Insights (Essays)

Insights (Essays) October 2009

What Elinor Ostrom can Teach Healthcare

Neil Seeman

Remember the "tragedy of the commons"? I learned the concept in first-year economics class at Queen's University - not in real economics class, but in the dorm room. The cleaning staff fluffed the pillows and vacuumed the carpets each Monday. Students would raze the place over the ensuing days. By Thursday the place was a pigpen.
We undergraduates lived the tragedy of the commons. Acting independently in our own self-interest, we destroyed the shared but limited resources of the common area: the pull-out sofa bed for out-of-town guests; the dart board; the ping pong paddles. In the hierarchy of student needs, these things ranked very highly; yet we ruined them. Why so?

More typically referenced examples of the tragedy of the commons tend to involve natural resources, like fish. If everyone in a village who fishes has equal rights to eat out of the same lake, human behavior (even if everyone in the village is kind-hearted) will lead inevitably to a disappearance of stocks. How do we regulate this?

Thanks to the influential article by the late biologist Garrett Hardin in Science in 1968, the paradox of the "tragedy of the commons" - Hardin used the example of herders sharing a common plot of land and then eroding its value due to individual self-interest - has flummoxed economists for the last 50 years.

The tragedy-of-the-commons problem is highly relevant to not-for-profit hospitals and public sector healthcare: how do we align collective self-interest to support public goods?

Elinor Ostrom, 76, one of this year's Nobel Laureates in Economic Science (shared with Oliver E. Williamson), devoted her career to cracking this riddle. A researcher at the University of Indiana and Arizona State University, Ms. Ostrom's work as a "collective action scientist" well preceded what we now call "good governance". Just as intriguing as her research is the way she went about attacking the problems she sought to solve.

Practical Economics

Economist David Henderson has described Ms. Ostrom's Nobel as a victory for "practical economics" as opposed to abstract formulas. Public reaction to her award, as measured by my quick sentiment analysis on Twitter, the social network, has been highly positive (try this: log on to Twitter, and search for "Congrats" and "Ostrom"). (Compare this to negative sentiment, and shock, registered in response to President Obama's Peace Prize win.)

Lost in the media parade over Ms. Ostrom on account of her being the first woman to win the economics Nobel has been her work itself. ("The important thing about Lin Ostrom," 2002 Nobel laureate Vernon Smith said, "is not that she is the first woman to win the prize but that she richly deserved it.") Ms. Ostrom challenged the tragedy of the commons as an absolute rule, and, upon reviewing dozens of governance case studies, discovered cases of communal ownership in poor regions that worked smoothly - i.e., where people's interests in the "commons" were aligned, and as a result the common resources did not disintegrate.

Among the case studies she uncovered that worked were those that had a manner of property rights system in place, despite the lack of private ownership in the resource itself. This led her to propose a series of rules for governing commonly pooled resources. These included the idea that rules should clearly define: who gets what; good conflict resolution methods; that people's obligations to keep the resource in good condition be proportional to the benefits they reap from the resource; that monitoring and punishing be done by the users or someone accountable to the users; and that users should be allowed to participate in setting and modifying those rules.

The Power of the Case Study

One lesson to be had from Ms. Ostrom's work is the power of case studies. Her practical case-study approach and field work led her to attack the paradox of the tragedy of the commons methodically, and in ways that economic theory never could.

In real life, Ms. Ostrom found, the tragedy of the commons theory did not unfold the same way all the time. She examined user-managed fish stocks, pastures, woods, lakes, and groundwater basins. Some common resources were overused and depleted, but some were managed well. She set forth her findings in her 1990 book, "Governing the Commons."

What is the secret to successful management of the commons? "One of the most important factors is whether local people monitor each other," Ms. Ostrom said in a news conference after her award was announced. "Not officials, locals. I'm not denigrating that officials can do something very positive. But what we have ignored is what citizens can do, and the importance of real involvement of the people involved…". This, to me, sounds like a good argument for involving every responsible citizen who consumes publicly funded health care to formulate its ethics and rules. In a word: engagement.

About the Author(s)

Neil Seeman is a writer, and Director and Primary Investigator of the Health Strategy Innovation Cell at Massey College at the University of Toronto.

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