Tag: ELINOR OSTROM

Inequality in India

By 2011 the BRIC economies had some of the highest rates of income inequality adjusted to the Human Development Index among developing nations.  At the same time, the BRIC countries had consistently had the highest GNP growth versus the previous 10 years among developing nations.  How is it that there is not a parallel growth of the Human Development of its citizens?  The answer and one of the biggest challenges for the BRIC countries is the fact that a large amount of the GNP is distributed among small elites that control their market economies.

Economists and investors such as O’Neill, Krugman and others largely emphasize the expected growth of the BRIC economies as indicators of where to invest their money.  Unfortunately, they have not paid the same interest to what many other economists consider important: the human development of the people.  Fortunately, there are still some economists who since the decade of 1970 paid a lot of attention to the issues of freedom and equality.  Economists leaded by Milton Friedman, the Economics Nobel Prize of 1976, argued that economic policies should be focused in the freedom of its citizens as a primary value.  To them, stressing equality per se could lead to economic inefficiency as well as it would put in risk Freedom itself.  However, the same economist argued that it was necessary for developing economies that the government took a central role in poverty alleviation in order to keep the pace with the economic growth of its economies.  Unfortunately, this poverty alleviation is not being done in the BRIC countries and the economic difference between the poorest and the richest continues to grow. Since the 60s, a large group of economists emphasized the negative effects of not paying attention to a free and equal development in emerging markets; economists like Friedman and Hayek wrote a lot in this regard and even recently Elinor Ostrom’s ideas, who won the Nobel Prize in Economics in 2009, are still not listened by those who have forgotten the importance of good governance economic policies.

India is the country in which this income inequality versus human development is more pronounced.  Currently, India occupies the position #93 with an IHDI of 0.392 and the country has descended in the rank many positions since the last decade.  Inequality in the earnings among Indians has doubled over the last two decades, making it one of the worst performers among developing economies.  Why? This is again the result of the failed attempts by the Indian government to combat corruption, bad administration and under-payments and also of the unawareness of foreign investors.

The fact that foreign investors have no interest in securing the welfare of the Indian people is a problem.  To them, the investment opportunities of this specific BRIC country are of value until they find a better economy to move their money to.  However, the real stakeholders are not the foreign investors but the Indian Government and its groups of interest who should aim to secure the welfare of all of its citizens now that they have a chance.  While the growth of this economies will continue the effect it will have in such unequal societies will result in some of the worst rates of poverty and hunger ever seen in history. By 2025 India will be the most populous country in the world but also, it will have 268 million people (20.3%) living still with less than US$1.25 a day as reported by economists in the World Bank. The Indian government should go aligned with the current trade liberalization in order to support higher productivity in the private sector and to exploit its comparative advantage of having a labor-intensive industry to foster the production of goods and services.

Paper on “Craftying analytical tools to study institutional change”

Today I did a presentation on the methodological plan for a study in the Internationalization of Leipzig’s Gallery of Contemporary Art.  I received very important critics that helped me correct the way of my research.  The critics were directed at focusing on the institutional evolution of the Gallery’s agenda (to understand what was behind of the internationalization process we had identified in our preliminary research). Indeed, crafting a study is not an easy thing and today I read that UDADISI had re-posted a great article on something related to the issue I’ll be dealing with in the next couple weeks.  So it was worth republishing. 😉 Here’s the article by Ostrom and Basurto,
These are some ideas on the evolution of institutions from the [very interesting!] paper:
What are rules:

[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).

What are norms:

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 lessons from institutional analysis:

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).

What are some of the processes of rule change?

[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.