Nobel Economics Prize Shines on Common-Pool Resources

Back in the 1990s, I was a graduate student studying the social and behavioral science behind how people managed natural resources.  I had lots of company, some of it quite a bit more visionary than this particular grad student. But part of the benefit of being a graduate student is the chance to study along side some of these visionaries. One of them was for a brief period in the summer of 1999 with Dr. Lin Ostrom of Indiana University. I was attending a summer exchange program at the Center for the Study of Institutions, Population and Environmental Change at IU.  I’m pretty sure I didn’t make any impression on her, but her work was monumental for me. Ostrom studied something called “common-pool resources.”

I was thrilled this morning to hear that Dr. Ostrom (along with another economist named Oliver Williamson) won the Nobel Prize for Economics. It is much deserved because Ostrom’s work reworked an old tale that’s been bouncing around in natural resources theory and economics for a long time.

So what is a “common-pool resource“?  To simplistically put it, a resource is common-pool if it is either too big, costly, harmful or difficult to manage by a single individual or firm.  Examples include the atmosphere, streams, oceans, the Internet, highways, police and fire services, broadcast airwaves, irrigation systems, forests, soils, or fisheries.  Another name for these special resources is “common property.” The problem of managing common property is an important one in economics. When common property is poorly managed, it can be over-exploited, leading to conflict.  Economists, ecologists, anthropologists and historians have written extensively about how over-fishing, pollution of lakes and streams, or over-grazing of rangelands can be caused by poor common property management. This problem is referred to as the tragedy of the commons.

Common-pool resources are global. Photo courtesy of NASA.

Common-pool resources are global. Photo courtesy of NASA.

The tragedy of the commons is commonly invoked to describe all kinds of resource abuses.  But a BIG assumption follows that there are no institutions, ethics, or regulations to govern that commons or common-pool resource.  Dr. Ostrom as well as a raft of others who followed in the economics and allied fields showed that this was simply not true. Instead, societies around the world have governed common pool resources more or less effectively based on the strength and flexibility of their institutions. In some cases, these institutions are not just governments or markets but also religious in nature.

A communal irrigation system in Sonora, Mexico. Photo by R. Emanuel.

A communal irrigation system in Sonora, Mexico. Photo by R. Emanuel.

For example, irrigators in Bali, New Mexico, and Chile have effectively regulated their scarce water resources through various social institutions with minimal conflict.  [This was the topic I worked on for my graduate research in Mexico a few years ago.]  In another example, lobster fishermen off of Maine have managed their fishery without collapse for decades using a careful system of seniority and self-regulation.

Meanwhile, other systems have collapsed under their own weight, abuse, or ineffective governance. A classic example is the nearly complete loss of the cod fishery off the New England and Maritime coast. Other examples include the excessive extraction of water out of Lake Baikal in the former Soviet Union or unsustainable groundwater mining from any number of Western U.S. aquifers.  Look at the unfolding fight over water in the Georgia, Florida and Alabama as another text-book example of common-pool water conflicts (thanks to OSU colleague and WaterWired‘s Mike Campana for keeping us up to date on that opera).  Last but not least, one could easily make the argument that a lack of regulation or global market institutions is behind the “tragedy of the commons” that is human-induced climate change.

So, congratulations to Dr. Ostrom for the long overdue recognition of her vital work. And if anyone would like to see the vast amount of publications on the subject of common-pool resources that she and others have gathered together at Indiana, check out the Workshop in Political Theory and Policy Analysis as well as the Digital Library of the Commons hosted there.

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4 thoughts on “Nobel Economics Prize Shines on Common-Pool Resources

  1. Hi
    I’m not a “fisher” but I live in Gloucester Mass and have been following the local news about the imposition of Catch Shares. I didn’t know what to make of it until I heard about Dr. Ostrom’s work. I even thought that sadly, maybe it was the best solution.
    Now that I am reading about her ideas, I am totally sold (even though I voted for Obama) on bottom-up self-regulation as the truest model of the nature of the resource. It is sophisticated thinking that is absolutely not yet and may never be “institutionalized” in science and government. I wish the fishermen of Gloucester had some amazing spokesperson, like maybe Dr. Ostrom herself, to say “wait a minute” to the regulators who are dead set on catch shares. I was always puzzled by the local paper (Gloucester Daily Times) talking about Pew Charitable Fund research as “bad science”. I thought it was highly unlikely and couldn’t understand what they meant. But now I see that they mean it is “traditional science”, Newtonian, linear, inappropriate. “Old school” compared to the new and more appropriate but less institutionalized complex systems “visionary” (as you say) science.
    Few people “get” this. I wish there were a way for Gloucester to have a convincing spokesman for self-regulation, and FAST.

    • Fortunately Ostrom’s ideas seem to be slowly catching on with folks who work in fisheries management. I am heartened that she won this Nobel–this is a big endorsement for her work that should point more managers to it. I am not sure how long it might be before those folks are the in the right positions of power but eventually they’ll get there. If you haven’t already read it, check out an old piece by anthropologist James Acheson about “Lobster Gangs” which talks of how those fishermen are so good at self-regulation and have been doing it successfully for a lot longer than the concept of Catch Shares has been around. See “The Lobster Gangs of Maine,” Durham, N.H.: University Press of New England, 1988; but you can find his other, smaller piece in: “The Question of the Commons.” (Eds. James Acheson and Bonnie McCay). Tucson, Arizona: University of Arizona Press, 1987. Catch Shares is an honest attempt–but it’s not truly an institutional framework for having everyone regulate the commons as Ostrom would have best described it.

  2. it is easier to manage through societies and the inherited values to look after what’s commonly ours regardless of the actual location. Gloucester and beyond.

    • Local social values certainly have a lot more sway than laws and policies instituted by the far-away. I would agree with you that inherited values are by far the most persistent and most likely to “catch” the free-rider before they take the ride, while outside legal institutions depend on catching them after the fact and making an example for others to follow. Not generally useful… Thanks for the comment. –Rob

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