A classic example is the tragedy of the commons, which I'll discuss in detail later. Basically, though, it's the tendancy for individuals to destroy the natural environment because it's in their personal best interest. Overall, though, it's not in the best interest of the community. Consequently, we build rules for individuals to act within limits, because we recognize that to do otherwise will destroy us all.

Unfortunately, government also tends to fall into this trap. The expression is 'cost shifting', as opposed to 'cost saving'. One department will downsize and shovel burdens into another department. There has been no gain, and it may fall into the cabinet to set up a set of rules for how the ministries should behave in order to prevent the type of waste that occurs when they downsize by shifting responsibilities elsewhere. A classic example of this is the downsizing of mental institutions, which led to increases in crime, social housing demands, and hospital admissions, all of which were much more expensive.