Elinor Ostrom on what makes Common Pool Resource #governance work (+ #discountrates)

agriculture irrigation Perolada 407 (irrigation, Perolada, Catalonia, 2007)

The common resources Ostrom describes are mountain commons and irrigation systems.

[T]he populations in these locations have remained stable over long periods of time. Individuals have shared a past and expect to share a future. It is important for individuals to maintain their reputations as reliable members of the community. These individuals live side by side and farm the same plots year after year. They expect their children and their grandchildren to inherit their land. In other words, their discount rates are low. If costly investments in provision are made at one point in time, the proprietors – or their families – are likely to reap the benefits. 

Extensive norms have evolved in all of these settings that narrowly define “proper” behavior. Many of these norms make it feasible for individuals to live in close interdependence on many fronts without excessive conflict. Further, a reputation for keeping promises, honest dealings, and reliability… is a valuable asset. Prudent, long-term self-interest reinforces the acceptance of the norms of proper behavior. None of these situations involves participants who vary greatly in regard to ownership of assets, skills, knowledge, ethnicity, race, or other variables that could strongly divide a group of individuals… 

(I don’t think it is necessary to exclude altruism, suppression of self, etc. in explaining these stories. But I think she wants to argue on their own terms with other economists.) 

These cases were specifically selected because they have endured while others have failed. Now the task is to begin to explain their sustainability and robustness, given how difficult it must have been to achieve this record in such complex, uncertain, and interdependent environments in which individuals have continuously faced substantial incentives to behave opportunistically. 

Ostrom sets out seven design principles that, she speculates, long-enduring CPR institutions need to fulfil:

  1. Clearly defined boundaries (of the CPR and of the people with the right to withdraw resource units from it).
  1. The appropriation rules (who can take what, when, how) are related to local conditions. 
  1. Most individuals affected by the operational rules can participate in modifying the operational rules. 
  1. Monitors, who actively audit CPR conditions and appropriator behavior, are accountable to the appropriators or are the appropriators. 
  1. Graduated sanctions.
  1. Conflict-resolution mechanisms. 
  1. The rights of appropriators to devise their own institutions are not challenged by external governmental authorities.

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

I love her rigour.

Published by

Paul Hodson

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

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