Does Steem have a Tragedy of the Commons dynamic?

What is the Tragedy of the Commons? How is it avoided? And why should the Steem ecosystem care?

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Introduction

In this essay, I will introduce a concept from economics, known as the Tragedy of the Commons. In short, the Tragedy of the Commons is a dysfunctional dynamic that emerges when profits are private but losses are shared. The concept was first described in the 1800s, and it received its name in 1968. Since that time, economists have studied the conditions that lead to this scenario, and also how to avoid it. In addition to introducing the concept, I'll also discuss a little bit about what has been learned about avoiding it.

Finally, I will argue that it is relevant to curation incentives in the Steem ecosystem. In particular, I suspect that the current generation of bidbots is caught up in a sort of Tragedy of the Commons dynamic. I will also do some brainstorming about how the Steem community might act to limit the negative impact of this phenomenon in our ecosystem.

Obviously, I'm not an economist, so this coverage is cursory and speculative. I especially welcome discussion from anyone with more of an economics background.

What is the "Tragedy of the Commons"

Imagine a group of ranchers who are sharing a common pasture for grazing their livestock. The pasture can sustain a certain number of animals, but if the herd size passes that point, the quality of the pasture goes down, and the herds start to suffer and die off. If there were just one rancher, that person would maintain their herd at the optimal size. However, when you add more ranchers into the mix, the rancher has to worry about what the other ranchers might do with their own herd sizes. In this case, each rancher increases their herd size as fast as possible so that they're sure to get the most value possible out of the common pasture before it inevitably collapses from overuse by the other ranchers.

In short, incentives when profits are held privately but losses are shared align themselves in a way that tends to produce a dysfunctional result. Here's a video that describes it in some more detail:

In his 1968 essay, The Tragedy of the Commons, Garrett Hardin described it like this:

Therein is the tragedy. Each man is locked into a system that compels him to increase his herd without limit--in a world that is limited. Ruin is the destination toward which all men rush, each pursuing his own best interest in a society that believes in the freedom of the commons. Freedom in a commons brings ruin to all.

Other examples of the Tragedy of the Commons include over-fishing, pollution, traffic jams on public highways, and hunting endangered wildlife to extinction.

Avoiding the Tragedy of the Commons

The video above suggests three general techniques that can be used to avoid the Tragedy of the Commons:

1. Affix property rights to public spaces
2. Top-down regulation
3. Bottom-up, trust-based collaboration

An example of the first type, affixing property rights to public spaces, would be to subdivide the shared resource into parcels and sell or lease usage rights to private individuals.

Examples of top-down regulation would include things like the Clean Water Act and other environmental regulations. Other examples include things like highway tolls or charging maintenance taxes and fees.

According to the video Elinor Ostrom, determined that bottom-up management of shared resources is successful when certain conditions are met:

• It is easy to monitor resources and their use, and the information can be understood/verified at relatively low cost.
• Rates of change are moderate for resources and user populations, as well as for economic, social, and technological considerations.
• Communities maintain conditions that engender trust, including frequent personal communication, and dense social networks.
• Outsiders can be easily excluded from using the resource.
• Users of the shared resource support effective monitoring and rule enforcement.

What does this have to do with Steem?

I suspect that the current generation of bidbots is caught up in a cycle that's something like the Tragedy of the Commons. The shared resource is the rewards pool, and of course the profits are derived privately by the bidbot owners, delegators, and the authors who make use of their service.

To be clear, I'm not opposed to voting bots, or even to bidbots. I think that they are absolutely necessary if Steem ever hopes to scale up and increase its user base by a factor of thousands or even tens of thousands.

In all, though, I think that the Steem curator - human or bot - has three main jobs for the blockchain:

1. Distribute rewards to authors
2. Generate curation rewards for voters
3. Rank posts in order by their likelihood to attract human attention and/or engagement.

The first two goals have to do with the short-term interests of blockchain participants. The third, in my opinion, effects the price, so it is more relevant to longer term incentives.

To me, it seems fairly clear that the bidbots are accomplishing the first two goals above, but they are entirely failing at the third. Because they are failing at the third goal, I think that they are harmful to the price of Steem in the market place. If there is something like the Tragedy of the Commons going on here, this could be an existential threat to the Steem blockchain, as the price of the tokens might gradually follow a death spiral down to zero.

So, to me the question is, how can the Steem ecosystem encourage the emergence of a more sustainable type of bidbot? Let's look at all three of the possible techniques for avoiding the tragedy of the commons:

Type 1: Privatize

The only thing that comes to mind is to change the relative cost of resource credits. In a sense, the rewards pool already is privatized through the use of Steem Power and Resource Credits, but maybe some adjustment could encourage bidbots to align their votes with longer, instead of shorter, term goals?

Maybe as an account gets more SP, the corresponding number of resource credits should exhibit some sort of decay?

Type 2: Top-down regulation

I always hate posts that say, "Steemit should do this...", but the reality is that Steemit is the only stakeholder that could qualify as a top-down influencer. So, the question really is, "what should Steemit do - if anything?"

An idea that occurred to me is that Steemit could use the downvote as a sort-of a tax. The goal wouldn't be to eliminate the bidbot, but simply to add some friction to its use. To do this, they could pick a certain percentage of random bidbot-boosted posts as they approach payout time and issue a downvote to counterbalance the highest value upvote (or some other portion) on those posts.

As time goes on, the size and frequency of the downvotes could be adjusted in order to (hopefully) lead to a more sustainable use of bidbots.

An interesting dynamic about this is that it reverses the flow of incentives: the "loss" would be privatized, and when the rewards are returned to the rewards pool, the profits would be shared.

Type 3: Bottom-up collaboration

This is complicated, but I was encouraged to learn that we already see the emergence of features that could facilitate it. In particular, the launch of Steem's Communities was a step in the right direction. Also, we have an increase of people publishing statistics about how the blockchain is used. Regular transparency reports on bidbot activity could help the communities to shape incentives that lead bidbot owners and users to produce better voting results.

To me, the big stumbling block here is this one: "Outsiders can be excluded from using the resource at low cost.", but maybe this goes back to the resource credits in the first sub-section. Or maybe it's already met, since voters must stake Steem first.

Conclusion

If you're still reading, thank you for staying with me to this point. I hope that I have described the Tragedy of the Commons and some ways that economists have suggested for avoiding it. Additionally, I applied the concept to the Steem ecosystem, and suggested some possible ways that we can mitigate this problem (if it exists) in the Steem ecosystem. These are:

• Changes to the resource credit allocation algorithm for Steem-Power holders
• The use of downvotes by large stakeholders as a metaphorical "bidbot tax"
• Working to develop decentralized methods for aligning incentives with long-term interests instead of short term interests.

As noted above, this is basically just brainstorming, so I'd be interested to hear other people's thoughts on the topic.

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Thank you for your time and attention.

As a general rule, I up-vote comments that demonstrate "proof of reading".

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Steve Palmer is an IT professional with three decades of professional experience in data communications and information systems. He holds a bachelor's degree in mathematics, a master's degree in computer science, and a master's degree in information systems and technology management. He has been awarded 3 US patents.