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For The Manager: A medieval morality tale all too applicable to agencies

The Tragedy of the Commons is a popular story used to demonstrate the conflict between individual interest and the common good. The English Commons of long ago were plots of land where the farmers of a village collectively grazed their livestock.

By Chris Burand | Updated on April 30, 2005

The Tragedy of the Commons is a popular story used to demonstrate the conflict between individual interest and the common good. The English Commons of long ago were plots of land where the farmers of a village collectively grazed their livestock. Each farmer could graze as many animals as he wished without cost or responsibility for the land. No one owned the land, and therefore no one had an incentive to care for it. As a result, the commons were over-grazed and soon became barren. The lesson is that when individuals use a public good, they do not bear the cost of their actions. If each person seeks only to maximize his own interest, he has the opportunity to ignore the cost of his actions on others.

The same situation happens–albeit to a lesser extent–in insurance agencies, where producers are the “farmers” and the staff represent the resources of the land. CSRs require the same time to write an account whether the commission is $200 or $750. A producer who writes many small accounts rather than large ones is not using agency resources wisely. A producer writing small accounts limits the resources available to other producers who are writing more significant ones. But producers rarely have an incentive to use the agency’s resources wisely. (Of course, it makes personal financial sense for producers to write larger accounts. However, if money were an effective incentive for all producers to write larger accounts, I would not be writing this article.)

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