Ostrom’s Work Lends Insight on Regulation

Lynne Kiesling

At the Wall Street Journal’s economics blog, Phil Izzo draws some insights from Elinor Ostrom’s work that complement my remarks in my previous post:

Ostrom’s work also has something to say about regulation: “The main lesson is that common property is often managed on the basis of rules and procedures that have evolved over long periods of time. As a result they are more adequate and subtle than outsiders — both politicians and social scientists — have tended to realize. Beyond showing that self-governance can be feasible and successful, Ostrom also elucidates the key features of successful governance. One instance is that active participation of users in creating and enforcing rules appears to be essential. Rules that are imposed from the outside or unilaterally dictated by powerful insiders have less legitimacy and are more likely to be violated. Likewise, monitoring and enforcement work better when conducted by insiders than by outsiders. These principles are in stark contrast to the common view that monitoring and sanctioning are the responsibility of the state and should be conducted by public employees.”

5 thoughts on “Ostrom’s Work Lends Insight on Regulation

  1. Interesting opinion. I’m a plain-meaning advocate myself as I believe property should be subject to the whim of the owner and not subject to any other interpretation.

  2. Surprising to me that both Krugman and Leavitt admit to not being familiar with Elinor Ostrom and her work (see the WSJ Real Time Economics compilation of reactions).

    (It is both surprising that they are not familiar with her work and surprising that they admit it. I guess my education at GMU was exceptional. I recall interest in Ostrom and her work by Vernon Smith and other experimentalists, by Public Choice scholars, and by Austrian economists. I guess to some extent all three of these subfields (experimental economics, Public Choice, and Austrian) are border line or outside the mainstream of economic thought.

    Perhaps if one is on the faculty at U Chicago or Princeton, one is not interested in what is coming out of schools like Indiana.

    Props to Krugman for observing, “The prize is also, of course, a happy reminder that most of the profession is not caught up in the macro wars!”)

  3. Leavitt shows some humility on Ostrom:

    “She is a political scientist, both by training and her career — one of the most decorated political scientists around. So the fact I have never heard of her reflects badly on me, and it also highlights just how substantial the boundaries between social science disciplines remain.”

    (Via Economist’s View.)

  4. Henry at Crooked Timber is good on Ostrom:

    a very interesting statement of what the Nobel committee see as important in economics.

    Lin’s work focuses on the empirical analysis of collective goods problems – how it is that people can come up with their own solutions to problems of the commons if they are given enough room to do so. Her landmark book, Governing the Commons, provides an empirical rejoinder to the pessimism of Garret Hardin and others about the tragedy of the commons – it documents how people can and do solve these problems in e.g the management of water resources, forestry, pasturage and fishing rights. She and her colleagues gather large sets of data on the conditions under which people are or are not able to solve these problems, and the kinds of rules that they come up with in order to solve them.

    This is, as Kieran suggests, a vote in favor of detailed, working-from-the-ground-up, empirical work, which doesn’t rely on sharply contoured theoretical simplifications and flashy statistical techniques so much as the accumulation of good data, which reflects the messiness of the real social institutions from which it is gathered….

    One plausible characterization of her life’s work is that it is about demonstrating the empirical weaknesses of a ‘cute’ economic model (the Tragedy of the Commons) that assumed a role in policy discussions far out of proportion to its actual explanatory power, and replacing it with a set of explanations that are nowhere near as neat, but are far more true to the real world.

  5. An organization/institution, as part of avoiding the “tragedy of the commons” will find it necessary to block or make illegal new competition for both the resource and the market for that resource. The justice of such an outcome must also be questioned – a bit of I am up, pull the latter up behavior.

    Sometimes this short term necessity will hurt in the long run. A good example is the Alaska salmon fishery. Twenty years ago, Alaska owned the world salmon market. They had the production, processing, distribution, financing and markets sowed up around the world. Along comes aquaculture and they had the worlds best coast line for net pen aquaculture along with the processing, distribution, financing and markets. However, to protect the users of the commons, Alaska baned aquaculture and now Chile, Canada, Norway, etc. now produce salmon cheaper that Alaska can catch them using less resources and producing less CO2. Meanwhile Alaska is loosing control over processing, distribution and marketing and loosing market share.

    If Alaska had not decided to ban aquaculture, they would still own the much larger salmon market resulting from farmed + wild (really ranched) salmon. The Alaska salmon fishermen have a better PR campaign in the US, but it is primarily just PR BS such as “color added” to farmed fish (actually added in the diet as feed sources rich in the required pigment), which is the identical chemical that causes “wild” or ranched salmon to be red (also the same red pigment in peppers and the red yeast sold in health food stores). Their PR also give the impression that wild salmon don’t eat forage fish and shrimp — they do eat and use more forage stocks per Kg of production than aquaculture.

    The uses of Alaska fisheries as examples also shows the weakness of these organizations and their ability to kill innovation.

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