A Nobel Prize for Sharing the Commons and Avoiding the Tragedy of Copenhagen

Congratulations to Elinor Ostrom, the first woman to win the Nobel Prize in Economics (seriously, what century is it?). This year's Prize is also a recognition that 21st century economics will be about sharing the Commons.

Ostrom's 1990 book Governing the Commons reframed the infamous "Tragedy of the Commons," and concluded that people can solve their own problems. Prior to Ostrom, the overuse of a shared resource such as open grazing lands (as popularized by a 1968 essay by Garrett Hardin), was seen as inevitable, and could only be addressed with either government intervention or the invisible hand of the free market. This simplistic approach fit nicely into America's polarized ideological divide: red-state or blue-state, liberal or conservative, Democrat or Republican, Coke or Pepsi, McDonald's or Burger King, et al or etc.

But Ostrom showed that it overlooked an important player: the people who live there and use the resource. As the winner of this year's Nobel Peace Prize said in a 2004 speech, "there's not a liberal America and a conservative America; there's the United States of America." Rather than socializing grazing land with government intervention, or privatizing the land and letting the market rule, Ostrom's book argues that resource users can create local rules and institutions to manage the resource while preserving shared access.

Her lessons can apply to a variety of Common Pool Resources including fisheries, groundwater, water in irrigation canals, the ozone layer, public forests, the oceans, and biodiversity.

And Ostrom's work could even help save the biggest commons of all: climate. In about 50 days, the Copenhagen climate conference will begin, and the world's countries will likely behave competitively in a zero-sum game. When one country says, I'll reduce 5%, the next says, I'll reduce 4%, followed by the next offering 3%. Each country knows that every gallon of gasoline they give up will be used by their competitor to beat them in the world economic race. The tragedy of Copenhagen.

A program promoted by the Environmental Defense Fund for depleted fisheries shows how Ostrom's work can be used to save Copenhagen. The "Catch-Share" program distributes "individual fishing quotas" to each fisherman, community or fishery association. Fishermen dislike constraining government rules, but support this tradable permit system. The Pacific Fishery Management Council plans to institute a Catch-Share program in order to encourage cooperation, rather than competition, among fishermen working the cod, whiting, rockfish, flounder and sole fisheries from Morro Bay on California's Central Coast to Puget Sound in Washington state.

A similar system geared to address climate change is called "Cap & Share." Fossil fuel producers are required to purchase a limited number of emission permits. However, instead of giving or selling the permits to companies, the permits are distributed as "shares" to households on an equal per capita basis. The point of regulation remains upstream, and fossil fuel producers and importers are required to purchase the shares from people. As people sell their shares to the upstream companies, the companies raise fuel prices, but return the value of the permits back to households. Cap & Dividend, promoted by author Peter Barnes, achieves a similar result through a government auction of permits to companies, returning the proceeds to households as a per capita dividend. It's a fair way to help households, and it could form the basis of the next international climate treaty.

Al Gore and the IPCC won the Nobel Peace Prize in 2007 for alerting the world to the problem of global warming. This year Elinor Ostrom's Nobel Prize in Economics is part of the solution.

Comments

[JohnCanfield]

Absolutely agree that we need to move away from the zero-sum game of nation-to-nation negotiations. Mike's proposed framework of capping carbon and distributing the permit value back to people equally is the right way to go!

[LMPE]

Are you listening, Glenn Beck?

[JeandeBegles]

Nice to learn that the Nobel price has to do with the tragedy of commons we are experiencing with the ongoing global warming.
The idea of a same CO2 quota per individual is the right one, but the implementation with a quota system for individuals is a wrong solution, absolutely unfitted with individual emissions.
The simple and efficient solution, as promoted by Jim Hansen, is tax and dividend.
The same individual dividend is exactly the financial amount corresponding to the individual quota.
It is that simple.
It becomes more complicated when you consider which part of the tax income must be shared between the citizen (of USA ie) and which part must be reserved as a compensation for the people of the poor countries like Bangla Desh struggling against sea rising provoked by OUR CO2 emissions. In France our taca association (taca.asso-web.com) considers that nearly half of the tax income must be reserved for this world Climate Fund.
This is what is at stake in Copenhague.

[johnnywalker]

Mr. Sandler,

Very nice article. I completely agree with your congratulations to Elinor Ostrom for winning this year's Nobel Prize in Economics. The idea of "sharing the Commons" is most timely and appropriate..

lt is interesting that you describe the Tragedy of the Commons as "infamous." One of Hardin's intentions was most surely to stimulate discussion, and controversy and it has certainly done so. One of the most controversial aspects of Hardin's paper is his clear assertion that Adam Smith's "invisible hand," rather than resulting in benefit for all in a commons, is the inevitable cause of the destruction of the commons. One of his proposed solution was "mutual coercion, mutually agreed upon," which seems like a common-sense approach; we can only hope that world leaders use common sense.

[Patrick Gregston]

This is already my favorite post on HP, and probably on most of the green pages I have seen.
Most of the problems we are going to experience first have to do with food and water- and not rising seas..
How timely she was back in 1990. How useful it could be in December.
Imagine cooperation among people who consensually agreed on an action. Isn't that refreshing !