Thursday, October 15, 2009

Round-up & Analysis on Prof. Ostrom's Nobel Prize

By now, everyone interested in the commons has probably heard of Professor Elinor Ostrom, the first woman to win the Nobel Prize in Economics.

It seems that the Nobel Committee’s decision to award the prize to Prof. Ostrom came as a shock to economists. Apparently the odds of her winning the prize were 50-against to 1; she was all the way at the bottom of a list of roughly 30 potential candidates. She was such a sleeper candidate at least in part because she’s a political scientist not an economist, as Steven Levitt pointed out in his Freakonomics blog. But it was also the focus of her work that kept her off the radar of traditional economists; a number of economist-bloggers confessed to having to look Prof. Ostrom up on wikipedia to even figure out what she works on. I shouldn’t be too hard on the economists though … I didn’t know who Prof. Ostrom was either, but am so glad that the Nobel Committee introduced her to us.

The Royal Swedish Academy wrote that Ostrom has “challenged the conventional wisdom that common property is poorly managed and should be completely privatized or regulated by central authorities.” Apparently this is a radical critique of economic orthodoxy. See, there’s this economic theory called “the tragedy of the commons” that supposes that when faced with a commonly held resource, the greed of rational actors will compel them to use up that resource. For instance, farmers with access to local grazing land have an incentive to let their cattle feed as much as possible, but if every farmer takes this maximum-feeding course there won’t be any grass left and everyone’s cattle will suffer. The traditional opposing options for dealing with this “tragedy” are either “let the best farmer win” (thereby depleting the grass) or regulate the behavior of the farmers. Obviously these extremes of unfettered consumption or rationing are straw men for either side of these debates over limited shared resources, and Prof. Ostrom’s work explains how a middle-ground of maintaining the commons actually works.

At the same time, her work straddles the “divide between libertarian and left politics in very interesting ways that challenge some of the underlying assumptions of both” – and also mean that people unfamiliar with her work (like myself) are reading into her theory what they want. For instance, a blogger for the Harvard Business School (who confessed to having to look Ostrom up) interprets Ostrom’s work as positing that “just because a market is declared to have failed, we don’t have to default reflexively to government regulation as the only solution.” That seems like a conveniently anti-government view, but I’m sure that activist-types (like myself) over-emphasize her focus on bottom-up and locally-based processes for ensuring the sustainability of our water, forests and other shared resources.

In addition to WHAT Prof. Ostrom has studied, her process is also apparently a radical departure from traditional economics. Instead of relying on the complex theoretical and statistical models that did nothing to forecast or prevent this current recession, Prof. Ostrom developed her theory based on observation of how the commons has been preserved around the world. It’s ironic that Ostrom’s fieldwork would be a radical departure for economics since the whole “tragedy of the commons” theory was actually developed by a biologist. Still the fact that Ostrom has distinguished herself by developing theory based on what is (or is not) working in the field reflects the work and orientation of the Building Movement Project (home of this website and work on the commons).

As advocates for commons-based thinking, I’m sure that we are going to be reading a lot of Prof. Ostrom’s body of work in the common months (at least those of us who hadn’t already); but we should also take another lesson from her and document our own examples of the commons at work.

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