Self-governance, polycentrism, and federalism: recurring themes in Vincent Ostrom’s scholarly oeuvre

Abstract This paper addresses Vincent Ostrom's treatment of self-governance, polycentrism, and federalism through which he has generated a coherent vision of political economy. After examining some ontological and epistemological presuppositions that are central to his work, the rest of the paper explores four topical areas: (1) his examination of knowledge, belief, and the requisites for good civic practice; (2) his conceptualization of a polycentric public economy; (3) his articulation of the problem of public administration through his conceptualization of a municipal services industry; and (4) his treatment of federalism as a compound republic rather than simply a form of administrative decentralization. JEL Codes: B3, D7, H1, H7 Keywords: Vincent Ostrom, polycentric public finance, federalism, municipal services industry, self-governance 1 I am grateful to many of the symposium participants for offering helpful comments on an earlier version of this paper, and particularly to my two official discussants, Roberta Herzberg and Sujai Shivakumar. Self-Governance, Polycentrism, and Federalism: Recurring Themes in Vincent Ostrom's Scholarly Oeuvre My assignment for this Symposium is to address self-governance, polycentrism, and federalism as these are treated within Vincent Ostrom's scholarly oeuvre. The interaction among these three interlaced themes provides a unifying coherence to Ostrom's work. Whether one examines Ostrom's early work on the organization of water supply, his subsequent work on public administration, his work on federalism and urban government, or his more recent work on Tocqueville and the problematic of democracy, a coherent analytical vision connects those works. While Ostrom's disciplinary home is political science and not economics, he is a scholar of public finance in my personal map Ostrom's scholarly work is based. That core primarily contains ontological and epistemological presuppositions that that are relevant to human governance. 2 For a survey of Staatswissenschaften, see the symposium in the European Journal of Law and Economics 12 (No. 2, 2001). For a symposium on the classic Italian approach to public finance, see Il pensiero economico italiano 11 (No. 1, 2003). For an articulation of a distinctive continental tradition of public finance that stands in sharp contrast to the Anglo-Saxon tradition, see Jürgen Backhaus and Richard Wagner (forthcoming). 2 From that core, Ostrom has generated unique insights and formulations across several intertwined areas of scholarship that are organized here under four topics. The first topic involves knowledge, belief, and the requisites for good civic practice. Ostrom seeks to bring the cognitive faculties to bear on the mitigation of conflict within the public square and, in so doing, shows a family resemblance to some of the formulations in the Germanic literature on ordnungstheorie. The second topic treats Ostrom's conceptualization of a polycentric public economy. In this, Ostrom stands in sharp contrast to the widespread treatment of government as some unitary being that exercises rulership over society. The third topic explores Ostrom's articulation of the problem of public administration as this stems from his conceptualization of a municipal services industry. Where the common approach to public finance these days construes government as an agent of intervention into society, Ostrom treats government as a process within which people participate in their own governance. The fourth topic is Ostrom's treatment of the compound republic and of the relationship among liberty, federalism, and democracy. Most scholarship on federalism subordinates federalism to democracy, making federalist governance a subset of democratic governance through administrative decentralization. For Ostrom, federalism is primary, but with federal governance being polycentric and not hierarchical. In this formulation, Ostrom stands in sharp contrast to the common formulations that treat federalism fundamentally as a matter of administrative decentralization. 3 Between Intelligence and Fate: Some Architectonics of Good Governance Sermons are presented as extended meditations or reflections on some text. While this paper is not a sermon, I did set myself the task of selecting some text that, upon suitable meditation and reflection, would make it possible to illuminate the logical structure of Vincent Ostrom's scholarly oeuvre. In looking for this text, I found myself returning repeatedly to the question Alexander Hamilton posed in Federalist No. 1: "whether societies of men are really capable or not of establishing good government from reflection and choice, or whether they are forever destined to depend for their political constitutions on accident and force (1961, 33)." The various interwoven threads that would comprise an effort to address this question provides a nice mental map for ordering the very substantial body of work that Ostrom has created so far in his career. To be sure, the subject of this paper is Vincent Ostrom and not Alexander For Ostrom, the architecture of good governance is centrally a problem of wisdom or cognition, though in a social and polycentric setting as these are reflected and incorporated into institutionalized practice. The challenge of achieving good governance is similar in form to the challenge of securing a fecund garden. Mother Nature provides us with opportunities and resources as well as setting limits on what we can achieve. The outcome depends both on the knowledge we can secure and the use to which we put that knowledge. It is the same in the social universe. The challenge of societal gardening, however, is more complex than the problem of ordinary gardening. Whereas ordinary gardening is a relatively simple matter of individual choice, societal gardening is interactive and catallactic. Additional complexity arises out of a fundamental distinction between the natural and the humane sciences. People might differ over whether pests should be fought with pesticides or by some sort of green-friendly approach and with those differences perhaps being held with great intensity. Regardless of those differences, however, the natural world operates independently of what we think about its operation. This is not so with the social world, for there the institutions we generate and the patterns of conduct we form can influence our activities and practices, which in turn can influence conventional norms about the governance of human 5 relationships. For instance, in free and open economies where goods are priced at market clearing levels, we would generally expect also to observe politeness among shoppers. Should price controls and rationing replace market clearing prices, we would expect the population to start transforming into pugilistic beasts as the density of rudeness increases within the population. One need only recall the growing amount of violence and increasingly bad manners that came to accompany the simple purchase of gasoline some 30 years ago in the United States. Fortunately for the cause of decent civil order, price controls over gasoline were abandoned before too long. The mental maps that we bring to bear on our activities can influence those activities. The challenge of securing good governance involves both the moral imagination and analytical reasoning about the performance characteristics of the institutional arrangements we create. Institutional arrangements can affect the content of practice, which in turn can affect the content of the moral imagination. In construing the task of securing good governance as a form of societal gardening, the central issue becomes what it might take to improve upon what Mother Nature might offer us. Mother Nature provides us plenty of opportunity along with plenty of peril, but to what extent we can influence the mixture, and in which direction, is the object of Vincent Ostrom's scholarly oeuvre, for that oeuvre represents an extended examination of the difficult tasks that must be surmounted in any effort to expand the scope for reflection and choice over accident and force. 6 Ostrom starts from the presumption that self-governance is a good thing within the public square, and then argues that achieving good governance requires both knowledge and will on the one hand, and supporting and consistent institutional arrangements on the other hand. Those matters concerning knowledge and institutional arrangements, moreover, are not independent and additive, but are related to each other. For Ostrom, liberal governance in modern, complex societies can only be accomplished through institutional arrangements that are polycentric. To try to mix hierarchical ordering processes into such a polycentric setting is a recipe for the generation of societal conflict. Such scholars as Craig It is easy to go astray by using models of hierarchy to examine polyarchical settings. Some polyarchies, however, perform better than others, and the challenge for good governance is to use intelligence to advance the good relative to the bad. The interacting public is comprised of people who differ from one another in many ways. Those differences provide opportunities for mutual gain through commerce. They also provide bases for conflict. Governments, 7 moreover, serve in a dual capacity that is laden with opportunities for conflicts of interest, in that they are simultaneously instruments for the control of conflict and loci for the organization of conflict. Ostrom's concern is how that public might be constituted so as expand the scope for human flourishing while restricting the scope of human degradation. For many free market economists, this seems to be an easy task: just adopt free markets. But this is to solve the problem by assuming it away. Free markets are the abstract noun we use to characterize that set of human relationships that are governed by the legal principles we denote as private property, freedom of contract, and personal liability. In no modern society do those legal principles hold exclusive jurisdiction. Moreover, legal principles must have some degree of resonance with the moral imaginations of those whose relationships are being governed by those principles. The legal principles of a market economy can be stated alternatively as a set of simple moral injunctions. Private property can be translated into something like don't take what is not yours. Freedom of contract can be translated into something like keep your promise, or if you can't, repair the damage that your failure to do so causes. Personal liability can be translated into something like make good the wrongs you do unto others. In a world where all participants held tightly to those moral beliefs, the legal framework for a market economy, as well as market ordering itself, would follow automatically. Actually, they would all evolve or emerge simultaneously. Natural law theorists of all varieties claim that both knowledge of the good and 8 willfulness are features of our natures; the former allows us to act as judges, the latter prevents us from acting as judges in our own causes. The classical approach to moral education also claims that knowledge can be amplified or degraded according to the specific content of training and practice. Individual souls could thus be relatively well-ordered or relatively ill-ordered, with the degrees of wellness or illness subject to influence through institutionalized practice. For Ostrom, the treatment of such classical themes is posed in a polycentric or interactive framework where the institutions of governance both reflect interactions among minds and, through specific forms of practice those institutions shape, also influence the content of those minds. Ostrom's theoretical orientation is fully centered on processes of movement and development, and not at all on the comparative statics of equilibrium states. Concepts of equilibrium might have some use as part of a mental experiment where that experiment itself is designed to illuminate processes of movement and change, but Ostrom does not confound a set of equilibrium conditions with reality. In this spirit, it would be consistent with Ostrom's analytical orientation to imagine a society of people whose members believe that their individual and common flourishing is best promoted through the liberal arrangement of private property and freedom of contract. Those people also have a parliamentary assembly to articulate and deal with some problems of general interest and concern. There is congruence between legal arrangements and moral belief, momentarily. 9 What happens as the seasons pass and time moves on? Consider a small town with only three residents, all landowners: Prima, Secundo, and Terza. Prima's land contains a marshy area that birds like and that she would like to drain and fill so that she can build a swimming pool on it. Secundo and Terza, though, like watching the birds and hearing them sing, and they would like to see that portion of Prima's land used as a bird sanctuary. This would be easy for them to accomplish within the legal framework of a market economy, but they would also have to pay for their bird sanctuary. In contrast, a legislative action that converts the bird sanctuary into a government project would transfer some of the cost onto Prima. Such an outcome would seem to allow Secundo and Terza effectively to plunder Prima in the name of public policy. In Ostrom's framework, as well as that of the classical Greeks and other theorists of natural law, a conflict has been set in motion between law and morality, only it is a polycentric conflict and not just a conflict that resides within an individual. It is reasonable to ask how various institutional arrangements promote or extinguish notions of normativity though the kinds of practice they encourage or discourage. For instance, in the above illustration repeated a number of times, an injunction not to take what is not yours will be subject to modification, perhaps transmuting into something like don't take it unless you can get some key legislators to support you. While Ostrom certainly acknowledges that people can have different preferences, he also construes the problem of governance as more significantly one of the generation and utilization of knowledge in society. The bulk of the 10 literature on public choice treats the revelation of preferences as the central problem of social order. For instance, voting rules are conceptualized as devices for aggregating preferences, with some of those rules allowing particular subsets of people and preferences to gain predominance over collective choices. In contrast, Ostrom's central concern is with the creation and use of knowledge. For Ostrom, arrangements for governance primarily concern the structuring of conversation among people, which is no simple task, as Bertrand de Jouvenal (1961) explains. Ostrom's central concern arises out of his realization that the quality of our actions and interactions in participating in the social world is affected by the frameworks we construct to guide our activities in the world. In pursuing this orientation toward the pivotal importance of knowledge and intelligence, Ostrom would seem to be complementing such luminaries as Friedrich Conflicts might arise among people because they want different things or because they believe they know different things. The source of conflict is important for framing the issues of governance. To illustrate, consider a very stylized representation of contemporary conflict over a very generic version of a welfare state. Some people support relatively expansive welfare programs and use a positive language that speaks of such things as safety nets. Other people support relatively austere welfare programs and use a negative language that speaks of such things as handouts. These differences could arise out of differences in preferences among people. Those who support relatively expansive programs might be characterized as having utility functions that 11 possess greater benevolence or altruism than those who support austere programs and speak of handouts instead of safety nets. An alternative explanation for the observed conflicts among people is rooted in knowledge, or in beliefs about knowledge. It is possible for people to be described as having the same preferences yet be observed to have widely varying attitudes toward the programs of the welfare state. Those differing attitudes could originate in different beliefs about reality. People who believe that people are naturally industrious and provident might believe that welfare payments will do little to undermine the naturally industrious and provident character of the recipients. In contrast, people who believe that the extent of industry and providence within a population can be strengthened or weakened, depending on the incentives created by particular programs and the practices those incentives promote, might believe that welfare payments are capable of doing significant damage to industry and providence. The potential conflict between what is held desirable and what is promoted through institutionalized practice lies at the center of the emphasis on marketconformability that was central to the analysis of order policy that was articulated initially in Walter Eucken (1952) and that has been carried forward in such places as Liepold and Pies Still others might establish, bus service, others might try monorails, and yet others might try to establish a subway service. All of these enterprises might be operated privately by profit-seeking companies, but if so this would be an emergent feature of the process and not something dictated in advance. There might be some cooperative enterprises that participate in this industry, and there could even be some municipally owned operations. With the prospect of municipal operation comes the Faustian bargain that Ostrom (1984) has explained crisply. It is one thing for governmental agencies to participate within polycentric societal processes on the same terms as other participants. In this case, municipally sponsored transit enterprises would have to compete for customers on the same basis as all other enterprises within a setting of universal contestation. Governments, though, have the possibility to avoid or skew such contestation, as through subsidizing enterprises that might otherwise fail in open competition with private transit enterprises. They can also impose disabilities on competitive enterprises through regulation; for instance, the competitive ability of a privately organized bus company might be degraded by requiring it to maintain routes and schedules that are not profitable. Alternatively, a government might strengthen the competitive ability of a municipal transit company by imposing a tax on parking garages. There are an indefinitely large number of ways by which a government can use taxation and 13 regulation to secure advantages for the enterprises it sponsors relative to other enterprises within a society. The various formulations of ordnungstheorie sought to develop a conceptual test to distinguish between government ordinances that were compatible with the basic ordering principles of a market economy and those that were not. That test asked whether policy measures were in conformity with the central operating features of a market economy. Import quotas would fail this test whereas tariffs would not, at least if applied universally and at relatively low rates. Ostrom's concern with governance in relation to the curbing or the promoting of conflict seems to reflect a similar orientation. The practice of selfgovernance requires a proper mental orientation among the participants. Subsequent practice may reinforce that orientation, but it might also weaken it. The formulations of the theorists of order policy sought a heuristic device that would serve as an instrument of guidance, and I think a number of Vincent Ostrom's formulations have been articulated within a similar orientation toward the heuristics of governance. The Polycentric Public Economy Starting with his early work on water supply and continuing throughout his career, Ostrom has sought to develop a polycentric framework for analyzing the operation of the public economy. A polycentric analytical framework removes government as a locus of ultimate knowledge and final authority. This removal clashes sharply with the hierarchical framework that dominates in the analysis of 14 public economies. For instance, in the customary formulations of welfare economics and public finance, market participants are treated as writing the first draft of the manuscript of social life, so to speak, with government then revising and correcting the manuscript so as to attain some such standard as Pareto efficiency. In thinking of the deep cleavage between Ostrom's polycentric approach to the public economy and the standard hierarchical or unitary approach, I was reminded of the dueling book reviews that were penned in response to th