A Tribute to Elinor Ostrom: Understanding the Commons
When I was in high school, I took a math seminar that covered the idea of the tragedy of the commons. The lecturer used game theory to explain that when a resource is held in common, the users are incentivized to overuse and deplete it. He then claimed that government regulation is necessary to deter this overuse and depletion. Having read libertarian material on the tragedy of the commons which offered alternative solutions through privatization, I argued with this professor. However, my arguments would have been very different, and much stronger, had I been familiar with the work of Elinor Ostrom, a Nobel Prize-winning economist born on August 7, 1933.
In her book Governing the Commons, Ostrom explores the wide variety of institutions people form to manage common pool resources. Unlike most economists before her who assumed the tragedy of the commons could only be averted by either privatization or government regulation, Ostrom discovered that the users of common pool resources often develop far more ingenious methods from the bottom up.
Garrett Hardin, who coined the phrase “tragedy of the commons,” was adamant that the problem could only be solved through regulation. He contended that “if ruin is to be avoided in a crowded world, people must be responsive to a coercive force outside their individual psyches, a ‘Leviathan,’ to use Hobbes’s term.” Yet Ostrom noted that while a perfectly knowledgeable regulator would produce good results, regulators in the real world have imperfect information and make mistakes. Ostrom constructed a game theory model where the state catches and punishes defectors (overgrazers) 70% of the time and improperly punishes those who are grazing within carrying capacity 30% of the time. Ostrom found that “Given this payoff structure, the herders again face a prisoner’s dilemma game. They will defect (overgraze) rather than cooperate (graze within the carrying capacity).” Moreover, “The equilibrium of the regulated game has a lower value than that of the unregulated game.” Ostrom’s attention to how limited information constrains the state’s effectiveness is a beautiful strike against hubris.
Ostrom rejected voices claiming that either regulation or privatization is “the only way” to solve the tragedy of the commons. Through game theory, she demonstrated how users of a common pool resource might form a contract amongst themselves to ensure responsible use of the common pool resource. “The self-interest of those who negotiated the contract will lead them to monitor each other and to report observed infractions so that the contract is enforced,” Ostrom said. She contrasted this with regulatory agencies that need to hire their own monitors and thus face additional costs. Perhaps more importantly, she highlighted how such a private arrangement takes advantage of local knowledge. “The herders, who use the same meadow year after year, have detailed and relatively accurate information about carrying capacity,” said Ostrom, and they “are not dependent on the accuracy of the information obtained by a distant government official regarding their strategies.” This focus on the advantages of local knowledge is reminiscent of Hayek, particularly his classic essay The Use of Knowledge in Society.
Ostrom acknowledged that such private contracts are not a panacea, however, and that real world institutions are often much more complex than the game theory models discussed. Governing the Commons delves into in-depth case studies and institutional analysis, examining where governance of common pool resources is effective and where it fails.
While Ostrom died in 2012, her work remains incredibly influential. The Vincent and Elinor Ostrom Workshop in Political Theory and Policy Analysis, founded by Elinor and her husband Vincent in 1973, continues the Ostroms’ research on governance institutions. Paul Dragos Aligica of the Mercatus Center recently published Institutional Diversity and Political Economy: The Ostroms and Beyond, a book that “discusses some of the most challenging ideas emerging out of the research program on institutional diversity associated with Ostrom and her associates, while outlining a set of new research directions and an original interpretation of the significance and future of this program.”
Ostrom’s work is being applied in new spheres, beyond the natural resources and local governance she was known for studying. Last year, Alex Tabarrok and Eli Dourado published a study at Mercatus exploring intellectual property through the lenses of public choice theory and Ostrom’s “Bloomington school” approach. By applying Ostrom’s insights about the opportunities and cooperation that can flourish in the commons, Tabarrok and Dourado illuminate the flourishing commons seen online in spaces like Wikipedia, and invite us to consider how excessive intellectual property law can “diminish the intellectual commons.”
Elinor Ostrom’s work has been incredibly influential on libertarian economists. Daniel D’Amico recommends Governing the Commons in his suggested reading list for students interested in public choice. Peter Boettke writes in his book Living Economics, “It is arguable, that not since Kenneth Boulding have we seen any social scientist allow sheer curiosity about the world to take him or her on such a methodological journey of so many different approaches to get at the phenomena he or she wants to understand—the rules of self-governance that are in operation in the lived lives of a diversity of people that result in cooperation and avoid conflict. At the same time, Ostrom has a unity in her research methods as well—rational choice as if the choosers were human, and institutional analysis as if history mattered.” To get a glimpse of Ostrom’s wonderfully nuanced methodology, I recommend watching her talk Beyond Markets and States, or reading it here. Or read her books, Governing the Commons and Understanding Institutional Diversity.