How Ostrom showed communities can manage shared resources

Ostrom gathered information on many successful and failed cases of shared resource management around the world and compared them systematically. She found that users of a common resource frequently build and enforce their own rules, and that these rules often work. She also backed the field findings with laboratory experiments on cooperation. This challenged the older view that only a state authority or private ownership could prevent overuse. [1] [2]

The tragedy of the commons, associated with Hardin in 1968, describes users who are each tempted to overuse a shared resource, so that all suffer when it is depleted. Before 1990, the predicted outcomes were destruction, division into private property, or management by an external state authority. The standard argument, as the Nobel summary puts it, is that each user weighs private benefits against private costs and neglects the harm to others. [3] [1]

Ostrom argued that these simple models ignore institutional detail. She described a wide range of institutions, many of them mixtures of private-like and public-like arrangements, and proposed self-governance by resource users as a third option. [3]

Irrigation was a central case. Research on irrigation systems showed that repeated interactions among users let them build institutions that monitor and discipline free riders. A study of Nepal examined head-enders near the water source and tail-enders far from it, and how bargaining between them can benefit both sides. Locally managed Nepalese systems allocated water for a long time even though their dams were small and primitive. Some modern concrete-and-steel dams built with donor help failed in practice, because durable dams removed the need for head-end users to rely on tail-end maintenance labor, so head-enders could take a disproportionate share. Crop yields were often higher around the primitive dams. [4] [2] [1]

In laboratory experiments, Ostrom found that many people are willing to bear private costs to sanction free riders, which helps explain why monitoring happens in practice. [1]

Ostrom identified design principles shared by successful cases. They include clearly defined boundaries and users, rules matched to local conditions, participation by most affected people in making and changing rules, monitors who are accountable to users or are users themselves, sanctions that start low and rise with repeated violations, rapid and low-cost conflict resolution, and government recognition of users' right to make their own rules. The Nobel summary adds that rules imposed from outside, or dictated by powerful insiders, have less legitimacy and are more likely to be broken. [3] [1]

Ostrom did not claim that self-governance always works. She called it no panacea, and some self-governed arrangements fail. The Nobel summary notes that privatization or public regulation sometimes does better, citing the failure to privatize oil pools in Texas and Oklahoma in the 1930s, which caused massive waste. Her main lesson, in that account, is that common property is often run by rules that evolved over long periods and are more subtle than outsiders realized. [3] [1]