Elinor Ostrom had a profound impact on research about institutions. She got the Nobel Prize in Economics. This was for her work thinking about how social affairs could be governed: Governing The Commons.
Common Pool Resoruces
This goes much wider than corporate governance. It speaks to how communities deal with the control of their valuable assets. Clearly, this has a lot of relevance to issues around the sustainable use of natural resources. For example, such resources that might be held in a common pool.
“Common-pool resources include resources that are sufficiently large that excluding potential beneficiaries from using them for consumptive or non-consumptive purposes is non-trivial”
Ostrom, 2008, page 24
Classic examples might be fishing grounds or forests. It is challenging to stop those who don’t pay their fair share from using them. (What is more it is even hard to determine everyone’s fair share to pay).
Governing The Commons Suggestions
There is a lot of common sense in the recommendations of Ostrom. She is, after all, interested in what works. She is not trying to argue for a specific political philosophy. Rather than argue exclusively for private, communal, or public ownership she takes a more nuanced approach.
“Examples exist of both successful and unsuccessful efforts to rely on private property, government property and community property”
Ostrom, 2008, page 24
She adds: “We cause harm, however, by recommending one-size fits-all institutional prescriptions based on overly simplified models of resources to solve problems of overharvesting” (Ostrom, 2008, page 28).
What Works?
Rules around private property, and enforcement of those rights, can be challenging. Public ownership can sometimes work but it can also fail to protect shared resources. The effectiveness of communal ownership varies widely. This is because it depends not least upon how robust the local communal institutions are.
Perhaps unsurprisingly with a challenging problem like protecting natural resources, the solutions are often complex. The solution, therefore, depend a lot on the precise local circumstances.
For more on governance and how we developed the model below, see here.
Read: Ostrom, Elinor. “Institutions and the Environment.” Economic Affairs, 28.3 (2008): 24-31.