The Tragedy of the Commons in business
Posted: Thu Apr 23, 1998 8:41 am
In Out of the Crisis, W. Edwards Deming describes two departments
of a company. Each department gets measured on meeting its cost
targets. I have forgotten the exact situation, but it goes some-
thing like this: Someone comes up with an idea that costs depart-
ment A $10 per unit, and saves the department B $50 per unit, re-
ducing the companys overall cost $40 per unit. As manager wont
agree, because that would raise As costs and make the manager
look bad.
Although it doesnt really fit the model of the Tragedy of the
Commons -- what resource do the departments use? "nega-bucks"? --
this has the same result: By trying to maximize their own benefit,
each department suffers. In mathematical terms, the attempts at
local optimization do not produce global optimization.
Does someone have a better archetype for this situation?
Matt
-------------------------------------------------------------------
Matt Barkley IBM Network Computing Software Division,
Research Triangle Park, NC
Internet: mbbjr@vnet.ibm.com
of a company. Each department gets measured on meeting its cost
targets. I have forgotten the exact situation, but it goes some-
thing like this: Someone comes up with an idea that costs depart-
ment A $10 per unit, and saves the department B $50 per unit, re-
ducing the companys overall cost $40 per unit. As manager wont
agree, because that would raise As costs and make the manager
look bad.
Although it doesnt really fit the model of the Tragedy of the
Commons -- what resource do the departments use? "nega-bucks"? --
this has the same result: By trying to maximize their own benefit,
each department suffers. In mathematical terms, the attempts at
local optimization do not produce global optimization.
Does someone have a better archetype for this situation?
Matt
-------------------------------------------------------------------
Matt Barkley IBM Network Computing Software Division,
Research Triangle Park, NC
Internet: mbbjr@vnet.ibm.com