Results for “ostrom”
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Economists in the Wild: Finkelstein, Oostrom and Ostriker

Here’s the latest Economists in the Wild video featuring Amy Finkelstein, Tamar Oostrom and Abigail Ostriker discussing some of their research (with Einav and Williams) on breast cancer screening. It’s a good video for illustrating how the tools of economics can be used to study a startling wide variety of problems.

Here’s a free assignment to help connect this video to class.
More professor resources.
High school teacher resources.

Women in Economics: Elinor Ostrom

Our first episode in the Women in Economics series is an introduction to Elinor Ostrom, the first woman to have won the Nobel Prize in Economics. Elinor Ostrom and Vincent Ostrom have long been a part of the intellectual foundations of “Masonomics”. Both the Ostroms were past presidents of the Public Choice Society, for example, as were Jim Buchanan, Gordon Tullock and Vernon Smith. The Mason Economics department was thrilled when Ostrom won the Nobel as there has been and continues to be fruitful interaction between public choice, experimental economics and institutional analysis.

At the Women in Economics website you can also find Ostrom’s Nobel Prize address, more on the tragedy of the commons, and other resources.

Especially valuable for in-depth research are Vlad Tarko’s biography of Elinor Ostrom and Paul Dragos Aligica and Peter Boettke’s introduction to The Bloomington School.

*Elinor Ostrom: An Intellectual Biography*

Once they moved to Indiana University and started the workshop, they were able to return to the initial idea.  Initially, Elinor Ostrom was hired for teaching “Introduction to American Government” on Tuesdays, Thursdays, and Saturdays at 7:30 a.m.  “How could I say no?” she joked later.

That is from Vlad Tarko’s new and very useful biography of Ostrom.  Of course in 2009 she was both the first political scientist and the first woman to win the Nobel Prize in economics.

*Elinor Ostrom: An Intellectual Biography*

By Vlad Tarko, order your copy here.  Here are two excerpts:

She went to Beverly Hills High School, across the street from her house.  “I’m very grateful for that opportunity,” she later recalled, “because 90 percent of the kids who went to Beverly Hills High School went on to college.  I don’t think I would have gone to college if not for that environment.”  She recalled that her “mother didn’t want me to go to college — [she] saw no reason whatsoever to do that…”

“Basically I put my husband through law school,” she recalled…Her own [first] husband objected to her getting a PhD, which led her to divorce him.

This book captures the essence of Elinor Ostrom.

Elinor Ostrom Passes

Indiana University has announced that Elinor Ostrom has passed away from cancer:

The entire Indiana University community mourns the passing today of Distinguished Professor Elinor Ostrom, who received the 2009 Nobel Prize in Economic Sciences for her groundbreaking research on the ways that people organize themselves to manage resources.

…The Royal Swedish Academy of Sciences awarded the 2009 Nobel Prize in Economic Sciences to Ostrom “for her analysis of economic governance, especially the commons.” Through a multidisciplinary approach that combined theory, field studies and laboratory experiments, she showed that ordinary people are capable of creating rules and institutions that allow for the sustainable and equitable management of shared resources. Her work countered the conventional wisdom that only private ownership or top-down regulation could prevent a “tragedy of the commons,” in which users would inevitably destroy the resources that they held in common.

Here is my post on Ostrom’s Nobel where I called her “the mother of fieldwork in development economics.” Here are other MR posts on Ostrom.

The economics of local forest management (or another lesson in Elinor Ostrom)

Here are some recent results:

In the first study of its kind, Chhatre and Arun Agrawal of the University of Michigan
in Ann Arbor compared forest ownership with data on carbon
sequestration, which is estimated from the size and number of trees in
a forest. Hectare-for-hectare, they found that tropical forest under
local management stored more carbon than government-owned forests.
There are exceptions, says Chhatre, "but our findings show that we can
increase carbon sequestration simply by transferring ownership of
forests from governments to communities".

One reason may be that locals protect forests best if
they own them, because they have a long-term interest in ensuring the
forests' survival. While governments, whatever their intentions,
usually license destructive logging, or preside over a free-for-all in
which everyone grabs what they can because nobody believes the forest
will last (Proceedings of the National Academy of Sciences, DOI: 10.1073/pnas.0905308106).

The authors suggest that locals would also make a better job
of managing common pastures, coastal fisheries and water supplies. They
argue that their findings contradict a long-standing environmental
idea, called the "tragedy of the commons", which says that natural
resources left to communal control get trashed. In fact, says Agrawal,
"communities are perfectly capable of managing their resources
sustainably".

If you turn to the first page of the paper itself, the header reads:

Edited by Elinor Ostrom, Indiana University, Bloomington, IN, and approved September 4, 2009 (received for review July 22,
2009)

Of course this sort of result is inspired by her work as well.  For the pointer I thank Andrew Grant.

Elinor Ostrom on climate change

You'll find a two-part transcript here, or the podcast version.  One recurring theme of her remarks is that we will need a great diversity of adjustment plans and that a "one size fits all" approach is bound to fail.  In this dialog Elinor occasionally speaks in a personal manner:

To some extent I’m kind of worried that there are many, many more people who are apart from the Earth in their everyday life. How do we get more kids involved in research on nature earlier? And there are some very exciting programs where they’re getting kids, in terms of bird observation days, training kids how to take measurements of birds and be involved in the counts. How to get them involved in measuring stream flow. There’s just lots of things that kids can do— all the way up to college kids. I’m not talking about just five year olds…But, five year olds can start. [Clears throat] If we take self-consciously the recognition that if we’re going to understand ecological processes, we have to understand them in a deeper way than the experience the last twenty-five to fifty years has been leading people.

Vernon Smith on Elinor Ostrom

Vernon, of course, knows Ostrom's work well:

Relentlessly, Ostrom has pursued answers to two questions:

(1) Since "everybody's property is nobody's property," how is it that there are so many cases where collectives of ordinary people with no education and with none of the economists' knowledge of "the tragedy of the commons," in fact discover ingenious rules (institutions) for taking the "tragedy" out of a productive resource they hold in common? If you read her book you will find among the diversity of examples a Swiss village whose people have private property in the plots they plant and harvest, but also have a communal summer meadow for grazing their cows. One rule, still enforced, dating back to 1517 states that "no citizen could send more cows to the alp than he could feed during the winter." Wintering a cow is costly, and this rule rations access to the commons by tying it to private property rights….

(2) As a distinguished political-economic scientist she will be the first to tell you that there are also plenty of commons problems that represent institutional failures and fragilities; she has asked why, and what makes the difference between success and failure? The fragilities include inshore fisheries and groundwater basins with continuing commons problems; failures include salt water fisheries and irrigation systems hamstrung by the complexity of the rules.

Success is associated with clarity in the definition of and bounds on individual rights (and opportunities) to take action, and the geography of the commons; details for monitoring, operations, sanctions and mechanisms for conflict resolution emerge from within the collective and out of motivated people's direct experience with environmental context and each other. When too many of these problem-solving elements fail, the governance systems fail or require continuing attention to their fragility characteristics. A fatal source of disintegration is the inappropriate application of uninformed external authority, including intervention to prevent application of efficacious rules to political favorites. Also detrimental to good solutions is the OPM (other people's money) problem.

…Ostrom brings a distinct style in applying her skill in different methodologies. She blends field and laboratory empirical methods, economic and game theory, the really important ingredient of scientific common sense, and she constantly challenges her own understanding by looking at new potentially contrary evidence and designing new experiments to challenge her understanding of the emergent historical rules and the theory used to explicate them.

Elinor Ostrom and the well-governed commons

Elinor Ostrom may arguable be considered the mother of field work in development economics.  She has worked closely investigating water associations in Los Angeles, police departments in Indiana, and irrigation systems in Nepal.  In each of these cases her work has explored how between the atomized individual and the heavy-hand of government there is a range of voluntary, collective associations that over time can evolve efficient and equitable rules for the use of common resources.  

With her husband, political scientist Vincent Ostrom, she established the Workshop in Political Theory and Policy Analysis in 1973 at Indiana University, an extraordinarily productive and evolving association of students and professors which has produced a wealth of theory, empirical studies and experiments in political science and especially collective action.  The Ostrom's work bridges political science and economics.  Both are well known at GMU since both have been past presidents of the Public Choice society and both have been influenced by the Buchanan-Tullock program.  You can also see elements of Hayekian thought about the importance of local knowledge in the work of both Ostroms (here is a good interview).  My colleague, Peter Boettke has just published a book on the Ostrom's and the Bloomington School.

Elinor Ostrom's work culminated in Governing the Commons: The Evolution of Institutions for Collective Action which uses case studies to argue that around the world private associations have often, but not always, managed to avoid the tragedy of the commons and develop efficient uses of resources.  (Ostrom summarizes some of her findings from this research here).  Using game theory she provided theoretical underpinnings for these findings and using experimental methods she put these theories to the test in the lab. 

For Ostrom it's not the tragedy of the commons but the opportunity of the commons.  Not only can a commons be well-governed but the rules which help to provide efficiency in resource use are also those that foster community and engagement.  A formally government protected forest, for example, will fail to protect if the local users do not regard the rules as legitimate.  In Hayekian terms legislation is not the same as law.  Ostrom's work is about understanding how the laws of common resource governance evolve and how we may better conserve resources by making legislation that does not conflict with law.

Russia fact of the day

A study of Russian publications in the 1990s found that some 39 percent of all nonfiction published in Russia in that decade had something to do with the occult.

That is from the really quite interesting The Russian Cosmists: The Esoteric Futurism of Nikolai Fedorov and His Followers, by George M. Young.  And for more on Russian Cosmism, you might try reading this collection.  It is interesting to get such a different perspective on the issues raised by Bostrom, Hanson, Balaji, Musk, and the longevity writers, among others.  I don’t believe any of those thinkers would be happy with these Russian discussions, but…I suppose that’s the point!

The Moral Foundations of Progress

Applied Divinity Studies has written an excellent and thought-provoking 34-pp. review of my book Stubborn Attachments.  Excerpt:

Naively, say there are three possible timescales for humanity, and we assign equal (33.3%) credence to each of them:

1. Short: Humanity dies out within 100 years or fewer
2. Medium: Humanity dies out within 1,000 years or fewer
3. Long: Humanity dies out within 1,000,000 years or more

In this case, the overwhelming moral importance still lies in the far-future (1,000,000+ years). So long as you accept the basic Atemporal argument of Attachments, the mere possibility of a far-future dominates the expected value calculus.

You could tweak the probabilities to assign 99% credence to the medium-term view and only 1% to the long-term view, and the math will still work out.

Growth will still matter in that it accelerates our arrival at the “saturation” point, but as estimated by Nick Bostrom in Astronomical Waste, the cost of this delay is miniscule compared to the cost of outright extinction. So existential-risk remains of tremendous importance, but where does that leave progress?

There is much more at the link.  And here is the blog of Applied Divinity Studies.

Oliver Williamson, RIP

Oliver Williamson won the Nobel in 2009 with Elinor Ostrom. My post on that event is reprinted below (no indent). See also Tyler here.

——————

In Adam Smith there is the pin factory and the market and from that beginning we trace the long literature in economics focused on the twin questions, What price to set?  How much to produce?  Following Coase, Williamson asks different questions, Why a pin factory?  Why are the 18 steps to make a pin performed by a single firm rather than two or more?  Why are there many firms instead of one large firm?  Why does the pin factory not vertically integrate upwards to buy the steel factory and downwards to buy the retail hardware shop?

Williamson’s answers rest on the notions of bounded rationality, contract incompleteness, asset specificity and opportunism. Start at the end, asset specificity and opportunism.  When a deal has been sealed the parties typically move from having many potential partners to being locked in.  That’s bad because it raises the possibility of opportunism–one party can exploit the other.  But it’s also good because when the lock-in is credible each party may be more willing to invest in assets which are extra-productive but specific to the relationship.

Marriage, for example, takes away some possibilities but it adds others.  With marriage, for example, comes a greater willingness to invest in children (n.b. asset specificity, the child is of extra value but only to the specific parties involved in the marriage) but that very benefit also means that one of the parties has the leverage to be opportunistic.  Knowing all of this when they enter the contract the parties bargain ex-ante, they exchange promises and make investments (the ring), they establish rules for ex-post bargaining or decide on the background rules to apply in that eventually (pre-nup, no fault divorce, covenant marriage).  The rules are never perfect and the contacts are always incomplete.

Transaction cost economics is all about applying these ideas in different settings to figure out the best governance structures (marriage, vertical integration etc.) in different circumstances. How does one deal with expensive investments (such as highly individual dies or plant construction) that are specific to a given
trade and put the investor at risk yet which increase productivity? Williamson analyzes how firms come to rely on long term contracts or vertical integration or other seemingly non-competitive solutions to enhance market productivity. Early generations of antitrust enforcers often saw these as monopolistic dealings, but scholars such as Williamson helped us understand how these are essential to the workings of the invisible hand.

Williamson’s paper, The Economics of Governance is an excellent recent summary of his views in the area.

Williamson’s work is notable for inspiring a large body of empirical and theoretical work in modern industrial organization and having influence in law, political science, and management. His work has been widely cited, and by some counts he was the most widely cited economist in the world.

I especially thank John Nye who contributed to this post.