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Solving Collective Action Dilemmas: Beyond Markets and States

In this video, Professor Mark Pennington describes how self-governance approaches compare to markets and states.
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How should we understand the governance challenges that underlie problems such as urban decay, the depletion of forests and fish stocks, and climate change? From an economist’s perspective, these problems are routed in collective action dilemmas. These kinds of dilemmas underpin many of the most pressing problems facing the world today and they occur at many different levels and scales of society – from the very local level right up to the global level. In this session I’m going to talk through a number of different examples of collective action dilemmas to illustrate their nature.
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Then in the next session we can start to look at some of the possible solutions to the collective action dilemmas, with a particular focus on what Elinor and Vincent Ostrom would describe as self-governance solutions. So what do we mean by collective action dilemmas? Collective action dilemmas are characterised by a set of incentives that mean whatever an individual or organisation does in relation to a particular problem makes no difference to whether that problem is actually solved. Let’s start at the most local and perhaps mundane level with a problem such as public littering. Many public spaces often get filled with litter – the litter is unsightly and very costly for the public authorities to remove. So why does the problem persist?
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Arguably, it is because of the incentives that face the individuals involved in generating the problem. From the point of view of someone who drops litter – their personal contribution to the overall problem of public littering is very small – dropping the odd plastic bottle or drink can on the street doesn’t make that much difference to the overall amount of litter that is there. At the same time, it may save the person in question the time of finding a litter bin or the trouble of taking the litter home.
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At the same time, if the person does make the effort to find a bin or to take the litter home, there’s nothing to stop the other people who use the street from dropping litter and contributing to the overall problem. In these circumstances, the individual feels powerless in the situation – it makes no difference how they behave to the overall problem of public littering. Economists often describe these kind of situations as involving a ‘free-rider’ problem – and this problem is particularly pronounced in situations where people know that they will get away with the free-riding behaviour, that there won’t be any social consequences or punishments for acting in this way.
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Now of course, if everybody reasons in such a spirit, then the problem will not be addressed. In this case, people will litter and the streets, over time, will become dirtier and dirtier. The conservation of forests or fish stocks often presents the same kind of problem. An individual or company that makes their living from cutting trees or harvesting fish may reason that if they take extra trees or fish, there will still be plenty left for others to take. If on the other hand they were to desist from taking the trees or the fish concerned, then they would simply be leaving those resources for other actors to exploit.
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If all of the individuals or companies involved in harvesting fish or in forestry think in this way, pretty soon there will be no forests or fish for people to harvest. Moving up to a still higher level – global environmental problems such as climate change present perhaps the ultimate collective action dilemmas. People and countries may reason to themselves that they shouldn’t desist from emitting carbon dioxide because if they do so it will fail to make that much difference to the overall problem. In the meantime, there will be nothing to stop other countries from emitting carbon dioxide instead.
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If all people and countries reason in this way, then they will continue to produce carbon dioxide and the climate change dilemma will fail to be addressed. Now you may think that the solution to all of these collective action dilemmas and to free riding behaviour in particular is to inculcate in people a very strong moral aversion to behaving in this way. From an economist’s perspective, however, while this may provide part of the answer it cannot be all of the answer to this kind of problem.
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The reason for this is as follows – unless you live in a society where all people are equally committed to the moral value in question, then at some point the people who are less committed may start to free-ride – and as they do so, this will start to shift the pattern of incentives for everybody else. Through a kind of rippling effect, gradually, the incentive to uphold the rules will be undermined and we will be left with a situation where only those who are the most committed to the value will continue to uphold it.
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It is for this reason that we may need to rely on institutions of governance and mechanisms for enforcing them that go beyond relying on strong moral beliefs. The question is, what kind of rules can perform this function and can they be supplied in a ‘self-governing’ manner? This will be the topic we address in our next session.

It is often assumed, even within the economics discipline, that there are two predominant ways to solve collective action dilemmas. The first is to make a common resource someone’s private property, and the second is to transfer ownership of the resource to a government. That is, either markets or states will supply rules for using common spaces and assets sustainably.

Elinor Ostrom, the 2009 winner of the Nobel Prize in economics, challenged this assumption. By studying how hundreds of communities around the world managed common pool resources, she discovered that there exists a wide diversity of institutional responses to collective action dilemmas beyond markets and states.

In this video, we will look more closely at her core contribution to the study of governance. We will then consider how these theoretical insights apply in real-world case studies in the next sessions.

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The Ideal of Self-Governance: Public Policy Beyond Markets and States

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