Book can be found in:
Genre = Economics, Law
Intriguing Connections = 1) How To Allocate Resources?, 2) Learning Economics: Basic to Advanced,
Common-pool resources (CPRs) are the focus of this book. CPRs have multiple users (or appropriators of the resources). The underlying theme is creating an alternative way of organizing the use of the CPRs. Rather than the state or market (entrepreneur/firm) deciding on the fate of the resources, this book shows that local communities can organize themselves to prevent unsustainable extraction of the CPRs. Rather than an external organizing force, an internal network shaping people’s behavior.
As Ostrom shows, many communities have historically created institutions which facilitated sustainable extraction of resources, making the resource available for future generations. The resources under observation are renewable such as geographical basins and fisheries. As these resources are limited, conflict and free-riding are ubiquitous incentives. The communities had to overcome these and many problems. Rather than evading these problems, Ostrom emphasizes how the communities designed institutions which helped resolve the problems.
Infractions to the institutions can be handled informally rather than using formal means of punishing community members. As the communities under observation are local, there is an incentive to monitoring others behavior as the infractions hurt each individual. Those who break the rules tend to be handled quickly, and as everyone in the community will shortly be aware of the rule breaker. This information motivates the rule breaker not to continue with the infractions to prevent dishonor, while providing proof that the monitoring works. Social norms are highly effective at altering behavior.
Enforcement of the rules need to be credible and change as the rules change. Although the author claims that these communities did not have external authorities in dictating the terms, it seems to be contradictory with the examples, for the communities themselves created the external monitor of rules, internalized the external monitor. Each community needs predetermined rules to set the appropriate expectations, with each community varying in determining what rules there are and how to enforce them. Some communities have different rules based on the condition of the CPR. Many rules require loads of information, and the community needs to take risks to obtain the appropriate information to handle their particular CPR.
Epistemology is present in this book for Ostrom takes much time to express the need for both theory and empirical work. Many parts of this book express the formulation of how policies are designed and their evolution. Great detail went into the examples of the communities that succeeded and failed but the examples are not the most exciting, although they are extremely important. The complex situations described makes some parts more easily understood than others. Throughout the book, game theory is used, but to understand the depth of the implications requires a good deal of prior knowledge of game theory. A lot of the implications can easily be missed with no prior game theory knowledge.
Pages to read: 221
1st Edition: 1990
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