commons, a social and economic trap that defines many of our modern crises.

Meet Dr. Yung-mei Tsai

To help students and the public understand this complex human behavior, Dr. Yung-mei Tsai, a distinguished Professor of Sociology at Texas Tech University, published a landmark paper in 1993. Dr. Tsai was an expert in urban sociology and social psychology, dedicated to revealing how social structures influence individual choices. His work turned abstract theories into lived experiences, most notably through his classroom simulation models.

What is the "Tragedy of the Commons"?

First coined by Garrett Hardin, the theory suggests that individuals acting independently and rationally according to their own self-interest will eventually deplete a shared resource, even when it is clear that it is not in anyone's long-term interest for this to happen.

Daily Examples of the Tragedy:

• The Office Fridge: Everyone uses it, but no one cleans it. Eventually, it becomes a biohazard because everyone assumes "someone else" will take care of it while they continue to store their own food.

• Public Wi-Fi: When everyone at a cafe starts streaming 4K video simultaneously, the "common" bandwidth crashes, and no one can even send a simple email.

• Traffic Congestion: Every driver chooses the "fastest" route on GPS. When everyone makes the same selfish choice, that road becomes a parking lot.

• Overfishing: If one boat catches more fish to increase profit, others do the same to compete. Soon, the fish population collapses, and all fishermen lose their livelihoods.

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The Game: Dr. Tsai’s Classroom Simulation

Dr. Tsai’s 1993 simulation provides a powerful "aha!" moment for participants. Here is how it is played:

The Setup:

1. The Pool: A bowl in the center of a group (4-5 people) filled with 16 "resources" (candies, crackers, or tokens).

2. The Goal: Collect as many tokens as possible.

3. The Rounds: Each round, players can take 0, 1, 2, or 3 tokens.

4. The Regeneration: This is the key. At the end of each round, the instructor doubles whatever is left in the bowl (up to the original capacity of 16).

The Typical Outcome:

• Phase 1 (No Communication): Players usually grab 3 tokens immediately, fearing others will take them all. The bowl is empty by the end of round one. The resource is dead. No regeneration occurs. Everyone "loses" the potential for a long-term supply.

• Phase 2 (Communication Allowed): Players talk and realize that if everyone only takes 1 token, the bowl stays healthy, doubles every round, and everyone can eat forever.

The Lesson: Dr. Tsai showed that without communication or shared rules, individual rationality leads to collective ruin.Cooperation isn't just "nice"—it's a survival strategy.

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