"The Tragedy of the Commons" is a type of market failure relating to common resources such as lakes, rivers, pastures, etc. Each individual with access to the common resources tries to maximise their benefit beyond a certain threshold at the cost of other individuals' benefits, eventually leading to the depletion of the common resource. This form of market failure has only been exacerbated recently with the advent of the Industrial Revolution and large-scale production technologies. While preserving common resources is an argument in its own right, it also has a close relationship with development problems.
 
The Ganges River is a common resource which provides fresh water to millions of Indians that is used for drinking and other domestic purposes. It is also a source of livelihood for many who rely on fishing and agriculture. Industries also gain utility from the river as it is an easy outlet to expel effluents and waste. 
 
Despite the river's tremendous cultural, religious, ecological, and economic significance, it continues to be severely polluted. More than a billion litres of raw sewage flow into the river daily, in addition to wastewater from tanneries on the banks. One might argue that these can be classified as negative externalities rather than "Tragedy of the Commons". However, water for irrigation is also being extracted at an unsustainable rate, faster than when monsoon rains can replenish it. This is a clear example of "Tragedy of the Commons". If each farmer / agricultural producer tries to utilise more water than a certain sustainable threshold, it can dry up and jeopardise the needs of future generations. Similarly, if industries pollute more than a specified limit, it can damage the marine ecosystem to a point where fishermen can no longer fish. 
 
The effects mentioned till now were only surface level. This also has deeper implications for the nation's long-term development. Firstly, the pollution has an adverse effect on human capital since it affects people's health reliant on the Ganges' water for drinking. This will weaken people's productivity and strain the nation's healthcare system. 
 
Secondly, it will adversely affect the livelihoods of fishermen and farmers, who generally earn low incomes. This will exacerbate existing inequality. Inequality in itself is an indicator of underdevelopment. However, inequality also causally hinders future development, as economist Debraj Ray points out in his theories of Aspirations.
 
Collective action involves stakeholders making a decision that serves to be in the best interest of the collective group rather than the individual. The main issue in this scenario is that it would be extremely difficult for the various stakeholders to cooperate since the river serves so many people. This creates a need for some form of government intervention. The 'Namami Gange Programme' involves several facets such as sewage treatment, afforestation, public awareness, etc. This can help restore the river to a certain extent. However, there needs to be a framework that deals with the economic incentives of stakeholders to prevent degradation proactively. In 2017, the Uttarakhand High Court declared Ganges a "living entity", giving it the same legal rights as a person. The definition of these additional rights changes the incentives of economic agents since polluting now has a more severe legal repercussion. It would violate the river's "right to life". The results, however, depend greatly on the enforcement and execution of this court ruling. It is easy for me to come up with various theoretical solutions. However, the main challenge lies in the enforcement and execution of those solutions. Our judicial and bureaucratic system itself is an example of market failure relating to institutions.
 
Until now, I had considered market failure to be a deviation from the norm since we first learned the models of perfect competition and introduced market failure as a unique discrepancy. Previously, my view on economic development was heavily biased as I placed greater weightage on GDP per capita and considered other indicators such as health, education, and inequality as secondary. However, upon considering the functional role of inequality in development, I developed an alternative perspective. Moreover, considering underdevelopment as formal institutions replaced by "imaginative" ones gives us an insight into making effective policies that go beyond the superficial levels of "increasing healthcare, education, etc.". 


Economics

The Ganges and the Commons: Market Failure as a Development Trap