Elinor Ostrom: Governing the Commons

In 1968, Garrett Hardin published "The Tragedy of the Commons"—one of the most influential and misleading papers in environmental science.

His argument was simple: shared resources are doomed. If a pasture is open to all, each herder gains by adding another cow. But everyone reasons the same way. The pasture is overgrazed. The commons is destroyed.

The solution, Hardin argued, was either privatization (give someone ownership, so they have incentives to maintain the resource) or government regulation (have the state control access).

This framing dominated policy for decades. Commons were problems to be solved by either markets or states. There was no third way.

Then Elinor Ostrom went and looked at actual commons. What she found overturned Hardin's framework entirely.

The Empirical Turn

Ostrom was a political scientist at Indiana University who did something unusual: she studied what actually happens with commons in the real world.

Her research took her to fisheries, irrigation systems, forests, and grazing lands across continents. She documented case after case of communities managing shared resources successfully—without privatization and without external government control.

Swiss alpine meadows governed by village associations for centuries. Japanese forest commons managed by local communities for generations. Irrigation systems in Spain and the Philippines operated by farmer cooperatives. Fisheries in Maine and Turkey regulated by traditional user groups.

These weren't failures. They were successes. Hardin had predicted they couldn't exist. Ostrom showed they existed everywhere.

The tragedy of the commons, it turned out, was not universal law. It was a prediction that came true only when certain conditions were absent. When those conditions were present, communities could govern commons sustainably.

For this work, Ostrom became the first woman to win the Nobel Prize in Economics, in 2009.

The Nobel committee specifically cited her "challenge to the conventional wisdom" that commons inevitably fail. The conventional wisdom had shaped decades of policy—privatization programs, state control regimes, interventions that often destroyed functioning systems to implement theoretical solutions.

Ostrom's contribution wasn't just academic. She had shown that the most influential paper in environmental policy was empirically wrong.

Design Principles

Ostrom's most famous contribution was identifying the "design principles" that characterized successful commons governance. After studying hundreds of cases, she found eight principles that appeared repeatedly:

1. Clearly defined boundaries. Successful commons have clear rules about who can use the resource and what the resource includes. If anyone can access it, the tragedy returns. Boundaries don't require fences—but they require shared understanding.

2. Congruence between rules and local conditions. The rules governing use are adapted to the specific characteristics of the resource and the community. One-size-fits-all doesn't work. What works for an alpine meadow doesn't work for a coastal fishery.

3. Collective-choice arrangements. Those affected by the rules can participate in modifying them. If rules are imposed externally with no local input, compliance drops and the rules don't fit local conditions.

4. Monitoring. There are mechanisms for monitoring whether rules are being followed. This doesn't require expensive surveillance—often users monitor each other. But without monitoring, defection goes undetected.

5. Graduated sanctions. Rule-breakers face consequences, but not immediately catastrophic ones. Minor violations get warnings. Repeated violations get escalating penalties. This allows for mistakes while deterring intentional defection.

6. Conflict-resolution mechanisms. There are accessible, low-cost ways to resolve disputes. Without this, conflicts fester and undermine cooperation.

7. Recognition of rights to organize. External authorities don't undermine the community's ability to create and enforce its own rules. Government interference can destroy functioning commons governance.

8. Nested enterprises. For larger commons, governance is organized in nested tiers. Local rules handle local issues. Regional bodies handle cross-community coordination. No single level tries to do everything.

None of these require privatization. None require external government control. They require communities with appropriate institutions.

The Third Way

Ostrom's work revealed a third option that Hardin's dichotomy had hidden: community governance.

Markets solve coordination problems through prices and property rights. States solve coordination problems through authority and enforcement. Communities solve coordination problems through norms, relationships, and collective rules.

Each mechanism has strengths:

- Markets work well when property is easily defined and externalities are minimal. - States work well when economies of scale are large and coercion is legitimate. - Communities work well when users know each other, share knowledge, and have ongoing relationships.

Each mechanism has weaknesses:

- Markets fail for goods that can't be easily privatized. - States fail when local knowledge is essential or enforcement is costly. - Communities fail when they're too large, too heterogeneous, or face external threats.

The error wasn't just Hardin's—it was the entire policy establishment's. By recognizing only markets and states, they overlooked a third pillar of human coordination that had been functioning for millennia.

Why Communities Can Succeed

What allows communities to avoid the tragedy that Hardin predicted?

Repeated interaction. The herders on a commons aren't playing a one-shot game. They're playing a repeated game, seeing each other day after day, generation after generation. In repeated games, cooperation can emerge and be sustained.

Monitoring by users. The people using a commons often have the best information about what's happening on it. They notice when someone takes too much. They know who's following the rules. This distributed monitoring is more effective than external surveillance.

Social sanctions. Communities have powerful enforcement tools: reputation, shaming, exclusion. Someone who violates commons rules pays social costs. These sanctions are cheap to impose and deeply felt.

Local knowledge. Communities understand their resources in ways outsiders don't. The specific carrying capacity of this pasture, the migration patterns of these fish, the maintenance needs of this irrigation canal. Rules that incorporate this knowledge work better than generic rules from above.

Shared identity. When people see themselves as part of a community, they internalize the community's welfare. Cooperation isn't just strategic calculation—it's identity expression. "This is who we are. This is how we do things."

These factors don't guarantee success. But they explain how communities can solve coordination problems that appear intractable in Hardin's analysis.

The key insight is that Hardin assumed a commons without governance. But real commons usually have governance. The herders on the pasture aren't strangers playing a one-shot game—they're neighbors playing a repeated game with established rules, monitoring, and sanctions. Once you see the governance, the "tragedy" dissolves.

Digital Commons

Ostrom's framework has proven surprisingly relevant to digital resources.

Open-source software projects are commons. The code is shared. Contributors are volunteers. There's no privatization (open licenses prevent it) and no external government control. Yet many projects thrive for decades.

How? They apply Ostrom's principles. Clear membership criteria (who can commit code). Rules adapted to project needs. Community decision-making about direction. Monitoring through version control. Graduated sanctions for bad behavior. Conflict-resolution processes. Recognition of community authority (the project "owns" itself).

Wikipedia is a commons—shared knowledge governed by community norms. The internet's infrastructure relies on commons governance through bodies like IETF and ICANN. Many digital goods have characteristics that make community governance appropriate: non-rivalry (my use doesn't diminish yours), low cost of monitoring, identity persistence through accounts.

The lesson generalizes: commons governance isn't a relic of pre-modern life. It's a permanently available form of coordination that may become more important as we face challenges that markets and states aren't solving.

When Commons Fail

Ostrom didn't claim communities always succeed. She documented failures too. Her framework predicted when failure was likely:

Large, heterogeneous groups. When users don't know each other or share values, community governance is harder. Repeated-game logic weakens. Social sanctions lose force. Trust is harder to build.

External disruption. Governments often undermine functioning commons by imposing their own rules, granting rights to outsiders, or failing to recognize community authority. Colonial governments were particularly destructive—ignoring existing governance and creating open-access conditions.

High discount rates. When people are desperate or don't expect to be around long, cooperation breaks down. If you need to eat today, you overgraze even if it destroys the pasture. Time horizons matter.

Rapid change. If resource conditions change faster than institutions can adapt, rules become obsolete. Climate change, technological change, population change—these can outpace the gradual evolution of commons governance.

Free rider problems beyond threshold. Some commons can tolerate a few defectors. Others are fragile—a small amount of defection triggers cascade collapse. The structure of the interdependence matters.

Ostrom's framework isn't optimistic or pessimistic. It's conditional. Success depends on specific institutional features that can be identified and designed.

The Policy Implications

Ostrom's work challenged the policy orthodoxy of the 1980s and 1990s, which emphasized privatization and government control as the only solutions to resource problems.

Support, don't supplant. Instead of replacing community governance with external control, policies should strengthen existing community institutions. Provide legal recognition. Offer technical assistance. Don't undermine what's working.

Respect local knowledge. Communities often know more about their resources than distant experts. Policy should incorporate local knowledge rather than imposing standardized solutions.

Enable adaptation. Institutions need to evolve as conditions change. Rigid rules—whether from markets or states—can't respond to local learning. Community governance is often more adaptive.

Polycentricity. Ostrom advocated for polycentric systems—multiple, overlapping centers of authority rather than a single governing body. Different scales of governance for different scales of problems. Local, regional, and national institutions working together rather than one level dominating.

These implications were controversial. They challenged both the market fundamentalism of the right and the state-centric approaches of the left. They suggested that the most effective governance often emerges from the people directly affected.

Trust in the Commons

Ostrom's framework connects to trust in multiple ways.

Commons require trust. You comply with restrictions because you trust that others will too. If you expect defection, you defect first. Trust is the foundation of successful commons governance.

Commons produce trust. By cooperating successfully, communities build trust. Each time the rules are followed and the resource is maintained, trust strengthens. Commons are trust-generating institutions.

Institutions enable trust. The design principles—monitoring, sanctions, conflict resolution—are mechanisms that make trust rational. You trust not because you're naive but because you have reason to believe cooperation will be reciprocated.

This circular relationship explains both why commons can work and why they can fail:

- Functioning commons: trust enables cooperation → cooperation maintains the resource → success builds more trust → virtuous cycle - Failing commons: distrust triggers defection → defection degrades the resource → degradation breeds more distrust → vicious cycle

The equilibrium you end up in depends on initial conditions, institutional design, and sometimes luck.

The Takeaway

Elinor Ostrom showed that communities can govern shared resources without privatization or government control. The "tragedy of the commons" is not inevitable—it's a prediction that fails when communities have appropriate institutions.

Her design principles—clear boundaries, adapted rules, collective choice, monitoring, graduated sanctions, conflict resolution, recognized authority, nested enterprises—appear repeatedly in successful commons governance.

The lesson isn't that communities always succeed. It's that there's a third option beyond markets and states. Community governance works under identifiable conditions. Policy should recognize and support it rather than replacing it with external control.

The commons are still with us—the atmosphere, the oceans, the internet, shared infrastructure of many kinds. Understanding how communities can govern them is more important than ever.

Further Reading

- Ostrom, E. (1990). Governing the Commons. Cambridge University Press. - Hardin, G. (1968). "The Tragedy of the Commons." Science. - Ostrom, E. (2010). "Beyond markets and states: polycentric governance of complex economic systems." American Economic Review.

This is Part 4 of the Economics of Trust series. Next: "Repeated Games: Why Cooperation Emerges"