Why Those Who Value Liberty Should Rejoice: Elinor Ostrom's Nobel Prize
Boettke, Peter, Freeman
Elinor Ostrom, the first woman to win the Nobel Memorial Prize in Economic Sciences, is also one of the most iconoclastic thinkers to win it. (She shared it with Oliver Williamson.) Professor Ostroms work focuses on the mechanisms of selfgovernance that operate in different societies. Her intellectual curiosity led her to study local public economies - in particular the municipal provision of police services, the management of water supplies, fisheries, forestry, and development in the less-developed world. Her framework of analysis builds from a model of humanly rational choice to a historically grounded institutional analysis. She studies the rules that govern the behavior of individuals in their interactions both with nature and with one another.
Her colleagues at Indiana University describe Ostrom as "humble and hardworking," and another Nobel Prize winner, Vernon Smith, calls her a "remarkable scholar" with a passionate drive to understand human societies in all their variety. A former president of the Public Choice Society and the American Association of Political Science, Ostrom is also one of the most beloved teachers in academia. The Workshop in Political Theory and Policy Analysis at Indiana Universify that she co-directed with her husband, Vincent, is perhaps the ideal model for a research and graduate education center.
But what do we learn from her studies? I would argue that we learn at least three major points of style and substance. First, much of the last century of political and economic discourse has been dominated by a debate between advocates of perfect markets and perfect central planners. The latter strove to demonstrate market failure, then would insist that government would provide the necessary corrective. Ostrom was one of the core thinkers in the social sciences to say, "Hold on. Markets may fail, but government solutions also might not work." One must always remember that Elinor and Vincent Ostrom are foundational contributors to the theory of Public Choice. But the Ostroms went further than simply demonstrating the possibility of government failure.
Rules In Use
This leads to the second point. In the history of political and economic thought the source of social order has been attributed either to the invisible hand of market coordination (Adam Smith) or the heavy hand of state control (Hobbes) . Perhaps one of the best ways to understand Elinor Ostrom's work is to see it as working out a Hobbesian problem by way of a Smithian solution. That is perhaps a bit of a stretch but not by much. Her work on local public economies and common-pool resources focuses on actual "rules in use" (as opposed to the "rules in form") that decentralized individuals and groups rely on to make decisions and to coordinate their behavior in order to overcome social dilemmas. It yields an optimistic message about the power of self-governance to succeed even in difficult situations. As my colleague Alex Tabarrok put it, Ostrom sees how, through various voluntary associations, groups transform the common-pool resource situation from a "tragedy of the commons" to an "opportunity of the commons."
Traditional economic theory argues that public goods cannot be provided through the market. Traditional Public Choice theory argues that government often fails to provide solutions. Ostrom shows that decentralized groups can develop various rule systems that enable social cooperation to emerge through voluntary association.
A point that sometimes trips up readers is that Ostrom often focuses on situations where the technology of parceling property into private plots does not exist. In these situations she studies collective, but nonState decision-making over common-pool resources. While private-property solutions are not employed in such cases, the "rules in use" that do operate accomplish what private property would have accomplished. We find rules that limit access and that make individuals athe group accountable for their misuse of the resource. …