Elinor Ostrom, Institutions and

Interactions among and between resource users and other stakeholders/ “players”



Nature of the Good and Biophysical Conditions

Action Situations – where policy choices on the CPR are made by boundedly rational but willing to learn “actors” (individuals and organizations)



Evaluative Criteria on e.g. efficiency, fiscal equivalence (e.g. user pay), distributional equity, accountability, conformance with local norms, and sustainability – which determine whether observed outcomes are satisfactory

Attributes of Community: trust, reciprocity of trust, social capital, common vision/understanding etc.



Rules-in-Use: formal laws, regulations, rules, informal rules, social norms, conventions, and public, common/shared and individual property rights



Outcomes – the result of outputs from the action situation and exogenous influences



Feedback and Adaptive Learning

Sources: Modified from McGinnis (2011a) and Ostrom (2009:415)

The core of the IAD framework is the “action situation” illustrated in Exhibit II below, which applies the methods and insights from cooperative and non-cooperative game theory. Action situations are the social spaces where individuals and organizations “interact, exchange goods and services, solve problems, dominate one another and fight” and therefore are used to “describe, analyze, predict, and explain behavior within institutional arrangements” (Ostrom 2011:11).

As noted in Exhibit II, formal and informal “rules-in-use”, including customs, conventions and social norms, play an important role in Ostrom’s IAD framework and in determining the structure and outcomes of an action situation. “Rules are shared understandings among those involved that refer to enforced prescriptions about what actions (or states of the world) are required, prohibited, or permitted” (Ostrom 2011:17-21).

Boundary rules influence the number of participants, their attributes and resources, the individuals and groups who are included in and excluded from the CPR group and its benefits, and the opportunities and conditions for entry and exit by participants. Position rules indicate e.g. how a member of the group can later be “promoted” to become a member with a specialized task or a group manager and leader. Choice rules determine the actions that are allowed and not allowed to be undertaken by different actors. Payoff rules influence the distribution of benefits and costs and establish the incentives, deterrents and possible sanctions that are associated with different actions and actors.

Scope rules place limitations on potential outcomes, and, through their backward linkage effects, influence how specific actions are related to specific outcomes. Aggregation rules influence “the level of control that a participant in a position exercises” and whether certain actions require prior permission from other members. Information rules “affect the knowledge-contingent information sets of participants” and e.g. indicate the information that is to be proprietary and secret versus the information to be shared with the general public.

Other External Variables
Exhibit II: The Internal Structure of an Action Situation


Aggregation Rules

Information Rules

Assigned to



ACTORS:

Individuals or Organizations



CONTROL of an Actor

Over Its Choices

Boundary

Rules

INFORMATION

Available



Scope

Rules



POTENTIAL OUTCOMES associated with each possible Combination of Actions


Position

Rules

POSITIONS Within the Action Situation “game”

Linked To



COSTS AND BENEFITS Associated with

Each Possible Action and Outcome

Assigned to




ACTIONS that are Allowed and Available to ACTORS



Choice

Rules



Payoff Rules

Source: Modified from Ostrom (2011:10-20)

Rules are not only important in themselves, but as well can have substantial lock-in, self-reinforcing, cumulative, increasing return, feedback, path dependence and related positive effects that through time can further expand user cooperation and support for and benefits from successfully managing and protecting a common-pool resource (Levin et al 2012:134-139).

The Ostrom research program and IAD framework generated eight design principles that are important to the success of local CPRs and to “scaling-up” the Ostrom framework to address global CPR challenges and social dilemmas including broader social-ecological systems. The eight principles as modified by Michael Cox et al (2010) are as follows.

1A User boundaries: Clear boundaries between legitimate users and nonusers must be clearly defined.

1B Resource boundaries: Clear boundaries are present that define a resource system and separate it from the larger biophysical environment.

2A Congruence with local conditions: Appropriation and provision rules and related rules on the distribution of costs and benefits are congruent with local social and environmental conditions.

2B Appropriation and provision: The benefits obtained by users/appropriators from a common-pool resource (CPR), as determined by the appropriation rules, are proportional to the amount of inputs that are required and provided in the form of labor, material, or money, as determined by the provision rules.

3 Collective-choice arrangements: Most individuals affected by the operational rules can participate in modifying the operational rules.

4A Monitoring users: Monitors who are accountable to the users monitor the appropriation and provision levels of the CPR users.

4B Monitoring the resource: Monitors who are accountable to the users monitor the condition of the resource.

5 Graduated sanctions: Appropriators who violate operational rules are likely to be assessed graduated sanctions (depending on the seriousness and the context of the offense) by other appropriators, by officials accountable to the appropriators, or by both.

6 Conflict-resolution mechanisms: Appropriators and their officials have rapid access to low-cost local arenas to resolve conflicts among appropriators or between appropriators and officials.

7 Recognition of appropriators’ rights to organize: The rights of appropriators to devise their own institutions are not challenged by external governmental authorities.

8 Nested enterprises: Appropriation, provision, monitoring, enforcement, conflict resolution, and governance activities are organized in multiple layers of “nested enterprises” (that encompass individuals as well as organizations).

Meta-analyses of CPR case studies, as well as experimental, game theory and related research that has been conducted over the past three decades, have indicated that the potential for CPR management success is significantly enhanced when all or at least most of these eight design principles are satisfied. Success is not guaranteed but the probability of success increases and the risk of failure diminishes when these design principles are satisfied to at least some degree.

Other factors that are important to CPR management success include:

1. 
   the size, productivity, and predictability of the resource pool;
   
2. 
   the potential for and extent of mobility of the resource units: fish swim while groundwater resources, grazing pastures and forests are less mobile;
   
3. 
   the existence and enforcement of “collective-choice rules” that the users have the authority and ability to adopt in order to change their own operational rules; and
   
4. 
   four attributes of the resource appropriators and other actors: the number of members, the existence and quality of leadership within the group, members’ knowledge of the common-pool resource and of the broader social-ecological system (SES), and the importance of the CPR and SES to the livelihoods and quality of life of the members (Ostrom 2011:23).
   

Through their research, Ostrom and her colleagues provide the optimistic message that, while solutions are not always obvious and simple, there are governance solutions to CPR challenges and social dilemmas that generally start from the agency of “nested and empowered” individuals, households, neighbourhoods, local communities, and other non-governmental organizations.

Non-government agency and solutions are then recognized, facilitated, and appropriately supported by government ministries and agencies and international organizations – which fully understand that their appropriate role in polycentric governance systems is to be a partner, investor in public good research, and provider of technical assistance, information, learning and when needed assistance with conflict resolution that complement the expertise, information, learning and governance tools held by local communities and other non-government groups (Ostrom 2012:81-82).

The Ostrom research program and analytical framework clearly indicate why “on their own” the simple panaceas of: (i) enclosure through private ownership and related market-based solutions; and (ii) government intervention through state ownership and state enforced laws, regulations and rules, do not work.

Totally open access can occur through either private ownership of the CPR, or common ownership where the resource is owned by everyone and therefore in essence by nobody (leading to extensive free-riding and the so-called tragedy of the commons). Under either regime, all appropriators are acting in terms of their rational self-interest and thus are attempting to maximize their own utility/benefits from the resource with no consideration for the impacts on other appropriators and the community and society more generally.

Entry is easy and exclusion is difficult or not attempted (because of the laissez-faire attitude of the appropriators and local society). Unless the common-pool resource is very abundant, the outcome will be high subtractability, leading to severe resource depletion and ultimately resource exhaustion.

Turning to government ownership and management of the resource, some scholars and advocates have argued that a well informed and motivated government planner (the omniscient and totally benevolent social planner of early textbooks on public goods and policy) should be able to provide the best of all possible worlds in terms of well-designed rules that: (i) are fairly and effectively enforced and monitored, (ii) strike the right balance between ease of access and exclusion to protect the resource, and (iii) result in efficient and sustainable resource use that has the support of all appropriators and the general community.

However, the research and analytical framework of Ostrom and her colleagues indicate that this best of all possible worlds is rarely achieved in government owned and managed CPRs. Government planners (i) have limited or the wrong information and their own behavioral biases, (ii) are more interested in advancing their careers than the public interest, (iii) ignore the knowledge of resource appropriators, (iv) apply rules (such as annual allowable catch) that are too general or are not appropriate to the CPR and community characteristics, and (v) are subject to political influences and corruption (leading e.g. to too much access and resource use by appropriators with political connections).

The result often is limited monitoring and enforcement by government officials who are underpaid and lack motivation, leading to CPR failures that are similar to the “tragedy of the commons” under the open access management regime. Government ownership and management can often lead to “action situations” where nobody takes responsibility for protecting and managing the resource in the community interest.

4.0 Applying the IAD Framework and Design Principles to the Global Commons

In recent years, Ostrom and her colleagues have wrestled with how the IAD framework and the eight design principles can be “scaled-up” and applied perhaps in modified form to global common-pool resources and related “super wicked problems” such as climate change, the global food system, integrated management of water systems that cross national boundaries, marine fisheries, and other global commons dilemmas. Some of their major findings on the opportunities, challenges and limitations for “scaling-up” the eight design principles listed in the previous section are as follows.

Well-defined user and resource boundaries under principle 1 are more difficult to establish for the global commons. Applying the IAD framework to the global commons will therefore require less rigid and more conceptual, flexible, fluid and “fuzzy” resource, social, geographic, user and/or actor based boundaries that encompass more informal adhoc arrangements between participants. Nevertheless, a looser conception of user and resource boundaries cannot lead to an open access resource that is entirely free of boundaries (Michael Cox et al 2010:43).

Establishing congruence between appropriation and provision rules and local conditions under Principles 2a and 2b become conceptually different and more challenging for the global commons such as climate change that are characterized by multiple users and other affected groups, multiple tiers, and geographic scales, even more complex polycentric systems, and in many cases multiple CPRs and social-ecological systems and the interactions and interrelationships between them.

Nonetheless, congruence and consistency between the appropriation and provision rules and conformity between the rules of appropriation and provision and the “local conditions” -- defined broadly to encompass ideology, beliefs, culture, conventions, material incentives, livelihood, social norms, and related strategies and “shared mental models” of the “relevant communities” – are still very important to differentiating one global commons from another and to global CPR governance and success; and should still be capable of measurement and evaluation to determine the contributions of Principle 2 to global CPR success and failure (Michael Cox et al 2010:43-46).

Achieving Principle 2 may represent the greatest challenge to scaling up from local to global CPRs. CPRs governance success depends to an important degree on the extent to which the benefits (outflows) to “appropriators”, consumers and other beneficiaries are appropriately aligned with: (i) their contributions (inflows) to the global CPR; (ii) fairness and equity considerations including inequality aversion and perspectives on distributive and procedural justice and fairness; and (iii) other social norms and ethical values that are important to the CPR group. Theory and empirical evidence clearly indicates that this is much easier for smaller CPR groups but is not impossible for larger common-pool resources.

Principle 2 and many other principles are relevant as well to non-resource and less tangible CPRs including market institutions, business reputation, networks and ecosystems, and national and global supply chains. Solutions to climate change and other global commons dilemmas will often encompass multiple resource and non-resource CPRs. Effective governance of each CPR and of the interactions and interrelationships between them would add substantially to the individual and societal payoffs and benefits from the overall common-pool resource and social-ecological system.

The Ostrom research program emphasizes that CPR governance success is a “positive sum game” for its members and society, which potentially can benefit from the successful governance of more business and market oriented CPRs that are driven by social norms and preferences as well as by the potentially larger payoffs provided by market incentives and outcomes, business reputation effects, interdependence and spillovers, and the management of complex business networks and ecosystems and national and global supply chains (see Appendix A).

Principles 3 to 7 on collective choice arrangements, monitoring arrangements and effectiveness, graduated sanctions, conflict-resolution mechanisms, and minimum recognition of the rights of appropriators to establish their own institutions, take on even greater importance and become even more challenging for the establishment, operation and success of resource and non-resource CPRs at the global scale.

Principle 3 reminds us that successful management of the global commons requires the establishment of complex multi-tiered, multi-layered and multi-scale polycentric governance systems, which ensure that individuals, households, local communities and other entities that are affected by the operational rules at the lower tiers and scales have the ability to participate in and to influence the modification of the operational rules at their own and the higher tiers and scales.

Principle 7 builds on principle 3 through emphasizing that international organizations, external governments and other entities at the higher tiers do not challenge, impede and eliminate the rights of individuals, local communities and other entities at the lower tiers to organize and create their own institutional arrangements and solutions to lower tier common-pool resource challenges.

These two principles are important to ensuring loyalty to and compliance with the global CPR rules-in-use by participants at the lower tiers and spatial scales, and to ensuring that the CPR rules take full account of the often superior knowledge and experience of users and other local “players”. Externally imposed rules, which do not correspond to local conditions at the lower tiers, ignore local expertise, and ignore and “disenfranchise” local participants, often result in failure for smaller and more local CPRs – leading to failure for overall global CPR governance system that depends on the local CPRs for its ultimate success.

As we move from the local to the global commons, monitoring and monitors under principle 4, which are effective, trusted by, and credible and accountable to all users and other stakeholders at all tiers and scales, take on even greater complexity and importance. This could be one of the greatest challenges and impediments to “scaling-up” the Ostrom framework and principles (see e.g. Ostrom and Cox 2010 and Levin 1992 and 2010).

Graduated sanctions under principle 5 -- when combined with building consensus, trust, reciprocity of trust, social capital and shared information, knowledge and expertise, and well established, reputable and cost-effective conflict resolution mechanisms under principle 7 -- will be even more important to the success of global CPRs. Graduated sanctions are especially important when complex and incomplete monitoring and information asymmetries and failures increase the risk of applying “disproportionate” sanctions to the “wrong” appropriator or other participant who may be important to the success of a global commons (Michael Cox et al 2010:46-48).

Principle 8, whereby successful CPR systems require that “governance activities are organized in multiple layers of nested enterprises”, is also more important, more complex and especially more challenging when the Ostrom framework and principles are extended to governing the global commons, which encompass multiple CPRs, participants, beneficiaries, functions, tiers, scales, formal and informal rules, property rights regimes and governance systems (Ostrom 1990:90)

When applied to global CPRs, the nested actor/enterprise principle would encompass: (i) vertical linkages and interactions between local groups at lower tiers and scales and governmental and non-governmental organizations including international organizations at higher tiers and scales; as well as (ii) horizontal linkages and interactions across user and other groups at the same or similar spatial scales conducting similar or different functions – including in different communities, sub-national regions, and nation-states – that are facilitated by social media, the Internet and other information and communication technologies (see e.g. Wing and Schott 2004).

Larger-scale CPR and SES problems are more challenging, but the Ostrom research program has identified many examples of cooperation between CPR groups and communities that emerge through more spontaneous “bottom-up” processes (Michael Cox et al 48-49 and Tarko 2012:62).

Moving from local to global CPR dilemmas and solutions that encompass and empower multiple nation-states at different stages of economic and institutional development suggest that the formal rules, regulations and governance systems of sub-national and national governments and international treaties, agreements and organizations will take on greater importance. Nonetheless, the informal rules, regulations and governance structures emphasized in the Ostrom IAD framework will continue to be fundamental to the governance of global CPRs and of the local CPRs that are embedded within the global commons.

This is especially true for developing and emerging market economies at earlier stages of economic, social, political and institutional development, where CPR members and other market participants and member of society have to depend more on informal rules and governance systems because of the limitations in their formal institutions, governance and property rights systems.

Fortunately, the Ostrom research program has given major attention to CPR governance and successes in developing and emerging market economies and indicates that more advanced economy governments, scholars and stakeholders have much to learn from the historical and current CPR governance successes in the developing world.

The possible limitations to Ostrom’s eight design principles should also be noted. Some critics believe that critical social variables should be given greater attention. Singleton and Taylor (1992) argue that a fundamental feature of the successful CPR systems in Ostrom (1990) is that each involves a “community of mutually vulnerable actors” (Michael Cox et al 2010:49). These communities of mutually vulnerable actors could emerge and arguably are already emerging at the global scale because of climate change, the vulnerability of global food, water management, and other systems, and other global super wicked problems that increase the risk of “catastrophic events” at the global scale.

Another criticism is that the eight design principles do not take sufficient account of external conditions and constraints. For example, market integration, globalization and rapid economic development can lead to: (i) greater heterogeneity and inequality between CPR participants; (ii) greater pressures on and risks of over-utilization of tangible and intangible resource pools; (iii) reductions in cooperation, trust and reciprocity; (iv) loss of control over resources by local user groups; and (v) reduced dependence of local users on common-pool resources because of alternative income opportunities and greater opportunities for exit – leading to reductions in common understanding, vision and interests, shared vulnerability, trust, reciprocity of trust, and cooperation at local and other tiers and geographic scales (Michael Cox et al 2010:49-50 and Steins et al 2000).

A final criticism and risk relevant to extending the Ostrom IAD framework to the global commons is that the eight principles would be viewed by international organizations, governments and stakeholders “as something of a magic bullet or institutional panacea and thus be misapplied as a prescription for improving the governance of CPRs in particular settings” (Michael Cox et al 2010: 52-53). These authors conclude that the design principles are well supported by the evidence, but that a probabilistic rather than a deterministic interpretation and application of the principles is warranted. This cautious approach is especially needed when examining and finding solutions to the global commons.

Ostrom and her colleagues are well aware of the challenges to CPR governance and success when the “action situation” is larger, more complex, and involves a large number of resource appropriators and other participants that are vastly different in terms of their endowments, material interests, and social attributes.

For example, governing a large watershed CPR and similar CPR situations, which encompass thousands of participants and potential appropriators and beneficiaries and are divided into major rivers and lakes, tributaries and sub-tributaries, provide special challenges as well as opportunities (Ostrom and Walker 2003, pages 58-61). In this action situation, CPR management could begin at the tributary and sub-tributary level. After success at the subgroup level, different subgroups may begin to work together by sharing water, information and experiences, and addressing common problems that span more than one tributary in the watershed. These successes have been found by Ostrom and her colleagues in field settings in several countries including Nepal, the Philippines, and Spain, and have lasted for better than one hundred years in every case and in one case for more than a thousand years.

These success stories “illustrate that when individuals can break up a large social dilemma into lots of smaller nested dilemmas, they can use face-to-face discussions in much smaller initial associations to eventually solve, through nested and empowered organizations, a much larger problem that would be almost intractable for self-organized groups without such a strategy”. External authorities and the more formal government-managed institutions need to be supportive of the efforts of sub-groups to build and manage natural resource and other CPRs (Ostrom and Walker 2003, pages 60-61).

In addition, heterogeneity among participants may be less of a problem when the CPR or broader social-ecological system is managed by the community compared to when the system is managed by a government agency. Left to their own devices, heterogeneous groups that share common interests and values can in certain contexts find solutions to their CPR dilemmas and collective action problems. Community based systems promote communication and positive intrinsic motivations to cooperate and comply among its members (see e.g. Bray 2009 and Bowles and Gintis 1998 and 2002). In contrast, government based systems, which are founded on formal laws and regulations enforced by distant government agencies, promote anonymity, individual over group action, adversarial over cooperative behaviour, defection, antagonism, and litigation, which takes us back to the rational agent model of conventional economics.

Even among heterogeneous CPR groups with significant differences in culture, ethnicity, wealth, and economic and political power, communication can increase identity and solidarity, can create at a minimum the shared perception of a consensus in favor of cooperation, and can in fact lead to actual commitments to cooperate (Ostrom et al 2002, Chapter 3).

Group learning through information sharing, doing things together and having shared successes can in time take precedence over and dominate the cultural and other differences within the group. In these contexts, the major role of government is to establish a policy and regulatory framework and provide facilitation, coordination and information and research services that promote positive motivations to cooperate, communication and group learning, mutual monitoring, graduated sanctions, shared benefits and successes, and social capital creation at the local level.