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Profound 30 minute Nobel Prize lecture by Elinor Ostrom.

Her deep study of institutions resulted in a doubling in the number of goods economics recognizes, a deeper understanding of complex systems in institutions, a discriminating theory about the tradeoffs of size and complexity in polycentric governance systems which shows that a mix of large and small systems is most efficient, indeed a deep advocation of the benefits of polycentric systems (in contradistinction to strict hierarchies or strictly focusing on economies of scale), deep insights into how to design and maintain common-pool resources (a solution to the "tragedy of the commons"?), recognition of the central role that trust plays in coping with dilemmas, and her compounding of evidence showing that panaceas are potentially dysfunctional.

Some of her work is a bit stilted by academic technicalities, but this presentation is simple, clear, and accessible. Sadly, three years after winning her Nobel Prize she and her husband both died. It is now up to us to carry on this great work and help it to become better known!

The four goods that economics now recognizes can be characterized by two properties: goods whose benefits to others are lost by use ("subtractability of use") and those which are more or less difficult to exclude beneficiaries. Public goods are those with less subtractability and less excludability. Toll Goods are those with less subtractability and more excludability (things like theater, day care, and private clubs), common-pool resources are those with more subtractability and less excludability, and private goods are those with more subtractability and more excludability.

Lessons learned from complex systems:
- Rules must fit the social-ecological context
- Panaceas are potentially dysfunctional
- Polycentric systems may better enable a fit between human action situations and nested ecological systems

The eight design principles for managing common-pool resources (direct from 
her lecture):
- Boundaries of users & resource are clear
- Congruence between benefits & costs
- Users had procedures for making own rules
- Regular monitoring of users and resource conditions
- Graduated sanctions
- Conflict resolution mechanisms
- Minimal recognition of rights by Government
- Nested enterprises

Some factors that positively affect outcomes for common-pool resources:
- Face-to-face communication enables them to increase cooperation
- If they design their own sanctioning system, they can achieve close to full optimality

Her slides are here: http://www.nobelprize.org/nobel_prizes/economics/laureates/2009/ostrom-lecture-slides.pdf

http://www.nobelprize.org/mediaplayer/index.php?id=1223
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