The Tragedy of the Commons”. Although the article has been criticized for its factuality, the concept itself — also known as “the tragedy of the fishers” — has been applied in other areas. Briefly stated: One business’ best practice, when replicated throughout an industry, may become a suicide pact. That is, each business may be acting independently and “rationally” as economists define rationality (that is, according to each business’ self-interest); yet taken as a whole they’re acting in a manner contrary to the best interests of the industry … and perhaps the national economy.
One good example is the buffalo-hide boom of the 1870s: The failure of the clothing industry to put a limit on demand through high prices practically insured that the great beasts would be hunted almost to extinction, with devastating effects on the Plains Indians who had built their lives and tribes around the buffaloes’ migrations. But none of this was the suits’ intent — they were simply trying to give the customers what they wanted, that’s all.
Economics is supposed to be an empirical discipline, concerned with how people do behave rather than how people ought to behave. Part of the problem with calling self-interested behavior rational is that self-sacrificial behavior is subtly, subconsciously apostrophized as irrational; any behavior becomes “moral” so long as you can make a business case for it. The boundary between is and ought is not only frequently crossed but was probably blurred to begin with. Moreover, it creates a false position in which economic laws become not just observed (or at least theoretical) relationships but something inviolable and self-enforcing as the laws of physics; invisible, indefinable “market forces” create an economic karma which punishes the unrighteous and creates order in the house.