Libertarians celebrate two winners of the Prize in Economics of whom one of them is Elinor Ostrom. That is because her works show that commons can be managed efficiently by groups of users rather than the State. I am unsure, however, if libertarians, especially the free market purists quite absorb the full implication after accounting for footnote associated with Ostrom’s works.
Her findings do very little to expunge coercion from solutions relating to large tragedy of the commons. This fact, through my observation, is what many libertarians have missed.
On purists, I know, I know, I have been accused as a purist myself but if I am a purist, then you are in for a big surprise at how other people can be purer in this thinking that me. These purer purists, if I may say so, are more anarchist than libertarian, with their hostility against the State bordering madness. I may sympathize with these anarchists however but I am convinced that the state of anarchy is unstable and in fact, detrimental to individual liberties. I am becoming more convinced of that position as I finally begin to read Robert Nozick’s Anarchy, State and Utopia, further settling in the minarchist pool of libertarians.
Many, I have seen, tend to celebrate one conclusion of Ostrom’s work but tend to ignore the other consequence that comes from the footnote to the celebrated conclusion. Most unfortunate, that footnote does not eliminate the case for intervention. Such intervention or really, coercion, may not originate from the State but by groups of individuals nonetheless.
A group of individuals should really be no different from the State if there is coercion. Coercion is really the key here and it is not whether it is the State or not. This is what most libertarians, when discussing this, have overlooked. To miss it is to miss the entire point of libertarianism.
When it comes to commons, I have long accepted the need for government, or any kind of intervention for that matter, for fear of tragedy of the commons occurring. I first accepted it when I first learned of it as an undergraduate in economics. Concern for tragedy of the commons, is perhaps, the only remnant of environmentalist thinking that remains with me.
That is the reason why, if I want to differentiate myself from other libertarians, I identify myself as a green libertarian. The green symbolizes my concern for market failures, which is what tragedy of the commons really is.
Market failures here are not as left-wingers tend to define it, which is more of rhetoric wrongfully attacking free market principles through mischaracterization and misleading definition but rather it refers to the economic definition, which is when there is a large difference between public and private costs, or more concisely, when there is externality. Examples include emissions of carbon or harvest of the ocean. It is for this reason too that I am largely supportive of Pigovian taxes: I definitely would like, for instance, to see fuel subsidy in Malaysia be replaced with carbon tax.
While I am admonishing libertarians here, I too made a mistake of celebrating Ostrom’s work prematurely, thinking that it solved my problem. I am well aware how hard it is to reconcile my concern for market failure with free market libertarianism that I hold. So, I was happy to see Ostrom seemingly offering a solution to me by stating users of commons do spontaneously organize themselves to prevent tragedy of the commons. Alas, upon further reading, I realized that I initially failed to comprehend the full conclusions by overlooking the footnote. And I do think libertarians who are celebrating Ostrom are misreading her conclusions by not reading the footnote too.
Traditional solutions to tragedy of the commons do not fall within the compound of pure free market libertarianism that completely intolerant of government intervention save for the classical liberal purpose of the state and that is the protection of individual negative rights. Such solutions typically involve the allocation or assignment of rights to users of resources of commons. In other words, to price such rights to internalize externality and then auction to it to achieve allocation efficiency.
In commons with multiple claims on it, some entity — government or some local body — has to be the final arbitrator for allocation of rights purpose and that will require coercion. These rights may be in form of permits that expire regularly or outright privatization (privatization is attractive but it does present complications; for instance, how do you privatize the atmosphere with respect to climate change? Clearly, enforcement of such rights is impossible, at least with current technology). Ostrom simply discovers that local groups may be better managers of the commons than government. She does not specifically say that it is will be done voluntary.
Yes, these local bodies can be voluntarily formed by users of commons. Self-organization out of spontaneous order which of voluntary in nature can be achieved but as stated in a write-up by the Economic Sciences Prize Committee of the Royal Swedish Academy of Sciences[1] and Ostrom’s article in Science Magazine[2], size of users and engagement time length matter, among others, affect the success of having such spontaneous order. There are multiple other factors but I am in the opinion that these two are the most important. The bigger the size, the harder it is to agree on voluntarily act to prevent exhausting the commons and make everybody worse off. The shorter the period of engagement, the harder it is to reach to an agreement.
The issue on number of users is really a matter of cost. As in the case of climate change, which is really the biggest common of all, bringing 6 billion individuals together is clearly unfeasible. Consider also the fact that even with hundreds of representatives sitting together in one hall, an agreement is hard to achieve. The planned climate summit in Copenhagen organized to find a replacement for the failing and expiring Kyoto Protocol is widely expected to fail.
On top of this, monitoring activities are costly. Monitoring is important because there is a strong incentive to — out my lack of creativity in selecting a word — cheat in the case of tragedy of the commons. Monitoring and enforcement are important in discouraging cheating.
On time length, it is a matter of repeated game. To make it more explicit, it is a repeated prisoner’s dilemma where cooperation is clearly a better option for both to failure to cooperate but there exists strong incentive to not to cooperate. Repetition of that game with the ability to communicate could bring about cooperation but again, that is highly dependent on the size of participants. Ultimately, achieving cooperation may take too long a time before the system collapses.
Further strengthening the argument, status quo effect is strong. Look at the Israeli-Palestinian conflict. Such conflict can be modeled as hawk and dove model, which is essentially another form of prisoner’s dilemma. They could cooperate and skip the deadly conflict, but they do not. In a game like this, it is crucial for trust to be built at the very beginning.
Trust simply takes a long time to rebuild once broken, if it is to be rebuilt at all, if the first step proved to be disastrous. This, known as tit-for-tat game, is one of the basic important lessons of game theory, in my humble opinion.
Given that, solving the problems of the commons through voluntary means, are likely hard if not impossible. Thus, intervention is still required to introduce market instruments like quotas, permits or taxation. Intervention may originate from the government, or some local groups but it is an intervention nonetheless, with not too implicit coercion demanding certain positive action, positive as defined by Isaiah Berlin when he differentiated between positive and negative rights.
If Ostrom is to be celebrated, then it is decentralization from government to local groups. That however should be mistaken as solving the problem of tragedy of the commons by voluntary means. Someone or something has to assign rights to users to commons. That means, the element of coercion, unfortunately, is still present.
That certainly does not solve my problem of reconciling concern for tragedy of the commons and free market libertarianism.
To summarize: it is a common and somebody or someone has to take control and assign rights to solve the problem of externality, i.e. tragedy of the commons. It does not have to be the government and local groups may be better manager but something or someone has to act as the assigner. And the footnote to Ostrom’s works indicate that it is hard to do so voluntary, save for, I think, localized commons. In the end, the element of coercion exists.
[1] — See Scientific Background on the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2009: Economic Governance. Economic Sciences Prize Committee of the Royal Swedish Academy of Sciences. October 2009
[2] — See A General Framework for Analyzing Sustainability of Social-Ecological Systems. Elinor Ostrom. Science Magazine. July 24 2009.