…is the edifice of economic orthodoxy beginning to chip and crumble. Or at least shift on its foundations.
Something extraordinary happened last Monday: a political scientist won the Nobel prize in economics—and not just any political scientist, but Elinor Ostrom, a University of Indiana/Bloomington scholar whose work has long focused on managing resources as commons—resources that are neither state- nor privately owned, but collectively owned and governed. This is a concept marginal to the conventional economic worldview, which has generally held that the only way to ensure sound management of forests, agricultural land, water supplies, fisheries, and so on must either be privatization or state ownership. Ostrom’s work analyzes and showcases cooperative resource management systems that, in some cases, have functioned successfully for hundreds of years.
Ostrom’s work challenged a giant in the resource management field, Garrett Hardin, whose influential 1968 essay, “The Tragedy of the Commons,” suggested that commons resources are destined for over-exploitation, because of the imbalance in incentives for people using them. An individual herdsman gains personally for every additional sheep he pastures, Hardin observed. But the cost of this activity—degradation of the pasture—is split among all users. This incentive imbalance, in Hardin’s view, would never be overcome because of the egoistic impulse of human beings. Yet a multitude of community-based arrangements, from cooperative irrigation systems in Spain and Bali to fisheries co-ops in Maine, prove Hardin wrong. In these cases, the protagonists were real, flesh-and-blood, collaborating people who were smart enough to work out social solutions to their resource challenges. They stand in stark relief to Hardin’s fictional profit-maximizing herders, whose sole focus is their own interests. These cardboard cutouts are the same people who hold starring roles in the simplistic and stylized world of conventional economic theory.
Ostrom’s win is noteworthy in itself, but it’s just the most recent in a string of related events that signal major, and welcome, changes in economics. In 2001, Columbia University economist Joseph Stiglitz won the economics Nobel mainly for his work (with others) showing that, contrary to dogma, economic actors rarely have perfect information and therefore markets are rarely efficient. Then, last month, Stiglitz and economist Amartya Sen (another Nobel winner) released a report commissioned and endorsed by French President Nicholas Sarkozy that critiques GDP as the main yardstick of economic wellbeing. Such critiques have been made for over 30 years, but they have never enjoyed such eminence before.
In short, the conventional economic thinking is beginning to evolve in directions that can only bode well for sustainability. It has taken years of dogged hammering away by visionaries not enslaved by the reigning dogma, who have looked at the world and seen it for what it is, not how theory says it should be.
Note: This entry was written by Tom Prugh and Gary Gardner, who are still figuring out how to post a jointly written piece.