Friday, October 30, 2009

Elinor Ostrom's Nobel Prize

Since the announcement was made that Elinor Ostrom would receive this year's Bank of Sweden Prize in Economics in Memory of Alfred Nobel, I have been struck by a couple of different aspects of the responses: (1) the knee-jerk reaction of several ignorant economists, and especially economics graduate students, expressing incredulity that someone they had never read, and a non-economist to boot, could possibly win the Prize; and (2) the way ideologues on the right and left have interpreted the meaning of the prize, apparently without having read Lin's work. Left-wing analysts noted with delight one implication of her work: that private property regimes and markets are not always the "best" solution, all things considered, for common pool resources (CPRs). Commentators on the right, by contrast, have focused exclusively on the implication of her work for government  ownership and regulation: that they may be neither necessary nor sufficient for sustainable use of CPRs. But, because of their ideological blinders, both groups have failed to grasp the essence of what Lin is saying: "there are no panaceas."

First, in an effort to correct those (including Hardin) who perceived only a binary choice between private property/markets and government regulation/socialism, Lin offered the empirical example of common-property regimes, in which groups of private resource users are sometimes able successfully to conserve CPRs over very long periods of time.

Second, Lin's work demonstrates that no single, first-best set of institutional arrangements - including property regimes - exists for conserving CPRs across all dimensions of concern, in all sets of circumstances. In making this argument, Lin follows the lead of her fellow Nobel laureate Ronald Coase, who will be celebrating his 100th birthday in 2010. In a relatively obscure discussion paper from 1964, Coase noted that all of society's mechanisms for organizing social relations - including markets, firms, and governments - are failures. For Coase, the lesson was to choose that mechanism that, in the circumstances, was least likely to fail or likely to fail the least. I take that pragmatic suggestion to be Lin's advice as well (albeit with regard to a larger set of institutions and organizations than Coase's work addressed).

Ultimately, Lin's work is important not only for (a) showing that common-property regimes sometimes (but only sometimes) succeed in conserving CPRs over long periods of time but also (b) explicating the multitudinous array of complex factors that explain institutional success or failure in conserving CPRs and (c) providing analytical structures for identifying, studying, and assessing those factors. She is not an ideologue, but a social scientist par excellence.

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