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The Future of the Commons,Beyond Market Failure and. Government Regulation,ELINOR OSTROM,with contributions from. CHRISTINA CHANG,MARK PENNINGTON,VLAD TARKO,The Institute of Economic Affairs. First published in Great Britain in 2012 by contents. The Institute of Economic Affairs,2 Lord North Street. Westminster,London sw1p 3lb,in association with Profile Books Ltd.
The mission of the Institute of Economic Affairs is to improve public. The authors 7, understanding of the fundamental institutions of a free society with particular Acknowledgement 9. reference to the role of markets in solving economic and social problems Foreword 10. Summary 14,Copyright The Institute of Economic Affairs 2012. List of figures and table 17,The moral right of the author has been asserted. 1 Elinor Ostrom common pool resources and, All rights reserved Without limiting the rights under copyright reserved above. the classical liberal tradition 21, no part of this publication may be reproduced stored or introduced into a.
retrieval system or transmitted in any form or by any means electronic Mark Pennington. mechanical photocopying recording or otherwise without the prior written Introduction 21. permission of both the copyright owner and the publisher of this book Ostrom on incentives and the management of. A CIP catalogue record for this book is available from the British Library. common pool resources 22,Ostrom and the classical liberal tradition 38. ISBN 978 0 255 36653 3 Conclusion Ostrom and the need for a new economics 44. eISBN 978 0 255 36681 6,References 46, Many IEA publications are translated into languages other than English or. are reprinted Permission to translate or to reprint should be sought from the 2 Elinor Ostrom s life and work 48. Director General at the address above Vlad Tarko,The life of Elinor Ostrom 48. Typeset in Stone by MacGuru Ltd, info macguru org uk Elinor Ostrom s intellectual contributions 49. Understanding public goods and common pool resources 57. Printed and bound in Britain by Hobbs the Printers Polycentricity 60. Fisheries an application of Ostrom s work 61,Conclusion 64.
References 64,t he authors,3 The future of the commons beyond market. failure and government regulation 68,Elinor Ostrom. Introduction 68,Challenges in achieving sustainability 69. The importance of second tier variables 72 Christina Chang is Lead Economic Analyst at CAFOD and is. Questions that can be addressed in our research responsible for their work programme on economic and financial. framework 75 issues CAFOD is the official development agency of the Catholic. Design principles for the management of natural resource Church in England and Wales and works with partners in 40. systems 77 countries around the world responding to immediate needs and. What have we learned 79 deeper causes of poverty She was previously Policy Manager at. The relationship between larger and smaller units of the International Chamber of Commerce in Paris. governance 81, Conclusion 82 Elinor Ostrom 1933 2012 was Distinguished Professor and. Arthur F Bentley Professor of Political Science at Indiana Univer. 4 Questions and discussion 84 sity In 2009 she became the first woman to be awarded the. Nobel Prize in Economics The award recognised her pioneering. 5 Ostrom s ideas in action 97 work on the governance of common pool resources In 1973 she. Christina Chang founded the Workshop in Political Theory and Policy Analysis. References 103 with her husband Vincent Ostrom Elinor Ostrom and her team. conducted a large number of case studies around the world. About the IEA 106 examining resources such as fisheries forests and grazing land. These studies enabled her to identify several design principles. for their successful management She also developed a theoret. ical framework for the analysis of different institutional arrange. ments Her extensive research led to the publication of numerous. academic papers and books including Governing the Commons. the future of the commons, 1990 and Understanding Institutional Diversity 2005 For the.
Institute of Economic Affairs she contributed a paper Institu. tions and the Environment to the Economic Affairs symposium A cknowledgement. on The Economic Analysis of Institutions September 2008 In. March 2012 Professor Ostrom gave the Twenty First Annual IEA. Hayek Memorial Lecture on The Future of the Commons Beyond. Market Failure and Government Regulation, The Institute of Economic Affairs would like to thank CQS. Mark Pennington is Professor of Public Policy and Political for its very generous sponsorship of the 2012 Hayek Memorial. Economy in the Department of Political Economy King s College Lecture and of this publication. University of London His most recent book is entitled Robust. Political Economy Classical Liberalism and the Future of Public Policy. Edward Elgar 2011 Previous books include Planning and the. Political Market Public Choice and the Politics of Government Failure. Athlone Continuum 2000 and Liberating the Land IEA 2002. Vlad Tarko is a PhD student at George Mason University and a. Research Fellow at the Mercatus Center He was previously a. researcher at the Center for Institutional Analysis and Develop. ment in Bucharest His main interests are new institutionalism. public choice and Austrian economics He has published papers. in Constitutional Political Economy Governance and Futures. manage the resource This is what happens with fisheries in the. European Union A benevolent government with perfect know. F OREWORD ledge it is argued will be able to develop the rules to prevent. overfishing and enforce those rules But what if government is not. benevolent and is subject to lobbying And what if government. is simply unable to monitor effectively Fully specified property. rights and private ownership are suggested as the alternative But. In March 2012 the IEA was fortunate to be able to host Elinor these can come with problems too such as enormous transaction. Ostrom for our annual Hayek Lecture and a range of other events costs of monitoring and enforcement. Throughout the day she was engaging and sparkling intellectu Elinor Ostrom showed how the community itself could often. ally Every idea that was brought up whether by young students define the rules for using common pool resources and also develop. or seasoned academics brought a very thoughtful and energetic appropriate monitoring mechanisms that were consistent with the. response Quite clearly Professor Ostrom enjoyed discussing customs that characterised the way in which those communities. economic ideas even those that were only tangentially related to lived Often monitoring mechanisms would be chosen that were very. her research Very sadly Professor Ostrom died shortly after the effective but which might seem counter intuitive to an outsider. Hayek Lecture and her husband who worked in a similar academic In no sense do Professor Ostrom s ideas conflict with the idea. area died shortly afterwards While this leaves a huge hole in the of a free economy Although there may be some role for govern. world of political economy Professor Ostrom s legacy has ensured ment such as providing information or courts systems for the. that across the world young academics are engaged in research adjudication of disputes Ostrom s observations about how. examining the management of natural resources by communities resource systems could be managed were essentially observations. Ostrom examined problems relating to the management of about free economic actors at work The community management. common pool resources These are very important environmental of pastureland fisheries and so on and the implicit property. issues especially for the poorest people in the world If we have rights that are involved form part of what might be described as. a fishery pastureland or forest area for example it is important the free economy outside the market economy It has to be said. for those relying on it as well as for consumers of products that and this was clear from the variety of people attending the Hayek. are produced using the resource that it is managed sustainably so Lecture and those asking questions at the end that Ostrom s. that it can renew itself ideas are attractive to those of a left leaning persuasion To the. Traditionally economists have suggested two solutions to left perhaps the community management of a resource is the. the problem of the management of common pool resources It acceptable face of a free economy like a mutual bank or coopera. has often been thought that the government should own and or tive retail outlet but it is no less free for that. the future of the commons foreword, Mechanisms related to those observed by Ostrom can be academic puts the lecture in a wider context and effectively. seen in the context of many other economic activities Golf clubs demolishes the myth that Ostrom should be a poster child for. develop their own rules systems and methods of enforcement anti market economists Vlad Tarko provides an intellectual biog. Organised sports more generally have many polycentric sources raphy of Elinor Ostrom and further context for her import ant. of rules and enforcement to ensure that those participating can work Finally Christina Chang who works for a foreign aid. achieve certain common aims The local village under eleven agency provides an interesting example of how she has found. football team is related to the very same organisations that Ostrom s ideas working in the context of a very difficult common. manage the Premiership and the World Cup For the children pool resource problem. playing there will be club rules local rules FA rules and FIFA Overall this excellent collection provides a very helpful intro. rules all sitting alongside each other and with different enforce duction to the work of Elinor Ostrom which the IEA commends to. ment mechanisms there are though no government rules those studying economics political economy and related discip. Before the state took over financial regulation the stock exchange lines It is also important for those policymakers who are trying to. would determine the rules by which participants in financial wrestle with natural resource problems and hopefully will help. markets acted this was a purely private body which would seem inject the required humility into their thinking. to have been a more successful rule maker than the government Over the coming decades Elinor Ostrom will be remembered. The UK and the USA both have a great tradition of private rule for her brilliant contributions to political economy She will also. making to facilitate groups of persons reaching a common end be remembered by IEA visitors staff and trustees for her inspiring. But Ostrom s main concern was common pool resources As visit to the UK and the wonderful way in which she interacted with. she makes clear in the question and answer session published intellectually curious students and others who engaged with her. below she was acutely aware of the serious problems facing the philip booth. UK and the European Union with regard to our fisheries systems Editorial and Programme Director. Not just there but in other areas too we need to apply Ostrom s Institute of Economic Affairs. work in order to ensure that we have sustainable management of Professor of Insurance and Risk Management. common pool resources Top down government approaches have Cass Business School City University. not worked If the work of left leaning and free market economists September 2012. points in the same direction with regard to these problems then. perhaps that is helpful in establishing an intellectual consensus The views expressed in this monograph are as in all IEA publi. Together with Ostrom s lecture which summarises her bril cations those of the author and not those of the Institute which. liant work in this field we also have important contributions has no corporate view its managing trustees Academic Advisory. by other authors in this publication Mark Pennington a UK Council members or senior staff. s u m m a ry, resource users or by assisting enforcement processes through. court systems, s ummary Elinor Ostrom s work in this field for which she won the. Nobel Prize in economics in 2009 was grounded in the. detailed empirical study of how communities managed. common pool resources in practice, It is essential that we avoid the panacea problem There is.
no correct way to manage common pool resources that will. Traditional economic models of how to manage always be effective Different ways of managing resources. environmental problems relating to renewable natural will be appropriate in different contexts for example within. resources such as fisheries have tended to recommend different cultures or where there are different physical. either government regulation or privatisation and the explicit characteristics of a natural resource. definition of property rights Nevertheless there are principles that we can draw from. These traditional models ignore the practical reality of the detailed study of the salient features of different cases to. natural resource management Many communities are help us understand how different common pool resources. able to spontaneously develop their own approaches to might be best managed which rules systems and systems of. managing such common pool resources In the words of organisation have the best chance of success or failure and so on. Mark Pennington Professor Ostrom s book Governing the Elinor Ostrom s approach has been praised by the left who. Commons is a superb testament to the understanding that can often see it as being opposed to free market privatisation. be gained when economists observe in close up detail how initiatives In fact her approach sits firmly within the. people craft arrangements to solve problems in ways often classical liberal tradition of political economy She observes. beyond the imagination of textbook theorists communities freely choosing their own mechanisms to. In particular communities are often able to find stable and manage natural resource problems without government. effective ways to define the boundaries of a common pool coercion or planning. resource define the rules for its use and effectively enforce In developing a viable approach to the management of. those rules the commons it is important among other things that a. The effective management of a natural resource often requires resource can be clearly defined and that the rules governing. polycentric systems of governance where various entities the use of the resource are adapted to local conditions. have some role in the process Government may play a role This suggests that rules imposed from outside such as by. in some circumstances perhaps by providing information to government agencies are unlikely to be successful. the future of the commons, There are important areas of natural resource management. where Elinor Ostrom s ideas should be adopted to avoid. environmental catastrophe Perhaps the most obvious figures and table. example relevant to the UK is in European Union fisheries. policy Here there is one centralised model for the. management of the resource that is applied right across the. European Union ignoring all the evidence about the failure of. that approach, Figure 1 The Institutional Analysis and Development. IAD framework 51,Figure 2 Second tier variables of an SES 73. Table 1 Types of goods 58,The Future of the Commons. 1 Elinor Ostrom common pool,resources and the classical.
liberal tradition,Mark Pennington,Introduction, I am very honoured to contribute this introduction to the ideas of. Professor Elinor Ostrom My own work has often drawn inspira. tion from her writings and it was a privilege to speak to Professor. Ostrom at a lunch hosted by the IEA prior to the annual Hayek. Lecture which is the subject of this occasional paper Her sad loss. a matter of weeks on from that lecture leaves the world without. one of the most innovative social scientists of the last century. In an introductory essay I cannot hope to convey all of the. insight and nuance that characterised Professor Ostrom s research. over a period of 40 years I aim instead to provide readers with. a broad outline of her work focusing on three particular dimen. sions The first and longest section sets out the core principles. that underscore her analysis of common pool resources and her. argument for moving beyond the dichotomy between privatisa. tion and government regulation The second section examines. the implications of Professor Ostrom s ideas for the classical. liberal tradition Towards the end of his life Hayek noted the need. for a more creative appreciation of the way in which institutions of. property rights might be adapted in view of emerging problems of. environmental protection Hayek 1988 Ostrom s work has been. crucial in identifying what these alternative property institutions. the future of the commons elinor ostrom and the classical liberal tradi tion. Ostrom and the new institutionalism rethinking institutions. might look like In addition I hope to show how some of these. and incentives, insights can be applied beyond the realm of resource conservation. to a broader range of socio economic questions where the case Though economists have traditionally focused on the role of. for decentralised forms of governance is often overlooked The institutions and incentives many analysts have approached the. final section briefly sets out how Professor Ostrom s work might interrelationship between them in a simplistic way Nowhere. impact on economics as a profession has this simplistic mode of thought been more entrenched than. in discussion of common pool resources Traditionally analysts. have assumed that all common pool resources suffer from the. Ostrom on incentives and the management of, same deficient incentive structure which leads to widespread. common pool resources, free riding When resources exist in an unowned state so the. Elinor Ostrom s Nobel Prize winning work on the management argument goes no individual will have an incentive to conserve. of common pool resources can be situated broadly within the because to do so will simply leave more resources for others to. rational choice tradition in economic and political theory Long take In the absence of exclusion devices which enable people to. before this work attracted widespread attention she and her profit personally from conservation they will extract as much of. husband Vincent were pioneers in public choice theory consti the resource as possible up to the point of depletion According to. tutional political economy and what has come to be known as this view as popularised by Garret Hardin 1968 the only way to. the new institutionalism Aligica and Boettke 2009 Though internalise externalities and avoid the tragedy of the commons. accepting that actors are not purely rational that they suffer is to have an external body impose a management structure over. from incomplete information and various cognitive limitations the resource This structure can take the form of either private. Ostrom s framework recognises that individuals are nonetheless ownership where exclusive rights to extract fish timber water. purposeful actors who respond to incentives Institutions shape etc are parcelled out to individual owners or it can take the form. the incentives that people face and affect the likelihood of whether of government ownership where the state takes responsibility. they will coordinate their actions successfully or whether they will for managing the asset either through direct control or via the. engage in negative sum games Institutions refers both to formal external imposition of rules and regulations. and hard institutions such as the relative extent of individual Ostrom s work represents a direct challenge to this form of. communal and state owned property rights and a legal system theorising because while recognising that incentives matter she. which enforces these rights and to informal or soft institutions argues that incentive structures are more varied and complex. such as cultural attitudes towards promise keeping and prefer than conventional analysis assumes 1 In the case of common pool. ences for long or short term gain 1 The tragedy of the commons should really be described as the tragedy of open. access The type of scenario discussed by Hardin refers to a situation where. the future of the commons elinor ostrom and the classical liberal tradi tion. resources it is not always the case that resources will be over the European Common Fisheries Policy which prevents fish. exploited There are many instances where communities of ermen either at the local or even at the national level from devising. resource users have managed to develop exclusion methods rules to limit overfishing De Alessi 1998 In developing nations. and evolve effective rules which have avoided the tragedy of the it includes the miserable record of nationalised forests and irriga. commons without external regulation Examples include the tion systems where centralised management has replaced intri. management of commonly owned pastures in the Swiss Alps the cate and long standing customary rules for dealing with resource. regulation of grazing and logging on commonly held meadows scarcity and conflict Ostrom 1990 23. and forests in Japan the sustainable management of inshore fish Though highly critical of externally imposed solutions to. eries by cooperatives in the eastern United States and the supervi common pool problems Ostrom does not claim that decentralised. sion of complex irrigation systems in the Valencia region of Spain community based approaches are always the most appropriate. Ostrom 1990 ch 3 institutional form She recognises that in many cases individu. On the other hand there are numerous examples where alised property institutions may be better placed to incentivise. attempts to impose individual property rights or government resource conservation and to allow greater scope for innova. ownership and regulation have had disastrous consequences tion than more collective structures for example McKean and. Thus attempts to privatise natural resources in some of the Ostrom 1995 Similarly she appreciates that in some circum. transition economies and in parts of Africa where basic norms stances neither private nor communal management may be. emphasising the protection of individual property rights do not feasible and that there may be no alternative to relying on state. exist have resulted in rampant corruption and cronyism as ruling regulation The question that Ostrom sets herself is to discover. elites have sought to grab access to resources for themselves and what factors are most likely to result in bottom up solutions to. their political and tribal allies Van de Walle 2001 In the case potential common pool problems and what factors are likely to. of government ownership meanwhile there is a whole catalogue thwart the development of these solutions Similarly she aims to. of cases where the takeover of natural resources by government provide a framework that can guide decisions about when to rely. agencies has produced disastrous results In developed nations on spontaneous processes of governance and when to rely on the. this includes the dismal record of centralising measures such as external generation of rules The key elements of this multilevel. framework for understanding what Ostrom refers to as socio. there are no rules governing the use of the resource This is a very rare situation ecological systems and the design principles to emerge from it. In practice most common pool resources are governed by a set of rules but. the origin of these rules differs In some circumstances they are developed en are set out below. dogenously by the resource users themselves but elsewhere they are imposed. on resource users by an external governing body The debate about the relative. efficacy of internally generated versus externally imposed rules is what Ostrom. highlights so well, the future of the commons elinor ostrom and the classical liberal tradi tion.
Socio ecological systems and design principles for common potential free riding and opportunistic behaviour Ceteris paribus. pool resources, the smaller the population of resource users the easier it will be. Boundaries to facilitate exclusion to detect people who are abusing the rules Similarly a cultur. A key factor affecting the likelihood of bottom up solutions ally homogeneous and relatively stable community where people. developing is the character of the resource and in particular have strong reputational and social ties and a commitment to. the existence or otherwise of clearly defined boundaries Exclu long term development is less likely to invite free riding than a. sion mechanisms are the key to overcoming free riding and more mobile community with no strong sense of local or cultural. resource boundaries increase the capacity for those who use a identification Groups which possess a high degree of interper. resource to limit access by those living outside the community in sonal trust or social capital are more likely to arrive at commonly. question Common pool resources vary significantly in terms of agreed rules and to adhere to these rules than are those lacking. these boundary attributes Grazing land in a mountain valley such social capital If they are to be successful therefore the rules. for example might have clearly defined boundaries owing to the for resource management need to reflect this sociocultural variety. nature of the surrounding terrain whereas open grassland on a. large plateau may lack such natural markers Similarly inshore The importance of monitoring and enforcement. fisheries often have clearly defined natural boundaries whereas According to Ostrom the most successful systems for common. offshore fisheries frequently do not pool resource management also include strong monitoring and. enforcement mechanisms In the Swiss Alpine commons for. The importance of internal rules example village courts impose fines on those who exceed their. Though the existence of boundaries to limit access by those outside allotted grazing rights Even when a community exhibits strong. a community of resource users is important it is also critical social cohesion there will be a tendency for people to break the. that there are rules which prevent people within the community rules if there are no rewards for upholding and no penalties for. concerned from appropriating too much of the resource Successful breaking them In addition communities where the population. models of resource management such as the Swiss mountain has a moral commitment to the rules in operation are likely to fare. commons and the Valencia irrigation system in Spain specify clear better in securing enforcement than those lacking a moral iden. procedures for when and how the resource can be used tification with the relevant rules When people derive a personal. sense of utility from knowing that right has been done they are. The importance of locally adapted rules more likely to enforce rules even when this may be relatively. Resources vary across time and place so no single management costly to themselves than when actors lack a strong sense of right. rule will be appropriate in all circumstances The character of and wrong on the significance of preferences for rule enforce. resource users also varies and this affects the capacity to overcome ment see Gaus 2011. the future of the commons elinor ostrom and the classical liberal tradi tion. Dispute resolution and especially when higher authorities respond to the demands. The existence of clear and well established procedures for dispute of external interest groups to allow access to a resource base then. resolution may also increase the scope for the decentralised reso common pool resource systems may be highly fragile This has. lution of common pool resource problems Even in relatively been a particular problem in many parts of the developing world. homogeneous and stable communities disagreements over the where local customary rights to use forests and other resources. correct interpretation of user rights are likely to arise Commu have often been overridden by national governments responding. nities with well developed and transparent court systems tend to the demands of either domestic or international business inter. to generate more sustainable forms of common pool resource ests in resource extraction industries Similarly in contexts where. management The Valencia region of Spain is for example prone central authorities assume responsibility for determining most of. to frequent conflicts and disputes over water access owing to the the rules that govern the use of resources there will be a dimin. often erratic pattern of rainfall and river replenishment Nonethe ished incentive for those involved at the local level to find ways of. less the holding of regular tribunals and court proceedings has devising their own governance arrangements. provided a context for speedy and efficient dispute resolution and. helped to sustain effective management of the irrigation system. Action situations and institutional implications, over several centuries notwithstanding rapid social and techno. logical change In the absence of such systems incentives to avoid All the factors listed above affect the incentive structure that faces. a scramble for resources are much weaker and a tragedy of the participants in the context of specific common pool resources. commons is likely to assert itself and these incentives constitute what Ostrom calls particular. action situations, Interaction between systems of rules The most important point to emerge from Ostrom s account. A final and often fundamental factor affecting the character of of socio ecological systems is that there are many action situ. common pool problems is the constitutional relationship between ations where decentralised community governance can work. different layers of rule making A key finding of Ostrom s work well Specifically when there are clear boundaries to a resource. is that effective rules are more likely to arise in situations where where a community has high levels of interpersonal trust or. those who have an immediate stake in overcoming common pool social capital where there are procedures for resolving disputes. resource problems are actively involved in shaping and enforcing and where the community concerned has sufficient decision. governance arrangements When communities make rules for making autonomy to create monitor and enforce its own rules. themselves they have strong incentives to make the rules work and and to exclude outsiders then incentives can operate to avoid the. to learn from their mistakes When locally established rules and tragedy of the commons In these common property regimes. property rights are not respected by higher tiers of governance resources are exclusive to a particular community rather than.

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