43. Common Pool Resources

Note: This post is the forty-third in a series. Click here for the full listing of the series.

Back in 1968, Garrett Hardin wrote an influential essay entitled, 'The Tragedy of the Commons'. Hardin started with the problem of what it is we should seek to maximize. He noted that with respect to human population there was a tradeoff between quality of life and quantity of population, concluding that, "The optimum population is, then, less than the maximum."

Hardin goes on to note, as I mentioned a while back, that in a situation where a group of people are sharing a common resource, the logic of the prisoner's dilemma (what's best for me diverges from what is best for the group) leads to tragedy,

"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 decision­making 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.... 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."

Note the similarities to the example of harvesting a forest that I used in the last post and the similar introduction of the notion of limits.

Hardin goes on to note that what is moral depends on the context,

"That morality is system-sensitive escaped the attention of most codifiers of ethics in the past. "Thou shalt not…" is the form of traditional ethical directives which make no allowance for particular circumstances. The laws of our society follow the pattern of ancient ethics, and therefore are poorly suited to governing a complex, crowded, changeable world. Our epicyclic solution is to augment statutory law with administrative law. Since it is practically impossible to spell out all the conditions under which it is safe to burn trash in the back yard or to run an automobile without smog ­control, by law we delegate the details to bureaus. The result is administrative law, which is rightly feared for an ancient reason -- Quis custodies ipsos custodes? --Who shall watch the watchers themselves? John Adams said that we must have a "government of laws and not men." Bureau administrators, trying to evaluate the morality of acts in the total system, are singularly liable to corruption, producing a government by men, not laws.

Prohibition is easy to legislate (though not necessarily to enforce); but how do we legislate temperance? Experience indicates that it can be accomplished best through the mediation of administrative law. We limit possibilities unnecessarily if we suppose that the sentiment of Quis custodiet denies us the use of administrative law. We should rather retain the phrase as a perpetual reminder of fearful dangers we cannot avoid. The great challenge facing us now is to invent the corrective feedbacks that are needed to keep custodians honest. We must find ways to legitimate the needed authority of both the custodians and the corrective feedbacks."

The question of how to achieve temperance in the use of the commons is one that has been taken up in recent decades by Elinor Ostrom, winner of the 2009 Nobel Prize in Economics.

Ostrom starts by recounting three influential models: the tragedy of the commons, the prisoner's dilemma, and the logic of collective action. She then contrasts two theoretical approaches to managing a commons: The 'Leviathan' Approach in which a strong central authority limits use of the commons to what is sustainable, and the 'Privatization' approach, in which the commons is replaced by a system of private property rights (e.g. every fisherman is given ownership over a particular piece of ocean or a particular group of fish).

Ostrom, after conducting extensive fieldwork around the world on what she calls common pool resources (small scale situations where a group of people manage a renewable but not inexhaustible resource - e.g. inland fisheries, pastures, irrigation systems, etc.) ends up rejecting both the Leviathan approach and the Privatization approach in favour of what she encountered in her research: locally managed and run collectives that are neither run directly by a central government (although support from the government is generally helpful) nor managed via a system of individual property rights (although granting of individual licenses of some sort is often part of the management approach).

Per wikipedia, Ostrom identifies eight requirements for insitutions that managed common pool resources to be successful:

"1. Clearly defined boundaries
2. Congruence between appropriation and provision rules and local conditions
3. Collective-choice arrangements allowing for the participation of most of the appropriators in the decision making process
4. Effective monitoring by monitors who are part of or accountable to the appropriators
5. Graduated sanctions for appropriators who do not respect community rules
6. Conflict-resolution mechanisms which are cheap and easy of access
7. Minimal recognition of rights to organize (e.g., by the government)
8. In case of larger CPRs: Organisation in the form of multiple layers of nested enterprises, with small, local CPRs at their bases."

Note how point 1, clearly defined boundaries, corresponds to the Guardian syndrome as representing territorial concerns. Points 4, 5 and 6 correspond to the Guardian value of taking vengeance as appropriate. Point 8 harkens back to the work of Mancur Olson (The Logic of Collective Action) which noted that the problems of motivating group-oriented (as opposed to self-oriented) behaviour in large groups could be mitigated by a hierarchical structure (as supported by the guardian values of obedience and respect for hierarchy).

The institutions that govern common pool resources, are clearly guardian-type institutions, managing a particular territory, based on taking rather than trading, seeking to optimize rather than maximize output, and requiring collective restraint rather than pursuit of self-interest. But at the same time, the participants who are extracting the resources are functioning to some extent as commercial operators - looking to make a living by trading what they extract, and pursuing innovation to the extent it helps them become better off.

A high standard of ethical behaviour is required of participants in the common pool management to be able to maintain a guardian based approach to management of the land on one point, while still retaining their commercial approach to trading the resource on the other hand. This may be why institutions for managing common pool resources failed in many (although by no means all) of the cases Ostrom studied.

I'm only scratching the surface of Ostrom's work in this post, and hopefully I'll have a chance to come back to it in more detail at a later date.