Sup friends, I’m starting a weekly “win-win of the week” newsletter which talks about some cool game-changing innovation/person/breakthrough, because a ) I need to get back to writing more and b) because it’s good for the soul to learn about inspirational, game-changing concepts.
So for my first WWotW, the queen of thinking-out-the-box: Elinor Ostrom
Ostrom was a political economist whose research into the so-called “tragedy of the commons” not only discovered a massive hole in economists’ model of human behaviour, but also showed us a better way to govern natural resources — a way that was so groundbreaking, she won the Nobel.
In the 1960s (when Ostrom’s research began), the mainstream academic consensus was that humans are naturally “Homo Economicus”: self-interested, rational utility maximizers. In other words: mostly selfish creatures, who always try to maximise their own personal gain at their first priority.
Now, from the perspective of markets & GDP growth, that self-interest is purely a good thing. After all, markets are incredible at using our self-interest to balance supply and demand across vast distances, making everything more efficient. Incredible coordination power that should never be scoffed at.
But from the perspective of a shared natural resource, our self-interest can be disastrous. After all, under such a model, each individual is incentivised to extract as much personal value out of that resource as they can, as quickly as they can, leading to its eventual destruction. Hence the “tragedy” of the commons. Moloch’s favourite tool.
And certainly, as we look at the increasingly sorry state of Earth’s ecosystems today, the tragedy has proven to be a very real phenomenon. Even by the mid 20th century (when the original TOTC paper was first published), things were trending so bad, most economists were convinced the only way we could ever protect the environment was either:
a) sell it all off to private owners, in the hope they do their bit to protect it, or
b) hand over all management to the state, who’d rule over it from above.
After all, what else could protect us from our innate selfishness and self-destructiveness?
A Third Way
But Ostrom found a third way that avoided both Big Government and Big Corporation.
She had long suspected that the “Economicus” model of human behaviour was insufficient — and mostly modern phenonemon — and set about finding proof.
And she was right. Turns out there were numerous examples of shared “commons” that had been sustainably managed, by all kinds of different communities, for hundreds and even thousands of years, without resorting to heavy-handed external state management, or mass privatization. And some of those commons, like the Swiss high alpine grazing pastures and the Valencia water court, are still thriving today.
So not only did she find proof that the tragedy of the commons was avoidable… it wasn’t even the default in pre-industrial times. People could actually be great at working together to sustain a shared pool for the long-run, even at personal cost. A massive blow to homo economicus theory.
But what made these communities so special? How did they resist the dark forces of game theory, when others couldn’t?
I recommend reading her Nobel lecture for the full rabbit hole, but the main thing they all common was that their communities were die-hard locals — peoples who had lived near the resource for generations, and thus were deeply invested (both economically and spiritually) on in its continued survival.
That multi-generational system also allowed highly specific and nuanced enforcement mechanisms to evolve in ways that were shockingly effective at keeping defectors in line.
Village Elders 1: Moloch 0.
But again, the big caveat: these systems only worked if managed by local people. Elinor found that the moment larger outside forces get too involved — be them hyper extractive large corporations, or meddling state-level bureaucrats — things tended to fell apart.
In fact, one of her key recommendations to policy makers before she died was:
Empower local people as much as possible to write their own rules
Limit the power of non-local corporations over those people
Otherwise keep your noses out
(my words here obv, not hers. Again, go read the source).
Takeaway
And therein lies the reason why the tragedy of the commons is so widespread today. Globalisation has grown the forces of big business AND big government so big, it’s almost impossible to keep them away from anything… not even the toughest grandparent can keep a defecting nation-state in line!
And this was something Ostrom was very aware of as she neared the end of her life in the 2010s, where she talked often about the urgent need for the world to take heed of her “eight principles” of governance design to manage its increasingly complex problems.
It’s beyond the scope of this piece to explain them, but I recommend you go deep on it, because they explain how to use nested layers of governance - from local to global - to dissolve the seemingly inexorable tradeoff between individual freedoms, and the needs for collective management.
In other words, a third way between the dark traps of Big Government, and Big Corporation.
And that makes her a massive win-win champion IMO.
Who should I discuss next?
#winwin #economics #governance