The Mint:                     Good afternoon, Erik. And thanks very much for joining The Mint, to talk about your recent book on Elinor Ostrom.

Erik Nordman:              Thanks a lot, Henry. It’s my pleasure.

Ostrom and Climate Change

The Mint:                     I thought given that COP26 is approaching and I suppose in some ways the ultimate resource to manage the climate. I wonder if we start with you reflecting on what Elinor Ostrom thought about applying her thinking in the climate change sphere.

Erik Nordman:              Thanks. And I think it’s very timely to be talking about COP26 and climate change. Here in the United States, we’ve had some very weird weather. We were just talking about the heat dome out west that was melting glaciers and snow pack, and the drying up of some of the reservoirs out in the Western United States. And here in the east, we’ve had a record rain. New York City had a record amount of rainfall for one hour, just a couple of days ago.

The Mint:                     And Texas, wasn’t it the same in Texas?

Erik Nordman:              Texas had some really weird weather too, where they had a winter storm that froze up a lot of their energy infrastructure, leaving people without power and without heat for days at a time. So yeah, we can see the effects of climate change happening right now, it’s not something that’s going to happen out in the distant future it’s happening today and not just in United States, but all over the world. So it’s a very timely topic to be discussing.

The Mint:                     And just to say, do you feel that it’s getting more media coverage as such in the US, that there’s an increasing realisation?

Erik Nordman:              I do. You’re starting to see news programmes make that connection between this unusual weather and climate change. I think for a long time, the news media were hesitant to make that chain, that connection, but the connection is very clear now. And the scientists, have the ability to do this attribution science, where they can say, “Yeah, this particular storm is outside the historical range and it is supercharged by heat in the atmosphere.” There is that scientific credibility behind that attribution. And I think people are making that connection now.

The Mint:                     And Elinor Ostrom, has already had some impact on the international response, hasn’t she?

Erik Nordman:              She has. Her first work on climate change goes back all the way to 1992, where she and her colleague Michael McGinnis were invited by Argonne National Laboratory to contribute to a workshop on climate change and global warming. This was just after, it was a couple of years after the IPCC was formed. The Intergovernmental Panel on Climate Change was formed in the late 1980s. So in 1992, they were invited to this workshop on different approaches, policy approaches for climate change. And that was just before the Rio Earth Summit in 1992, where the countries of the world, including the United States and the UK, they signed the United Nations Framework Convention on Climate Change.

Erik Nordman:              So she was right there at the beginning of all these climate change policies, however she had… I’ll give you a quote from her where she said in 1992, “The current emphasis on global solutions based on international conventions meant to establish global institutions to manage environmental change may be fundamentally misguided.” Ostrom, and her colleagues were very sceptical of a one size fits all top-down policy that would impose legally binding restrictions on nations to reduce their greenhouse gas emissions. She was pretty strongly convinced by her work on local commons that a more decentralised approach would be more effective. And she felt that way for a number of reasons. One, she said, and I’m paraphrasing a quote of hers, “But if we wait for the big guys to come up with a decision, then we’re going to be in big trouble because, there’s nobody there to come and rescue us.”

Erik Nordman:              We can be doing a lot of work to reduce our emissions at other levels, instead of just waiting for top-down government intervention. And she was also sceptical, because those one size fits all prescriptions tend to be very fragile. How do you get everybody to agree on it? So fast forward to 2015, Her work was very influential in the structure of the Paris Agreement, even though she died in 2012, her ideas are really, can be seen in the Paris Agreement structure.

The Paris Agreement and ratcheting up

The Mint:                     And what precise elements of that Paris agreement structure do you think she’s particularly influenced?

Erik Nordman:              The Paris Agreement is really decentralised and is based on this pledge and review system. So each country comes up with a pledge about how much they’re going to reduce their greenhouse gas emissions and by when? And then those pledges are compared to peer countries. So the US and the UK, we’re peer countries, our pledges are going to be compared to one another. And if one is less ambitious, then those peers can exert some pressure and say, “Hey, you need to amp up your pledge a little bit or maybe a lot.” And so there’s no one size fits all approach, it’s very decentralised and it relies on peer pressure rather than top-down enforcement. And that’s pretty typical of the Ostrom approach.

The Mint:                     Well, I suppose to date, it’s yet to be really tested, hasn’t it? Because I mean, we’ve had one commitment and we, and the idea is that that peer pressure will ratchet it up, but of course the ratcheting up has yet to happen.

Erik Nordman:              That’s right. And COVID has messed things up a little bit too, especially the timetable. So for research for my book, I travelled to COP25 in 2019. That’s COP is the Conference of Parties, that’s the annual climate summit that’s held. So I went to the 25th Conference of Parties in 2019 that was held in Madrid. And that was, the theme was raising ambition and anticipation of COP26, which was supposed to be held in 2020 we held it in year in 2021, where nations are supposed to come out with their renewed more ambitious climate pledges. So 2019 was all about exerting that peer pressure, but lurking, not in the background, it’s really out in front. 2019 was also the year that the United States under President Trump withdrew from the Paris Agreement.

Erik Nordman:              And I think that’s another example of this, the robustness of this decentralised structure, that just because one large country withdraws the rest of the world was able to put that peer pressure on not just the United States to get back into it, but also allowed the United States sub national units from states and cities, businesses like Microsoft and Lyft, they stepped forward into this vacuum and said, you know what? The US might be formally out of it, but all these other groups and sub national units of government are still in. We have our own climate pledges, it’s not going to be enough, but it’s enough to keep the momentum going. And now the United States is back in.

Climate Change and Power dynamics

The Mint:                     Yes, I can see that depth of connection that’s possible, but I suppose one dimension I’d be interested to explore is the dimension of power in these situations, because one of the, I suppose the criticisms of Elinor Ostrom, is that she didn’t really address so much the question of power dynamics. And I suppose in that climate change, we can see obviously the power dynamics and that the US being so dominant that if they weren’t, they could call the shots to some extent. And potentially leave, whereas other countries would not be in quite that situation.

The Mint:                     And I mean, I’ve been involved in international meetings at the OECD where you can just see the just totally different style of the US in terms of their interactions. They say, “We won’t accept that.” They dictate and bully and coerce in those situations in a way that no other country can get away with. Do you think it’s fair to say that, Elinor Ostrom didn’t address the power issue to the extent that she might have. And if so, what does that, what are the implications of that?

Erik Nordman:              I think that is a fair criticism, and you’re not the only one to have brought that up. I was at a meeting, a conference back in 2019 where this was a theme. One of the tools that she invented for policy analysis was called the Institutional Analysis and Development framework, and it’s a diagram that allows researchers really to understand the institutions, the players, and the rules and how they interact in a given situation. And the criticism has been that there’s no place for power, where do you draw the power dynamics in relationships and those things? And there’s not really a spot for that in the IAD framework.

Erik Nordman:              So from an academic research perspective, that’s been a criticism. In the international relations part of this, when it comes to climate change, I did talk with a few people related to the workshop like Dan Cole, who’s a lawyer, and is a law school professor, and some folks at the COP25 meeting in Madrid. Dan Cole, in particular noted that when it comes to international relations, there is no real global police that can enforce things. All international agreements are in practise voluntary. And the only thing that really works well are trade sanctions. So if someone is not being a good global citizen, the other countries can get together and impose trade sanctions on those.

Erik Nordman:              And when it comes to climate change, we do see that starting to happen. There’s been a lot of talk and actually actual proposals now to implement a border carbon adjustment, which would effectively tax imports from countries that don’t have a price on carbon or are not meeting their obligations to reduce emissions. So trade sanctions can be important.

The Mint:                     But that would certainly skew the power, wouldn’t it? Because the people who are big importers, clearly would have the power to do that. And of course, how you measure effort towards climate change is a very much a subjective. I mean, well different people will have different perspectives on that, wouldn’t they?

Erik Nordman:              Yes. Yeah, the devil is in the details, as they say. How do you do that in practise? It’s pretty complicated. I know that the European Union came out with a plan just recently in the last month or two about a proposed border carbon adjustment. I think it was pretty lengthy and detailed. I don’t know all the details. The United States also said, that’s something we would like to do, but they were really thin on the details and how that would actually work. So I would expect more movement from the Europeans on this and we’ll see how the details play out and how that’s actually implemented.

The Mint:                     Well I mean, I suppose that’s interesting factor in the power thing that actually the biggest people, the people who have had most impact on climate change on what’s happening to people of course are the west, who have the historical emissions. And now under this, they have the power to actually tell other people to sort it when on the face of it, they should be the ones who really sort this because they have the historical responsibility.

Erik Nordman:              Yes. And that’s a good point. The Paris Agreement also, in addition to the emissions reductions has a Green Climate Fund. The idea is that countries that are responsible for most of the historical emissions, the carbon that’s actually in the atmosphere today, if they got rich based on burning fossil fuels, then they should be able to compensate or help developing countries leapfrog over that, fossil fuel technology and go right to low carbon sources. Getting those commitments, those financial commitments has been a tough issue and I don’t think that that programme is fully funded.

The Mint:                     Yeah. Which makes you feel that there’s a risk of a lot of people involved in this process, feeling they are suckers, to use Elinor Ostrom’s terminology, the developing countries who are going to have the biggest impacts, feel the biggest impacts of climate change, who are not receiving the finance that’s been promised to them in the past, who potentially could be facing a carbon tax border adjustments in the future. I mean, that’s sort of, I’d feel a bit of a sucker to bother being involved in that if I’m pretty screwed anyway.

Erik Nordman:              Yeah. It does have the potential to be a double whammy where you’re a country that’s being taxed because you’re not perceived as doing enough to address your current emissions yet you’re being affected by these legacy admissions from rich countries. So there that does go back to your power dynamic, I don’t know, I don’t have a good answer for you.

Ostrom and her bottom up empirical approach

The Mint:                     Just moving on, then one of the things, reflections I had, which I’ll be interested to know what you thought, is that what is very particular about Elinor Ostrom’s work, it seems to me is the body of empirical work in terms that she studied on the ground, how common resources were managed across the ages, didn’t she? In lots of different situations. And what I reflected, it’s interesting that that’s been done, but if you look for a comparable body of work, that’s look at how markets work in reality, I’m not sure if you can find such a thing.

The Mint:                     And I was wondering, if you started looking at markets in the same way that Elinor Ostrom and all her colleagues looked at management of resources, you’d probably get quite an interesting complex story of different sorts of markets, market institutions, different sorts of relationships, power dynamics, all the sorts of things that she found in looking at common resources. So I just wonder that… I mean, she found if you like, a different spot, but in a way the other spots probably are similar in terms of being really understood, under explored by economics as well.

Erik Nordman:              That’s a really good point, when I teach the basics of economics, we start with the theory, we start with supply and demand and market efficiencies and things like that. And then work backwards and see, well, how does this, how does real life depart from the theory?

The Mint:                     It’s a strange approach. Isn’t it?

Erik Nordman:              It is. It’s pretty typical I think, in economics to start with the theory and then work for the perfect model world and see how does the real world diverge from that perfect model? It does trip us up though, because sometimes we forget that the perfect model doesn’t exist, and anyway. But going back to Ostrom, she was looking at all these different resource systems around the world and had a much more bottom up approach. And she and her graduate students, Edella Schlager and William Bloomquist, for example, they got together all these cases that other people had researched.

Erik Nordman:              So sociologists, anthropologists, hydrologists, people all around the world in all these different disciplines had found instances where commons were being managed successfully and sometimes unsuccessfully. And they were able to with this database start to tease out the patterns, so it was really a bottom up approach. And that’s how she discovered these design principles. Communities that successfully manage the commons, what do they have in common? What are their traits? And what’s missing from those that are unsuccessful? And I think that that bottom up approach is quite different than we typically look at in economics.

The Mint:                     I mean, I know there is the workshop that she and husband set up, isn’t there?

Erik Nordman:              Yeah.

The Mint:                     Is there any other equivalent? Do you think there’s been any more of that bottom up approach to investigation and research in other areas of economics?

Erik Nordman:              I couldn’t tell you. I’m not sure.

Ostrom’s wider influence in economics

The Mint:                     Yeah, so it’s interesting. The general thing is what sort of influence for me that Ostrom has had, because she is the first woman who won a Nobel Prize. And we can see that I suppose the other big stream of Nobel Prize winners was behavioural economics. And you can say, well, behavioural economics has migrated a bit into the mainstream. Interesting, of course it’s seen as biases against rationality, so again the theory is primary and these are the differences from theory. Rather than actually understanding how people really work bottom up, if you like. But it’s got in there. But are there any signs that the work that Ostrom did and the way she worked and the thinking has also got anywhere into mainstream economics?

Erik Nordman:              Well, it’s interesting, because Ostrom was a political scientist, she was not an economist, so-

The Mint:                     But then the behavioural economist to start with were psychologists, weren’t they?

Erik Nordman:              That’s right.

The Mint:                     And Elinor was a political economist.

Erik Nordman:              Yeah. So her work is getting more attention in economics. The Nobel Prize in economics is broad enough that you don’t have to be an economist like Kahneman, and other behavioural economists. It’s open to psychologists, mathematicians, anybody who is working in a field that has an influence on the field of economics. So Ostrom was a political scientist and she was working in this area of what you might call political economy or from the economic side institutional economics. So if we’d take a step back from markets, which economists mostly focus on markets, but if we take a step back, markets aren’t just natural things that you find and observe, they are predicated on a set of rules, like property rights and all these other things.

Erik Nordman:              So if you step back and look at well, what are the rules that allow for markets to emerge? Or what are the rules for alternative arrangements for allocating resources and access to those resources? Those are the institutions, that’s the institutional economics or political economy world that she was operating at. So it was one step more abstract from a market interaction. And I think that well, Paul Krugman, who’s a columnist for the New York Times and himself, a Nobel Prize winner in economics. He called that 2009 award a Nobel for institutional economics. Because, it was not just Ostrom, she shared the prize with Oliver Williamson who studied how those decisions are made within a firm.

Erik Nordman:              So we typically think of well, businesses use markets to allocate scarce resources, but actually inside a business, they don’t typically use markets, they use managerial hierarchies to allocate resources. Who’s going to work on this, and the budgets and things like that? So Williamson was looking at economic governance within businesses, Ostrom was looking at economic governance in the commons, and that’s where they overlap.

The Mint:                     But then in my, from looking around, institutional economics is really… To do a course on institutional economics, it’s really difficult to find one. It seems to be a strand of economics, which is yeah, really, really marginal.

Erik Nordman:              Yeah. Our university doesn’t have one and I’d be interested in maybe introducing a course if there was a sufficient interest among the students. I guess, it’s that grey area between political science and economics. So it doesn’t fit in really neatly in either realm, which is ripe for that interdisciplinary work, but if you’re operating in the disciplinary silos of a university it can be tricky, I think.

Ostrom and Policy Making

The Mint:                     I think just to move on to another area of Ostrom which is obviously related, but really struck me and it seems to have immediate practical implications. It’s in the towards the end of her Nobel Prize speech, one of the things you said to paraphrase was that, “Policymakers, instead of seeking to control, cajole, incentivize, force people out there to do the right thing, they should instead seek to design institutions within which people will do the right thing or are more likely to do the right thing.” That’s a huge message to policymakers. Do you think that is getting through at all?

Erik Nordman:              That is another really good question. And she was very optimistic about human nature. And you can see that in her contrast early on, I think she’s probably best known outside of economics for her contrast with Garret Hardin and the Tragedy of the Commons. And Hardin had a very pessimistic outlook on human nature that, he called his article, The Tragedy of the Commons, using that phrase tragedy in the Greek tragic sense. That the characters are in this drama and we are locked into these fates, which we can’t escape, so if you have-

The Mint:                     A bit like Marxism, really.

Erik Nordman:              Yes. And we’re doomed to over-fish the oceans and overgraze our pastures and things like that. We can’t get out of it unless we either privatise it or have these top-down hierarchical approaches to the regulations. So it’s a much more pessimistic outlook on human nature. And Ostrom’s work, her research around the world, shows that people actually can design these institutions, these rules, and they can enforce them without privatising the resource and just making the commons go away, and without top-down government constraints. That people have the capacity for self-governance.

Erik Nordman:              And that shows through her work from when she was a graduate student, looking at these, what she called public entrepreneurs, people who can get together and solve these collective action dilemmas, all the way through to people managing global commons like climate change. So she’s much more optimistic about the capacity for self-governance, if we can design those institutions to allow humans to flourish in that way.

The Mint:                     I wonder if this is about the human nature or really a reflection of the fact that humans don’t sit there alone, with no context, no existing institutions? Obviously the institutions have existed. People are born into institutions like the family, like the village, like the culture, et cetera, et cetera. So isn’t this more, an optimism about institutions that individuals are born into that create the seeds for creating other institutions.

Erik Nordman:              Yes. And that is one of the themes in institutional economics. There was an old institutional economics that was, that rejected the mathematical formalism of the neoclassical school, but it didn’t have a lot of theory. It was all about observation, but it didn’t have a lot of theory, that went away at their early 20th century. And in the mid 20th century, there was a renewed interest, so now they call it the new institutional economics, that Ostrom and Williamson are a part of. And it has much more theory.

Erik Nordman:              I think Ronald Coase who also Nobel Prize said, “It’s about how people act in real world constraints.” That’s not quite the quote, but it’s looking, it’s not just about theoretical market perfections and things like that and how people deviated, but let’s look at people as they are, and let’s investigate these real constraints, whether they’re, whatever they are.

The Mint:                     I mean, I got the feeling when new institutional economics came first that one of the key elements of it was to accept some of the tenants of neoclassical economics, like rationality, like utility maximising. And fit institutionals into that, so that creating institutions with obviously Game Theory, all that sort of space. Whereas to some extent, Ostrom broke out of that, didn’t she? And maybe could she be seen as a bridging figure between new and old, in that she takes a broader approach to rationality and institutions and a more evidence-based approach, than a lot of new institutional economics does. But at the same time, she tries to develop theory and structure?

Erik Nordman:              I think that’s a good way to put it. One thing she said about that was, “If it works in practise, it’ll work in theory.” And if we see it happening in the world, and our theories don’t account for it, then there’s something wrong with our theory. So you need to have that, both the emphasis on field work, which she was also noted for, and collaborations. But also the robust theory building, like she put together the Institutional Analysis and Development framework, the social-ecological systems model. Those things were pretty big advancements in allowing those observations to be analysed in a rigorous way. So she really put both of those together.

The Mint:                     She’s certainly a hero of mine. And so often now she comes up in conversation with people working in nature-based solutions and agri food, circular economy, all those sorts of situations. So I do think she’s going to have a huge and lasting influence, and it’s been fantastic talking to you about her.

Erik Nordman:              Thank you. It’s been my pleasure.

The Mint:                     And I wish you best luck with your book and getting the story out there. Hopefully, even to people in mainstream economics who might learn about it.

Erik Nordman:              I hope that too. Thank you.

The Mint:                     Thanks very much.

Erik Nordman

Erik is a professor of natural resources management at Grand Valley State University in Michigan, USA. Nordman is also a faculty affiliate at Indiana University’s Ostrom Workshop, where he was …

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