Posted by: erichosemann | October 14, 2009

Elinor Ostrom and The Power Of The Poor

Elinor Ostrom, co-winner of the 2009 Nobel Prize in economics, specializes in understanding growth of institutions that manage and protect common property. A part of Nobel laureate Vernon Smith’s description of her work:

“Success [in preserving commonly held resources]is associated with clarity in the definition of and bounds on individual rights (and opportunities) to take action, and the geography of the commons; details for monitoring, operations, sanctions and mechanisms for conflict resolution emerge from within the collective and out of motivated people’s direct experience with environmental context and each other. When too many of these problem-solving elements fail, the governance systems fail or require continuing attention to their fragility characteristics. A fatal source of disintegration is the inappropriate application of uninformed external authority, including intervention to prevent application of efficacious rules to political favorites. Also detrimental to good solutions is the OPM (other people’s money) problem.”

It seems to me that there is plenty of overlap between Hernando De Soto’s work on the extra-legal institutions of the poor and Ostrom’s work on the creation of institutions to protect commonly held resources. Bringing the extra-legal institutions of the poor out of the shadows and into the light of global trade will require, as Smith says, “clarity in the definition of and bounds on individual rights (and opportunities) to take action.”

Ostrom discusses her ideas in the video below. I particularly like the emphasis she gives to the difference between “roving bandits”–those who deplete a commonly held resource and then move on–and ordinary people who can’t simply move from resource to resource:

“There are many people who are not able just to roam and steal. They have a time and place that is theirs. And it isn’t ‘the government’s’ it is theirs.”

People all over the world develop means of preserving resources, and those means, according to Ostrom, are often more efficient than those developed by outside specialists or governments:

“The presumption is that it’s always got to be the state–the big guys with the guns–who tell us what we should do.”

h/t KPC

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