Public Choice (2010) 143: 327–333 DOI 10.1007/s11127-010-9623-8
Elinor Ostrom’s contributions to the experimental study of social dilemmas T.K. Ahn · Rick K. Wilson
Received: 25 January 2010 / Accepted: 22 February 2010 / Published online: 11 March 2010 © Springer Science+Business Media, LLC 2010
Keywords Elinor Ostrom · Social dilemma · Experiment The second author vividly remembers dashing into Lin Ostrom’s office in 1980 and asking her about using experiments. Wilson was looking for a dissertation topic and was in the middle of a pilot observational study on the provisioning of public goods. He was frustrated by the fact that he couldn’t find enough institutional variation to test key conjectures about how institutional rules affected behavior. He stumbled on a working paper by Plott (1981) who argued that experiments were a great way to test for institutional variation because the experimenter could design those institutions. It was a eureka moment for Wilson. He asked Lin “did she know this Plott guy and what did she think about experiments?” Lin, as always, was enthusiastic. She knew Plott, she knew about experiments, but she wondered whether Wilson had a question worth asking. When it seemed there was a glimmer of an idea, she indicated that experiments might be a useful method for addressing the question. In her usual low key manner she gave Wilson a lengthy reading list and pressed him to go visit a brand new assistant professor who had just been hired in economics—Arlington Williams. At the time Wilson thought this was simply routine; he did not realize that Lin had never designed or run an experiment, instead she always kept her eyes open for methods to tackle interesting questions and knew everyone who was doing exciting work. Lin Ostrom has always pressed her students (and co-authors) to come up with a key question. Once defined she presses for the appropriate empirical method. Ostrom has encouraged students and colleagues alike to explore new methods in the social sciences so as to gain greater precision in measurement. Among the methods she has championed has been
T.K. Ahn Department of Public Administration, Korea University, Anam-dong, Seongbuk-gu, Seoul 136-701, South Korea e-mail:
[email protected] R.K. Wilson () Department of Political Science, Rice University, Houston, TX 77251-1892, USA e-mail:
[email protected]
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the use of experiments. In large part her approach to laboratory experiments comes from the tradition of experimental economics. The Nobel Prize in Economic Science devotes a section of its scientific background article to the contributions made by “Ostrom and colleagues” to experimental studies of social dilemmas. We provide a more detailed account of the evolution of experimental research as an integral part of Ostrom’s research program. We show, first of all, that theory building has always been an integral part of Lin Ostrom’s endeavor to understand the dynamics of social dilemmas. This emphasis on theory was one of the most important reasons for the productive and successful use of experimental methods. Second, Ostrom collaborated with experimental economists and theorists at Indiana University, particularly James M. Walker and Roy Gardner, which led to a series of seminal common-pool resource (CPR) research designs that still provide a gold standard for experiments. Third, Ostrom and colleagues used their observations about CPRs in the field to implement “punishment” in the lab and implement endogenous “rules and institutions.” These design elements provided a common benchmark that facilitates comparability among multiple studies.
1 Paving the way to the lab experiments: theory building and fact finding Ostrom and colleagues’ experimental works are supported by fine-tuned game theoretic work addressing issues and puzzles originating from observations about naturally occurring situations. Theory provided the tool to achieve the “right” level of abstraction that is essential for good laboratory experiments. While the Nobel Committee characterizes Ostrom’s works as “based on field studies” and the theorizing mostly “inductive” the committee overlooks the three-way interaction between theory, experiment and field work. After a sabbatical in Bielefeld in 1981, Ostrom took up Paul Sabatier’s challenge (Ostrom 1990, xiv) to see whether self-governing institutions for the ground water basins she reported in her dissertation (Ostrom 1965) were still intact. This led her to more fully consider the theoretical underpinnings of common property resources and whether evidence from the field provided support. The first of these efforts was published in 1985 (Blomquist and Ostrom 1985).1 They meticulously examine to what extent the repeated game solution to the commons dilemma (Lewis and Cowens 1983) provides a theoretical explanation of the successful collaboration among governmental and non-governmental entities to govern West Basin in California. Blomquist and Ostrom characterize the repeated game solution as a “resolution without institutions.” Pointing to Lewis and Cowens’s (1983) model they look at assumptions such as complete information, costless communication, symmetry, perfect monitoring, and deterrence by a grim trigger strategy. Blomquist and Ostrom find that these assumptions are unrealistic in light of the evidence from West Basin case. Instead of dismissing game theory, they propose a “resolution with institutions” in which the assumptions in repeated games are incorporated as variables that take values as functions of the characteristics of the resources, the extant institutional arrangement and the participants’ rule-making and rule-enforcement efforts. Thus, for example, instead of assuming that all the players have complete information about the conditions of a common-pool resource, which is critical in inferring the 1 Of course, the problem of the commons was not Ostrom’s first contact with game theory. The efforts to
develop a framework for institutional analysis goes back at least to late 1970’s and the first major synthesis of these efforts was presented in 1984 as the presidential address at the Public Choice Society, and subsequently published as Ostrom (1986). Further work game theoretic work developed the IAD framework (Ostrom et al. 1994) and the “grammar” of institutions (Crawford and Ostrom 1995).
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strategies used by other players and implementing a conditional strategy, Blomquist and Ostrom ask “is there some way for participants to find out what is going on? Can participants engage some mechanism for discovery about the causes of their losses? Is there a court system, an agency, or a foundation that might be able to inform the users or undertake inquiry?” This approach is applied to monitoring, enforcement and communication and they conclude with a set of institutional characteristics that lead to the successful governance of the commons. Thus, game theory is taken seriously in relation to empirical research, but not accepted blindly. Game models are utilized as organizing conceptual device for empirical evidence, but at the same time critically evaluated in light of the evidence. Such models became the basis for designing the CPR experiments.
2 Advent of experiment informed by and contributing to game theory and field research There were several people conducting experiments in the Workshop and at Indiana in the early 1980s. The Political Science Department hired a young formal theorist, Roberta Herzberg, who worked with Rick Wilson on spatial committee experiments. Arlie Williams, in Economics, worked on auction mechanisms. Often their work was presented at the Workshop and Ostrom was very supportive of using experiments. Of course, Lin had been quite interested in experiments stemming from discussions with Reinhart Selten at Bielfield in 1981. In 1983 Ostrom put together a 9 page bibliography of experimentally-based papers to read in political science and economics. Most were theoretically based and the experiments were aimed at testing those predictions. In the mid-1980s Lin embarked on a Texas trip with Arlie Williams and Jimmy Walker to look at the physical design of different laboratories. She toured Ray Battalio’s lab at Texas A&M, John Kagel’s lab at the University of Houston and Rick Wilson’s lab at Rice. Upon returning to Indiana, Lin was instrumental in starting a new lab in the Political Science Department and helped with the design of the lab in Economics.2 In the spring of 1990 Ostrom organized a small conference on experiments at the Workshop. Among the participants were Charlie Plott, Vernon Smith, Jim Andreoni, Jane Sell and John Ledyard. The latter was starting to write his survey of public goods experiments and there were extensive discussions over whether common-pool experiments were different, in kind, from public goods experiments. In late 1986 Ostrom began collaborating with Jimmy Walker and Roy Gardner. While there were a large number of models and experiments that had been conducted on public goods, few had given thought to common-pool resources.3 The first product of the collaboration among them appeared as a 1987 NSF grant to conduct the experiments and several working papers (Gardner et al. 1989; Walker et al. 1988). Gardner et al. (1989) details the collaborative efforts to “bring conceptual order” to the study of the commons as a prerequisite for designing a baseline CPR experiment. That experiment was designed only after having developed “several formal models” (p. 4). The design was meant to capture what is common across the rich diversity of CPR dilemmas, particularly the difficulties for the users in obtaining mutually desirable outcomes. At the time parallel empirical research was 2 This was the first of three laboratories that she was instrumental in building at Indiana. 3 Earlier CPR experiments include Brechner (1976), Messick et al. (1983) and a few others cited in Ostrom
et al. (1994, p. 13). These experiments, however, were not based on theoretical models. Other important differences between these works and those by Ostrom and colleagues include use of deception and provision of extra credit as incentives.
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launched in natural settings and the design was intended to build a bridge between theory and observational findings. The single round decision environment of the CPR baseline design (Ostrom et al. 1992, 1994) is considered the CPR constituent “game.” As a non-cooperative game it consists of a set of players, a set of strategies for each player, and the payoff functions that determine the earnings for each player. Following Smith’s (1982) concept of induced valuation, sufficiently large monetary rewards are provided and the exact amount of money each player receives depends upon one’s own choice and all others. The constituent CPR game consists of N players, each of whom have an endowment that can be split between appropriation of the CPR or private activities. For example in a fishery, fishers each have a fixed number of hours to divide between fishing (appropriation) activities and other income generating (private) activities. It was critical to create a payoff function that ensured a commons dilemma, but distinguished it from a public goods provision problem. The payoff function has the three characteristics. First, any investment in private activities generates a constant marginal return. Second, any investment in appropriations from the common-pool resource is initially larger than that from private activities, but as others also invest in appropriations then the return from the commons is smaller than that from private activities. This generates a unique social optimum level of joint investment in appropriations. Third, for a range of individual appropriation levels, the marginal benefit to the individual is larger than her individual cost but smaller than the costs for the entire group. This divergence between individual and social costs creates the social dilemma in which individually rational behavior results in socially sub-optimal outcomes. The CPR experimental design generates a unique symmetric Nash equilibrium in which the appropriators invest in the same level of appropriation from the commons but the level of aggregate appropriation is higher than what is optimal for the group as a whole. The incentive structure is similar to the standard public goods provision game (also called the VCM, see Isaac et al. 1984; Isaac and Walker 1988) in that the one-shot game equilibrium returns payoff profiles that are Pareto-inferior to the profile of payoffs in other feasible outcomes, including the socially optimal arrangement. Ostrom and colleagues found in their baseline CPR experiments (Ostrom et al. 1994, Chap. 5) that the Nash equilibrium describes the average behavior of the subjects pretty well particularly in later rounds. But they also found a great deal of heterogeneity at the individual level such that in none of the 150 rounds did all of the subjects behave exactly as predicted by the Nash equilibrium. They also found a persistent “pulsing” in which the appropriation level fluctuates between high and low. The key lesson from the baseline experiments was clear; in the absence of institutional devices such as communication and sanctioning common-pool resources were sub-optimally appropriated. In addition, the suboptimal appropriation was often worse in this bare institutional setting than the Nash equilibrium.
3 Institutional solutions to the commons dilemma and their endogenous provision Ostrom and colleagues’ baseline commons experimental design has been adapted and modified by themselves and others to examine the effects of various factors, including resource characteristics and institutional arrangements, on the resolution of the commons dilemmas. The initial foci were on the effects of communication and punishment.4 Ostrom and 4 Walker and Gardner (1992) examine the effect of renewability as a resource characteristic. See also Gardner
et al. (1997) and Herr et al. (1997) for experimental studies of time-dependent CPRs.
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colleagues (Ostrom and Walker 1991; Ostrom et al. 1992, 1994, Chap. 7) confirmed the beneficial effects of communication on resolving experimental social dilemmas reported in public goods contexts by many others (for example, Dawes et al. 1977; Isaac et al. 1985; Isaac and Walker 1988). Including punishment was relatively new. Yamagishi (1986, 1988) precedes Ostrom, Gardner, and Walker and was duly acknowledged by them. Yamagishi poses punishment as a second-order dilemma, in that punishment may prevent free-riding behavior, but it is costly for the punisher and results in another dilemma. In Yamagishi’s work, however, the true nature of the punishment dilemma was not fully captured since punishment tokens were automatically directed to the lowest contributor in a group. This resolves part, if not all, of the second order free-riding incentives because part of the cost of punishing others is the fear of retaliation. Ostrom et al. (1992) designed a punishment experiment in which subjects were informed, after each round, of the appropriation levels of each of the other members. Subjects were allowed to choose whom to punish and how much to spend on the punishment. Punishment in these experiments was costly to both the punisher and the punished in the sense that it reduced payoffs of the both. Thus, the punishment option generates a second-order dilemma. That is, while the threat of punishment may prevent or reduce free-riding in the contribution game, the punishment is not a credible threat for a finitely repeated game because the punisher incurs costs. Ostrom and colleagues found that subjects were willing to pay the costs and punish freeriders; this in turn significantly reduced appropriation levels. They also found that after the cost of punishment was taken into account the overall level of social welfare decreased. This led them to investigate the combined effects of punishment and communication, and whether subjects would choose the punishment option when it was available but not imposed. Their experiments suggested that the most efficient results are achieved when the subjects choose the punishment option and communication is also allowed. In this condition, subjects use communication to devise a joint strategy and then use the threat of punishment to deter defection. Fehr and Gächter’s (2000, 2002) influential study adopted a variation on the punishment design of Ostrom et al. (1992) in a public goods provision experiment and scores of experimental papers using punishment have now been published in prominent journals including Science, Nature, American Economic Review. The design also leaves room for counter-punishment, explored systematically by Nikiforakis (2009), and antisocial punishment (Herrmann et al. 2008). Ostrom, Gardner, and Walker also varied the cost of punishment, an experimental feature more fully examined in a public goods provision game by Anderson and Putterman (2006). More recently, researchers are beginning to examine the comparative effectiveness of punishment and reward in facilitating cooperation in N-person dilemmas (Sefton et al. 2007; Rand et al. 2009). More recently, Ostrom and colleagues developed an innovative experimental design, called ‘virtual commons’. In this experimental setting, subjects face a type of CPR dilemma in ‘real time’; subjects see on a computer screen stocks of spatially distributed resource and they move their ‘avatar’ on the screen and harvest the resource by clicking the mouse button (Janssen et al. 2008; Janssen and Ostrom 2008). This new experimental technology provides a much more realistic and easier-to-understand decision environment to the subjects. The faster pace of the experiment facilitated by this new technology also allow experimenters to investigate the effects of diverse institutional configurations more efficiently. Ostrom’s experimental work has not been limited to CPRs. In the late 1990s she gave a boost to scholars working on trust. The concept of trust appeared to be central to understanding how local actors could come together to build self-enforcing institutions. Working
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with the Russell Sage Foundation, she and Jimmy Walker brought together a disparate group of scholars working on trust. Many were from experimental economics tradition, but also prominent were animal ethologists interested in patterns of cooperation and those interested in evolutionary psychology. Some of this work was assembled into a volume (Ostrom and Walker 2003). Her current work on trust focuses on issues of institutions that assign different property rights (Cox et al. 2009).
4 Impact What has been the impact of Ostrom’s experimental work? Part of her concern, elaborated in her Presidential address to the American Political Science Association, concerned human motivation. Ostrom was deeply concerned that game theoretic models missed several relevant features of human motivation, signaling that researchers ought to pay more attention to findings in neuroscience and genetics. By doing so, scholars might better understand systematic biases in behavior that can better inform our theoretic models. Because of the problems of sorting between culturally derived aspects of behavior and innate aspects of behavior in natural settings, experiments are a natural direction to take. Ostrom reminds us of the crucial link between empirical observation and theoretical development. In her work empirical results pose complex questions. Formal theory is often used to simplify and gain purchase on critical features of a problem. Experiments are then used to test key features of the theory, establish causal relations and to help recast theory. Ostrom’s experimental work clearly points to the importance of rule configurations. Where experiments are informed by theory, comparative statics predictions across differing institutional rules can be powerful. Her work on CPRs is a powerful reminder of this point. Finally, the focus on endogenous institutions is crucial. This is difficult to implement in natural settings, yet we know that individuals endogenously choose their rules. Ostrom and colleagues have demonstrated the value of doing this in the laboratory and increasingly empirical work is catching with the analytic models.
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