The death of Elinor Ostrom, economist, radical and first woman to win the Nobel Economics Prize, seems to have passed largely unnoticed in the Anglo-Saxon world; a look at the #ostrom hashtag on Twitter in the hours following the announcement of her passing showed tributes in many languages, for once English not in the majority. Yet Ostrom’s work remains an inspiration to those on the Green left and, I’d argue, is supremely important in developing a counter-narrative as the failure of the Anglo-Saxon model of free market economics becomes clearer by the day.
Why does Ostrom matter? To answer this, you need to go back to one of the most influential texts of free market economics – Garrett Hardin’s The Tragedy of the Commons, published in 1968. The heart of Hardin’s argument can be found in these paragraphs:
The tragedy of the commons develops in this way. Picture a pasture open to all. It is to be expected that each herdsman will try to keep as many cattle as possible on the commons. Such an arrangement may work reasonably satisfactorily for centuries because tribal wars, poaching, and disease keep the numbers of both man and beast well below the carrying capacity of the land. Finally, however, comes the day of reckoning, that is, the day when the long-desired goal of social stability becomes a reality. At this point, the inherent logic of the commons remorselessly generates tragedy.
As a rational being, each herdsman seeks to maximize his gain. Explicitly or implicitly, more or less consciously, he asks, “What is the utility to me of adding one more animal to my herd?” This utility has one negative and one positive component.
1) The positive component is a function of the increment of one animal. Since the herdsman receives all the proceeds from the sale of the additional animal, the positive utility is nearly +1.
2) The negative component is a function of the additional overgrazing created by one more animal. Since, however, the effects of overgrazing are shared by all the herdsmen, the negative utility for any particular decision-making herdsman is only a fraction of -1.
Adding together the component partial utilities, the rational herdsman concludes that the only sensible course for him to pursue is to add another animal to his herd. And another; and another…. But this is the conclusion reached by each and every rational herdsman sharing a commons. Therein is the tragedy. Each man is locked into a system that compels him to increase his herd without limit–in a world that is limited. Ruin is the destination toward which all men rush, each pursuing his own best interest in a society that believes in the freedom of the commons. Freedom in a commons brings ruin to all.
In other words, Hardin argues that collective control of a resource is impossible. The answer to this tragedy – private ownership (Hardin goes on to compare the use of commons to bank robbery). It is a hugely influential text, one that has been used over and again to argue that common ownership is impossible. Hardin argues that common ownership will lead to environmental degradation; ultimately he concludes that the answer lies in preventing the populace from breeding. It’s important to note that, not only is this argument fundamentally anti-democratic, but it is firmly rooted in the social Darwinism that informs so much American socio-political discourse (the irony that this unsupportable bastard offspring of Darwinism holds sway in a society in which millions reject the central, scientifically-supported tenets of evolution is of course vast and obvious).
The failures in the metaphor are obvious. Most obviously, Hardin offers no evidence at all that the commons are doomed to fail; the actual historical evidence shows that in many societies at many periods, land has been managed as a commons, sustainably and to the benefit of all, according to common rules. Hardin argues that private ownership will do better; he offers no evidence to support this claim. Also, the image of the rational being painted by Hardin is clearly one-dimensional; the rational actor is the one who seeks immediate gratification without thought to the collective consequence. But it’s a straw man; while those attributes look very much like the actor in models of market economics, the simple fact is that not only do people do not necessarily think like that, but in almost all the interactions of life we actually do completely the opposite. These are ideologically-based assumptions that pay no heed to the empirical world. I refute Hardin’s psychological assumptions every time I put my scraps on my compost heap. The use of pseudo-mathematics in Hardin’s example is really just a form of obfuscation.
Most importantly, in spite of all these flaws, this unsupported concept of humanity provides a ready rationale for the appropriation and privatisation of common assets – or, more generally, of natural resources. It’s actually a deep expression of pessimism about the human race – a set of assumptions that Hobbes would have recognised.
The importance of Elinor Ostrom’s work is that it provides a refutation of this world view. And significantly – at a time when academic economics has retreated increasingly into the refining of mathematical models, leaving the relationship of economic theory to the real world increasingly unexamined, Ostrom was a thinker who worked in the field; her work was informed by a range of projects looking at issues as diverse as water associations in Los Angeles, police departments in Indiana and irrigation in Nepal. It’s an economics that is grounded in experience. She drew on history and empirical research to show that in reality people are not just selfish actors, but do consider the wider consequences of their actions for those around them and the environment in which those actions are carried out.
At the heart of Ostrom’s contribution is a set of rules for the commons:
- Clearly defined boundaries (effective exclusion of external un-entitled parties);
- Rules regarding the appropriation and provision of common resources that are adapted to local conditions;
- Collective-choice arrangements that allow most resource appropriators to participate in the decision-making process;
- Effective monitoring by monitors who are part of or accountable to the appropriators;
- A scale of graduated sanctions for resource appropriators who violate community rules;
- Mechanisms of conflict resolution that are cheap and of easy access;
- Self-determination of the community recognized by higher-level authorities;
- In the case of larger common-pool resources,organization in the form of multiple layers of nested enterprises, with small local units at the base level.
These are of course high-level principles – there is no magic wand being waved here; governing the commons, like any democratic exercise, may well in practice be messy and difficult – and involve a lot of activity that those who only measure achievement in terms of cash output will regard as wasteful and bureaucratic – but the fact is that it can be done, and done democratically and sustainably. In that it contrasts powerfully with the central conceit of market economics that there is, in Margaret Thatcher’s phrase, no alternative. Market economics posits a set of pseudo-psychological statements about how individuals behave – of which Hardin’s comment is one; Ostrom’s work on the commons shows that human activity is far richer and more diverse than the market theorists would allow, and is above all democratic – it’s a basis for how equal human beings can resolve key issues about the management of resources without the coercion of ownership, or, crucially, the appropriation of resources
What does Ostrom tell us about the current world financial crisis?
Ostrom’s theory of the commons can be seen as providing a powerful alternative to the conceits and fallacies at the heart of the current world economic crisis. The current crisis looks in many ways very much like Marx’s crisis of capital accumulation – corporate interests hoarding vast cash piles, while demand slumps, in the face of the capital’s need to accumulate to survive. It’s a scenario that moved Keynes – whose mission was always to save capitalism from the idiocies of its practitioners – to formulate the need to stimulate demand, to kick-start the normal process that kept capitalism working (and, one might add with the hindsight of today, to escape the cycle of crises that increasingly appears to characterise raw unregulated capitalism).
Commons thinking addresses two key elements of the way in which capital has continued to accumulate. The first is through accumulation and price inflation of assets like land – the latest crisis, like every financial crisis since 1973, was precipitated by the collapse of a property bubble. The second is through the monetisation and effective privatisation of assets held in common but which have sat outside the traditional purview of exchange. This includes such things as the appropriation and exploitation of land belonging to indigenous people (or colonialism, as we used to call it) and the turning of subsistence economies into cash-based suppliers for the wealthier parts of the world; it also includes the monetisation of natural resources like air and water or even life itself (for example in the case of the appraisal mechanisms for new roads, where the safety benefits of new roads are calculated on the basis of a “value of life” number generated through stated preference techniques); exchanges that have traditionally been free acquire a cash value that can be factored into GDP numbers that feed capital’s voracious need for compound growth. It means that economic activity – and increasingly what we would traditionally think of as non-economic activity – is carried on according to structures of value dictated by capital’s need for voracious expansion. And many would argue that it is that expansion, based on paper values of intangible assets rather than the needs and aspirations of the majority, that is at the root of the current crisis. Moreover, the inexorable pressure of capital accumulation – especially in times of crisis – is towards short-term gain; an economy which is based on the short-term realisation of paper gain in relation to monetised assets is the very opposite of sustainable.
Commons thinking offers us a way to counteract this. It challenges the belief that the only measure of wealth is the generation of asset numbers on paper; it reminds us that real wealth often has little or nothing to do with economic activity, and it places democratic decision-making at the heart of the generation of real value (it actually means that we decide democratically what has value, rather than leaving that decision to owners of capital and their tame accountants, or to politicians in a representative democracy in which those who do not share the prevailing ideology have little or no voice). It’s a challenge to the fatalism of market economics – notably to the belief that millions of people are not permitted to have a view on what matters. It emphatically does not offer easy solutions – in that sense it is way more honest than the neoliberal view that suggests we just have to make markets work more efficiently to ensure prosperity for all. It recognises the messiness of life, the fact that the world is full of conflicting interests that have to be resolved, far more effectively than a system based on the single imperative of maximising paper asset value in the long-term.
In summary: the commons, and Ostrom’s work, offer a starting-point for an economic and political discourse that is more humane, nuanced, grounded and sustainable than the dominant neoliberal ideology. At a time when neoliberalism is failing and the reaction to that appears increasingly to be an abandonment of democratic principles, the work of Elinor Ostrom is desperately important.