Bwyond Markets and States

Beyond the Markets and States: Elinor Ostrom

Assignment: Organizational Economics

Ratika Garg (M2016HRM043)

The lecture by Professor, vividly underscores the power of leaders coming together across organizations to steward local resources on behalf of their communities. Her research found that communities, left to them, can sort out their own ways of stewarding their resources to sustain them over time.

The first and by far the only Nobel Laureate, Prof. Elinor Ostrom strongly believes in three schools of thoughts.

1. According to her the major challenge faced by societies now days is of Collective Action Problem. These are the problems that arise when individual rational decisions result in collective irrational decisions. That is, the best decision at individual level may not be the best decision for the entire organization.  
2. Secondly, she thinks that economic governance is much more than just markets and states.
3. Thirdly, she emphasizes heavily on the practical significance of the Common Pool Resources like ground water, air we breathe etc.

She believes that people generally face dilemmas and are helplessly trapped in them. They at heart want to contribute for the sake of benefit for themselves and everyone else, however there is always a strong temptation to not do anything and still obtain that benefit.

 Keeping this thing in mind, she and her team develops various models to check for the affects of human intervention and selfishness on common pool resources like fisheries, water bodies etc. They collect data, code models and apply boundary rules, so as to develop models that are closest to the real time situation and then study the problems and their plausible solutions for the same.

Professor Elinor, is a great believer of game theory and draws huge inspiration from Nash’s model for her research. Game theory works as the main principle behind machine learning and artificial intelligence. The essence of the concept is that a person/model can learn to find the optimal route/solution when exposed to the same problem under different circumstances. For example, if a person encounters similar problem again and again, he/she would use past experiences as a guiding line to approach the problem next time. In a similar fashion, Elinor considers this as a part of a larger game, where actors, actions, positions are pre-defined. When the game is repeated over and over again, the actors or the players themselves decide on the penalties, rewards, rules etc and no hard coding of rules is required.