I recently received the latest edition of the American Economic Review and it was quite the pleasure to read Elinor Ostrom’s Nobel lecture. Ostrom’s work has helped us understand how people go about dealing with tragedy of the commons problems. Through her work she finds that there are several examples where people are able to manage common property without government involvement. Cultural and societal norms along with other rules and penalties agreed upon by those using the common property can restrict actions that will lead to better outcomes. Really fascinating work with really cool implications.
Towards the ends she gives us the following paragraph:
Designing institutions to force (or nudge) entirely self-interested individuals to achieve better outcomes has been the major goal posited by policy analysts for governments to accomplish for much of the past half century. Extensive empirical research leads me to argue that instead, a core goal of public policy should be to facilitate the development of institutions that bring out the best in humans. We need to ask how diverse polycentric institutions help or hinder the innovativeness, learning, adapting, trustworthiness, levels of cooperation of participants, and the achievement of more effective, equitable, and sustainable outcomes at multiple scales.
Quite frankly, I cannot begin to tell you how refreshing reading her lecture was. Give the entire lecture a read. It is a draft. To read the finalized edition you, unfortunately, have to be an AEA member.
Cross posted on Rational Conduct.