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.

Comments

Maybe some here can help me understand something that has been puzzling me about Ostrom.

I think she is a great choice for the prize, but what I am wondering about are some relatively recent publications/comments she has made about being optimistic about the ability to provide the global public good of climate change mitigation (i.e. protection of the global common pool resource of certain atmospheric services). It seems to me that the climate problem categorically does not meet Ostrom’s prerequisites and it is thus difficult to understand what her optimism is grounded in. The problem is not that no global commons problem can adequately approximate the prerequisites (e.g. I would say the ozone problem did/does to a much larger extent), but rather that the particulars of the climate problem should generate strong pessimism if we follow Ostrom.

The tragedy of the commons problem is by definition non-exclusionary: it is a commons because its participants cannot control the behavior of other participants. If the participants are capable of enforcing a rule like "no citizen could send more cows to the alp than he could feed during the winter", then there is no commons problem to begin with. Someone has to be enforcing the per-participant limit on cows; this entity may as well be a rentier. At least then there would be no distortion towards investment in wintering facilities (for example).

Olstrom herself seems to place far stricter limits on applicability than I've mentioned seen so far, e.g.:

Effective commons governance is easier to achieve when (i) the resources and use of the resources by humans can be monitored, and the information can be verified and understood at relatively low cost (e.g., trees are easier to monitor than fish, and lakes are easier to monitor than rivers) (29); (ii) rates of change in resources, resource-user populations, technology, and economic and social conditions are moderate (30–32); (iii) communities maintain frequent face-to-face communication and dense social networks—sometimes called social capital— that increase the potential for trust, allow people to express and see emotional reactions to distrust, and lower the cost of monitoring behavior and inducing rule compliance (33–36); (iv) outsiders can be excluded at relatively low cost from using the resource (new entrants add to the harvesting pressure and typically lack understanding of the rules); and (v) users support effective monitoring and rule enforcement (37–39). Few settings in the world are characterized by all of these conditions. The challenge is to devise institutional arrangements that help to establish such conditions or, as we discuss below, meet the main challenges of governance in the absence of ideal conditions (6, 40, 41).

Miss Olstrom's saying something very simple: if you have societal cohesion, problems like "tragedies of the commons" can be solved. But "institutional arrangements" cannot substitute for societal cohesion. That depends on language, ideology, traditions and even ethnicity. Acknowledging the need for and, even more, fostering such cohesion are so unlikely in today's political climate that I fear "strong pessimism" is fully justified.


Effective commons governance is easier to achieve when (i) ... (v)

Reading this list, it almost sounds like the "cure" is worse than the disease, if back-to-the-future means old-boys networks, guanxi, cartels, provincialism and mistrust of outsiders, resistance to disruptive and innovative technological change, a world where who you know or who your parents were is more important than your character or ability, rule of law and equal opportunity is trumped by hoary traditions, and so forth.

Maybe I'm reading too much into it, but some elements of this program sound like a sinister throwback to old ways that we spent centuries trying to overcome.


The challenge is to devise institutional arrangements that help to establish such conditions...

How about no?

Like Jared Diamond in "Collapse," Elinor Ostrom has pointed out the problems for effective commons management caused by ethnic diversity.

http://isteve.blogspot.com/2009/10/elinor-ostoms-economics-nobel-prize.html

For example, if you show up in a New England lobstering village, where tradition dictates which families can do how much lobstering when, and announce you are going into the lobstering business, unless you've married into a local family, you'll find your boat at the bottom of the marina the next morning.

A classic case: American shrimp fishermen in Texas were universally denounced as racists in the late 1970s when they resisted the government's efforts to encourage Vietnamese refugees to become shrimpers in their waters. French director Louis Malle made a movie, Alamo Bay, denouncing ugly Americans fighting hardworking immigrants.

What got lost in all the tsk-tsking is that fishing communities always resist newcomers, especially hardworking ones, because of the sizable chance that the outsiders who don't know the local rules or don't care about them will ruin the ecological balance and wipe out the stocks of fish.

Oh brother. Leave it Steve Sailer to try to turn Ostrom into Lou Dobbs or worse.

She makes clear that these trust networks are linked to social capital. Certainly we know
that fishing villages tend to be very insular and do not like outsiders of any sort, even
including people of their same ethnicity. This is not strictly a matter of immigration, Steve,
even though you are like the person with a hammer who thinks everything you see is a nail.

The leading expert on social capital is Robert Putnam. He distinguishes "bonding" social
capital from "bridging" social capital. The first is the sort tied to ethnic insularity and
only trusting a narrow group of insiders, however defined. "Bridging" is tied to more
general social trust across groups. The evidence is strong that it is the latter that is
more favorable for economic growth than the former.

A quick Google search finds Nobel Laureate Elinor Ostrom, like Jared Diamond, also cautiously expressing Doubts About Diversity in her book "The Drama of the Commons."

" ... Alesina et al. (1999) find that ethnic diversity is associated with lower public goods funding across the U.S. municipalities because different ethnic groups have different preferences over the type of public good ... In the kind of rural societies considered in this chapter ... the effectiveness of social sanctions weakens as they cross ethnic reference groups. In this vein, Miguel (2000) constructs a theoretical model where the defining characteristics of ethnic groups are the ability to impose social sanctions within the community against deviant individuals and the ability to coordinate on efficient equilibria in settings of multiple equilibria. With data from the activities of primary school committees in rural western Kenya, Miguel then shows that higher levels of ethnic diversity are associated with significantly lower parent participation in parent meetings, worse attendance at school committee meetings, and sharply lower teacher attendance and motivation.

"If social groups (not solely ethnic groups) are defined as those whose boundaries coincide with the effective monitoring and enforcement of shared social norms ... this is one way of understanding the notion cited earlier of cultural homogeneity, a variant of what many authors have called social capital or social cohesion. ... Irrigation organizations that cross village boundaries can rely less on social sanctions and norms to enforce cooperative behavior ..."

There are basically two ways to get people to play nice with a common resource such as shrimp or irrigation water: violence or ostracism. The latter works most effectively regarding marriage -- if you don't play by the rules, nobody respectable will let your kid marry his daughter. But when newcomers who don't ever want their children to marry your children arrive and start exploiting your irrigation system or fishery (or whatever), then the old non-violent traditions break down, and people start turning to violence or its threat, whether anarchic or government-based (e.g., socialism and property rights are based on the threat of the government's monopoly on violence).

Thanks, Barkley, for validating the stereotype of the shipwrecked economist with the unopened can of beans: "Assume we have "bridging capital" ...

Barkley says:

"Some societies have more of it than others."

Indeed.

Vernon's piece is excellent, on the money. I am in a similar situation to some extent. I am teaching environmental economics this semester and am in the middle of discussing problems of managing forests and fisheries. While I do not have the students actually reading her work, I had mentioned her Governing the Commons when making clear that it is governance mechanisms of access control that are key, not the label that one puts on property rights per se. I was further discussing these matters today in conncetion specifically with forests and fisheries and was pleased to be able to tell the students at some length about Elinor Ostrom's work and how relevant it is to dealing with these very important problems in a constructive way.

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