Brushes with Ostrom

Elinor Ostrom and Oliver Williamson jointly won the Nobel Prize for economics today for separate work on governance and institutions for resolving conflict especially (in Ostrom’s case) in common-property settings. I was first turned-on to her work by Rod Dobell (see, e.g., “Social Capital and Social Learning in a Full World“) and Darcy Mitchell (see, e.g., “When Communities Collide“) in the mid-90s. Ostrom’s work influenced some of my work around 2000, especially an article I wrote called “On the Saturday Morning Soccer Field: A Habermasian Perspective on the British Columbia Commission on Resources and Environment.”

This paper addressed political discourse surrounding British Columbia’s wilderness, natural resource and land use public policy as it evolved through a range of distinct frames over the course of the 20th century. Towards the last half of the century this policy discourse was marked by an escalating conflict of values that, by the 1980s, had heightened into what became referred to as “the war in the woods.” As one response to this intensifying conflict, the B.C. government established the Commission on Resources and Environment (CORE) in 1992 to develop a land use and environmental management strategy for the province based on principles adapted from the dispute resolution field. While dispute resolution has emerged from a rich theoretical and applied background rooted in, inter alia, American legal theory and sociology, there also exists a European tradition of discourse theory that contains important insights for understanding conflicts. Yet much of the American dispute resolution tradition seems not to have embraced the discourse theory literature. The potential for integrating discourse theory into the dispute resolution tradition, and by extension imagining how CORE might have evolved had its crafters consulted this work, was explored in this paper.

It was there that I tried to link Habermas’ theory in Between Facts and Norms and Ostrom’s work: “If the problem under discussion is of multiple dimensions having an impact on a diversity of interests, or where the rational discourse supposition (that social power structures be neutralised) cannot be achieved … no generalisable interest or clear prioritisation of values is possible. In such cases, Habermas points to bargaining between parties willing to co-operate as a possible alternative. Bargaining aims at compromises that the participants will find acceptable, where the compromise provides for an arrangement that satisfies three conditions:

  1. it is better than no arrangement;
  2. it excludes free riders who do not co-operate; and
  3. it does not exploit parties who contribute more than they gain.

The compromise that results from such bargaining contains a negotiated agreement that balances conflicting interests. A rationally motivated consensus rests on reasons that convince all parties in the same way; a compromise agreement can be accepted by the parties for different reasons.

Ostrom’s work addresses the problem of free-riders: some institutions designed to manage common-property resources have succeeded in overcoming the logic of collective action (a problem due, in part, to free-riders). This is accomplished through clearly defined boundaries, rule making by the affected parties, graduated sanctions for violators, and low cost conflict resolution mechanisms. In the case of small-scale common property resources, “when individuals have lived in such situations for a substantial time and have developed shared norms and patterns of reciprocity, they possess social capital with which they can build institutional arrangements for resolving [common pool resource] dilemmas.” (Ostrom, Elinor. 1992. Crafting Institutions for Self-Governing Irrigation Systems. San Francisco: Institute for Contemporary Studies Press, p. 183).

On another front, I really liked Barry Ritholtz’ observation of the irony of Ostrom and Williamson winning the 2009 award (or, more accurately, on the irony of Eugene Fama not winning). Followers of Fama’s Efficient Market Hypothesis (EMH) have created various predictions markets, and one such market had Fama the 2 to 1 favorite to win the prize this year. Oh well, better luck next year.


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