The Economist Who Solved the Free-Rider Problem – Developing Economics
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Defenders of capitalism argue that cooperation is undermined by individuals’ tendency to take more from society than they contribute. The economist Elinor Ostrom refuted this idea, but without identifying capitalism as the real cause of exploitation.
Socialist arguments that cooperation and collective action represent the basis of a better society are often dismissed by supporters of capitalism. “Human nature,” so the argument goes, is inherently self-seeking.
The so-called “free-rider problem” purports to prove that large-scale cooperation is unsustainable because individuals seek to benefit from the collective action of others while minimizing their own contribution. This tendency is, the argument goes, a barrier to collective solutions to social problems.
Rather than cooperate, individuals should allow market forces to dictate how they decide to allocate their time and resources. Such arguments are applied by supporters of capitalism to explain why rational collective resource management and attempts to tackle climate breakdown are unlikely to succeed without the aid of market forces.
Since capitalism emerged as the world’s dominant economic system, its defenders have argued that private property rights and the pricing of natural resources are the only way to collectively manage our social goods.
The economist Elinor Ostrom provided a sharp critique of such notions from within the framework of mainstream economics. She demonstrated that cooperative management of natural resources can preserve rather than degrade them, and that trust between strangers can be established, expanded, and become the basis of collaborative ways of managing what she described as “common-pool resources.”
Within the field of sustainable development studies, her work became highly influential and helped to bring the notion of “the commons” to a broader audience. However, outside of academia, she remains largely unknown — a glaring oversight in a world in which education, water, and even land are increasingly run and managed for and by private companies.
Against Free-Rider Problem Approaches
Born in 1933 in Los Angeles, Ostrom grew up during the Depression against the backdrop of a socially conservative America and worked as an economist until her death in 2012, at the age of seventy-eight. At school, she was denied the opportunity to study mathematics because she was a woman, a slight that had a long-lasting impact on her career.Ostrom demonstrated that cooperative management of natural resources can preserve rather than degrade them.
Later, when she applied for doctoral study at the University of California Los Angeles, she was denied entry to the economics program because of her lack of earlier training in mathematics. She decided instead to study for a PhD in political science, a move that made her alert to the depoliticizing tendencies of the discipline she would come to shape. Her PhD, completed in 1965, focused on the management of shared groundwater in Southern California.
Perhaps surprisingly for someone whose work had an egalitarian bent, Ostrom associated with and participated in conservative circles. Between 1982 and 1984, she was president of the Public Choice Society. The tradition of public choice is rooted in the assumption that policymakers are self-seeking, that the capitalist market is a public good, and that privatization is desirable.
While she did not entirely accept the dominant ideology of neoliberal economics, she shared many of its assumptions. This put limits on her work that economists of the Left seeking to engage with her thinking would have to overcome.
One of the prime targets of Ostrom’s work was the aforementioned “free rider problem,” which purported to show that if a person cannot be excluded from the benefits provided by the collective action of others, then that person is motivated not to participate but to “free-ride” on gains of the others.
Perhaps the most pernicious variant of the free-rider problem was what the ecologist Garrett Hardin called the “tragedy of the commons.” In 1968, Hardin used the example of common grazing land to argue that, while it is in everyone’s interest to cooperate, individuals follow their self-interest and exploit shared resources until they are exhausted. Avoiding this tragedy required extinguishing the commons by state control or privatization.
Hardin’s thesis became popular in conservative circles as part of a backlash against a rising tide of left-wing environmentalism that had emerged in the early 1960s. For example, the marine biologist Rachel Carson’s book Silent Spring illuminated the link between corporate capital’s profit-seeking and increasingly widespread environmental destruction caused by pesticides....