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The third stepin my road map of failure is perhaps the most common and most surprising one: a society's failure to make even a rudimentary attempt at solving a problem it has recognised.

Such failures frequently arise because of what economists term 'rational behaviour': they stem from clashes of interest between people. Some people may reason correctly that they can advance their own interests by behaviour that is harmful to other people. Economists term such behaviour 'rational', even while acknowledging that morally it may be rather naughty.

The perpetrators – beneficiaries of big, certain, immediate pro fits from the bad status quo – are likely to get away with their rational bad behaviour because they are typically concentrated (few in number) and highly motivated. The losers meanwhile are diffuse (the losses are spread over large numbers of individuals) and lack motivation because they receive only small, uncertain, distant profits from halting or reversing the bad behaviour of the minority.

A typical example of rational bad behaviour is "good for me, bad for you and for the rest of society". To put it bluntly, 'selfishness'. A few individuals may correctly perceive their self-interest to be opposed to the interest of the majority.

For example, until 1971, mining companies in Montana tended to just dump their toxic waste of copper and arsenic into rivers and ponds because the state of Montana had no law requiring them to clean up after abandoning a mine. And after the Montana legislature did pass such laws, mining companies discovered they could still extract the valuable ore and avoid the expense of cleaning up by declaring bankruptcy.

The result has been billions of dollars of clean-up costs borne by the citizens of the United States and, in particular, Montana. The miners had correctly perceived that they could advance their own interests and save money by making their mess and leaving the clean-up burden to society.

One particular form of such clashes of interest has received the name 'tragedy of commons'. It refers to a situation where many people harvest a communally owned resource – such as fish in the ocean, or grass in common pastures – but in which there is no effective regulation that specifies how much of the resource each individual can draw.

Under those circumstances, individuals can correctly reason, "If I don't catch that fish or graze that grass, some other fisherman or herder will, so it makes no sense for me to be careful about over fishing or overharvesting". The correct rational behaviour is to harvest before the next person can, even though the result is depletion or extinction of the resource, and hence harm for society – and all of the fishermen and herders – as a whole.

Clashes of interest also arise when a group has no long-term stake in preserving a resource. For example, much commercial harvesting of tropical rainforests today is carried out by international logging companies, which lease land in one country, cut down all the rainforest, and then move on to the next country selected for harvesting.

International loggers have correctly perceived that as soon as they have paid for the lease their interests are best served by clear-cutting their leased land without regard to its future use or rehabilitation.

In this way, loggers have destroyed most of the forest in the Malay Peninsula, Borneo, the Solomon Islands and Sumatra; the same is likely to happen in the Philippines, Papua New Guinea, the Amazon, and the Congo Basin. In such cases, the consequences are borne by the next generation; and the next generation cannot vote or stage protests.

Failures also occur when the interests of a decision-making elite conflict with the interests of the rest of society. The elite are particularly likely to do things that profit them but hurt everybody else if they can somehow insulate themselves from the consequences of their actions.

Such clashes are increasingly frequent in the United States, where the high-flyers and the wealthy live in gated communities inhabited by people like themselves; their conduct and decisions impact on a society with which they have little connection. Enron's executives calculated they could gain huge sums of money for themselves by looting the company and harming the rest of society, and that their gamble was likely to go undetected. They almost succeeded.

Such failures are less likely in societies where the elites cannot insulate themselves from the consequences of their decisions. Take Netherlands, a modern nation with the highest proportion of citizens belonging to environmental organisations. I never understood the reason for this national interest in the environment until I was visiting a few years ago and raised this question with my Dutch colleagues as we were driving through the countryside.

"Just look around you," they answered. "The land here is 7m below sea level. It was once a shallow bay of the sea that we surrounded by dikes and then drained with pumps to create low-lying land we call a 'polder'. We have pumps that pump out the water that is continually leaking into our polders through the dikes."

"If the dikes burst, the people in the polder drown. But it is not the case that the rich Dutch live on top of the dikes, while the poor Dutch are living down in polders. If the dikes burst, everybody drowns, regardless of their wealth."

"That was what happened in the terrible floods of February 1953, when high tides and storms drove water inland over the polders of Zeeland and nearly 2,000 Dutch drowned. After that disaster, we all swore, 'Never again!' and spent billions building reinforced barriers against the water."

In Netherlands, the people in power know they cannot insulate themselves from their mistakes, and that they have to act in ways that will do the maximum good for as many people as possible.

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