[S]hared understandings by actors about enforced prescriptions concerning what actions (or outcomes) are required, prohibited, or permitted.

[Rules] are linguistic statements containing prescriptions similar to norms, but rules carry an additional, assigned sanction if forbidden actions are taken and observed by a monitor (Commons, 1924).

Norms are prescriptions about actions or outcomes that are not focused primarily on short-term material payoffs to self. A participant who holds a truth- telling norm gains an internal reward (that can be modeled as an additional value added to their utility function) for telling the truth even when material payoffs would be greater when telling a lie (Crawford and Ostrom, 2005).

Some of the lessons coming out of our institutional analyses in Nepal and elsewhere show that resource users who have relative autonomy to design their own rules for governing and managing common-pool resources frequently achieve better economic (as well as more equitable) outcomes than when experts do this for them.

How do rules originate on farmer irrigation systems? 

Farmers in old and established systems tell researchers that they do not know much about the origin of the rules they use. In Bali, for example, rules are encoded in a sacred religious system and are monitored and enforced by priests (Lansing, 1991, 2006).

[T]he evolution of a rule system is not synonymous with progress. Certainly, evolutionary processes do not entail a priori judgments on the outcome. Evolutionary processes do involve, however, the generation of new alternatives, selection among new and old combinations of structural attributes, and retention of those combinations of attributes that are successful in a particular environment. In evolving biological systems, genotypic structures are changed through blind variation or directed variation (such as in the case of the domestication of many species of plants and animals). In evolving human-based rule systems, rule configurations within an action situation can change as a result of many self-conscious or unconscious mechanisms, including trial-and-error efforts, especially in collective-action processes. In some instances, the capacity of the biophysical resource system to buffer abuse from trial-and- error of different rule systems seems to play a necessary but not sufficient role in the emergence of successful self-governed rule systems (Basurto, 2008; Basurto and Coleman, 2010). Mechanisms for change in rule configurations can be roughly divided into relatively self-conscious and unconscious processes of change. Among examples of self-conscious processes that are frequently mentioned in the literature are those driven by imitation (Richerson and Boyd, 2005). Imitation of rules used by others can lead to rule evolution over time, especially if the farmers from multiple irrigation systems in a region regularly interact in a local market or other regular meeting place.

Imitation of entire rule systems that are thought of as ‘successful’ can also take place at the constitutional-choice level, such as the case of the adoption of the US National Parks’ law system by the Costa Rican nascent national park system. Other self- conscious processes of change in rule systems include some cases of external development interventions, such as when external aid support is conditioned to changes in local institutions based on foreign views of fairness, productivity, democracy, or development itself.

Competitive processes can also lead some users to self-consciously favor some institutional arrangements over others. Similarly, conflict over the interpretation of rules is also a process that frequently leads to self-conscious change.

Most self-conscious processes of change are based on the ability of humans to learn (Henry, 2009), such as when members of a rural fishing community organize to modify rules to control levels of exploitation based on past experiences (Basurto, 2005).

Unconscious processes of change include forgetting, like when there is a very large number of rules and no one ‘remembers’ them all without extensive research, or when laws are never practiced. The same phenomena are observed when certain taboos disappear through language loss, cognitive dissonance, technological change, or non-enforcement. These mechanisms can slowly erode rule systems, which then wither away and eventually can be replaced by new practices and norms of behavior (Kofinas, 2005).

Our dependence on language to communicate and the inherent ambiguity of language can lead to a number of unconscious processes of rule change as well. Rules are composed of mere words and, as Vincent Ostrom (1997) has frequently pointed out, words are not always understood by everyone with the same meaning (see also 2008a, 2008b). A guard may not understand the rules the same way as users. A guard, for example, may interpret rules that place heavy costs on the guard in contrast to those rules that involve low costs. Babbling equilibrium problems are widespread, even among scholars studying rules and norms systems! And, it is a key problem for the social sciences (E. Ostrom, 2005: 179).

Dopfer et al. (2004) view an economic system as a population of rules, a structure of rules, and a process of rules, where the micro domain refers to the individual carriers of rules and the systems they organize, the macro consists of the population structure of systems of meso, which is where processes of rule change take place.

It is worth restating that it would be naıve to assume that any evolutionary process always leads to better outcomes. In biological systems, competition among populations of diverse species led to the weeding out of many individuals over time who were outcompeted for mates and food in a given environment.