Political economy application of “tragedy of anti-commons”: Greek Government debt crisis

The tragedy of the anti-commons unfolds when separate social agents – be they private owners of a property who intend to use the property for their own economic benefit or political actors who want to achieve their goal – do not have an exclusive right to use their economic or political power for their own purposes without the consent of the other players of the economic or political game. The successive sovereign debt crises of the Eurozone countries or in a broader framework, those of the members of the European Union provide us with good and insightful examples of the anti-commons problem. We have chosen the Greek financial crisis to demonstrate how the analytical framework of the tragedy of the anti-commons can be applied to better understand why the efforts of the EU countries have reaped limited results.

 The Eurozone countries demanded that Greece implemented an austerity program along with a comprehensive structural reform of its government finances. Two additional bail-out plans have followed since, without great success. Greece obviously strived for receiving maximum financial assistance for the “price” (effort) it had to pay in terms of austerity measures, while the donor countries had two options to choose from: they could either cooperate in designing a bail-out plan, or they could individually decide how much they were willing to contribute to the Greek financial assistance package and under what conditions. We exclude the possibility that the Eurozone countries would let Greece down, for the risk of the European Union’s disintegration would largely increase that would be too high a cost for them to pay.

By applying simple tools of economics and game theory we can demonstrate the strength and applicability of the tragedy of the anti-commons’ analytical framework: the bail-out programs of the Eurozone countries can easily fail if the countries pursue their own, uncoordinated strategies in assisting Greece or other troubled countries. The donor countries will require too high an effort from, and provide insufficient financial help to the recipient country that just maintains and exacerbates the problem of its government debt.