Elinor Ostrom

A Nobel Prize for Showing That Freedom Works

Why Elinor Ostrom won

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Pundits and politicians act as if government can solve almost any problem. At the slightest hint of trouble, the ruling class reflexively assumes that knowledgeable, wise and public-spirited government regulators are capable of riding to the rescue. This certainly is the guiding philosophy of the Obama administration.

So how remarkable it is that this year's Nobel Memorial Prize in economics was shared by Elinor Ostrom, whose life's work demonstrates that politicians and bureaucrats are not nearly as good at solving problems as regular people. Ostrom, the first woman to win the prize (which she shared with Oliver Williamson of UC-Berkeley), is a political scientist at Indiana University. The selection committee said that she has "challenged the conventional wisdom that common property is poorly managed and should be either regulated by central authorities or privatized. Based on numerous studies of user-managed fish stocks, pastures, woods, lakes and groundwater basins, Ostrom concludes that the outcomes are, more often than not, better than predicted by standard theories. She observes that resource-users frequently develop sophisticated mechanisms for decision-making and rule enforcement to handle conflicts" (emphasis added).

Ostrom's work concentrates on common-pool resources (CPR) like pastures and fisheries. Policymakers assume that such situations are plagued by free-rider problems, where all individuals have a strong incentive to use the resource to the fullest and no incentive to invest in order to enhance it. Analysts across the political spectrum theorize that only bureaucrats or owners of privatized units can efficiently manage such resources.

Few scholars actually venture into the field to see what people actually do when faced with free-rider problems. Ostrom did. It turns out that free people are not as helpless as the theorists believed.

She writes in her 1990 book, Governing the Commons: The Evolution of Institutions for Collective Action, that there is no shortage of real-world examples of "a self-governed common-property arrangement in which the rules have been devised and modified by the participants themselves and also are monitored and enforced by them."

In other words, free people work things out on their own.

Not only is government help often not needed, Ostrom says it usually screws things up because bureaucrats operate in an ivory tower ignorant of the local customs and the specific resource.

Political theorists assume away the problems of political control, but the problems are real. There is no reason to believe that bureaucrats and politicians, no matter how well meaning, are better at solving problems than the people on the spot, who have the strongest incentive to get the solution right. Unlike bureaucrats, they bear the costs of their mistakes. Moreover, as the prize committee pointed out, "Rules that are imposed from the outside or unilaterally dictated by powerful insiders have less legitimacy and are more likely to be violated."

Some of Ostrom's readers think that she is as critical of the free market as she is of government management. She writes, "(N)either the state nor the market is uniformly successful in enabling individuals to sustain long-term, productive use of natural resource systems." But what those readers miss is that the resource-management arrangements Ostrom documents are voluntary agreements that people themselves devise, monitor, and enforce. These agreements are part of the free market, even if the resource is not formally divided into privately owned units. Fundamental for advocates of freedom is not "the market" narrowly conceived, but the broader realm of consent and contract.

I was amused to see the lengths to which The New York Times went to spin Ostrom's (and Williamson's) selection in an anti-free-market direction. Reporter Louis Uchitelle wrote, "Neither Ms. Ostrom nor Mr. Williamson has argued against regulation. Quite the contrary, their work found that people in business adopt for themselves numerous forms of regulation and rules of behavior—called 'governance' in economic jargon—doing so independently of government. …"

Please. Rules of behavior that are independent of government are not what anybody means by "regulation." Advocates of regulation say people can't devise methods of "governance" that leave politicians out of the picture, but Ostrom shows they are wrong.

We libertarians aren't against rules—we are against top-down rules imposed by out-of-touch bureaucrats. People generate better rules when the state leaves us alone.

John Stossel will soon host Stossel on the Fox Business Network. He's the author of Give Me a Break and of Myth, Lies, and Downright Stupidity.

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  1. Congrats to Ostrom

  2. Speaking of media spin of Ostrom’s work, it took me hours of listening to NPR that day just to find out what her work was actually on. They mentioned her at the top of every half hour, but all they talked about was her gender. I could tell from their omission that she must be a threat to government control.

  3. The sound of every FOX reporter:
    Blah blah blah Obama sucks yadda yadda yadda.

    1. You seem to hear Obama’s name the way that a dog hears his own, or a high-pitched whistle.

      Open up your mind a little and try actually reading the story.

      1. The point is that Warren can’t read the article. As evidenced by his summary, the only words he knows are Obama and sucks. I presume his brief preamble he copied and pasted from somewhere else.

  4. omg I think this is the first Stossel piece I was able to read without his voice creeping into my head.

    1. I too noticed the lack of “aw shucks”. And he self identifies as libertarian.

      He is writing better stuff. I’m just not sure he can be heard above the herd.

      1. His writing is much better than his TV appreances, IMHO. I think he would do more good if he concentrated on writing.

        1. What’s wrong with his TV appearances?

          1. It’s the ‘stache. It makes him look like Tom Selleck.

      2. “aw shucks”.

        You mean “gee whiz”

    2. I didn’t notice until you pointed it out, but I also failed to hear his voice in my head. Unfortunately, I now can’t RE-read it without hearing it, so thanks.

  5. Please. Rules of behavior that are independent of government are not what anybody means by “regulation.”

    Indeed. I’ve been telling people for years that if there wasn’t an FDA, that a private, voluntary, food safety regulation system would develop on it’s own.

    The statist argument has ALWAYS been that the free market can’t develop it’s own voluntary self-regulation mechanisms, so the government needs to step in.

    It’s simply a gross misconception of libertarian theory that there would be NO mechanism whatsoever in the absence of government.

    1. How do the statists explain UL or the Kosher markings on food?

      1. They don’t. The prefer to pretend they don’t exist.

        They also bitch about how the FDA defines organic without realizing the irony.

      2. Or the Snell Memorial Foundation ratings on helmets.

        http://en.wikipedia.org/wiki/S…..Foundation

        1. What? You mean you don’t think DOT is superior to Snell?

          ///cue sarcasm///

    2. We don’t need a goverment if everyone voluntarily buys health insurance, supports elderly, cares for the poor, makes voluntary donations to the public funds. Basically everyone is wise and responsible and acts likes an angel all the time.

      1. Andy, I think you’ve hit the nail on the head. Unfortunately it was stuck in your own.

      2. Yes, that was the gist of Hobbes work, but we’re referring to some more recent research.

  6. No Fox reporter is allowed to talk about Obama’s tax cuts or the fact that it’s now allowed to carry guns in federal national parks thanks to Obama.

    Because Obama’s all about high taxes and taking away your guns!

    1. Citations, please.

      1. Any citations would be dispositive of his comment (at least the first sentence).

    2. Which is relevant to this story….how ?

    3. The Federal Park rule changed during the last administration.

      It just went into effect during this one after the lawsuit got dropped.

      1. …and with an Oh, SNAP! robc crushes Dave K’s little non-point.

        1. The federal park rule comes from an amendment by Senator Coburn that in a bill signed by Obama.

          1. Originally it was a (Bush) administrative rule. But, there was a lawsuit/delay due to “lack of environmental impact study”. The Coburn amendment pushed that out of the way.

            I had forgot about that last step.

            1. One of the rare times that a “midnight regulation” was actually good.

              1. It’s a good thing. I want to be armed in case I stumble upon a large marijuana growing area within our national parks and are accosted by violent thugs. Saw it on a lifetime movie AND a fox reporter told me about it. Must be true.
                This has nothing to do with Elinor Ostrom, but felt I had to… out of respect for the thread.

    4. So Obama can take credit for implementing a Bush administration policy.

      OK. I’ll give him that.

      Now, about those tax cuts. . . .

      1. There will be tax cuts. But they will have a negative sign in front of them.

  7. Here’s a really interesting 1999 article which quotes Ostrom and explores some of the ideas in her domain: http://www.thecornerhouse.org……ml?x=52004.

    As best as I can tell, it’s put out by a leftist outfit but the views are not necessarily incompatible with libertarianism. In any case, it’s an engaging read.

    1. As Elinor Ostrom notes: “Small-scale communities are more likely to have the formal conditions required for successful and enduring collective management of the commons. Among these are the visibility of common resources and behaviour toward them; feedback on the effects of regulations; widespread understanding and acceptance of the rules and their rationales; the values expressed in these rules (that is, equitable treatment of all and protection of the environment); and the backing of values by socialization, standards and strict enforcement.”

      Indeed interesting. Thanks for the link.

      1. anyone here ever live in a “small scale community”?

        1. I’ve lived in a town of 220 people, but that was early in the 21st century, so not quite like what I believe you are alluding to. Some of us pooled resources in certain ways, like sometimes combining trips to the nearest city or harvesting each others’ orchards, but that’s about as close as it got to what I think you mean.

        2. There was one in Fairfax County, VA. Reason did a story on it once, I think. Tiny houses, almost like a circus town.

        3. I was in a fraternity in college.

        4. Oh but we have. We all lived in small, hunter-gatherer communities 30,000 years ago. It makes sense that our brains would have evolved for this type of existence, doesn’t it?

  8. Therefore, extrapolating from the second to last paragraph, libertarians recognize that the nation state is not necessary.

  9. Allow me to explain a different take on why she won.

    I think the Nobel committee thought that her work could show that we could all have communal property without government mandating it. Their goal is collectivism – the means of that don’t really matter to them.

    Besides, what better way to get people who hate government to take another look at communal property? I mean, the State would only be “enforcing” voluntary regulations. A small step from that to government making the regulations and forcing people to abide by them.

    I agree her work is interesting to those of us who dislike government control, but be careful here. It’s still suggesting a way around private property.

    1. Oh, I agree. I think they gave the prize to her because they thought that it in some way supported a kind of soft socialism.

      I’d classify her as left-libertarian. She’s the kind of person who would probably support local communes, cooperatives, and such – with internally defined rules for distributing the resources of the collective.

      Lots of these things do exist, and I have no problem with them if they can survive absent state subsidies. But I also observe that most of these things tend not to be hugely sucessful.

      As someone pointed out last week, Whole Foods became a national chain based under libertarian management, while the competing lefty coop in Austin remained a small, financially shaky operation.

      But the thrust of Ostrom’s work tends to be on resources like fisheries and pastures. You can say that alloting time-shares and such is “socialist”, or you can consider it an abstract form of property. Instead of owning a specific plot of resources, you own (and trade) the right to fish or graze during a specific time slot. Nobody thinks time-share condos are socialist.

      1. The abstract form of property is the idea I get, and honestly it’s one that speaks to me (within reason of course). Growing up on the Cape Cod seashore, I learned about how the native americans there viewed their natural resources and their subsequent stewardship of those resources. Shellfish, for example, were a food source as well as a trade item–both whole and as wampum–and as such, better stewards had better supplies. There wasn’t much in the way of resource stripping for monetary gain, and a lot of this was due to the shared societal value and immediate social feedback loop that Ostrom mentions that I quote in a comment above. In as much as particular natives ‘owned’ their stretch of seashore and were its stewards, they also understood that an abstract property border between a given stretch of beach was just that; abstract.

    2. I’d have to read a bit more of her work to be sure, but I don’t get the idea it’s a refutation of private property. Yet. I do agree with your admonition in that it seems the sort of work that central planners would love to misquote if it would help their redistribution.

    3. But I still have no real idea what “communal property” really means. Does it mean that, what, 20 people bought it and own it? 50? 1000? or does it mean that no one owns it? It’s just there. People, left to their own resources are inclined to cooperate. Big whoop. Thing is, the philosophy of the left (and probably the right) invariably runs into internal contradictions when taken to its logical conclusion and that’s why these people are careful not to examine their own view too deeply.

      1. Unowned open land. Kinda like forest and fishing territory amoung native Americans.

  10. “At the slightest hint of trouble, the ruling class reflexively assumes that knowledgeable, wise and public-spirited government regulators are capable of riding to the rescue.”
    and the ruled classes demand that they do — what a wonderful fit, don’tcha think?

    1. How convenient it is for the tyrant that the people can’t rule themselves.

  11. So how remarkable it is that this year’s Nobel Memorial Prize in economics was shared by Elinor Ostrom, whose life’s work demonstrates that politicians and bureaucrats are not nearly as good at solving problems as regular people. Not exactly. It depends on the problem. Her work wouldn’t necessarily apply if we were invaded by another county, for example, or faced a serious pandemic.

  12. Pardon the cognitive dissonance, but if Obama winning a Nobel Prize for doing absolutely nothing cheapens its value, why do we fall all over ourselves when a NP is awarded to a person espousing Libertarian ideals? I mean this is as an honest question.

    1. It’s just encouraging that not everything is completely infected.

    2. Agreed completely. What makes anyone think that the Nobel Committee has some kind of special insight into what counts as great work or not?

      Maybe I’m growing out of my childhood training that a Nobel Prize is the highest honor one can receive, but after all, it’s just another freaking award handed out by a bunch of arbitrary people based on their own prejudices.

      1. When I learned a long time ago that Gandhi had never won the prize despite being nominated but that Kissinger had won it, I mentally placed it right next to the Rhodes Scholarship: In the toilet.

        1. But the peace prize has very little to do with the science prizes. They are awarded by completely different committees. The science prizes, and the economics prize, are awarded by committees consisting of leading Swedish scholars in their respective fields. At least the hard science prizes have reached the level of respect they have because the committes, over the years, have given the awards to scientists who in general have been seen as worthy recipients by their peers. The peace prize has simply recieved it’s high reputation by being associated with the more respected rewards, despite being a strange and politicized beast from the very start.

          The economics prize is awarded along the same lines as the science prizes, only with the distinctions that it’s not a prize instituted in Nobel’s will and that economics is a more politicized field than medicine, physics and chemistry.

  13. Joe H,

    As some will quickly tell you, there is no nobel prize in economics, its given out by a different organization altogether.

    (its give out by a different organization)

    1. Just as the science prizes are. The Science, and economics, prizes are awarded here in Stockholm and the recipients are choosen by leading Swedish scientists in the respective fields. So far they have mostly done a good job, as far as I can tell. The recipients seem to be pretty uncontroversial, most of the time. The same process applies to the economics prize. That prize is a bit more controversial due to the nature of economics being a very politicized field, many people questioning the classification of economics as sience and all. If you look at the recipients througout history you’d be hard pressed to see it as a socialist leaning prize though. Most winners tend to be some shade of market liberal, as economists in general tend to be. People like Krugmann and Stiglitz are the exception and they got their prizes for actual economic research that is not connected with their political views.

      The Peace prize is given out by a bunch of Norwegian communists. A result of the Nobel’s will being written before those traitorous dogs broke up our union. We try to ignore it the best we can.

      1. Thanks for the information, robc and Stockholmian.

        Eller skulle jag s?ga tack s? mycket?

  14. Freedom to drink and drive works most of the times, but get you killed one in a while.

  15. You all are lucky! I get a hybrid of Stossel and Andy Rooney.

    Why is it that everytime I talk to a liberal it is like trying to take the cap off my medication. And why do they put it on so tight? Who are they trying to keep out? Al-queda?

  16. The opinion of a professional tea-bagger (http://www.americansforprosperity.org/101909-health-care-town-halls-john-stossel) isn’t worth the few KB of harddrive it is stored on.
    Stossel a journalist? What a joke!

  17. The socialists and marxists see it as a Nobel Prize for saying that private property is unnecessary.

  18. Basically, if people are allowed to protect a resource, they will. If they aren’t allowed to due to government intervention the tragedy of the commons happens. Private property is when the government/society/people_in_the_area_say (or possibly you, say it and no one has enough power to stop you) says, “Ok, this small parcel belongs to X, he can protect it, and we won’t hurt him for doing so.”

  19. What’s wrong with being a tea bagger? Are our nuts too salty for you Peter Jensen?

  20. So the Nobel Prize goes to sommeone who describes things like self-governing co-ops and user run fishing grounds, not the Libertarians and activists who invented and developed them against stiff opposition and have been saying what she “discovered” for years?

  21. My only point is that if you take the Bible straight, as I’m sure many of Reasons readers do, you will see a lot of the Old Testament stuff as absolutely insane. Even some cursory knowledge of Hebrew and doing some mathematics and logic will tell you that you really won’t get the full deal by just doing regular skill english reading for those books. In other words, there’s more to the books of the Bible than most will ever grasp.

  22. My only point is that if you take the Bible straight, as I’m sure many of Reasons readers do, you will see a lot of the Old Testament stuff as absolutely insane. Even some cursory knowledge of Hebrew and doing some mathematics and logic will tell you that you really won’t get the full deal by just doing regular skill english reading for those books. In other words, there’s more to the books of the Bible than most will ever grasp. I’m not concerned that Mr. Crumb will go to hell or anything crazy like that! It’s just that he, like many types of religionists, seems to take it literally, take it straight…the Bible’s books were not written by straight laced divinity students in 3 piece suits who white wash religious beliefs as if God made them with clothes on…the Bible’s books were written by people with very different mindsets

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