Understanding Institutional Diversity

Elinor Ostrom

• Publisher: Princeton University Press
• Year: 2009
• ISBN:
  9781400831739
• Topic: Politics & International Relations
• Subtopic: Political History & Theory
• Index: Politics & International Relations

The analysis of how institutions are formed, how they operate and change, and how they influence behavior in society has become a major subject of inquiry in politics, sociology, and economics. A leader in applying game theory to the understanding of institutional analysis, Elinor Ostrom provides in this book a coherent method for undertaking the analysis of diverse economic, political, and social institutions. Understanding Institutional Diversity explains the Institutional Analysis and Development (IAD) framework, which enables a scholar to choose the most relevant level of interaction for a particular question. This framework examines the arena within which interactions occur, the rules employed by participants to order relationships, the attributes of a biophysical world that structures and is structured by interactions, and the attributes of a community in which a particular arena is placed.The book explains and illustrates how to use the IAD in the context of both field and experimental studies. Concentrating primarily on the rules aspect of the IAD framework, it provides empirical evidence about the diversity of rules, the calculation process used by participants in changing rules, and the design principles that characterize robust, self-organized resource governance institutions.

Part I

AN OVERVIEW OF THE INSTITUTIONAL ANALYSIS AND DEVELOPMENT (IAD) FRAMEWORK

One

Understanding the Diversity of Structured Human Interactions

TO UNDERSTAND institutions one needs to know what they are, how and why they are crafted and sustained, and what consequences they generate in diverse settings. Understanding anything is a process of learning what it does, how and why it works, how to create or modify it, and eventually how to convey that knowledge to others. Broadly defined, institutions are the prescriptions that humans use to organize all forms of repetitive and structured interactions including those within families, neighborhoods, markets, firms, sports leagues, churches, private associations, and governments at all scales. Individuals interacting within rule-structured situations face choices regarding the actions and strategies they take, leading to consequences for themselves and for others.

The opportunities and constraints individuals face in any particular situation, the information they obtain, the benefits they obtain or are excluded from, and how they reason about the situation are all affected by the rules or absence of rules that structure the situation. Further, the rules affecting one situation are themselves crafted by individuals interacting in deeper-level situations. For example, the rules we use when driving to work every day were themselves crafted by officials acting within the collective-choice rules used to structure their deliberations and decisions. If the individuals who are crafting and modifying rules do not understand how particular combinations of rules affect actions and outcomes in a particular ecological and cultural environment, rule changes may produce unexpected and, at times, disastrous outcomes.

Thus, understanding institutions is a serious endeavor. It is an endeavor that colleagues and I at the Workshop in Political Theory and Policy Analysis have been struggling with for at least three decades.¹ After designing multiple research projects; writing numerous articles; developing ideas in the classroom; learning from eminent scholars in the field, from students, and from colleagues; and making diverse attacks on this problem, it is time to try to put thoughts on this subject together within the covers of a book, even though I am still not fully satisfied with my own understanding. Consider this a progress report on a long-term project that will be continued, I hope, by many others into the future.

Diversity: A Core Problem in Understanding Institutions

A major problem in understanding institutions relates to the diversity of situations of contemporary life. As we go about our everyday life, we interact in a wide diversity of complex situations. Many of us face a morning and evening commute where we expect that others, who are traveling at great speeds, will observe the rules of the road. Our very lives depend on these expectations. Others depend on our own driving behavior conforming in general to locally enforced rules about speeding, changing lanes, and turn-taking behavior at intersections. Those of us who work in large organizations—universities, research centers, business firms, government offices—participate in a variety of team efforts. In order to do our own work well, we are dependent on others to do their work creatively, energetically, and predictably, and vice versa. Many of us play sports at noontime, in the early evening, or on the weekends. Here again, we need to learn the basic rules of each of the games we play as well as find colleagues with whom we can repeatedly engage in this activity. During the average week, we will undertake activities in various types of market settings—ranging from buying our everyday food and necessities to investing funds in various types of financial instruments. And we will spend some hours each week with family and friends in a variety of activities that may involve worship, helping children with homework, taking care of our homes and gardens, and a long list of other activities undertaken with family and friends.

Somehow as individuals we implicitly make sense of most of these diverse and complex situations. We do so even today, with all of the new opportunities and risks that were not even conceivable a few generations ago. We now expect to watch the Olympic games and other international competitions as they happen, no matter where they are located or where we are in the world. We have become accustomed to buying bananas, oranges, and kiwi fruit at any time of the year in almost any market we enter around the globe. Not only do millions of us drive to work regularly, many of us also fly to other parts of the globe on a regular basis, trusting our lives to the knowledge and skills of pilots to know and utilize the many do’s and don’ts of flying airplanes.

If we are considered to be adults and sane, we are expected to be able to reason about, learn, and eventually know what to do in many diverse situations that we confront in today’s world. We know that when we are shopping in a supermarket that we can take a huge variety of goods off the shelf and put them in a pushcart. Before we put these same goods in our car, however, we need to line up at a counter and arrange to pay for them using cash or a credit card (something else that was not so widely available a few years ago). When we are shopping in an open bazaar in Asia or Africa, however, the do’s and don’ts differ. If we go at the end of the market day, we may bargain over the price of the fruit that is left on the stand—something we could never do in a supermarket where fruit will be refrigerated overnight. If we are in the household goods section of the bazaar, vendors would be astounded if we did not make several counteroffers before we purchased an item. Try that in a furniture store in a commercial district of a Western country, and you would find yourself politely (or not so politely) told to leave the establishment. Thus, there are many subtle (and not so subtle) changes from one situation to another even though many variables are the same.

These institutional and cultural factors affect our expectations of the behavior of others and their expectations of our behavior (Allen 2005). For example, once we learn the technical skills associated with driving a car, driving in Los Angeles—where everyone drives fast but generally follows traffic rules—is quite a different experience from driving in Rome, Rio, and even in Washington, D.C., where drivers appear to be playing a bluffing game with one another at intersections rather than following traffic rules. When playing racquetball with a colleague, it is usually okay to be aggressive and to win by using all of one’s skills, but when teaching a young family member how to play a ball game, the challenge is how to let them have fun when they are first starting to learn a new skill. Being too aggressive in this setting—or in many other seemingly competitive situations—may be counterproductive. A “well-adjusted and productive” adult adjusts expectations and ways of interacting with others in situations that occur in diverse times and spaces.

Our implicit knowledge of the expected do’s and don’ts in this variety of situations is extensive. Frequently, we are not even conscious of all of the rules, norms, and strategies we follow. Nor have the social sciences developed adequate theoretical tools to help us translate our implicit knowledge into a consistent explicit theory of complex human behavior. When taking most university courses in anthropology, economics, geography, organization theory, political science, psychology, or sociology, we learn separate languages that do not help us identify the common work parts of all this buzzing confusion that surrounds our lives. Students frequently complain—and justifiably so—that they have a sense of being in a Tower of Babel. Scholars also see the same problem (V. Ostrom 1997, 156).

Is There an Underlying Set of Universal Building Blocks?

The core questions asked in this book are: Can we dig below the immense diversity of regularized social interactions in markets, hierarchies, families, sports, legislatures, elections, and other situations to identify universal building blocks used in crafting all such structured situations? If so, what are the underlying component parts that can be used to build useful theories of human behavior in the diverse range of situations in which humans interact? Can we use the same components to build an explanation for behavior in a commodity market as we would use to explain behavior in a university, a religious order, a transportation system, or an urban public economy? Can we identify the multiple levels of analysis needed to explain the regularities in human behavior that we observe? Is there any way that the analyses of local problem solving, such as the efforts of Maine lobster fishers for the last eighty years to regulate their fisheries (see Acheson 1988, 2003; Wilson 1990), can be analyzed using a similar set of tools as problem solving at a national level (Gellar 2005; McGinnis forthcoming; Sawyer 2005) or at an international level (Gibson, Anderson, et al. 2005; O. Young 1997, 2002)?

My answer to these questions is yes. This answer is, of course, a conjecture and can be challenged. Asserting that there is an underlying unity is easy. Convincing others of this is more difficult. I welcome exchanges with others concerning the fundamental building blocks of organized human interactions.

Many Components in Many Layers

The diversity of regularized social behavior that we observe at multiple scales is constructed, I will argue, from universal components organized in many layers. In other words, whenever interdependent individuals are thought to be acting in an organized fashion, several layers of universal components create the structure that affects their behavior and the outcomes they achieve. I give a positive answer to these questions based on years of work with colleagues developing and applying the Institutional Analysis and Development (IAD) framework.²

Helping others to see the usefulness of developing a multilevel taxonomy of the underlying components of the situations human actors face is the challenge that I undertake in this volume. Scholars familiar with the working parts used by mathematical game theorists to describe a game will not be surprised by the positive answer. To analyze a game, the theorist must answer a series of questions regarding universal components of a game, including the number of players, what moves they can take, what outcomes are available, the order of decisions, and how they value moves and outcomes.

On the other hand, game theorists will be surprised at the extremely large number of components identified in this book that create the context within which a game is played. Further, if one drops the use of a universal, simplified model of the individual, the number of options that a theorist must self-consciously make is even larger than experienced in the past. While the usefulness of a universal model of rational behavior is challenged in chapter 4, the assumption of a universal framework composed of nested sets of components within components for explaining human behavior is retained throughout the book.

Building a Framework

Game-theoretical analysis is drawn on and expanded in this book in several ways. First, I do not confine analysis to those situations that are simple enough to be analyzed as formal games. The core concept of an action situation (discussed in chapters 2 and 3) can be formalized as a mathematical game to represent many simple and important situations. Many other significant situations—particularly where rules are the object of choice—are too complex to be modeled as a simple game. (Agent-based models and simulations of diverse types will provide the modeling tools we need to capture patterns of interaction and outcomes in many of these more complex settings [Janssen 2003].)

Second, I dig further to develop a consistent method for overtly analyzing the deeper structures that constitute any particular action situation. For some game theorists, this deeper structure is irrelevant once the structure of a game itself is made explicit. Third, the narrow model of human behavior used in game theory is viewed as one end of a continuum of models of human behavior appropriate for institutional analysis. The three basic assumptions of that model are used as a foundation for specifying the type of assumptions that a theorist needs to make when animating an institutional analysis.

The challenge for institutional theorists—as I discuss in chapter 4—is to know enough about the structure of a situation to select the appropriate assumptions about human behavior that fit the type of situation under analysis. Thus, the approach presented here encompasses contemporary game theory as one of the theories that is consistent with the IAD framework. Also included, as discussed in chapter 4, are broader theories that assume individuals are fallible learners trying to do the best they can in the long term by using norms and heuristics in making their immediate decisions.

As a scholar committed to understanding underlying universal components of all social systems, I do not introduce complexity lightly. I view scientific explanation as requiring just enough variables to enable one to explain, understand, and predict outcomes in relevant settings. Thus, for many questions of interest to social scientists, one does not need to dig down through nested layers of rules that are examined in the last half of this book. One can develop a good analysis of the situation (chapters 2 and 3), decide what assumptions to make about participants (chapter 4), and predict outcomes. If the predictions are supported empirically, that may be all that is needed.³

If the predictions are not supported, however, as is the case with much contemporary work on social dilemmas and settings involving trust and reciprocity, one has to dig under the surface to begin to understand why. And if one wants to improve the outcomes achieved over time, one is faced with the need to understand the deeper structure in the grammar of institutions discussed in chapter 5 and the types of rules used to create structure as discussed in chapters 7 and 8. This volume can be viewed as presenting a series of nested conceptual maps of the explanatory space that social scientists can use in trying to understand and explain the diversity of human patterns of behavior. Learning to use a set of conceptual maps and determining the right amount of detail to use is, however, itself a skill that takes some time to acquire just as it does with geographic maps (see Levi 1997b).

Frameworks and Conceptual Maps

For example, if I want to know the quickest route from Providence Bay to Gore Bay on the Manitoulin Island, where Vincent Ostrom and I spend summers writing at our cabin on the shores of Lake Huron, I need a very detailed map of the interior of the island itself. If I want to explain where the Manitoulin Island is to a colleague—who wants to know where we spend our summers—I need a less detailed and larger map that shows its location on the northern shores of Lake Huron, one of the Great Lakes of the North American continent. If I try to use a map of the entire Western Hemisphere, however, the Great Lakes are all so small that locating the Manitoulin Island itself may be a challenge. I may only be able to point to the Province of Ontario in Canada, where it is located, or to the entire set of the Great Lakes. The advantage of a good set of geographic maps is that after centuries of hard work, multiple levels of detailed maps of most places are available and are nested in a consistent manner within one another. Most of us recognize that there is not one optimal map that can be used for all purposes. Each level of detail is useful for diffe...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Dedication Page
• Contents
• List of Illustrations
• Acknowledgments
• Part I: An Overview of the Institutional Analysis and Development (IAD) Framework
• Part II: Focusing on Rules
• Part III: Working with Rules
• Notes
• References
• Index