Elinor Ostrom on #discountrates

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Ostrom argues that discount rates vary between people in systematic ways.

In a fishery, for example, the discount rates of local fishers who live in nearby villages will differ from the discount rates of those who operate the larger trawlers, who may fish anywhere along a coastline. The time horizons of the local fishers, in relation to the yield of the inshore fishery, extend far into the future. They hope that their children and their children’s children can make a living in the same location. More mobile fishers, on the other hand, can go on to other fishing grounds when local fish are no longer available… 

Discount rates are also affected by the general norms shared by the individuals living in a particular society, or even a local community, regarding the relative importance of the future as compared with the present.

(Elinor Ostrom, Governing the Commons – the evolution of institutions for collective action, 1990) 

I suppose that in a social setting with high discount rates and a public resource, more public intervention (in privatising or controlling access to the resource) is needed to avoid over-exploitation than in a social setting with low discount rates. In that sense, high discount rates of particular groups impose a cost on society at large.

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Paul Hodson

Head of Unit "EnergyEfficiency" at European Commission, Directorate-General for Energy

2 thoughts on “Elinor Ostrom on #discountrates”

  1. Hi Paul, according to Ostrom’s view you wouldn’t necessarily need more public intervention in a community with higher DRs. Within local communities, rules and institutions can overcome this issue, without the need for public intervention. At least this is the kind of governance she was up to.

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    1. I think you’re right, Serena, that she would not think it impossible.

      However, the effort that a community puts into bringing a non-local trawler operator (who doesn’t care about the survival of the fishing grounds – high DR) into their institutions is higher than the effort for local people.

      (A consequence of this line of argument could be that it makes economic sense to invest in encouraging people to take a long term view. Philosophy to the rescue!)

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