What we hold in common

Vinay Bharat Ram
http://www.indianexpress.com/news/what-we-hold-in-common/761309/0
Posted: Sat Mar 12 2011, 00:26 hrs

Not long ago, at the Bharat Ram Memorial Lecture, I had the opportunity to listen to the Nobel-winning economist Elinor Ostrom on the subject of what are called common pool resources, or CPRs. Indeed, her terms of reference, concepts and concerns extend well beyond conventional economics.

CPRs do not have a clear-cut pattern of ownership between the state, private players and the community. Some examples include river waters, forests, mineral wealth and the fish in the sea. Many questions arise, like: who keeps the rivers clean? Who prevents forests and wildlife from destruction, forest-dwellers from displacement, the seas from over-harvesting?

Half a century ago, scholars believed what is regarded today as a rather simplistic solution. The assumption was that markets are a suitable guide for private goods from the viewpoint of both producers and consumers, and non-private or public goods are best handled by the government, which can frame rules and impose taxes.

Further, at one end of the scale is a hierarchical governance structure which would induce compliance between private citizens and officials in the orderly consumption and generation of public goods. At the other end, a single governance structure which reduces “chaos”, improves efficiency, limits conflict between government agencies and better serves a “homogenous” public.

This approach, it is believed, is out of touch with the diverse ways in which people actually deal with CPRs. Current research — based on numerous studies, specially in the context of large metropolitan centres — favours a “polycentric” concept with multiple centres of decision-making. Here government bodies compete and cooperate, but have recourse to a central mechanism to resolve conflicts. At the same time there is a rider that one size — meaning one kind of polycentric governance structure — doesn’t necessarily fit all situations. I wonder if MCD and DDA in Delhi are good examples to study.

Ostrom further discusses the state of some major reserve forests in India to illustrate the conflict between protecting forest cover and wood-cutting (as well as cattle-grazing). Her conclusion, based on various ground-level studies, is that the involvement of the locals or van panchayats in protecting the forests gives measurably better results than leaving the problem only to forest officials. In other words, involving all stakeholders is the best way forward.

At a broader level, Ostrom leaves us with the impression that the potential for cooperation in “common” properties has not been fully explored worldwide. One impediment appears to be the rationality-based assumptions about human behaviour: in the classic prisoner’s dilemma, for example, prisoners are separated so that they cannot communicate with each other, and each has to second-guess the other’s behaviour. Such constraints don’t apply to users of CPRs, and therefore cooperative outcomes can be superior to those you’d get in the prisoner’s dilemma experiment. Instead of a zero-sum game we can hope for a win-win situation.

Global warming, for example, has been a subject of growing concern for nations worldwide and has led to a series of debates on how to reduce the world’s carbon footprint. The developed economies, notably Europe and America, are ranged on one side as major polluters; the emerging economies like China, India and Brazil on the other, as those whose rapid growth rates will lead to further pollution in the future. Progress towards a consensus has been tardy, though it is clear that cooperation is the only way forward and time is running out. Signals indicating urgency emerge practically every day. It is now believed that the current food shortages are a worldwide phenomenon closely related to climate change. In the last year alone, the US has experienced an unprecedented snowstorm that stretched from the East Coast to the Midwest, a massive typhoon caused devastation in Australia and floods plagued Pakistan.

Indeed the planet is a vast commons. Within that, regions and nations are smaller commons. And within nations are a plethora of CPRs. That they are intertwined in a complex network from the micro to the macro is beyond doubt.

The problem in India stems from its growing population and rising aspirations in the context of limited CPRs — forest cover, inland water resources, cultivable area and spaces for industrial use. Inevitably there are competing users for increasingly scarce resources, which cannot be left entirely to the market mechanism. While the state steps in to deal with CPRs that by and large belong in the public domain, Ostrom brings a body of theoretical knowledge to deal with them in a more scientific and sensitive manner.

Her approach combines empiricism with behavioural principles hopefully ensuring greater chances of success. Jairam Ramesh and Montek Ahluwalia, we hope you are listening.

The writer is a visiting professor of economics at IIT, Delhi