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Rewarding Diversity with Sustainability

October 18, 2009

Last week a committee at the Swedish Central Bank awarded a share of this year’s Nobel Prize in Economics to Dr. Elinor Ostrom of Indiana University for her work on alternative approaches to managing common property resources.  Her groundbreaking research demonstrates the ability of self-organizing and emergent organizations of various types to govern commons in ways superior to the solutions afforded either by markets or government regulation.

Acknowledgement of her insights could not have come at a better time.  The current economic situation has tested our faith in both markets and government.  Knowing not only that we have alternatives, but understanding how they can operate effectively is well worth recognizing and promoting.

Economists have long recognized the powerful role of self-interest in governing individual economic behavior.  But economists have had a more difficult time explaining why people sometimes prefer suboptimal solutions that embrace values such as altruism or equity.  Similarly, while they have found it possible through experiments to explain the advantages of cooperation, even when it does not involve exchanges of good or services to the comparative advantage of all participants, they have had a more difficult time describing the necessary and sufficient conditions for the emergence of such behavior in the absence of common purpose or shared governance.

Political scientists have not had much more success explaining how governments can avoid failure than economists have had predicting when markets will fail.   The application of the police power of the state invariably raises questions about the legitimate limits of state authority in a democracy, especially one that embraces capitalism.

The tragedy of the commons — the observed tendency of people to over-exploit a free public good for short-term gain at the expense of their own or others’ long-term good — has loomed large in policy circles in recent years as the world has come to grips with its many manifestations and the troubling consequences it poses for human civilization.

Anthropologist, sociologists, and even evolutionary biologists have taken a different tack.  One that coincidentally complements Dr. Ostrom’s observations.  They have consistently observed one abundant truth about human beings: We all need to cooperate, and as such have evolved remarkably sophisticated ways of doing so.

As Dr. Ostrom herself noted when interviewed after the Nobel announcement, it should come as no particular surprise that alternatives to markets and government exist.  What we do not realize often enough is just how rich, varied, and rewarding the alternatives we have devised really are.

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