Governing the Commons: The Evolution of Institutions for Collective Action

“The key to my argument is that some individuals have broken out of the trap inherent in the commons dilemma, whereas others continue remorsefully trapped into destroying their own resources. This leads me to ask what differences exist between those who have broken the shackles of a commons dilemma and those who have not.”

Ostrom chose case studies in which individuals have failed to resolve the commons dilemma and others in which successful management has been achieved. She seeks to uncover The Conditions for Successfully Managing Common Pool Resources. She identifies design principles for the successful cases and notes the absence of those principles in the failures.

“Many policy prescriptions are themselves no more than metaphors. Both the centralizers and the privatizers frequently advocate oversimplified, idealized institutions—paradoxically, almost ‘institution-free’ institutions.”

Traditional theories of collective action prescribe general policies that are meaningless in practice, which Ostrom highlights as one of the flaws of collective action theories. Such theories offer no guidance about important details, such as limitations on authority, selection of its personnel, monitoring of performance, and others. These impractical prescriptions do more harm than good.

“When years have been spent in the development of a theory with considerable power and elegance, analysts obviously will want to apply this tool to as many situations as possible. The power of a theory is exactly proportional to the diversity of situations it can explain.”

Collective action theories fit this description and have been applied inappropriately to small-scale CPRs. Empirical research demonstrates that they do not accurately predict the resolution of problems concerning the use of these resources. Absent from this literature is a theory in which individuals organize themselves to secure a CPR. Ostrom hopes to fill this gap.

“When appropriators act independently in relationship to a CPR generating scarce resource units, the total net benefits they obtain usually will be less than could have been achieved if they had coordinated their strategies in some way.”

Without coordination, appropriators are likely to contribute to the unsustainability of the CPR. Classic collective action problems, such as the tragedy of the commons, might result. Unlike the assumptions of classic theories, Ostrom does not presume that appropriators do not communicate with one another. Instead, coordination is a possibility.

“At the most general level, the problem facing CPR appropriators is one of organizing: how to change the situation from one in which appropriators act independently to one in which they adopt coordinated strategies to obtain higher joint benefits or reduce their joint harm.”

Ostrom emphasizes The Importance of Understanding Institutional Change. Organizing presents its own collective action problem, as costs of doing so can be high and there is a temptation to free ride. Ostrom breaks down the process, explaining that such changes can be incremental. Once small steps are taken, incentives can change and lead to bigger steps.

“But some individuals have created institutions, committed themselves to follow rules, and monitored their own conformance to their agreements, as well as their conformance to the rules in a CPR situation. Trying to understand how they have done this is the challenge of this study.”

Traditional theories of collective action presume that such accomplishments are not possible, yet Ostrom insists that they do exist. Ostrom therefore hopes to reveal the conditions for successfully managing CPRs.

“What makes the problem more difficult in a CPR situation than in a public-goods situation is that unless appropriation problems are resolved, the provision problems may prove intractable. In a public-goods situation, appropriation problems do not exist, because resource units are not subtractable.”

Provision problems, in part, relate to the supply of the resource, which requires maintenance. If appropriation is out of control and the resource is dwindling, it will prove almost impossible to get appropriators to share maintenance costs and duties. The situation is different for public goods, such as clean air, because the actions of those using the resource do not deplete it.

“All of the Swiss institutions used to govern commonly owned alpine meadows have one obvious similarity—the appropriators themselves make all major decisions about the use of the CPR.”

In all the successful cases of CPR management, the appropriators can participate in rulemaking. Ostrom makes this one of the design principles for successfully managing CPRs. It is contrary to assumptions in traditional collective action theories, which call for central regulation or privatization.

“The most striking similarity between the huerta and zanjera systems is in the central role given to small-scale communities of irrigators who determine their own rules, choose their own officials, guard their own systems, and maintain their own canals.”

Once again, participation in rulemaking by those using the resource is critical to the successful management of a CPR. It is additionally key that monitoring is done either by the appropriators themselves or by those answerable to them. They must have trust that others are abiding by the rules to ensure their own compliance. This also becomes one of the design principles of a successful CPR.

“In these robust institutions, monitoring and sanctioning are undertaken not by external authorities but by the participants themselves. The initial sanctions used in these systems are also surprisingly low.”

Ostrom reiterates the importance of the role of appropriators in monitoring. She then explains that sanctions are minor for first-time offenses in successful CPRs. There is understanding, rather than a draconian approach. People are motivated to conform given their relations with other appropriators and the desire to avoid embarrassment. Severe sanctions are only necessary for repeat offenders, who are rare in successful systems.

“Institutional analysis that simply posits an external, zero-cost enforcer has not addressed the possibility that the rules devised by appropriators may themselves have a major effect on the costs, and therefore efficiency, of monitoring by internal or external enforcers.”

Poor enforcement can cause failure in CPR management. Some types of rules are easier to enforce than others, with appropriators themselves in the best position to identify easily enforceable rules. For example, it is easier to identify non-compliance when the resource can only be harvested on certain dates versus stipulating how much one can take. Theories that assume ease of enforcement for all rules with no cost are highly misleading.

“The practice of obtaining the best information available and disseminating it widely increased the degree of understanding and level of cooperation among the participants.”

Speaking about the management of the West Basin in California, Ostrom highlights the value of information for appropriators when they evaluate the costs and benefits of action and inaction. In this case, an independent study demonstrated the unsustainability of current practices, which motivated participants to take action. Ostrom emphasizes the error of theories that simply assume that participants have good information, as information most often comes at a cost.

“Once litigation had been initiated, however, the court could impose its own judgment if the water producers could not reach an agreement on their own.”

Here, Ostrom stresses the importance of understanding institutional change. With a lawsuit filed, incentives changed. The participants now had to weigh the possibility of a negative judicial outcome if inaction was chosen. Additionally, the litigation resulted in a scientific study of the resource, which provided parties with information about its sustainability. This one action led to others.

“Instead of relying strictly on hierarchical relations, as within a single firm, the management system is governed by negotiation and bargaining processes among many different actors in several different arenas.”

Referring to the combined management of the Central and West Basins in California, Ostrom explains that governance can take place within the public sector without central regulation. Private water companies and voluntary producer associations participate in governance. Instead of central edicts, rules are negotiated and, therefore, more likely to gain acceptance.

“The difference between an active effort by a central government to regulate appropriation and provision activities and an effort to provide arenas and rules for microinstitutional change is frequently blurred.”

In the management of small-scale CPRs, central governments can play a helpful role via providing arenas for discussion and means to institute rules changes. The state of California did so in the water basin cases from Los Angeles County. In contrast, a central government that dictates uniform rules to all CPRs is not helpful.

“That some rule changes could be undertaken with low transformation costs enabled the participants to gain some advantages of collective action before they were faced with more costly alternatives.”

Ostrom emphasizes the incremental nature of institutional change, invoking the importance of understanding institutional change. It is easier to motivate people to incur low costs for the sake of a better situation. Once those small changes are put in place, subsequent changes can build on them. Participants also build trust while working together.

“In a political regime that does not provide arenas in which low-cost, enforceable agreements can be reached, it is very difficult to meet the potentially high costs of self-organization.”

The political context significantly influences the successful or unsuccessful resolution of CPR problems. Governmental regimes can play a helpful role by enabling individuals to come together. Otherwise, individuals are unlikely to see the possibilities of incremental changes and fail to take any action to make changes.

“Individuals who do not have similar images of the problems they face, who do not work out mechanisms to disaggregate complex problems into subparts, and who do not recognize the legitimacy of diverse interests are unlikely to solve their problems even when the institutional means to do so are available to them.”

Studying a case of a failure to manage a water basin in another part of California, Ostrom explains that a helpful government is no guarantee that a successful resolution will be reached. In this case, there were fundamental disagreements about the rights of diverse pumpers as well as issues about the definition of the resource itself. No one took the initiative to form voluntary water associations despite a politically friendly regime.

“Instead of finding means for strengthening locally evolved rule systems to ensure that access and use patterns would continue to be controlled in those territories where effective rule systems had already been devised to match local environmental and technological systems, Canadian policy has been to develop one standard set of regulations for the entire coast.”

Ostrom considers the resolutions to prevent over-fishing in Nova Scotia fragile. Successful resolution is tied to having rules devised by local appropriators that fit local conditions. If the Canadian government imposes uniform rules, they are likely to fail to prevent overfishing and deplete the resource.

“Thus, no more than three of the design principles characterized any of the cases in which CPR appropriators were clearly unable to solve the problems they faced.”

All seven of the design principles for successfully managing CPRs must be present for the successful resolution of CPR problems. Ostrom demonstrates that the cases where appropriators failed to resolve their problems did not have all these principles. The most that any of the failing cases had was three. This is important because the principles would not be predictive of success if they were all present in failing cases.

“If this study does nothing more than shatter the convictions of many policy analysts that the only way to solve CPR problems is for external authorities to impose full private property rights or centralized regulation, it will have accomplished one major purpose.”

Ostrom stresses the important consequences of exposing the flaws of collective action theories. Those theories encourage governments to impose uniform solutions that do not fit local conditions. As a result, they do harm and often fail to protect CPRs. Her study demonstrates that local rules devised by the appropriators are more likely to resolve small-scale CPR problems.

“Let us […] look at the larger CPRs […] and how those that have succeeded in solving problems of collective action have done so. All of these are characterized by design principle 8: the use of nested enterprises. The larger organizational units in these systems are built on previously organized smaller units.”

The nesting principle ensures that local appropriators have a voice and makes the broader levels, such as regional ones, more legitimate in their eyes. They are represented in these forums. This principle provides promise for resolution of larger and more complex CPRs.

“Success in starting small-scale initial institutions enables a group of individuals to build on the social capital thus created to solve larger problems with larger and more complex institutional arrangements.”

Traditional theories of collective action miss this insight and therefore presume that participants are unable to create institutions to solve CPR problems. The incremental nature of change makes it more likely that participants can change the rules. Even a small step can drastically change incentive structures, reflecting the importance of understanding institutional change.