Tragedy of the Nutella

I’m not a fan of Nutella, but it seems students at Columbia University are.

The story is a little bizarre and, frankly, a little bizarrely written, but the message is interesting. Nutella is provided at Columbia University Dining Halls. Students can eat as much Nutella as they can (or at least, as much as there is) without paying any marginal cost.

As it turns out, the problem is slightly worse than that given it’s alledged that students are spiriting away stealing jars of Nutella from the dining hall to eat later. The actual theft or whatever they’re calling it here only compounds the problem.

The problem is the age-old Tragedy of the Nutella Commons. A good that has no marginal cost to any individual will be over-used to the detriment of all.  If everyone can let their cattle graze on the village common, pretty soon everyone will put their cattle on the common rather than on their own land, overgrazing the common and destroying the ability of the lucerne or grass to regrow and be self-replenishing.

As it is with our roads. The full cost of using the roads (road maintenance, new roads) isn’t borne through fuel levies of vehicle licences (particularly heavy vehicles) therefore additional funds are needed from the general income tax revenues and at the same time the roads condition deteriorates rapidly.

As a thought-provoking aside, if the villages held a lottery and gave permanent use of the village common to one villager, even though inequality will have been massively increased, average and total utility will be greater than if the villagers were to destroy the common through overgrazing.

Published by David Kirk

The opinions expressed on this site are those of the author and other commenters and are not necessarily those of his employer or any other organisation. David Kirk runs Milliman’s actuarial consulting practice in Africa. He is an actuary and is the creator of New Business Margin on Revenue. He specialises in risk and capital management, regulatory change and insurance strategy . He also has extensive experience in embedded value reporting, insurance-related IFRS and share option valuation.

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