I.U. economist showed us wow to cooperate


“Tragedy of the Commons” refers to the ruin of resources, such as land, water, or the environment in general, available for use by any resident. Lacking legal ownership, commonly held resources become extinct, over-used, congested or polluted.

Such resources are considered public goods in which free-riders take personal advantage. When the stock of these resources degrades, society as whole experiences a decline in total well-being.

Garrett Hardin’s essay, “The Tragedy of the Commons,” became popular around 1968. Hardin, for example, suggested that any group grazing sheep on a common pastures has an incentive to increase the size of its personal flock. The first group to seize this opportunity could form a monopoly, accumulate wealth, and over time exhaust the grazing potential for other users (Frischmann, Marciano, and Ramello, “Tragedy of the Commons after 50 Years,” Journal of Economic Perspectives, Fall, 2019, 211-228).

Hardin recognized two solutions for this problem: government regulation or privatization. Government could limit the tragedy by directly regulating resource use. Or, it could establish a system of property rights extending private ownership to resources presently held in common. Note that both solutions rely on collective action through government to introduce constraints. Hardin argued that infringements on personal liberty is the price for avoiding universal ruin.

Around the time Hardin’s essay was published, the late Elinor Ostrom along with her husband, Vincent Ostrom, were working at Indiana University. They studied how commonly held resources in the real world do not always lead to tragic ruin. In 2009, Elinor was awarded a Nobel Prize in Economics. She challenged conventional wisdom by explaining and providing examples of how commonly held property was being successfully managed without central (federal) authority or privatization. Ostrom ruled out one of Hardin’s basic assumptions: people could not communicate and find ways to cooperate in making decisions about commonly shared resources (Frishmann, 218).

Consider local examples supporting the Ostrom hypothesis. Indiana state parks retain a unique local character and protect against depletion and congestion with adjustable user fees to deal with changing conditions. The Indiana Toll Road is under private contract, but the state retains ownership and longterm decision-making.

Consider, as well, Friends of the Pumpkinvine Nature Trail dedicated to converting an abandoned railroad corridor into a linear park and greenery. This not-for-profit group of individuals purchased the land and retain a voluntary advisory committee to assist with monitoring activities and trail maintenance. The Pumpkinvine is presently managed collaboratively by four separate park departments: Goshen, Middlebury, Elkhart County and Shipshewana.

But what about housing condominiums and other private associations lacking any government enforcement? Elinor Ostrom, following three decades of study and observation, concluded that individuals engaging in face-to-face communication can approach socially optimal usage levels in commons aside from any association with government.

Her optimism was based on the assumption that certain individuals, unlike “rational egoists,” are willing to forgo personal gain and contribute to the common good. She identified such individuals as “conditional cooperators” (Frishmann, 218-219). A “rational egoist” chooses not to trust and therefore tends not to participate in cooperative activities. A “conditional cooperator” values reciprocity, fairness and being trustworthy and therefore starts with a predisposition to cooperate.

Ostrom realized that, even if a significant proportion of “conditional cooperators” agree to the bylaws of a homeowner’s association, this does not guarantee the intended behavior. As time rolls by, residents may, for example, construct whatever type of fencing they desire and waterski day and night on an interior lake. Therefore, Ostrom offered a model agreement designed to result in favorable outcomes (“Collective Action and the Evolution of Social Norms.” Journal of Economic Perspectives, Summer 2000, 137-158).

The first design principle of Ostrom’s model is acknowledging that associations achieve a more sustainable outcome of common resources when they devise and enforce their own clear basic rules rather than those externally imposed. Second, agreed to rules, crafted to local conditions, must be designed to restrict the amount, timing and ways in which the common resource is used and to allocate benefits proportional to user fees. Third, most of the individuals affected should be able to participate in making and modifying rules. Fourth, to survive long term, the association must be able to select its own monitors for assessing resource sustainability and user behavior. The fifth and final design principle is the need to introduce graduated sanctions that depend on the seriousness and context of violators. A real threat to the continuance of any association occurs, if some participants repeatedly break rules (Ostrom, 151).

We come to realize all too well the truth of these principles through personal experience. However, this in no way diminishes the contribution of a Hoosier economist offering hope and a blueprint for circumventing the “Tragedy of the Commons”.

Maryann O. Keating, Ph.D., a resident of South Bend and an adjunct scholar of the Indiana Policy Review Foundation, is co-author of “Microeconomics for Public Managers,” Wiley/Blackwell. Send comments to [email protected].

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