Elinor Ostrom on the Need for Institutional Diversity
Back in December, ‘09, the Nobel Foundations announced Elinor Ostrom as a recipient of the prestigious Nobel Prize in Economic Sciences. I remember hearing the announcement on the radio and fleetingly thinking to myself, “First woman to receive the Nobel Prize in Economics, that’s neat, good for her.” I did not note, I’ll admit, why Ostrom received the prize or what particular area her work is in – perhaps because I was tackling extremely rainy roads and night driving just outside of Seattle.
Just recently, Ostrom’s name came to my attention again, and this time, I did look up her area of work. As it turns out, her research falls right in line with my own curiosity about the role of community in our world.
To explicate, I’ll try to sum up Ostrom’s work:
Much of today’s economic thought is structured around Garrett Hardin’s Tragedy of the Commons theory. The Tragedy of the Commons model basically states that people will inevitably pursue personal gain at the expense of a group where a common resource is concerned (see my previous blog entry for an explanation of the Tragedy of the Commons). The end result of self-interested individuals sharing a commons is eventual degradation of the commons. Garrett Hardin’s suggested solution to this tragedy is a) privatization of resources, or b) socialism where nobody owns the resource. In other words, he advocates against communally managed resources (“Revisiting the Commons”).
Ostrom’s work proves that privatization and socialism are not the only answers to the commons tragedy. Instead, her work has proved that individuals will act for the good of the group even with personal costs to themselves. In some cases, Ostrom has seen that communally managed commons have actually proved to be better managed than traditional models.
In Mongolia, for example, Ostrom found that nomadic herders managed commonly shared grasslands far better than their neighbors in China who had privatized agricultural lands. Degradation of the Mongolian ecosystem made up 1/10 of the used area whereas degradation of the Chinese lands was 1/3. Similarly, in Russia, where land was managed under a more socialist regime, degradation made up 3/4 of the area used (The Royal Swedish Academy of Sciences).
Based on this example, it would appear that group cooperation can, in fact, serve as a functional institution to manage resources.
Check out this video for Ostrom’s own words on her work. The video starts to get pretty exciting at the end when Ostrom explains our reluctance to engage in mutually beneficial relationships base on trust is a result of our fear of being what she calls, “suckers.” It’s entertaining; I recommend you watch it!
Ostrom argues that we need a diversity of institutions. We can’t just operation in markets where privatization is the norm, and we can’t operate in markets where nobody owns the resources. We need a multiplicity of institutions, and a communal institutional most definitely has a place in that multiplicity. Our world is complex, why would we limit ourselves?
Even with that multiplicity of institutions, Ostrom holds that the distribution of “communication, information, and trust” is incredibly important to a properly functioning society and a well-maintained commons (“Revisiting the Commons”). Successful governance, in turn, is dictated by “active participation of users in creating and enforcing rules” (The Royal Swedish Academy of Sciences). Participation, communication, and trust are not features of the top management down approach of the past. They are features of community.
What does all of this mean for those of us who interested in the role that community plays in our lives? It means that we could be seeing changes in the way businesses are run, in the way that conservation efforts are approached, in the way we look at global development, and even in the way we carry out the education of our youth. Group cooperation is possible, sometimes it’s better than the traditional alternatives, and it will, in the future, be incorporated into the institutional structure of our lives.








