From One Nobel Prize Winner to Another: Vernon Smith on Elinor Ostrom’s Contribution to Economics

Economics Nobel Prize winner Elinor Ostrom, who passed away today, made significant contributions to the scholarship on the development of institutions for the management of resources. As CEI President Fred Smith notes, ” some of her work did touch upon modern property rights — illustrating how commons could evolve into properties that could be restricted by use, by time, and in other ways that moved toward the formal property rights of today, ultimately meeting my friend Rick Stroup’s 3-D definition of property — definable, defensible, and divestible.”

Indeed, another Nobel Laureate, Vernon Smith, noted Ostrom’s contributions in a 2003 interview with CEI:

One of the best pieces of work on public choice was done by Elinor Ostrom of Indiana University, Governing the Commons. She’s looked at a huge number of commons problems in fisheries, grazing, water, fishing water rights, and stuff like that. She finds that the commons problem is solved by many of these institutions, but not all of them. Some of them cannot make it work. She’s interested in why some of them work and some of them don’t.

One example is the Swiss alpine cheese makers. They had a commons problem. They live very high, and they have a grazing commons for their cattle. They solved that problem in the year 1200 A.D. For about 800 years, these guys have had that problem solved. They have a simple rule: If you’ve got three cows, you can pasture those three cows in the commons if you carried them over from last winter. But you can’t bring new cows in just for the summer. It’s very costly to carry cows over to the winter—they need to be in barns and be heated, they have to be fed. [The cheese makers] tie the right to the commons to a private property right with the cows.

For the full interview, see here for parts one and two (each part begins on page six).

For Fred Smith’s tribute Elinor Ostrom, see here.