Ghost of Midnight

Cooperation vs. Competion or Regulation

Scott Heiferman’s tweet led me to take a closer look at the work of recent Nobel Laureate (economics) Elinor Ostrom.  She studies how cooperation works best in some cases… better than competition or regulation… our two dominant forms of organizing markets.  From a Forbes article…

Garrett Hardin called his famous 1968 essay on shared resources “The Tragedy of the Commons.” He argued that a shared village grazing pasture would tend to get overused and eventually destroyed. But even Hardin later acknowledged that shared common resources did not inevitably have to end in destruction, saying that he should have called his essay “The Tragedy of the Unmanaged Commons.”

And from Fran Korton’s interview at Shareable…

Fran: It’s interesting that your research is about people learning to cooperate…

Elinor: I have a new book coming out in May entitled Working Together, written with Amy Poteete and Marco Janssen. It is on collective actions in the commons. What we’re talking about is how people work together. We’ve used an immense array of different methods to look at this question “case studies, including my own dissertation and Amy’s work, modeling, experiments, large-scale statistical work. We show how people use multiple methods to work together.

Fran: Many people associate “the commons” with Garrett Hardin’s famous essay, “The Tragedy of the Commons.”… What’s the difference between your perspective and Hardin’s?

Elinor: Well, I don’t see the human as hopeless. There’s a general tendency to presume people just act for short-term profit. But anyone who knows about small-town businesses and how people in a community relate to one another realizes that many of those decisions are not just for profit and that humans do try to organize and solve problems.

If you are in a fishery or have a pasture and you know your family’s long-term benefit is that you don’t destroy it, and if you can talk with the other people who use that resource, then you may well figure out rules that fit that local setting and organize to enforce them. But if the community doesn’t have a good way of communicating with each other or the costs of self-organization are too high, then they won’t organize, and there will be failures.

Fran: So, are you saying that Hardin is sometimes right?

Elinor: Yes. People say I disproved him, and I come back and say “No, that’s not right. I’ve not disproved him. I’ve shown that his assertion that common property will always be degraded is wrong.” But he was addressing a problem of considerable significance that we need to take seriously. It’s just that he went too far. He said people could never manage the commons well.

At the Workshop we’ve done experiments where we create an artificial form of common property such as an imaginary fishery or pasture, and we bring people into a lab and have them make decisions about that property. When we don’t allow any communication among the players, then they overharvest [the commons]. But when people can communicate, particularly on a face-to-face basis, and say, “Well, gee, how about if we do this? How about we do that?” Then they can come to an agreement.

That last bit there about communication leading to better community decisions… love it.  It’s so obvious. I guess that’s why it takes a non-economist Nobel Laureate in Economics to explain it to the economists of the world.  And, for what it’s worth, her observation jibes with what we see at Front Porch Forum too.  FPF leads to better communication among neighbors, more face-to-face conversation, and, in many cases, better community decisions.

Congratulations Dr. Ostrom!