In the woods: darkness at noon or Sunday in the park with Lin?

Transcription

1 Public Choice (2010) 143: DOI /s In the woods: darkness at noon or Sunday in the park with Lin? Thráinn Eggertsson Received: 31 January 2010 / Accepted: 22 February 2010 / Published online: 5 March 2010 Springer Science+Business Media, LLC 2010 Abstract I discuss Elinor (Lin) Ostrom s long journey into complex social systems and draw attention to her reliance on induction and the methods of experimental science. In her own words, the simple organism she has experimented on is a particular type of human situation the common pool situation. I compare the philosophy of science associated with the European Enlightenment to Lin s approach. I discuss the implication of problem difficulty and complexity for institutional policy, and conclude by comparing the tragedy of the commons to the tragedy of the anticommons, claiming that little is known empirically about the existence of the latter phenomenon. Keywords Commons Complexity Useful knowledge Induction Institutional policy Intellectual property 1 Introduction: a Bloomington pointillist Evil and inefficient dictatorial states are an unhappy feature of human history. In his classic novel, Arthur Koestler paints a disturbing picture of a totalitarian state that brutalizes society and creates Darkness at Noon: the state creates its own obscure logic that blurs the line between truth and falsehood (Koestler 1940). Yet, in our best of all possible worlds, life can also be happiness indeed: Georges Seurat and his renowned painting A Sunday Afternoon on the Island of La Grande Jatte portrays visitors to an island park, where they, shaded by 1 The painting, which took Seurat two years to make, is now in the permanent collection of the Art Institute of Chicago. The painting inspired the musical Sunday in the Park with George with music and lyrics by Stephen Sondheim and book by James Lapine. T. Eggertsson ( ) Department of Politics, New York University, 19 West 4th Street, New York, NY 10012, USA te15@nyu.edu T. Eggertsson School of Business, University of Iceland, 101 Reykjavík, Iceland thrainn@hi.is

2 276 Public Choice (2010) 143: parasols and trees, relax, play, and watch boaters on the Seine. 1 Koestler does not mention a specific country in his novel, but we know that it deals with conditions in the Soviet Union in the late 1930 s (Scammell 2009). Seurat interprets society and nature in France in the 1880 s. These two worlds differed in many ways, but a critical difference is found in the relative degree of central control over political, economic, and social affairs. The Soviet leaders, unlike the government of France, attempted to create a monolithic state and to centrally manage the details of political, economic and social affairs. The Soviet model was a monumental experiment in social engineering, and a great disaster. It was the antithesis of the polycentric system of governance that Lin (Elinor) Ostrom and other members of the Bloomington School believe is our way out of the jungle (Ostrom et al. 1961;Ostrom 1997). Rational choice social scientists lean toward the deductive method. They build, and then test, rigorous formal models, which they derive from simple truths about how the world works. Often the reliance on deduction from simple first principles the reliance on homemade logical systems of society is carried to extremes. The scholar does not absorb her subject but steps away from it: She uses broad brushes and strong colors but her forests have no trees. George Seurat respected detail. He is the best-known practitioner of pointillism, a method of painting that uses disparate colored points to create both imagery and shades of colors (a technique now used by color printers). Lin is concerned with detail and, like many natural scientists, uses inductive reasoning: She uses colorful points collected from all over the world to portray complex governance mechanisms crafted by the users of common pool resources. We can say that Lin is a pointillist, like Seurat. In the following note, I discuss Lin s exploration of complex social systems. 2 Headlong into complexity How do people choose social systems? Do they act in the manner of a social scientist that optimizes inside his formal model? In other words, do decision makers know the set of all possible social arrangements and use their preference functions to select the highest valued arrangement? And, once people have identified their preferred systems, do they know how to design them? We can restate the two last questions by asking: How inclusive and reliable are people s social models (their what knowledge of social systems) and how reliable are their social technologies (their how knowledge of designing social systems)? In rational choice institutionalism many scholars prefer to model actors as making their choices in terms of decision theory and game theory, assuming that all relevant relationships and states of the world are known either precisely or as probability distributions. But, if policy makers know what they are doing, why do social reforms and social experiments often fail? The defenders of strict rational choice methods usually offer two explanations for these apparent failures: (1) Failed reforms are based on decisions that are rational ex ante, but the decisions were (explicitly) made under risk, which explains why undesirable ex post outcomes sometimes occur. (2) Policy makers sometimes hide their true types (their utility or preference functions), and the apparently undesirable outcomes are actually optimal, given the decision makers true types. Other scholars claim that our knowledge of social technology is weak, except when institutional policy involves simple or marginal adjustments. In this view, incomplete knowledge

3 Public Choice (2010) 143: (policy models) often severely constrains policy makers who attempt substantial institutional reform. Scott Page, who is an expert on computational models of complex adaptive systems, uses the concepts problem difficulty and system complexity to model the environment and behavior of policy makers who have incomplete knowledge of social systems (Page 2008). Problem difficulty occurs in systems where the actions of actors are insulated the individual payoffs are independent of the actions of others. It arises because policy makers are overwhelmed by the multiple alternatives in their choice sets the task of optimizing exceeds their search and processing capacities. When dealing with problem difficulty, actors rely on their various internal languages. They use perspectives to define a limited range of alternatives and heuristics to search among the alternatives. Their behavior is rule-based. 2 The actors only search and interpret a subset of possible alternatives, and they are more likely to select local rather than global optima. To overcome difficult problems, institutions encourage actors to acquire diverse heuristics and perspectives... (Page 2008, p. 118). Complexity occurs in dynamic environments of multiple interacting players. Complex environments cannot be solved in any sense. At best the complexity can be harnessed... (p. 117). And to harness complexity, institutions adjusts selection criteria, rates of variation and the level of connectedness (p. 118). 3 And, finally, as Page shows: by extending decision theory and game theory in the direction of behavioralism, we bump into the concepts of difficulty and complexity (Page 2008, p. 118). Which of the two approaches global optimization under risk or variable internal languages and rule-based behavior is more useful for analyzing institutional policy? How complete is our knowledge of social technologies? Does institutional policy involve difficulty and complexity? At the desk, in the armchair, and on the blackboard we can go on forever and speculate about the nature of social systems, but the question is an empirical one: To answer it, we must measure the world. 3 Across the river and into the trees in search of useful knowledge In his recent work, the economic historian Joel Mokyr advances a theory about the intellectual origins of modern economic growth (Mokyr 2005, 2007). In his view, a new ideology in Europe created incentives for developing science-based technology that later became the engine of the British Industrial Revolution and subsequent industrial revolutions. Mokyr s radically new ideology is the Enlightenment of the 17th and 18th centuries and embodies, among other ideas, the belief that human progress is possible and desirable, and the way to go is to unlock the secrets of nature and actively seek useful knowledge. The Enlightenment created necessary conditions for continuous (rather than intermittent) technical change, and in that process the relatively new phenomena of research, induction, and experiments had a central role. But there was more: The idea of turning research into useful knowledge was larger than the discovery of underlying general laws. Description and organization mattered as much.... Knowledge could only be useful if it was organized... Taxonomy, often dismissed as a form of knowledge, was quite central to the market for ideas in the eighteenth century. The great figures were the Swedish botanist Carl Linnaeus and his French rival 2 Page (2008, p. 117) still assumes that individuals respond to incentives in the same way that a fully rational actor would. 3 Page (2008, p. 118) emphasizes that institutions cope differently with uncertainty (by which he means costly and unequally distributed information) than with difficulty and complexity: To reduce uncertainty, institutions create incentives to gather more information or somehow aggregate what information exists efficiently.

4 278 Public Choice (2010) 143: Georges-Louis Buffon... (Mokyr 2007, p. 6). The scientific revolution also required better instruments for measuring nature. Progress in the 18th century was advanced in part because new tools such as the telescope, the barometer, and the air pump, allowed new observations and made new experiments possible (Mokyr 2007,p.7). Mokyr s work suggests several questions concerning the development of social science. Have we seen progress in social science that is comparable to the continuous, science-based technical change that, in the 18th century, emerged in natural science? Have modern social scientists made a concentrated effort to measure social systems and then order and classify their knowledge? Is there a strong interactive relationship between social science and social technology (institutional policy)? Does institutional policy draw on a strong and rapidly growing scientific base? Have there been important breakthroughs in social science that are related to new tools of measurement? And, finally, is it at all reasonable to expect revolutionary breakthroughs in social technology that are comparable to modern advances in physical technology? I leave these outsize questions with the reader to contemplate, but the reason why I bring up the Enlightenment story is that reading Mokyr s excellent account of the origins of continuous technical change, I was reminded of Lin and the Bloomington School. Bloomington School has always focused on measurement and induction (Ostrom et al. 1961). The inductive approach is evident already in the 1960 s and 1970 s in their studies of urban services in the United States. At the time, according to conventional wisdom, small governance units of urban services were seen as inefficient, and doubly so when a metropolitan area involved many small and even overlapping units. In retrospect, we see that the conventional armchair theorists over-emphasized the prevalence of scale effects in urban services and, where scale is important, failed to recognize that small independent units can cooperate. In the 1960 s and 1970 s, economic theory paid little attention to information and transaction costs or to the problems of agency and monitoring. Traditional policy advisers did not understand that urban dwellers that rely on large service units have relatively high cost (the scale effects are negative) of revealing their preferences or trying to monitor the service providers. Finally, social scientists and government advisers, who had assume the problem of knowledge away, saw no need to equip urban structures with multiple mechanisms for search, experimentation, and diffusion of successful social technologies. How would a scientist that is inspired by the spirit of the Enlightenment respond to disputes over the relative effectiveness of scales and structures in systems for delivering public services in urban areas? She would measure the world. She would leave her desk and measure potholes in roadways and the quality of police service across different governance units. And that is what Lin and her associates did. They found that small and medium size units were efficient in providing direct services (police patrol) but there were often positive scale effects in providing indirect services (crime labs), but then small units cooperated in providing such scale-dependent services. The measurement of urban services in the 1960 s and 1970 s provided findings that were consistent the Bloomington School s believe in the merits of polycentric systems of governance. A polycentric governance system is a structure where citizens are able to organize not just one but multiple governing authorities at different scale...each unit exercises considerable independence to make and enforce rules within a circumscribed domain of authority for a specific geographic area. In a polycentric system, some units are general-purpose governments while others may be highly specialized. Self-organized resource governance systems in such a system may be special districts, private associations, or parts of a local government. These are nested in several levels of general-purpose governments that also provide civil, equity, as well as criminal courts (Ostrom 2005, p. 283).

5 Public Choice (2010) 143: Lin s polycentric systems fit well with Page s model of difficulty and complexity, which I discussed above, particularly the need to provide institutions that encourages diverse heuristics and perspectives (Page 2008). Polycentric systems, by emphasizing efficient decentralization and small units, promote cooperation through personal contacts, encourage citizens to participate in governance, strengthen social cohesion, and reduce agency problems. 4 Of mice and men Lin s international scholarly recognition rests essentially on her empirical studies of governance mechanisms for common pool natural resources, with particular emphasis on conditions that allow efficient self-governance (Ostrom 1990). Many observers seem to believe that her work on the commons has application only for primitive forms of agricultural organization, mostly in developing countries. In this section, I argue that they are wrong. In a recent interview, Lin compares her research strategy to that of a biologist who hopes to better understand a biological process in the human body by studying the process in some simple organism where it occurs in clarified, or even exaggerated, form and can be studied most efficiently. My organism for much of my work has been a particular type of human situation the common-pool resource situation, says Lin (Ostrom and Ostrom 2003,p.14). I agree with Lin s analogy. There is a resemblance between advancing human medicine through animal experiments and trying to understand key organizational aspects of the modern world by carefully measuring and analyzing communal governance regimes for pastures, water reservoirs, communal forests, and fisheries. Self-governance mechanisms on the commons the mechanisms of coordination and cooperation are the basic units of social organization. These mechanisms are found within modern corporations, political parties, government bureaus, clubs, and condominiums. These self-grown and mostly self-sustained mechanisms, which are nested in other governance units, are the cement of society. They are our answer to the question: Who monitors the monitor? Note that successful natural resource commons, which are relatively pure examples of spontaneous order, are almost always nested in other parallel and higher control structures. The users of the historical common mountain pastures in Iceland, for example, utilized other inputs or resources that were exclusively owned, including livestock, farmland, and buildings (Eggertsson 1992). The farmers, who belonged to a local governance unit called hreppur, were the last link in a chain of command that originated with the King in Copenhagen, their colonial master. Modern structures, such as corporations or government agencies, are also composed of complex bundles of property rights or systems of control, including social mechanisms that generate spontaneous order. Spontaneous order, however, does exist in vacuum. The extent and nature of spontaneous order depends in part on beliefs, formal constraints, various physical and social conditions, and the opportunity set of the actors. Note also that spontaneous order is not always desirable or efficient. An illegal system of bribe taking by public officials, for instance, is system of self-governance with its own internal rules and mechanisms of enforcement, and frequently resting in a hard-to-crack equilibrium. 5 Lin in the park with Linnaeus Carl Linnaeus ( ), the Swedish botanist and physician, is often named the father of taxonomy. On the occasion of the tercentenary of Linnaeus s birth, Uppsala University conferred an honorary degree on Lin Ostrom in commemoration of Carl Linnaeus. Linking

6 280 Public Choice (2010) 143: Lin with Linnaeus was a shrewd decision. They share an interest in measuring the world, and Lin has continued to measure and classify at margins where Linnaeus left off. As we know, she has studied the rules governing the cohabitation of (usually) small ecological systems and social systems. Those who travel across the world to measure the structure of common property regimes will encounter a bewildering variety of rules, which are likely to overwhelm the investigator unless she relies on a sturdy taxonomy. To organize their efforts, the Bloomington research group has developed a sophisticated schema for institutional analysis, The Institutional Analysis and Development (IAD) framework (Ostrom 2005, Chap. 2). When Lin started her massive program of measuring and classifying governance regimes for common pool resources, she had expected eventually to discover (through induction) an optimal set of efficient rules of universal validity. An optimal set of rules has not emerged, which is consistent with Page s (2008) analysis of problem difficulty, mentioned above. Lin may be observing a whole range of (tolerably efficient) local optima for self-governing regimes. The variety inherent in dynamic, interactive ecological and social systems is another explanation. Complex interaction between physical and social conditions in evolving systems differentiates the systems each commons is unique and prevents the convergence of rules. And finally, rule variety may result from search and decision processes that are guided by perspectives and heuristics belonging to the internal languages of actors, who over time learn and update their perspectives and heuristics. Linking the structure of social organization to human imagination plus learning potentially gives rise to a huge variety of governance mechanisms. Similar reasoning explains why there are about 7000 known human languages in the world today and perhaps why the scientific method appears to produce fewer general laws in social science than in natural science. The experience with variety has made Lin settle for eight general design principles that characterize robust self-governance mechanisms for joint social and ecological systems (Ostrom 2005, pp ). The design principles recognize the need for incentive compatibility, the existence of information and transaction costs, the need for learning, and for flexible adjustments to external shocks. By definition, local self-governance implies local control in the relevant domains. Finally, the community must set up an internal government and courts for handling rulemaking and conflict resolution. 4 6 Conclusion: Waiting in line for tickets to the tragedies I conclude by emphasizing one of Lin s many contributions to social science. By refusing to accept conventional wisdom about the tragedy of the commons, she has created incentives for social scientists to look inside the black box; map their subject matter on an appropriate scale; and, when discussing policy, avoid using meaningless terms, such as the market, capitalism, socialism, multi-national corporations, the welfare state; or the tragedy of the commons. In a complex world, these general terms say little about the social systems in question; they are pebbles that thoughtless ideologues throw at each other. I will briefly illustrate my point with a recent example of a journey without a map. 4 Ostrom (2005, p. 259) uses the following labels for her eight design principles: 1. Clearly defined boundaries; 2. Proportional equivalence between benefits and costs; 3. Collective-choice arrangements; 4. Monitoring; 5. Gradual sanctions; 6. Conflict resolution mechanisms; 7. Minimal recognition of rights to organize; 8. Nested enterprises.

7 Public Choice (2010) 143: For about twenty years or even longer, social scientists, and others, have argued, sometimes with furious intensity, about the consequences of recent extensions of intellectual property rights in various directions, including extensions upstream toward basic research in fields such as microbiology and genetics. Those who oppose these developments claim that the Republic of Science is under siege, and that a new tragedy of the anticommons will slow to a trickle the mighty river of technical innovations. The problem of anticommons is associated with excessive fragmentation of property rights rather than their absence. Other observers have a more positive view of modern developments. From their desks, they do not see any slowdown in technical progress and argue that the actors in the modern knowledgeindustries have the capacity to negotiate around inefficient intellectual property obstacles, à la Coase. The point here is that intellectual property rights are an option for the inventors, not a constraint imposed on them by the state. It is up to the inventors whether to use the rights at all; use them selectively (for instance, make the inventions available for free to non-commercial researchers); join other actors in a patent pool, and so on. Of course, information and transaction costs can block such arrangements, even those that are jointly beneficial and wealth enhancing. In theoretical terms, the tragedy of the anticommons in the new knowledge industries is a mirror image of the tragedy of the natural resource commons. We have learned from Lin s work that, before we review tragedies, we should first attend the performances. She has diligently attended commons performances from Los Angeles to Nepal, and her reviews have changed the way we think about the tragedy of the commons. The disputants in the anticommons debate are still outside the theaters throwing pebbles at each other, although a few thoughtful scholars have formed lines to buy tickets. Robert Merges is one of them, and so are also three law professors, Michael J. Madison, Brett M. Frischmann and Katherine J. Strandburg, who are planning a project where a modified version of the Bloomington AID framework will be used to document intellectual commons in various domains (Merges 2004). 5 References Eggertsson, T. (1992). Analyzing institutional successes and failures: a millennium of common mountain pastures in Iceland. International Review of Law and Economics, 12(1), Koestler, A. (1940). Darkness at noon. London: Macmillan. Madison, M. J., Frischmann, B. M., & Strandburg, K. J. (forthcoming). Constructing commons in the cultural environment. Cornell Law Review. Merges, R. P. (2004). A new dynamism in the public domain. University of Chicago Law Review, 71(1), Mokyr, J. (2005). The intellectual origins of modern economic growth. Journal of Economic History, 65(2), Mokyr, J. (2007). The European enlightenment, the industrial revolution, and modern economic growth. European University Institute: Max Weber Lecture Series 2007/ Accessed 10 February Ostrom, E. (1990). Governing the commons: the evolution of institutions for collective actions. NewYork: Cambridge University Press. Ostrom, V. (1997). The meaning of democracy and the vulnerability of democracies: a response to Tocqueville s challenge. Ann Arbor: University of Michigan Press. Ostrom, E. (2005). Understanding institutional diversity. Princeton: Princeton University Press. 5 Their paper, Constructing Commons in the Cultural Environment, along with comments by several scholars (including Lin Ostrom and the author) will appear sometime in 2010 in a special issue of Cornell Law Review.

8 282 Public Choice (2010) 143: Ostrom, V., & Ostrom, E. (2003). Rethinking institutional analysis: interviews with Vincent and Elinor Ostrom. By P.D. Aligica. Interview, Mercatus Center at George Mason University. publication/rethinking-institutional-analysis-interviews-vincent-and-elinor-ostrom. Accessed 10 February Ostrom, V., Tiebout, C. M., & Warren, R. (1961). The organization of government in metropolitan areas: a theoretical inquiry. American Political Science Review, 55(4), Page, S. (2008). Uncertainty, difficulty, and complexity. Journal of Theoretical Politics, 20(2), Scammell, M. (2009). Koestler: the literary and political odyssey of a twentieth-century skeptic. NewYork: Random House.