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Pinedale Online > News > October 2009 > Why we should care about the Nobel prize in economics
Nobel economics prize has local implications
by Cat Urbigkit, Pinedale Online!
October 13, 2009

The Nobel Prize in economics was awarded this week to an Indiana professor for her work on economic governance, with emphasis on the organization of cooperation.

Why should we in Sublette County, Wyoming, care about this prize? Because it may, in the future, impact our natural resources and management of public lands.

Professor Elinor Ostrom effectively argues "active participation of users in creating and enforcing rules appears to be essential. Rules that are imposed from the outside or unilaterally dictated by powerful insiders have less legitimacy and are more likely to be violated. Likewise, monitoring and enforcement work better when conducted by insiders than by outsiders. These principles are in stark contrast to the common view that monitoring and sanctioning are the responsibility of the state and should be conducted by public employees."

Ostromís economic theory is summarized below:
"Many natural resources, such as fish stocks, pastures, woods, lakes, and groundwater basins are managed as common property. That is, many users have access to the resource in question. If we want to halt the degradation of our natural environment and prevent a repetition of the many collapses of natural-resource stocks experienced in the past, we should learn from the successes and failures of common-property regimes. Ostromís work teaches us novel lessons about the deep mechanisms that sustain cooperation in human societies.

"It has frequently been suggested that common ownership entails excessive resource utilization, and that it is advisable to reduce utilization either by imposing government regulations, such as taxes or quotas, or by privatizing the resource. The theoretical argument is simple: each user weighs private benefits against private costs, thereby neglecting the negative impact on others.

"However, based on numerous empirical studies of natural-resource management, Elinor Ostrom has concluded that common property is often surprisingly well managed. Thus, the standard theoretical argument against common property is overly simplistic. It neglects the fact that users themselves can both create and enforce rules that mitigate overexploitation. The standard argument also neglects the practical difficulties associated with privatization and government regulation."

According to the official release, "The Royal Swedish Academy of Sciences has decided to award The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for 2009 to Elinor Ostrom,
Indiana University, Bloomington, IN, USA,

"for her analysis of economic governance, especially the commons" and Oliver E. Williamson
University of California, Berkeley, CA, USA, "for his analysis of economic governance, especially the boundaries of the firm."

The importance of citizen involvement rather than official mandates from above, has finally been put in the international spotlight with Ostromís honor. For more information, click on the link below.

Related Links
  • Economic governance: the organization of cooperation - The Royal Swedish Academy of Sciences (273K PDF)
  • Pinedale Online > News > October 2009 > Why we should care about the Nobel prize in economics

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