Melanie Konrad, our student intern, considers classic economic theory, collective action and common resources, following the thought of Nobel Laureate Elinor Ostrom.
Since many goods that are essential to meet basic needs do not fit in a framework that differentiates between only public or private goods, scholars like Ostrom explore alternative forms of economic organisation based on ‘polycentric’ decision-making and the establishment of social norms. The objectives of such research include, among other things, the search for comparable structures of decision-making in scenarios that require collective action, drawing conclusions about human behaviour in community management.. Locality and local production, as well as the abolition of hierarchies and domination and the establishment of an alternative environmentally, socially and economically sustainable system are the fundamental concerns of the discourse on anti-capitalism (Wall 2005). Additionally, Murray Stewart (2000) states that the concept of sustainability was becoming more and more important in the realm of cultural institutions. In his text Community Governance, he further explores this subject for neighbourhoods and “community based decision-making, of power and management”. Stewart discusses the notion of “carrying capacity” for the realm of governance; he outlines that there were an upper end in the quantity and quality that public management could deliver.
However, Ostrom’s work on the governing of common-pool resources (CPRs), such as grazing meadows, irrigation systems, woods or fishing grounds, is based on the assumption that there are forms of sustainable economic activity that are neither based on the principles of the market nor on those of the state. These forms of sustainable management prove to be more appropriate when applied to the management of CPRs. Ostrom strongly feels that the view of only two forms of organisation (either market or state), two types of goods (private or public) and one model of human behaviour (rational, utility oriented) is outdated. Some of the key findings she presented in her Nobel Prize winning lecture from 2009 show the following characteristics of CPR management. Ostrom’s meta-analysis of CPRs, which she presented in Governing the Commons (1990), is based on thinking in “multilevel, polycentric systems” and empirical field and lab studies in game theory to elaborate a conclusive theory of choice. Together with other researchers she developed, for example, the “Institutional Analysis and Development (IAD) framework”, a tool to analyse decision-making processes in ‘chaotic’ circumstances. Ostrom ascribes to what would be called ‘chaos’ in traditional economic theory, and what she and her husband Vincent labelled “polycentricity”, an undeniably productive potential. For instance, studies on irrigation systems and forestry in Nepal show that governments do not necessarily “do a better job than users in organizing and protecting important resources.” Inspired by the findings, Ostrom altered the binary typisation of goods and redefined the characteristics e.g. of ‘club goods’ to ‘toll goods‘ (Figure 1).
|Subtractability of Use|
|Difficulty of Excluding PotentialBeneficiaries||High||Common-pool resources: groundwater basins, lakes, irrigation systems, fisheries, forests, etc.||Public goods: peace and security of a community, national defense, knowledge, fire protection, weather forecasts, etc.|
|Low||Private goods: food, clothing, automobiles, etc.||Toll goods: theatres, private clubs, daycare centres|
Figure 1: Four types of goods (Ostrom 2009, 413; adapted from Ostrom 2005, 24).
Figure 1 shows the four categories of goods that are organised according to ‘subtractability’ and ‘excludability’ Ostrom furthermore introduced a gradation system of “subtractability” instead of the binary of absence or presence of “rivalry” over a specific good. Subtractability is used to qualify the degree to which the use of a resource diminishes the probability for others to use it as well. For example, food diminishes when it is eaten, yet the consumption of knowledge does not solely diminish the amount available to others. Excludability is part of the traditional conception of goods and indicates whether someone can effectively be barred from using a resource.
CPRs were further characterised by their complex legal arrangements, inasmuch as they are framed in a regime of “bundles of rights rather than a single right.” One of the main findings of Ostrom’s work is that, if people do not communicate with each other, the probability that they will overharvest a CPR is distinctly higher than if they are allowed to communicate on a joint strategy. As a result, to analyse different settings of social behaviour, the IAD framework includes an array of “external factors”, such as environmental, social and political conditions. Ostrom experimented a lot with game theory, because she was looking to find a ‘game’, a setting, which could be used for all sorts of social dilemmas. She found out that it was not achievable to develop one comprehensive game. However, she argues that it was possible to find a general coding of structural elements in terms of an actor-network setting that would allow comparable “data gathering and analysis.”
Furthermore, Ostrom challenges the view of the rational but helpless individual that is not able to alter the structures it operates in. However, whether individuals would actually alter the structures in a threatening situation was highly variable and not predictable with certainty. In any case the defining of social norms in collective action was a crucial part of the management, whereas Ostrom roughly differentiates between “boundary” and “choice rules” and “forms of monitoring”. Additionally, individuals almost never have full information and in many situations they use “heuristics”, or “rules of thumb”, based on their experience, yet these may not work when circumstances change. Ostrom highlights that, although there were many differences in people’s behaviour, the particular context of a social setting was more significant, such as the quality of communication, and the extent to which people can trust each other. Consequently, the motivations of individuals are far more complex “than posited in earlier rational-choice theory.”
Ostrom’s findings therefore illustrate that the classical economic theory, neither on the organisational level nor on the level of the characterisation of goods, provided an appropriate theoretical framework to analyse CPRs. Additionally, the concept of human interactions and the decision-making processes of collectives needs further elaboration. Since neither state nor market can deliver some services satisfactorily, other forms of organisation necessarily had to emerge. Furthermore, in the discourse on environmental sustainability, the notion of CPRs and forms of economic production beyond the principles of capitalism and hierarchy have been popular ever since. Consequently, self-organisation and collective action on a local scale are seen by environmentally concerned thinkers as alternative strategies to tackle the negative effects of globalisation.
Stewart, M. (2000) ‘Community Governance’ in H. Barton (ed.) et al. Sustainable Communities: The Potential of Eco-Neighbourhoods. London: Earthscan Publications Ltd, pp. 176-186.
Ostrom, E. (1990) Governing the Commons: The evolution of institutions for collective action. Cambridge: Cambridge University Press.
Ostrom, E. (2000) ‘Collective Action and Evolution of Social Norms’, The Journal of Economic Perspectives 14/3, pp. 137-158.
Ostrom, E. (2005) Understanding Institutional Diversity. Princeton, New Jersey: Princeton University Press.
Ostrom, E. (2009) ‘Beyond Markets and States: Polycentric Governance of Complex Economic Systems’ Prize Lecture 08.12.2009, nobelprize.org, pp. 408-444, http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/2009/ostrom_lecture.pdf (accessed: 22.04.2014).
Wall, D. (2005) ‘Small is Beautiful: Green Localism’ in Babylon and Beyond: The Economics of Anti-Capitalist, Anti-Globalist and Radical Green Movements. London: Pluto Press, pp. 64-83.