My layman understanding of the Efficient Market Hypothesis is that there is so much brain power focused on the maximization of profit in the marketplace, that the market will find the best solution both in the short and in the long term.
The particular instance of "Tragedy of the Commons" I have in mind is global warming, for which there is a fair amount of scientific consensus that it will disturb our civilization to an extent that does not guarantee that markets will continue existing as usual (stable governments being somewhat important for markets).
So here is my question: It seems that market players are not investing in ensuring the effects of global warming are minimized (i.e. market players are not ensuring the continuing existence of a market place). Does this mean that the Efficient Market Hypothesis is a model that does not describe our actual reality? If that is the case, how is one supposed to know when the Efficient Market Hypothesis is a good model?
A side question: Is this whole "exploiting the commons before someone else exploits them, irrespective of the fact that we are all doomed without the commons" more closely described by a Prisoner's Dilemma? But if that is the case, would you not expect the intelligent efficient actors in the marketplace to decide to work together to save themselves?
My education is not in economics so maybe my question is not well defined. My hope is that even if this is the case, an explanation of why the question is not well defined would be useful on its own.