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Elinor Ostrom (1933-2012) was an American political economist who, along with her husband, Vincent Ostrom founded the Bloomington School of Political Economy that, like Buchanan (Document 28) and Tullock of the Virginia school, engaged in public choice analysis, but focused on the importance of institutions and polycentric governance as solutions to collective action problems and public administration. For Ostrom, economics should not be based on only mathematical models but should also include qualitative studies of how people actually live their lives. In this respect, she was similar to Ronald Coase who also wanted to get away from what he called “blackboard economics.”
This selection is part of a book on the governance of natural resources or common-pool resources. In 2009, she won the Nobel Prize in economics for this work, the first and only woman ever to win the prize. Researchers today often refer to Alexis de Tocqueville’s theory of townships in conjunction with Ostrom’s work to emphasize the potential for individuals to self-govern at a local level and the value of having multiple centers of decision-making in governance systems.
Source: Elinor Ostrom, “Reflections on the Commons” in Governing the Commons: The Evolution of Institutions for Collective Action. Cambridge: Cambridge University Press, 1990.
Hardly a week goes by without a major news story about the threatened destruction of a valuable natural resource. In June of 1989, for example, a New York Times article focused on the problem of overfishing in the Georges Bank about 150 miles off the New England coast. Catches of cod, flounder, and haddock are now only a quarter of what they were during the 1960s. Everyone knows that the basic problem is overfishing; however, those concerned cannot agree how to solve the problem. Congressional representatives recommend new national legislation, even though the legislation already on the books has been enforced only erratically. Representatives of the fishers argue that the fishing grounds would not be in such bad shape if the federal government had refrained from its sporadic attempts to regulate the fishery in the past. The issue in this case—and many others—is how best to limit the use of natural resources so as to ensure their long-term economic viability. Advocates of central regulation, of privatization, and of regulation by those involved have pressed their policy prescriptions in a variety of different arenas.
Similar situations occur on diverse scales ranging from small neighborhoods to the entire planet. The issues of how best to govern natural resources used by many individuals in common are no more settled in academia than in the world of politics. Some scholarly articles about the “tragedy of the commons” recommend that “the state” control most natural resources to prevent their destruction; others recommend that privatizing those resources will resolve the problem. What one can observe in the world, however, is that neither the state nor the market is uniformly successful in enabling individuals to sustain long-term, productive use of natural resource systems. Further, communities of individuals have relied on institutions resembling neither the state nor the market to govern some resource systems with reasonable degrees of success over long periods of time.
We do not yet have the necessary intellectual tools or models to understand the array of problems that are associated with governing and managing natural resource systems and the reasons why some institutions seem to work in some settings and not others. . . . To do this, I first describe the three models most frequently used to provide a foundation for recommending state or market solutions. I then pose theoretical and empirical alternatives to these models to begin to illustrate the diversity of solutions that go beyond states and markets. Using an institutional mode of analysis, I then attempt to explain how communities of individuals fashion different ways of governing the commons.
THREE INFLUENTIAL MODELS
The tragedy of the commons
Since Garrett Hardin’s challenging article in Science (1968), the expression “the tragedy of the commons” has come to symbolize the degradation of the environment to be expected whenever many individuals use a scarce resource in common. To illustrate the logical structure of his model, Hardin asks the reader to envision a pasture “open to all.” He then examines the structure of this situation from the perspective of a rational herder. Each herder receives a direct benefit from his own animals and suffers delayed costs from the deterioration of the commons when his and others’ cattle overgraze. Each herder is motivated to add more and more animals because he receives the direct benefit of his own animals and bears only a share of the costs resulting from overgrazing. Hardin concludes:
Therein is the tragedy. Each man is locked into a system that compels him to increase his herd without limit—in a world that is limited. Ruin is the destination toward which all men rush, each pursuing his own best interest in a society that believes in the freedom of the commons. (Hardin 1968, p. 1,244)
. . .
If the only “commons” of importance were a few grazing areas or fisheries, the tragedy of the commons would be of little general interest. That is not the case. Hardin himself used the grazing commons as a metaphor for the general problem of overpopulation. The “tragedy of the commons” has been used to describe such diverse problems as the Sahelian famine of the 1970s (Picardi and Seifert 1977), firewood crises throughout the Third World (Norman 1984; Thomson 1977), the problem of acid rain (R. Wilson 1985), the organization of the Mormon Church (Bullock and Baden 1977), the inability of the U.S. Congress to limit its capacity to overspend (Shepsle and Weingast 1984), urban crime (Neher 1978), public-sector/private-sector relationships in modern economies (Scharpf 1985, 1987,1988), the problems of international cooperation (SnidaI 1985), and communal conflict in Cyprus (Lumsden 1973). Much of the world is dependent on resources that are subject to the possibility of a tragedy of the commons.
The prisoner’s dilemma game
Hardin’s model has often been formalized as a prisoner’s dilemma (PD) game (Dawes 1973, 1975). Suppose we think of the players in a game as being herders using a common grazing meadow. For this meadow, there is an upper limit to the number of animals that can graze on the meadow for a season and be well fed at the end of the season. We call that number L. For a two-person game, the “cooperate” strategy can be thought of as grazing L/2 animals for each herder. The “defect” strategy is for each herder to graze as many animals as he thinks he can sell at a profit (given his private costs), assuming that this number is greater than L/2. If both herders limit their grazing to L/2, they will obtain 10 units of profit, whereas if they both choose the defect strategy they will obtain zero profit. If one of them limits his number of animals to L/2, while the other grazes as many as he wants, the “defector” obtains 11 units of profit, and the “sucker” obtains -1. If each chooses independently without the capacity to engage in a binding contract, each chooses his dominant strategy, which is to defect. When they both defect, they obtain zero profit. Call this the Hardin herder game, or Game 1. It has the structure of a prisoner’s dilemma game…
In a prisoner’s dilemma game, each player has a dominant strategy in the sense that the player is always better off choosing this strategy – to defect – no matter what the other player chooses. When both players choose their dominant strategy, given these assumptions, they produce an equilibrium that is the third-best result for both. Neither has an incentive to change that is independent of the strategy choice of the other. . . .
The prisoner’s dilemma game fascinates scholars. The paradox that individually rational strategies lead to collectively irrational outcomes seems to challenge a fundamental faith that rational human beings can achieve rational results. . . .
The logic of collective action
A closely related view of the difficulty of getting individuals to pursue their joint welfare, as contrasted to individual welfare, was developed by Mancur Olson (1965) in The Logic of Collective Action. Olson specifically set out to challenge the grand optimism expressed in group theory: that individuals with common interests would voluntarily act so as to try to further those interests (Bentley 1949; Truman 1958). On the first page of his book, Olson summarized that accepted view:
The idea that groups tend to act in support of their group interests is supposed to follow logically from this widely accepted premise of rational, self-interested behavior. In other words, if the members of some group have a common interest or object, and if they would all be better off if that objective were achieved, it has been thought to follow logically that the individuals in that group would, if they were rational and self-interested, act to achieve that objective. (Olson 1965, p.l)
Olson challenged the presumption that the possibility of a benefit for a group would be sufficient to generate collective action to achieve that benefit. In the most frequently quoted passage of his book, Olson argued that
unless the number of individuals is quite small, or unless there is coercion or some other special device to make individuals act in their common interest, rational, self-interested individuals will not act to achieve their common or group interests. (Olson 1965, p. 2; emphasis in original)
Olson’s argument rests largely on the premise that one who cannot be excluded from obtaining the benefits of a collective good once the good is produced has little incentive to contribute voluntarily to the provision of that good. His book is less pessimistic than it is asserted to be by many who cite this famous passage. Olson considers it an open question whether intermediate-size groups will or will not voluntarily provide collective benefits. His definition of an intermediate-size group depends not on the number of actors involved but on how noticeable each person’s actions are.
The tragedy of the commons, the prisoner’s dilemma, and the logic of collective action are closely related concepts in the models that have defined the accepted way of viewing many problems that individuals face when attempting to achieve collective benefits. At the heart of each of these models is the free-rider problem. Whenever one person cannot be excluded from the benefits that others provide, each person is motivated not to contribute to the joint effort, but to free-ride on the efforts of others. If all participants choose to free-ride, the collective benefit will not be produced. The temptation to free-ride, however, may dominate the decision process, and thus all will end up where no one wanted to be. Alternatively, some may provide while others free-ride, leading to less than the optimal level of provision of the collective benefit. These models are thus extremely useful for explaining how perfectly rational individuals can produce, under some circumstances, outcomes that are not “rational” when viewed from the perspective of all those involved.
What makes these models so interesting and so powerful is that they capture important aspects of many different problems that occur in diverse settings in-all parts of the world. What makes these models so dangerous—when they are used metaphorically as the foundation for policy—is that the constraints that are assumed to be fixed for the purpose of analysis are taken on faith as being fixed in empirical settings, unless external authorities change them. The prisoners in the famous dilemma cannot change the constraints imposed on them by the district attorney; they are in jail. Not all users of natural resources are similarly incapable of changing their constraints. As long as individuals are viewed as prisoners, policy prescriptions will address this metaphor. I would rather address the question of how to enhance the capabilities of those involved to change the constraining rules of the game to lead to outcomes other than remorseless tragedies.
CURRENT POLICY PRESCRIPTIONS
Leviathan as the “only” way
. . .
The presumption that an external Leviathan is necessary to avoid tragedies of the commons leads to recommendations that central governments control most natural resource systems.
. . .
Privatization as the “only” way
Other policy analysts, influenced by the same models, have used equally strong terms in calling for the imposition of private property rights whenever resources are owned in common. . . .
The “only” way?
Analysts who find an empirical situation with a structure presumed to be a commons dilemma often call for the imposition of a solution by an external actor: The “only way” to solve a commons dilemma is by doing X. Underlying such a claim is the belief that X is necessary and sufficient to solve the commons dilemma. But the content of X could hardly be more variable. One set of advocates presumes that a central authority must assume continuing responsibility to make unitary decisions for a particular resource. The other presumes that a central authority should parcel out ownership rights to the resource and then allow individuals to pursue their own self-interests within a set of well-defined property rights. Both centralization advocates and privatization advocates accept as a central tenet that institutional change must come from outside and be imposed on the individuals affected. Despite sharing a faith in the necessity and efficacy of “the state” to change institutions so as to increase efficiency, the institutional changes they recommend could hardly be further apart.
If one recommendation is correct, the other cannot be. Contradictory positions cannot both be right. I do not argue for either of these positions. Rather, I argue that both are too sweeping in their claims. Instead of there being a single solution to a single problem, I argue that many solutions exist to cope with many different problems. Instead of presuming that optimal institutional solutions can be designed easily and imposed at low cost by external authorities, I argue that “getting the institutions right” is a difficult, time-consuming, conflict-invoking process. It is a process that requires reliable information about time and place variables as well as a broad repertoire of culturally acceptable rules. New institutional arrangements do not work in the field as they do in abstract models unless the models are well specified and empirically valid and the participants in a field setting understand how to make the new rules work.
Instead of presuming that the individuals sharing a commons are inevitably caught in a trap from which they cannot escape, I argue that the capacity of individuals to extricate themselves from various types of dilemma situations varies from situation to situation. The cases to be discussed in this book illustrate both successful and unsuccessful efforts to escape tragic outcomes. Instead of basing policy on the presumption that the individuals involved are helpless, I wish to learn more from the experience of individuals in field settings. Why have some efforts to solve commons problems failed, while others have succeeded? What can we learn from experience that will help stimulate the development and use of a better theory of collective action—one that will identify the key variables that can enhance or detract from the capabilities of individuals to solve problems?
Institutions are rarely either private or public—”the market” or “the state.” Many successful CPR institutions are rich mixtures of “private-like” and “public-like” institutions defying classification in a sterile dichotomy. By “successful,” I mean institutions that enable individuals to achieve productive outcomes in situations where temptations to free-ride and shirk are ever present. A competitive market—the epitome of private institutions—is itself a public good. Once a competitive market is provided, individuals can enter and exit freely whether or not they contribute to the cost of providing and maintaining the market. No market can exist for long without underlying public institutions to support it. In field settings, public and private institutions frequently are intermeshed and depend on one another, rather than existing in isolated worlds.
An alternative solution
To open up the discussion of institutional options for solving commons dilemmas, I want now to present a fifth game in which the herders themselves can make a binding contract to commit themselves to a cooperative strategy that they themselves will work out. . . .
A self-financed contract-enforcement game is no panacea. Such institutional arrangements have many weaknesses in many settings. The herders can overestimate or underestimate the carrying capacity of the meadow. Their own monitoring system may break down. The external enforcer may not be able to enforce ex post, after promising to do so ex ante. A myriad of problems can occur in natural settings, as is also the case with the idealized central-regulation or private-property institutions.
The structure of the institutional arrangements that one finds in natural settings is, of course, far more complicated than the structure of any of the extremely simple games presented here for discussion. What I attempt to do with these simple games is to generate different ways of thinking about the mechanisms that individuals may use to extricate themselves from commons dilemmas—ways different from what one finds in much of the policy literature. To challenge this mind-set, one needs only simple mechanisms that illustrate alternatives to those that normally are presented as the dominant solutions.
An empirical alternative
Game 5 illustrated a theoretical alternative to centralization or privatization as ways to solve CPR problems. Let us now briefly consider a solution devised by participants in a field setting—Alanya, Turkey—that cannot be characterized as either central regulation or privatization. The inshore fishery at Alanya, as described by Fikret Berkes (1986b), is a relatively small operation. Many of the approximately 100 local fishers operate in two- or three-person boats using various types of nets. Half of the fishers belong to a local producers’ cooperative. According to Berkes, the early 1970s were the “dark ages” for Alanya. The economic viability of the fishery was threatened by two factors: First, unrestrained use of the fishery had led to hostility and, at times, violent conflict among the users. Second, competition among fishers for the better fishing spots had increased production costs, as well as the level of uncertainty regarding the harvest potential of any particular boat.
Early in the 1970s, members of the local cooperative began experimenting with an ingenious system for allotting fishing sites to local fishers. After more than a decade of trial-and-error efforts, the rules used by the Alanya inshore fishers are as follows:
- Each September, a list of eligible fishers is prepared, consisting of all licensed fishers in Alanya, regardless of co-op membership.
- Within the area normally used by Alanya fishers, all usable fishing locations are named and listed. These sites are spaced so that the nets set in one site will not block the fish that should be available at the adjacent sites.
- These named fishing locations and their assignments are in effect from September to May.
- In September, the eligible fishers draw lots and are assigned to the named fishing locations.
- From September to January, each day each fisher moves east to the next location. After January, the fishers move west. This gives the fishers equal opportunities at the stocks that migrate from east to west between September and January and reverse their migration through the area from January to May (Berkes 1986b, pp. 73-74).
The system has the effect of spacing the fishers far enough apart on the fishing grounds that the production capabilities at each site are optimized. All fishing boats also have equal chances to fish at the best spots. Resources are not wasted searching for or fighting over a site. No signs of overcapitalization are apparent.
The list of fishing locations is endorsed by each fisher and deposited with the mayor and local gendarme once a year at the time of the lottery. The process of monitoring and enforcing the system is, however, accomplished by the fishers themselves as a by-product of the incentive created by the rotation system. On a day when a given fisher is assigned one of the more forest productive spots, that fisher will exercise that option with certainty (leaving aside last-minute breakdowns in equipment). All other fishers can expect that the assigned fisher will be at the spot bright and early. Consequently, an effort to cheat on the system by traveling to a good spot on a day when one is assigned to a poor spot has little chance of remaining undetected. Cheating on the system will be observed by the very fishers who when have rights to be in the best spots and will be willing to defend their rights using physical means if necessary. Their rights will be supported by everyone else in the system. The others will want to ensure that their own rights will not be usurped on the days when they are assigned good sites. The few infractions that have occurred have been handled easily by the fishers at the local coffeehouse (Berkes 1986b, p. 74).
Although this is not a private-property system, rights to use fishing sites and duties to respect these rights are well defined. And though it is not a centralized system, national legislation that has given such cooperatives jurisdiction over “local arrangements” has been used by cooperative officials to legitimize their role in helping to devise a workable set of rules. That local officials accept the signed agreement each year also enhances legitimacy. The actual monitoring and enforcing of the rules, however, are left to the fishers.
Central-government officials could not have crafted such a set of rules without assigning a full-time staff to work (actually fish) in the area for an extended period. Fishing sites of varying economic value are commonly associated with inshore fisheries (Christy 1982; Forman 1967), but they are almost impossible to map without extensive on-site experience. Mapping this set of fishing sites, such that one boat’s fishing activities would not reduce the migration of fish to other locations, would have been a daunting challenge had it not been for the extensive time-and-place information provided by the fishers and their willingness to experiment for a decade with various maps and systems. Alanya provides an example of a self-governed common-property arrangement in which the rules have been devised and modified by the participants themselves and also are monitored and enforced by them.
The case of the Alanya inshore fishery is only one empirical example of the many institutional arrangements’ that have been devised, modified, monitored, and sustained by the users of renewable CPRs to constrain individual behavior that would, if unconstrained, reduce joint returns to Policy the community of users. In addition to the case studies discussed in Chapters 3, 4, and 5, productive CPR institutional arrangements have been well documented for many farmer-managed irrigation systems, communal forests, inshore fisheries, and grazing and hunting territories.
Game 5 and empirical cases of successfully governed CPRs provide theoretical and empirical alternatives to the assertion that those involved cannot extricate themselves from the problems faced when multiple individuals use a given resource. The key to my argument is that some individuals have broken out of the trap inherent in the commons dilemma, whereas others continue remorsefully trapped into destroying their own resources. This leads me to ask what differences exist between those who have broken the shackles of a commons dilemma and those who have not. The differences may have to do with factors internal to a given group. The participants may simply have no capacity to communicate with one another, no way to develop trust, and no sense that they must share a common future. Alternatively, powerful individuals who stand to gain from the current situation, while others lose, may block efforts by the less powerful to change the rules of the game. Such groups may need some form of external assistance to break out of the perverse logic of their situation.
The differences between those who have and those who have not extricated themselves from commons dilemmas may also have to do with factors outside the domain of those affected. Some participants do not have the autonomy to change their own institutional structures and are prevented from making constructive changes by external authorities who are indifferent to the perversities of the commons dilemma, or may even stand to gain from it. Also, there is the possibility that external changes may sweep rapidly over a group, giving them insufficient time to adjust their internal structures to avoid the suboptimal outcomes. Some groups suffer from perverse incentive systems that are themselves the results of policies pursued by central authorities. Many potential answers spring to mind regarding the question why some individuals do not achieve collective benefits for themselves, whereas others do. However, as long as analysts presume that individuals cannot change such situations themselves, they do not ask what internal or external variables can enhance or impede the efforts of communities of individuals to deal creatively and constructively with perverse problems such as the tragedy of the commons.
Policy prescriptions as metaphors
Policy analysts who would recommend a single prescription for commons problems have paid little attention to how diverse institutional arrangements operate in practice. . . . Many policy prescriptions are themselves no more than metaphors. Both the centralizers and the privatizers frequently advocate oversimplified, idealized institutions—paradoxically, almost “institution-free” institutions. An assertion that central regulation is necessary tells us nothing about the way a central agency should be constituted, what authority it should have, how the limits on its authority should be maintained, how it will obtain information, or how its agents should be selected, motivated to do their work, and have their performances monitored and rewarded or sanctioned. An assertion that the imposition of private property rights is necessary tells us nothing about how that bundle of rights is to be defined, how the various attributes of the goods involved will be measured, who will pay for the costs of excluding nonowners from access, how conflicts over rights will be adjudicated, or how the residual interests of the right-holders in the resource system itself will be organized.
. . . What is missing from the policy analyst’s tool kit—and from the set of accepted, well-developed theories of human organization—is an adequately specified theory of collective action whereby a group of principals can organize themselves voluntarily to retain the residuals of their own efforts. Examples of self-organized enterprises abound. Most law firms are obvious examples: A group of lawyers will pool their assets to purchase a library and pay for joint secretarial and research assistance. They will develop their own internal governance mechanisms and formulas for allocating costs and benefits to the partners. Most cooperatives are also examples. . . .
Further, all organizational arrangements are subject to stress, weakness, and failure. Without an adequate theory of self-organized collective action, one cannot predict or explain when individuals will be unable to solve a common problem through self-organization alone, nor can one begin to ascertain which of many intervention strategies might be effective in helping to solve particular problems. As discussed earlier, there is a considerable difference between the presumption that a regulatory agency should be established and the presumption that a reliable court system is needed to monitor and enforce self-negotiated contracts. If the theories being used in a policy science do not include the possibility of self-organized collective action, then the importance of a court system that can be used by self-organizing groups to monitor and enforce contracts will not be recognized.
I hope this inquiry will contribute to the development of an empirically supported theory of self-organizing and self-governing forms of collective action.