The Sustainable Economics of Elinor Ostrom

Commons, contestation and craft

Derek Wall

• Publisher: Routledge
• Year: 2014
• ISBN:
  9781136173110
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Elinor Ostrom's Nobel Prize-winning work on common pool property rights has implications for some of the most pressing sustainability issues of the twenty-first century — from tackling climate change to maintaining cyberspace. In this book, Derek Wall critically examines Ostrom's work, while also exploring the following questions: is it possible to combine insights rooted in methodological individualism with a theory that stresses collectivist solutions? Is Ostrom's emphasis on largely local solutions to climate change relevant to a crisis propelled by global factors?

This volume situates her ideas in terms of the constitutional analysis of her partner Vincent Ostrom and wider institutional economics. It outlines her key concerns, including a radical research methodology, commitment to indigenous people and the concept of social-ecological systems. Ostrom is recognised for producing a body of work which demonstrates how people can construct rules that allow them to exploit the environment in an ecologically sustainable way, without the need for governmental regulation, and this book argues that in a world where ecological realities increasingly threaten material prosperity, such scholarship provides a way of thinking about how humanity can create truly sustainable development.

Given the inter-disciplinary nature of Ostrom's work, this book will be relevant to those working in the areas of environmental economics, political economy, political science and ecology.

1 An accidental life?

DOI: 10.4324/9780203081341-1

‘Vincent and I used to go on Thursday nights and all day Saturdays to (Unionville carpenter) Paul Goodman’s,’ she recalled. ‘Yes, we made furniture there. Our dining room table, cabinets. Pretty much everything in our house except the padded chairs’.

(Leonard 2009)

Introduction

It is said that on being woken by an early morning phone call on 10 October 2009 to inform her that she had won a Nobel Prize in economics, Elinor Ostrom turned to her spouse and colleague Vincent Ostrom and delivered the immortal words ‘Wake up, honey. We have won a prize’ (Sabetti 2011: 73). Her desire to see the prize as shared extended beyond Vincent, with whom she had worked for nearly a lifetime, to the members of their Workshop in Political Theory and Policy Analysis at Indiana University. It is also said that she took a draft of her Nobel lecture to a workshop session where her students and colleagues were encouraged to criticise it before she rewrote it. ‘We’ so often replaced ‘I’ in her work, which was collaborative and peer-to-peer, long before the term was first used. She was the first woman to win the prize, and while she did not even claim to be an economist, but instead a political economist, my argument developed in this book is that her work has the potential to transform economics.

We live in a world in crisis, and part of this crisis extends to economics. In 2011, uprisings toppled leader after leader in the Middle East and North Africa with governments falling like dominoes. Part of the reason for revolt was the sharply rising cost of basic food stuffs; rice, wheat, sugar and maize all accelerated in price during this period. While commodity prices are often volatile, there are real fears that an increase in extreme weather events was part of the reason for the increase in costs. For example, in 2010 fires raged in Russia, destroying wheat fields and pushing the price of bread upwards. In the same year, floods in Pakistan damaged cotton crops and the price of cloth rose. As I write in 2012, flooding is affecting much of Britain. Some scientists believe that climate change has led to these and other disruptive weather events.

No one can tell with certainty, whether climate change is already having an impact. However, there is little doubt that if greenhouse gas levels continue to rise, the climate will become more unstable, extreme events will increase, crops will be disrupted, commodity prices will rise further and millions of people are likely to become refugees. Climate change is just one facet of an environmental crisis; biodiversity is declining and basic ecological cycles are under pressure. Many commentators also argue that high oil prices are here to stay. During the 1990s, oil was priced around $10 a barrel, in 2013 it sat at $100. Higher oil prices push up the general level of inflation and stifle economic growth.

Economists appear to have problems rising to such a challenge; simply allowing supply and demand to act as an invisible hand may be inadequate. Economists have been widely derided for their failure to predict, let alone correct, real world crises. Such crises have extended to the global economy. In 2008, imbalances in the international economy, a credit balloon and financial instability led to a global financial collapse and severe recession. In 2012, the Eurozone is in deep crisis and four years after the financial crash the US economy remains fragile. Growth in China, which has been helping the global economy, seems to be slowing. While events move fast, the global economy appears to have shifted in a dangerous and unstable direction. Economists have failed to provide policy advice that has helped to heal a wounded world economy. Events will no doubt move on; sustained growth may return, commodity prices may fall and technological innovation may make environmental problems less intractable. Yet critics argue that mainstream economics demands revision.

In turn, the research techniques and even the basic assumptions used by economists have also been criticised with increased force. The argument that a basic rethink of the discipline is necessary can be heard more loudly and from diverse quarters. So, if conventional economics demands a critical eye and perhaps even a fundamental shift in orientation, where will an alternative come from? If we need a new economics, where will we find it? This title argues that one source is via a seemingly obscure professor of politics from a Mid-Western university. A woman forgotten by most economists, and even academics on the left that are critical of the current discipline and its role in determining policy. The person under discussion is, of course, Professor Elinor Ostrom.

In 2009, when Professor Ostrom became the first woman to win the Nobel Prize in Economic Sciences, which she shared with Oliver E. Williamson, most economists probably sighed with surprise and said something along the lines of ‘Elinor who?’. Ostrom was not well known among economists at the time. Strictly speaking, she was not even an economist, but worked in a politics department and preferred to be known as a political economist. Steven Levitt, who wrote Freakonomics, a bestselling popular economics title, noted on his New York Times blog:

If you had done a poll of academic economists yesterday and asked who Elinor Ostrom was, or what she worked on, I doubt that more than one in five economists could have given you an answer. I personally would have failed the test. I had to look her up on Wikipedia, and even after reading the entry, I have no recollection of ever seeing or hearing her name mentioned by an economist.

(Levitt (12 October 2009))

Despite this apparent obscurity, the awarding team judged her work to be vitally important. Indeed, it will be suggested that the late Professor Ostrom, who died in 2012, has produced a body of work that contributes to some of the most important questions of the twenty-first century, from tackling climate change to conserving cyberspace. With her unusual but rigorous emphasis on qualitative as well as purely quantitative research, her work also has important implications for debates about economic methodology.

It is possible to overstate Elinor Ostrom’s apparent obscurity; she was a former President of the American Political Science Association and a Professor at both Indiana and Arizona State Universities. She won numerous awards. For example, in 1999 she became the first woman to win the Johan Skytte Prize in Political Science. Other prizes include the National Academy of Sciences John J. Carty Award in 2004, as well as the James Madison Award and William H. Riker Prize in Political Science. She was one of only a few women to become members of both the National Academy of Sciences and the American Academy of Arts and Sciences. In 2010, Utne Reader magazine included her as one of the ‘25 Visionaries Who Are Changing Your World.’ In 2012, Time magazine listed her as one of the hundred most influential individuals on the planet. However, it is true to say that as a pioneer of inter-disciplinary research, she was probably better known among academic ecologists and political scientists than economists.

She won the Nobel Prize in Economic Sciences for her work on common pool resources and property. Traditionally, economists have argued that there are two forms of property, private and state. Economies are mixed, i.e. some activities such as policing are largely controlled by the state, while others are provided by the market. Ostrom argued that a third form of property, neither privately owned nor state controlled, but based on common ownership, is also significant. In turn, economic activity is not merely split between the alternatives of market and state but can be regulated by collective social activity. Even where property is privately owned, user rights may exist for a variety of individuals and communities rather than only for a single owner. In fact, she conceptualised a wide diversity of property rights, ownership systems and forms of governance.

Her work, and that of Oliver Williamson, with whom she shared the Nobel Prize in Economic Sciences, is rooted in institutional economics. While institutional economics is made up of a number of different schools of thought, all tend to suggest that economics is shaped by forms of governance (Rutherford 1996). The political economy of institutions extends to community management as well as formal state activity. The Nobel authorities on awarding their joint prize noted:

Economic transactions take place not only in markets, but also within firms, associations, households, and agencies. Whereas economic theory has comprehensively illuminated the virtues and limitations of markets, it has traditionally paid less attention to other institutional arrangements. The research of Elinor Ostrom and Oliver Williamson demonstrates that economic analysis can shed light on most forms of social organization.

(Nobel Prize 2009a)

While Williamson (1985) examined how corporations can resolve conflict and manage transaction costs, Ostrom’s institutional research focussed on common pool resources and property. Indeed Ostrom can be seen as the economist or political economist best placed to conceptualise the explosion in web-based activity and social media, which are largely built on commons-based platforms. The accelerating growth of the World Wide Web, peer-to-peer production and Wikipedia have been investigated by economists, but forcing them into the pre-existing categories of market and state is far from satisfactory.

Ostrom’s practical research examined how communities succeeded or sometimes failed to maintain marine fisheries, forests, grazing land and other forms of common pool resource. Ostrom challenged the notion of the tragedy of the commons, showing that while commons can fail, we should not assume that they will always do so. Neither is commons, Ostrom (1990) insisted, an absence of property rights but often is based on carefully constructed rules for management of a resource.

Ostrom argued that people can, in some circumstances, construct rules that allow them to manage the environment without destroying it. In a world where ecological realities increasingly threaten material prosperity, her work provides a way of thinking about how humanity can create truly sustainable development, maintaining key ecosystems while meeting human needs.

Ostrom’s approach is often difficult to categorise with traditional notions of economics or political philosophy. At first glance, she seems to draw upon concepts and schools of thought that appear, without further study, contradictory. Yet, I would argue, further examination suggests clarity and coherence in her thinking.

Elinor Ostrom might, for example, be understood as an Austrian-influenced thinker. ‘Austrian’ refers to the work of market-based European economists such as Friedrich von Hayek and Joseph Schumpeter. Indeed, in March 2012, shortly before her death, Ostrom delivered the Institute of Economic Affairs Annual IEA Hayek Memorial Lecture to a large audience in London. The Institute of Economic Affairs (IEA) is a free market think tank, which advocates privatisation, tax cuts and curbs on trade union power. While the IEA does not deny the reality of climate change, it is concerned that interventionist policies that seek to reduce rising levels of carbon dioxide and other greenhouse gases may damage industrial competitiveness.

Elinor, however, had little interest in industrial competitiveness. She increasingly came to see promoting sustainability as her vocation, speaking at international environmental conferences and writing articles about social-ecological systems for scientific journals. Her experience as a woman has also shaped her thinking. As we shall see, she faced difficult challenges as a woman academic in a sexist climate during the first decades of her career. Her awareness of the need to fight gender-based prejudice and other forms of discrimination seemed to set her apart from market-based liberal economists. While she did not research gender she was happy to be associated with feminist economics (May and Summerfield 2012). Yet issues that might be seen as left orientated, such as environmental concern and female empowerment, were approached from new perspectives. For example, while she was an advocate of policies for tackling climate change, she remained critical of the very notion of policy if it is imposed from above. Equally, she distanced herself from statist forms of socialism, but perhaps paradoxically endorsed collectivist solutions to economic and environmental problems in some situations. She believed that governments should fund public services, but leave their production to firms or community organisations. Ostrom, who once described herself ‘as a stubborn son of a gun’, is a thinker who is difficult to pigeonhole within existing categories in economics and political philosophy. Ostrom’s work, and that of her husband and co-worker Vincent, is unusual and requires careful examination. To introduce her work, at a superficial level, we can contrast Hayekian market-based interpretations with normative concerns that seem firmly on the left. While this is a good way perhaps of introducing a debate about the orientation of her work, it has to be discarded relatively quickly. Her work does not fit into the usual categories; she and Vincent Ostrom were highly independent scholars who drew upon astonishingly varied theorists and schools of thought.

It is also clear that the thinker with whom they identified most was the nineteenth century French political commentator Alexis de Tocqueville. His two-volume study Democracy in America helped inspire the Ostroms’ fascination with self-governance, reflected in all of their work.

To get an idea of Elinor Ostrom’s work from her own perspective, it is worth reading her syllabus for the last course she taught at Indiana University (see Appendix). She begins with a question linking concerns with sustainability to Tocqueville’s fascination with grassroots democratic self-government, asking how can ‘fallible human beings achieve and sustain self-go...

Table of contents

• Cover Page
• Half-Title Page
• Series Page
• Title Page
• Copyright Page
• Dedication
• Table Of Contents
• Preface
• Acknowledgements
• 1 An accidental life?
• 2 Signs and wonders
• 3 On method
• 4 Au contraire, Monsieur Hardin!
• 5 Green from the grassroots: social-ecological systems
• 6 Knowledge commons
• 7 The political economy of the commons in physical goods
• 8 Politics without romance
• 9 A new science for a new world
• Appendix
• Bibliography
• Index
• Backcover Page