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Polycentricity, Complexity, and the Commons

DECENTRALISM FILE

Elinor Ostrom

Elinor Ostrom (1933-2012) was a celebrated economics and political science professor at Indiana University from 1965 to her retirement in 2010.  With her husband Vincent, also an IU economist, she was founding director and senior research director of The Vincent and Elinor Ostrom Workshop in Political Theory and Policy Analysis. She conducted research on topics ranging from urban police departments to groundwater basins, irrigation systems, pasture lands, forests, and fisheries. In 2009 she was awarded the Nobel Memorial Prize in economics for her analysis of economic governance, especially the commons.

In her book Governing the Commons and in many other publications, she demonstrated that groups can effectively manage resources without resorting to government control or private ownership. She coined the term “polycentricity” to describe the capability for decentralized self-government to perform better than remote and heavy handed governmental hierarchies.

The Problem of Complexity

The search for rules to improve the efficiency, sustainability, and equity of outcomes obtained in commons dilemmas is an incredibly difficult task. A key problem of all common-pool problems, such as managing a forest, an irrigation system, an inshore fishery, or the Internet, is that of excluding free riders. Thus, an essential set of rules defines who is eligible to use a common-pool resource. Empirical studies of boundary rules used in field settings have identified 27 different types of boundary rules used alone or in combination (E. Ostrom, forthcoming; E. Ostrom, Gardner, and Walker, 1994). A second essential set of rules relates to the harvesting and other activities in which individuals may participate. Empirical studies have identified over 100 types of rules that specify when, where, how, and how much of the products of a commons may be appropriated by someone who is authorized to do so. The number of rules related to incentives and sanctions, to information conditions, and to procedural requirements that could be used to regulate activities related to a common-pool resource is also very large. Since rules are used in combination with one another, the potential configuration of rules that could be used to improve the efficiency, equity, and sustainability of common-pool resources approaches infinity.

Consequently, instead of assuming that the choice of institutional rules to improve the performance of human systems that utilize common-pool resources—or any other complex task for that matter— is a process of designing optimal rules, we need to understand the policy design process as involving an effort to tinker with a large number of component parts (see Jacob, 1977). Those who tinker with any tools—including rules—try to find combinations that work together more effectively than other combinations. Policy changes are experiments based on more or less informed expectations about potential outcomes and the distribution of these outcomes for participants across time and space (Campbell, 1960, 1975). Whenever individuals agree to add a rule, change a rule, or adopt someone else’s proposed rule set, they are conducting a policy experiment. Further, the complexity of the ever-changing biophysical world combined with the complexity of rule systems means that any proposed rule change faces a nontrivial probability of error.

When only a single governing authority makes decisions about rules for an entire region, policymakers have to experiment simultaneously with all of the common-pool resources within a jurisdiction with each policy change. And, once a change has been   made and implemented, further changes will not be made rapidly. The process of experimentation will usually be slow. Information about results may be contradictory and difficult to interpret. Thus, an experiment that is based on erroneous data about one key structural variable or one false assumption about how actors will react can lead to a very large disaster (see Wilson el al., forthcoming). In any design process where there is substantial probability of error, having redundant teams of designers has repeatedly been shown to have considerable advantage (see Landau, 1969, 1973; Bendor, 1985).

For example, let us imagine a series of inshore fisheries located along the coast of a region, and posit that every policy change has a failure probability of 1/10. If the region were regulated by a single governing agency, one out of ten policy changes would be failures for the entire region. If designing rules were delegated to three genuinely independent authorities, on the other hand, each of these authorities would still face a failure rate of one out often. The probability that a failure would simultaneously occur along the entire coast, however, would be reduced from 1/10 to 1/10^2 or 1/100. On a coast with many more relatively separable inshore fisheries, the likelihood of a coastal-wide failure is reduced still more. Of course, the failure rate for such design tasks cannot itself be known, but the positive effect of parallel, redundant design teams each trying to find the best combination of rules does not depend on any particular error rate. The important point is: If the systems are relatively separable, allocating responsibility for experimenting with rules will not avoid failure but will drastically reduce the probability of immense failures for an entire region.

In contrast to forms of organization that are the result of central direction, most self-organized groups—including locally organized fisheries, forests, grazing areas, and irrigation systems—are better viewed as complex adaptive systems. Complex adaptive systems are composed of a large number of active elements whose rich patterns of interactions produce emergent properties that are not easy to predict by analyzing the           separate parts of a system. Holland (1995: 10) views complex adaptive systems as “systems composed of interacting agents described in terms of rules. These agents adapt by changing their rules as experience accumulates.” Complex adaptive systems “exhibit coherence under change, via conditional action and anticipation, and they do so without central direction” (Holland, 1995: 38-39). Systems that do not have central direction can take on many forms. One form that is frequently thought of is a completely decentralized layer of government that is composed entirely of self-organized, local bodies each of which governs a smaller-scale resource system. Such a form has both significant advantages and disadvantages.

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Advantages and Disadvantages of Fully Decentralized Systems

Among the advantages of assigning the authority to regulate smaller-scale and separable common-pool resources to the users are:

  • Local knowledge. Appropriators who have lived and appropriated from a resource system over a long period of time have developed relatively accurate mental models of how the biophysical system itself operates, since the very success of their appropriation efforts depends on such knowledge. They also know others living in the area well and what norms of behavior are considered appropriate by the community.
  • Inclusion of trustworthy participants. Appropriators can devise rules that increase the probability that others are trustworthy and will use reciprocity. This lowers the cost of relying entirely on formal sanctions and paying for extensive guarding.
  • Reliance on disaggregated knowledge. Feedback about how the resource system responds to changes in actions of appropriators is generated in a disaggregated way. Fishers are quite aware, for example, when the size and species distribution of their catch changes over time. Irrigators learn whether a particular allocation system is efficient by comparing the net yield they obtain under one set of rules versus others.
  • Belief adapted rides. Given the above, appropriators are more likely to craft rules that are better adapted to each common-pool resource than any general system of rules.
  • Lower enforcement costs. Since local appropriators have to hear the cost of monitoring, they are apt to craft rules that make infractions highly obvious so that monitoring costs are lower. Further, by creating rules that are seen as legitimate, rule conformance will tend to be higher.
  • Redundancy. The probability of failure for an entire region is greatly reduced by the establishment of parallel systems of rule making, interpretation, and enforcement.

There are, of course, limits to all ways of organizing the governance of common-pool resources. Among the limits of a highly decentralized system are:

  • Some appropriators will not organize. While the evidence from the field is that many local appropriators do invest considerable time and energy into their own regulatory efforts, other groups of appropriators do not do so. There appear to be many reasons for why some groups do not organize, including the presence of low-cost alternative sources of income and thus a reduced dependency on the resource, conflict among appropriators along multiple dimensions, lack of leadership, and fear of having their efforts overturned by outside authorities.
  • Some self-organized efforts will fail. Given the complexity of the task involved in designing rules, some groups will select combinations of rules that generate failure instead of success. They may be unable to adapt rapidly enough to avoid the collapse of a resource system.
  • Local tyrannies. Not all self-organized resource governance systems will be organized democratically or rely on the input of most appropriators. Some will be dominated by a local leader or a power elite that only changes rules that will be of advantage to them. This problem is accentuated in locations where the cost of exit is particularly high and reduced where appropriators can leave.
  • Stagnation. Where local ecological systems are characterized by considerable variance, experimentation can produce severe and unexpected results, leading appropriators to cling to systems that have worked relatively well in the past and stop innovating long before they have developed rules likely to lead to better outcomes.
  • Inappropriate discrimination. It is always necessary to exclude some individuals from using a resource who do not have a legal right to use a resource and are not contributing to the sustainability of that resource. However, exclusion can be based on inappropriate grounds or on ascribed characteristics that have nothing to do with legal rights or the trustworthiness of individuals to follow a set of agreed-upon rules.
  • Limited access to scientific information. While time and place information may   be   extensively developed and used, local groups may not have access to scientific knowledge concerning the type of resource system involved.
  • Conflict among appropriators. Without access to an external set of conflict-resolution mechanisms, conflict within and across common-pool resource systems can escalate and provoke physical violence. Two or more groups may claim the same territory and may continue to make raids on one another over a very long period of time.
  • Inability to cope with larger-scale common-pool resources. Without access to some larger-scale jurisdiction, local appropriators may have substantial difficulties regulating only a part of a larger-scale common-pool resource. They may not be able to exclude others who refuse to abide by the rules that a local group would prefer to use. Given this, local appropriators have no incentives to restrict their own use.

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The Advantages of Polycentricity

Many of the capabilities of a parallel adaptive system can be retained in a polycentric governance system. By polycentric, I mean a system where citizens are able to organize not just one but multiple governing authorities at differing scales (see V. Ostrom et ah, 1961; V. Ostrom, 1987, 1997; McGinnis, 1999a, 1999c). Each unit may exercise considerable independence to make and enforce rules within a circumscribed scope of authority for a specified geographical 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.

In a polycentric system, the users of each common-pool resource would have some authority to make at least some of the rules related to how that particular resource will be utilized. Thus they would achieve many of the advantages of utilizing local knowledge as well as the redundancy and rapidity of a trial-and-error learning process.

On the other hand, problems associated with local tyrannies and inappropriate discrimination can be addressed in larger, general-purpose governmental units that are responsible for protecting the rights of all citizens and for the oversight of appropriate exercises of authority within smaller units of government. It is also possible to make a more effective blend of scientific information with local knowledge where major universities and research stations are located in larger units but have a responsibility to relate recent scientific findings to multiple smaller units within their regions. Because polycentric systems have overlapping units, information about what has worked well in one setting can he transmitted to others who may try it in their settings. Associations of local resource governance units can be encouraged to speed up the exchange of information about relevant local conditions and about policy experiments that have proved particularly successful. And when small systems fail, there are larger systems to call upon—and vice versa.

Polycentric systems are themselves complex, adaptive systems without one central authority dominating all of the others. Thus, there is no guarantee that such systems will find the combination of rules at diverse levels that are optimal for any particular environment. In fact, one should expect that all governance systems will operate at less than optimal levels, given the immense difficulty of fine-tuning any very complex, multitiered system.

In the United States, many examples of dynamic, polycentric resource governance systems exist where there is strong evidence of high performance. One example is the Maine lobster fishery, which is noteworthy because of the long-term, complementary roles adopted by both local and state governance systems. Maine is organized into riparian territories along most of the coast. Boundary rules and many of the day-to-day fishing regulations are organized by harbor gangs (Acheson, 1988).

In order to go fishing at all, one must become a member of a “harbor gang,” the group of fishermen who go lobstering from a single harbor. Once one has gained admittance into such a group, one can only set traps in the traditional territory of that particular harbor gang. Members of harbor gangs are expected to obey the rules of their gang concerning fishing practices, which vary somewhat from one part of the coast to another. In all areas a person who gains a reputation for molesting others’ gear or for violating conservation laws will be severely sanctioned. Incursions into the territory of one gang by fishers from another are ordinarily punished by surreptitious destruction of lobster gear. There is strong statistical evidence that the territorial system, which operates to limit the number of fishers exploiting lobsters in each territory, helps to conserve the lobster resource (Acheson el ah, 1998: 400).

At the same time, the state of Maine has long-established formal laws that protect the breeding stock and increase the likelihood that regeneration rates will be high. “At present, the most important conservation laws are minimum and maximum size measures, a prohibition against catching lobsters with eggs, and a law to prohibit the

taking of lobsters that once had eggs and were marked—i.e., the ‘V-notch’ law” (Acheson et al., 1998: 400). Neither the state nor any of the harbor gangs have tried to limit the quantity of lobster captured. The state does not make any effort to limit the number of fishers since this is already done at a local level. However, the state        t has been willing, to intercede when issues   exceed the scope of control of local gangs. In the late 1920s, for example, when lobster stocks were at very low levels and many local areas appear to have had substantial compliance problems, the state took a number of steps—including threats        to close the fishery—that supported informal local enforcement efforts. By the late 1930s, compliance problems were largely resolved and stocks had rebounded.

Recently, in response to changes that were breaking down the harbor gang system, the state formalized the system by dividing the slate into zones with democratically elected councils. Each council has been given authority over rules that have principally local  impacts—trap  limits, days and times fished, etc. Interestingly, the formalization of local zones was followed, almost immediately, by the creation of an informal council of councils to address problems at a greater-than-local scale. It is expected the council of councils will be formalized soon (Wilson, 1997).

Today, the state needs only about six patrol officers on the water to police the activities of 6,800 lobstermen, all the other fisheries, and coastal environmental laws. During the 1990s, the fishery has been growing substantially with increased yields (Acheson, 1993). At the same time, there is strong evidence that the number of reproductive-age females in the Maine waters is very large and that the recruitment levels will continue at a high level.

The system of co-management of the Pacific salmon fisheries in the state of Washington is another noteworthy example of a recently evolved polycentric system that appears to be working much better than an earlier system that was dominated primarily by State and Federal agencies (see Singleton, 1998). The change in the system came as a result of a major court decision in the mid-1970s that allowed the Indian tribes that had signed treaties more than a century before to have protected rights to 50 percent of the fish that passed through the normal fishing areas of the tribes. This has required the state to develop a “co-management” system that involves both the state of Washington and the 21 Indian tribes in diverse policy roles related to salmon. This is a large, transboundary resource utilized by major commercial firms as well as by the Indian tribes. Having the state strongly involved means that it is “safe” for any local group to agree to follow strong conservation practices, because they know that other local groups are also involved in the same conservation practices. At the same time, the earlier, centrally regulated system had focused on aggregations of species and spent little time on the freshwater habitats that are essential to maintain the viability of salmon fisheries over the long term. Individual tribal authorities have concentrated their attention on the specific stocks and how to manage these better. Co-management of migrating fishery stocks has also been evaluated as successful in British Columbia and other locations (Pinkcrton, 1989; Poffenberger and McGean, 1996). Alcorn and Toledo (1998) stress the complementary institutional systems at the national level in Mexico—supportive of ejidos and communidades at a local level—as generating a more sustainable governance system than exists in similar ecological conditions.

Polycentric political systems are frequently rejected on the basis of their surface appearance. They look messy and chaotic. In studies of local public economies, however, messy polycentric systems significantly outperformed metropolitan areas served by a limited number of large-scale, unified governments (McGinnis, 1999b). Evidence that complex, multitiered systems for governing common-pool resources are successful is now accumulating as discussed above. The good society may not be achievable by systems that look neat but do not have the information and adaptive capabilities needed to achieve efficiency, sustainability, and equity. Those of us in academic life need to learn how better to analyze complex systems in order that we can distinguish between those complex systems that are truly counterproductive, and those that are well matched to the ecological systems they are intended to govern.

From Polycentricity, Complexity, and the Commons. PEGS Vol. 9: no.2, 1997.

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