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Vincent Ostroms Contributions toPolitical Economy
Robert L. Bish*
*University of Victoria and Tulo Centre of Indigenous Economics;
[email protected]
This article describesVincent Ostroms work on water resources
and local government prior to the
time he began to refer to himself as a political economist
within public choice theory. He then
returned to the work of Hamilton, Madison, andTocqueville with a
new perspective and produced
two classics: The Political Theory of a Compound Republic and
The Intellectual Crisis in American
Public Administration. He helped restore the importance of
federalism, including an expanded
theory of federalism away from levels of government to
operational and constitutional-choice
rules for different governments, including local governments.
Based on this work, he and his wife
and colleague, Elinor LinOstrom, developed theory and empirical
work that led to Elinor receiving
the Nobel Prize in Economic Sciences in 2009.
Vincent Ostrom was one of the most consequential political
economists of the
twentieth century. Between 1961 and 1973, he published work that
changed the
way many scholars think about governing water resources and
metropolitan areas,
gave new life to the importance of federalism, and challenged
mainstream public
administration while restoring an approach to political science
based on the
political theories of Thomas Hobbes, Alexander Hamilton, James
Madison, and
Alexis de Tocqueville. He simultaneously nested the restored
approach in
contemporary public choice and political economy. His work and
the work of his
wife, Elinor, made significant contributions to our
understanding of complex
systems of governance.
In this article, I will describe the development of Vincents
most important
contributions and how his work in different areas came together
in an integrated
multidisciplinary approach to provide much of the framework for
Elinors
empirical work. These contributions and their joint theory
building resulted in her
receiving the Nobel Prize in Economic Sciences in 2009. My
perspective is that of
an economist who is also a former student, coauthor, and
colleague who studied
and worked with Vincent during the time the ideas behind his
major contributions
came together. Vincent and Lin published many books, chapters,
and articles, as
did the students and colleagues who worked with them and
participated in joint
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research projects. Only a few of their publications are cited in
this review. Lists of
publications by Vincent, Elinor and colleagues who worked with
them are
contained on the web site at The Vincent and Elinor Ostrom
Workshop in Political
Theory and Policy Analysis at Indiana University
(http://www.indiana.edu/
workshop/).1The work Vincent did immediately before he joined
Indiana University in 1964
was critical for his understanding of complex systems, markets,
and federalism
theories. It was also after completion of a 1967 Public Choice
Theory seminar,
taught with economist Herbert Kiesling, that he began to refer
to himself as a
political economist, a label he also gave to Hamilton, Madison,
and Tocqueville,
and that he described as in the sense of using economic
assumptions to reason
about the human condition and about the effect that political
regimes would have
upon the capacity of people to advance their self-interest
rightly understood
(V. Ostrom 1971a, 7). Vincent and Elinors work also evolved to
have significant
differences from what became mainstream public choice
theory.
Water Resources
Vincent described his graduate work as being in classic public
administration.
At that time, the work of Luther Gulick (Gulick and Urwick 1937)
was prominent,
as was POBSCORB.2 However, Vincents dissertation, Water and
Politics
(V. Ostrom 1953), was part of a Haynes Foundation series of
public sector
industry studies. A public sector industry comprises all of the
organizations,
government or private, which provide, regulate, or produce a
public function such
as policing or allocating a natural resource such as water. The
public sector
industry approach provided Vincent with the importance of
understanding the
relationships among the public and private organizations that
interacted to produce
public services and was a fundamentally different perspective
from the classic
public administration model of a bureaucracy. The industry
approach also differed
from the concept of a market in packageable goods as taught in
mainstream
economics because the notion of a public sector industry mixed
governments
and private organizations and treated packageable goods, public
goods and
commons resources.
Vincent had also chosen an extremely complex function. Water has
a
multiplicity of uses ranging from in-channel recreation,
navigation, and pollution
disposal to out-of-channel agricultural, industrial, and
domestic uses. Furthermore,
in California, the institutional arrangements included a variety
of public and
private enterprises functioning within multiple legal systems:
Spanish civil law,
common law, state constitutional, and statutory law, federal
constitutional and
statutory law, and state and federal court interpretations of
those laws. Vincent
could not have begun his public administration research in a
more complex area
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of the public sector where classic public administration theory
was useless. The
non-packageability of the resource also made a simple market
approach
inappropriate. The industry approach filled the gap between
bureaucracy and
markets. Vincent went on to develop a detailed understanding and
description
of the California water industry (V. Ostrom 1971b), including
detail on the
organization and operation of the states 4,500 water
organizations and the laws,
including court decisions, governing them.
Vincent contributed in other areas too. He valued his practical
work drafting the
Alaska Constitutions provisions on natural resources, while also
publishing
excellent, but traditional, academic articles. An intellectual
problem arose, however,
when he participated with Joe Bain, Richard Caves, and Julius
Margolis on a study
of the California water industry sponsored by Resources for the
Future (RFF) in
the early 1960s. As traditional industrial-organization
economists, Bain, Caves,
and Margolis looked at the complexity and recommended a
regulatory agency to
oversee the system. Vincent dissented because he appreciated the
entrepreneurship
within the system that had allowed millions of people to live in
a desert. He saw no
evidence that a regulatory agency could oversee such a complex
system. His dissent
was not included in the final RFF report (Bain, Caves, and
Margolis 1966).
The experience did, however, increase his awareness that within
economics there
was a paradigm difference between economists who, upon seeing a
market
failure, recommended an ethical observer solution by government
and
economists who looked toward the dynamics of markets and complex
systems to
resolve such issues. He came back to this paradigm difference
many times. It was
very important in both The Political Theory of a Compound
Republic (V. Ostrom
1971a) and the specific focus of his The Intellectual Crisis in
American Public
Administration (V. Ostrom 1973). His Water Resource Development:
Some
Problems in Economic and Political Analysis of Public Policy (V.
Ostrom 1968)
provides an outstanding analysis of the specific kinds of
incentives faced by
different kinds of organizations within the water industry that
prevent it from
functioning like the economists model of a purely competitive
market. It also
provides an analysis of how the dynamics of polycentric
governance are likely to
outperform any single-sovereign approach to governance. Vincent
used the term
polycentric to describe systems where different organizations
have independent
jurisdiction in contrast to decentralization, where a
hierarchical source was
assumed. He first used this term in his comparison of Gargantua
and polycentric
approaches to organizing metropolitan government (V. Ostrom,
Tiebout, and
Warren, 1961). His The Choice of Institutional Arrangements for
Water Resource
Development (V. Ostrom 1971b) puts his RFF study work into the
context of public
choice theory.
While Vincents water resources work was not widely read, it was
very important
for his intellectual development and was carried on by his
students from UCLA and
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Indiana. These analyses include books by Bish, Warren, and
Weschler on Puget
Sound (Bish et al. 1975; Bish 1981) and Mark Sproule-Jones on
the Great Lakes
(1993, 2002). Most important, however, was his initial
supervision of Elinor
Ostroms dissertation at UCLA. Elinors dissertation, Public
Entrepreneurship:
A Case Study in Ground Water Basin Management (E. Ostrom 1965),
was a study of
the bottoms-up evolution of a constitution for the governance of
the ground water
basin underlying the city of Los Angeles and adjacent
municipalities. In addition to
the detailed empirical work, it integrated the emerging public
choice literature,
including Buchanan and Tullocks Calculus of Consent, with
Vincents industry
approach so both private and government organizations were
included. Combining
the public choice theories of the nature of goods and resources,
differentiating
between constitutional and operational decision rules, and
applying the concepts to
real-world resource use situations were the defining
characteristic of her future
work for which she received the Nobel Prize in Economics.
Following completion
of her dissertation, however, she joined Vincent with research
on local
governments, which in turn led to her policing studies before
she returned to
focus on natural resource problems.
Local Governments
Vincent had conducted research on education and local government
at the
Universities of Wyoming and Oregon, but his major work on local
governments
began when he took over responsibility for the Metropolitan
Study of Los Angeles
when John Bollens went on leave from UCLA in 1957. Robert Warren
had
completed his PhD exams in political science and his
dissertation was to be based
on the study. The expectation when the study began was that the
conclusion would
be that the municipalities in Los Angeles County should be
merged with the
Los Angeles County government to become an integrated
county-city like San
Francisco. The study recommendation would fit the then-common
diagnosis that
there were too many governments in metropolitan areas and that
consolidation
into one government would be less expensive and provide more
uniform services
throughout the region.
To help coordinate the study, Vincent established a weekly
seminar for the
project team and other faculty who were interested. Local city
administrators also
were invited to attend and make presentations so that faculty
not participating in
field interviews could get a better perspective on how
administrators perceived the
local government system and their role in it. Among those
attending was Charles
Tiebout. Tiebout was an urban-regional economist who had already
provided a
model of how demands for public goods could be articulated by
citizens with
similar preferences grouping together in different
municipalities (Tiebout 1956).
Tiebouts analysis was a traditional equilibrium-optimization
model that
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required many assumptions in order to achieve the optimum. These
included an
infinitely large market size to provide a sufficient number of
municipalities and no
mobility costs.
Most political scientists rejected the model, at least in those
years, because the
assumptions were unrealistic. However, an Austrian3 approach to
markets does not
require the same limiting assumptions. Austrian markets are not
focused on
equilibrium and optimization; they focus on information,
incentives, innovation,
adjustments, and feedback. In this approach, having a
multiplicity of municipalities
with different taxes and services should lead citizens to select
the municipality
where the combination of housing available, taxes, and public
services most meets
their preferences. This is not an economists utopia, but is
better than the
alternative of only one level of service for everyone.
The results of the Los Angeles Metropolitan Area Study are
detailed in Robert
Warrens Government in Metropolitan Regions: A Reappraisal of
Fractionated
Political Organization (Warren 1966). The theoretical comparison
of a consolidated
system (labeled Gargantua) and a fragmented system (labeled
polycentric) was
examined in the classic article, The Organization of Government
in Metropolitan
Regions: A Theoretical Inquiry, by V. Ostrom, Tiebout, and
Warren (1961). An
explicit public choice analysis is provided in my The Public
Economy of
Metropolitan Areas (Bish 1971), written for economists, and
shortly after in a more
popular American Enterprise Institute publication with Vincent,
Understanding
Urban Government: Metropolitan Reform Reconsidered (Bish and V.
Ostrom 1973).
Many of the municipalities studied had been created in the 1950s
with
boundaries that followed land-use classifications from the
county plan. This
resulted in some very specialized municipalities, such as the
cities of Industry,
Commerce, and Dairy Valley, as well as many residential suburbs
with very
different populations and characteristics where there were
significant differences in
the public services that were provided as anticipated by
Tiebout. Most striking,
however, was how new municipalities, the first of which was
Lakewood, had not
begun with in-house bureaucratic production of municipal
services. Instead, they
contracted with other governments (primarily the county) or with
private
companies to produce the services decided upon by the municipal
council. With
seventy-six municipalities in Los Angeles County, a large market
existed so there
could be specialization in production. This model was labeled
Lakewood Plan
Cities. Warren used a market analogy to describe the system in A
Municipal
Services Market Model of Metropolitan Organization (Warren
1964). Within this
market, municipalities were both buyers and sellers, and
municipal producers could
be as efficient as private firms under the right incentives.
This is described in Scale
and Monopoly Problems in Urban Government Services (Bish and
Warren 1972),
which is based on Warrens findings that the difference in
production costs
between municipal in-house production and contracted-out
production was not
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due to the difference between public and private. It was due to
whether the
producing organization had competition or was a monopoly.
It is impossible to disentangle the contributions of Vincent,
Tiebout, Warren,
and others involved in the Los Angeles metropolitan area study,
but the outcomes
had a major impact on how we think about local governance in
metropolitan areas
and on the theories we use to study local governments. To an
economist, the
approach is relatively simple: local governments are collective
consumption units.
Thus, on the demand side, we have not only individuals,
families, and all kinds of
private or cooperative organizations, but also organizations of
citizens who make
their purchase decisions (labeled provision decisions) jointly,
usually through an
elected municipal or county council. On the production side, we
have not only
individuals and private firms, but also local government
producing bureaucracies
that sell in the market. We no longer can conceptualize public
or private with
the assumption that public means a council with its own
producing bureaucracy.
We must instead look at the detail as to what organizations are
making provision
decisions and what organizations are producing services. All of
these organizations
function as an industry within a legal system, which Vincent
labeled the public
economy. In summary, metropolitan areas have a variety of
institutional
arrangements that may be every bit as complex as the California
water industry.
In their classic 1961 article, V. Ostrom, Tiebout, and Warren
did not argue that
their polycentric model was superior to Gargantua for organizing
government in a
metropolitan area. They argued that we must proceed to empirical
evidence
because we have competing theories. What they launched was an
incredible stream
of empirical research on the associated issues, which included
Elinor Ostroms first
major postdoctoral research: the police studies.4
Elinors local government research began at a very fundamental
level: to be sure
citizens could perceive the level and quality of service they
were receiving. She and
her graduate students and colleagues developed multiple measures
of police
performance and compared the costs and performance of different
policing
activities (e.g., police patrol, homicide investigation,
laboratory analysis) for a
multiplicity of differently sized and differently organized
departments. Her
empirical research demonstrated that different policing
activities possessed different
economies of scale and that within the police industry
bottoms-up arrangements
among providers and producers could create more efficient
production than either
large hierarchical police departments or small police
departments that did not enter
into cooperative arrangements on activities where economies of
scale existed (Parks
1985). The policing research strengthened the relevance of
Robert Warrens
observations on how the markets for public services had evolved
in Los Angeles
County and contributed significantly to the importance of
Vincents earlier
theoretical work.
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Vincent as a Political Economist and Public ChoiceTheorist
Following his own empirical work on water resources, Elinors
dissertation, his
participation in the Los Angeles metropolitan area study and his
use of concepts
from public choice theory, it is useful to look at some of the
key elements of
Vincents way of thinking as he approached two seminal works: The
Political Theory
of a Compound Republic (V. Ostrom 1971a) and The Intellectual
Crisis in American
Public Administration (V. Ostrom 1973).
Vincent had demonstrated a thorough understanding and ability to
use
traditional economic analysis in his earlier work on water
resources. He had also
published water resources work in the American Economic Review
where all but one
citation was to major natural resources economists; the
exception was to a court
case. What bothered him about economics as it was taught in the
1950s and 1960s,
however, was the treatment of government as if it were a single
sovereign. What
made that teaching worse was that economists conducted a policy
analysis of a
market failure (e.g., a failure to reach an equilibrium-optimum)
and then
recommended that the government impose the optimum solution as
if this were
a simple task.5 To a political scientist, it was as if
economists assumed Platos
philosopher king was alive and well, and also in charge.
Throughout his writings, Vincent did not describe his work in
terms of markets
because the model of a market to mainstream economists implies
packageable
goods with an equilibrium-optimum expecteda model that is
inappropriate for
the public economy and rejected by most political scientists.
Once Ostrom,
Tiebout, and Warren added the concept of collective consumption
organizations
(e.g., local governments), some economists followed Warren in
his market model
article and looked at the public economy as a market, but one
that is significantly
different from that of mainstream economists and more in keeping
with a view of
markets in the broader sense of Adam Smith and the Austrians.
Vincent and Elinor
also differentiated a model from a framework where a model had
fixed
assumptions and a framework had a list of variables to be drawn
upon as most
appropriate (V. Ostrom 2007). Warrens market model was a
framework although
that distinction was not present in Vincents writings in the
1960s. Most important,
however, is that a Warrens market model requires the integration
of political
science and economics and rejection of the idea that the public
economy can be
effectively understood within the confines of either of those
disciplines. Vincent
also emphasized the need for care in using the assumption that
individuals only
act rationally in their own narrow self-interest. In many
situations, individuals
may give priority to other objectives, such as fairness,
especially when
organizing institutional arrangements. This observation was
further reinforced by
Elinors empirical and experimental research (E. Ostrom 1990; E.
Ostrom et al.
1994).
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The most serious problem with economics, however, was
considering any failure
to reach an equilibrium-optimum as a reason for government
intervention.
Vincents previous work on water resources and local government
did not lead to a
conclusion that a government, conceptualized as a single
sovereign running a
gargantuan bureaucracy, would not experience its own failures.
James Buchanan
had described the standard economists approach as having the
second singer
problem. After the first singer sang, the judges decided that
the second could
not be worse and awarded the prize to the second without hearing
her sing.
This problemassuming the government efficiently knows what
people want and
efficiently produces the outcome whenever the conditions of
perfect competition
with packageable goods are not metwas the basis for creating the
Public Choice
Society in 1963. The initial members were committed to examining
both market
and government failures in order to obtain a better
understanding of how the
public sector actually works and what can be expected from
it.
Vincent was a founding member and early president of the Public
Choice
Society; Elinor was a later president. The founders, with James
Buchanan and
Gordon Tullock credited with having the original idea, also
included William Riker
from Rochester. Public choice still retains methodology that
includes individual
preferences, namely, methodological individualism (i.e., one
always must consider
individuals, their preferences and the choices they face),
explicit consideration of
the nature of the good or resource (i.e., goods can range from
purely private
packageable goods to pure public goods and common-pool
resources), and
institutional arrangements (which include both constitutional
and operational
choice rules). Public choice differs from most political science
with its
methodological individualism and consideration of the nature of
the good or
resource, and from most economics with its attention to the
details of institutions
(Bish 1971) and rejection of an assumption that transactions
always lead toward an
equilibrium. Within this approach the single work that had the
most influence on
Vincent was Buchanan and Tullocks Calculus of Consent (Buchanan
and Tullock
1962) and specifically its focus on constitutional choice.
Recent work (Boettke and Coyne 2005) has described public choice
as being
made up of three schools: Virginia (based on the work of
Buchanan and Tullock),
Rochester (Riker), and Bloomington (Vincent and Elinor). The
Rochester school
continued formal models and is also referred to as social
choice. The Virginia
school is by far the largest and closest to Bloomington, but
many of its followers
(but not Buchanan and his students) are traditional
equilibrium-optimization
economists, who have simply added government to their analysis.
This means that
within public choice, there can be the two very different
paradigms that Vincent
confronted in the debate with Bain, Caves, and Margolis on the
California water
industry and the difference between Gargantua and polycentricity
in local
government.
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The Bloomington school focuses most closely on institutional
arrangements
within polycentric systems, especially as Elinor and Vincent
developed the
Institutional Analysis and Development approach (E. Ostrom
2005). This stresses
the importance of individuals and the nature of the resource or
service in a specific
action situation in terms of individual choice rules, operating
rules for the
organizations individuals deal with, and the constitutional
rules those organizations
operate under. Vincent and Elinor also emphasized that in any
specific action
situation, one must understand the motivation of the
individuals. One cannot
assume narrow self-interest, as is common in the Virginia and
Rochester
approaches (McGinnis and E. Ostrom 2012). This is another place
where Vincent
and Elinor used a framework and not a model as did many Virginia
school
economists (V. Ostrom 2007). Elinor also used a broader range of
approaches to
research than did the others, including game theory,
experimental, case studies,
and small and large comparative studies (E. Ostrom 2010). She
also continued
an emphasis on common-pool resources that followed from her
dissertation
(E. Ostrom 1965) and her classic Governing the Commons: The
Evolution of
Institutions for Collective Action (E. Ostrom 1990). Elinor and
Workshop staff also
were instrumental in starting the International Association for
the Study of the
Commons, which has become a major international
organization.
Federalism and The Intellectual Crisis
Following the 1967 Public Choice seminar taught with Herb
Kiesling, Vincent
returned to an analysis of how the theory of a federal system
related to his idea of
polycentricity. He stated that he reread The Federalist
(Hamilton, Jay, and Madison
n.d.) from the perspective of a political economist, and it gave
him a much more
integrated understanding of the logic of Madison and Hamilton as
they explained
the draft of the U.S. Constitution. With hindsight, this is not
surprising. The
approach in The Federalist appears to be the same as the
eighteenth-century
Scottish philosophy of scholars such as David Hume, whom
Hamilton cites
(no. 84), and Adam Smith (V. Ostrom 1987, 21). Smiths (1937
[1776]) market
economics and the constitutional analysis of The Federalist both
view individuals in
the same way, both have a similar normative perspective, and in
both, to use terms
from economics, the issues of competition, monopoly,
information, and
coordination among many independent individuals and
organizations are central
to the analysis (Bish 1987). Smiths approach to markets is
consistent with
Vincents polycentricity and closely allied with the Austrian
approach to markets
rather than the equilibrium-optimization approach used by many
contemporary
economists. Vincents rereading of The Federalist also reinforced
the importance of
the difference between polycentricity and single-sovereign
approaches he had
encountered in water resources and metropolitan government.
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Vincents previous work was brought together in his seminal The
Political Theory
of a Compound Republic and The Intellectual Crisis in Public
Administration in 1971
and 1973. The critical ideas in these two works cannot be
separated, and there is
some repetition. The Compound Republic, which is subtitled A
Reconstruction of the
Logical Foundations of American Democracy as Presented in The
Federalist,
analyzes the difference between Vincents interpretations and
those of other
Federalist scholars and, most important, the paradigm of Walter
Bagehot and
Woodrow Wilson, who believed every government has (or should
have) a single
sovereign. In The Intellectual Crisis, he goes into much more
detail on the paradigm
problem and introduces the difference between classical public
administration and
the congruence of the contemporary political economists
(previously labeled in
his work, public choice theory) and democratic administration.
Democratic
administration is described by both Max Weber and Alexis de
Tocqueville to
contrast with bureaucratic administration.
Democratic administration assumes that civil servants are no
different from
anyone else and they need to be nested in multi-organizational
systems, where there
are checks and balances so citizens can hold them to account. In
his detailed
description of democratic administration, Vincent also points
out many places in
The Federalist where the authors approach to cooperation and
rivalry among
individuals and governments was consistent with democratic
administration
(V. Ostrom 1971a, 8089). He also made clear in The Compound
Republic that the
founders conception of federalism was consistent with
contemporary political
economy and Tocquevilles democratic administration (V. Ostrom
1971a, 119). To
this end, he specifically cites that The Federalist authors
considered that the logic of
a federal system could be extended into the system of
governments within each
state (V. Ostrom 1971a, 84).
Vincent now had an integrated theoretical framework that brought
together his
thinking in all of his previous work. It reinforced the
rejection of what he
had called the ethical-observer model in water resources, and it
eliminated the
distinction between political science and economics when
governments are
considered collective consumption units within a market, which
Vincent labeled
polycentricity. The rereading of The Federalist showed that all
of these approaches
were part of the same paradigm, and in opposition to
ethical-observer single-
sovereign approaches. Most important, the paradigm was based on
the design of
governments in the United States, and thus appropriate for
diagnosing and
proposing solutions to real problems in the United States.
Vincents rereading of The Federalist convinced him that his
approach was
thoroughly grounded in the fundamentals of the U.S.
Constitution. It was as if the
return to The Federalist provided validation for his previous
efforts and the
approach to analysis that he was following. His explicit
recognition that the logic in
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The Federalist could be extended to the system of governments
within each state
further reinforced his attraction to Tocqueville (1945 [1835,
1840]).
It is important to recognize a fundamental difference between
Vincents
federalism and that of many other scholars. Vincents focus is on
an integrated
theory of federalism where one must differentiate between
constitutional choice and
operational rules for all kinds of governments. Constitutional
rules are the rules the
government itself uses to make operational decisions and the
government, through
normal decision processes, cannot change those rules. There is
no hierarchy of
governments or discussion of levels of government; instead, he
states that
principles of federalism permit people to function through
self-governing
institutions among local, regional, and national communities of
interest in
organizing collective endeavors (V. Ostrom 1987, 173). This
logic can also be
extended to supranational organizations such as the European
Community.
Citizens are simultaneously citizens in a multiplicity of
governments and each one
has its own constitutional rules. For the national government,
we think first of the
U.S. Constitution and Supreme Court decisions. For states, we
add state
constitutions and court decisions, and for local governments we
add, depending on
the state, state legislation, and/or home rule charters. The
conceptual difference
between constitutional rules and operational rules appears
simple. In practice, it
may require the kind of research Vincent engaged in on water
resources and local
governments. Vincents interest was constitutional choice, and
that is what Elinors
empirical work concentrated on.
A second difference between Vincent and other scholars,
including James
Buchanan and most economists, is that economists generally
consider federalism to
consist of levels of government, each with clearly defined and
nonoverlapping
jurisdiction over particular functions (Buchanan 1995; Oates
1972).6 Within this
model, the focus is usually on exit (voting with ones feet) for
dissatisfied citizens,
and in Buchanans case, the right for states to exit the
federation as well. While
Vincent would not object to exit strategies, he places much more
emphasis on
competition, both intergovernmental and interjurisdictional,
among government so
that when citizens are unsatisfied with services from one
government they may be
sought from another. For example, if one is unsatisfied with
local schools, one may
seek supplementary programs from the state or national
governments. Similarly, if
local police are corrupt, citizens have recourse to state and
federal police.
Overlapping to avoid the monopoly problem was as important to
Vincents theory
of federalism as was choice among competitors to Adam Smith in
markets (Bish
1987). Vincents polycentricity is a dynamic, multiorganizational
systemnot two
levels of government, each with a monopoly over some government
functions.
Following publication of The Compound Republic Vincent continued
to expand
on his approach to federalism. Both subsequent editions of The
Compound Republic
(V. Ostrom 1987; V. Ostrom and Allen 2008) were enlarged and
among his
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publications were eleven articles in Publius: The Journal of
Federalism from 1974 to
1995. Among his additions was his own examination of Adam Smith
and the
parallels of the idea of a covenant with that of a constitution
(V. Ostrom 1980).
To help understand the work Vincent moved to next, it is useful
to look more
closely at problems he perceived for the United States.
Vincents Diagnosis ofWeakness in the American System
Vincent began Understanding Urban Government (Bish and V. Ostrom
1973)
believing that how one thinks determines ones diagnosis of a
problem and the
solutions one proposes. His analyses had convinced him that most
political
scientists and others interested in public policy thought in
terms of the single-
sovereign model of government. This also led him to consider the
actual language
we use as being critical. It made a great deal of difference,
for example, as to
whether government or governments was used to refer to the
public sector.
Language and thought go together. If people always use the term
government,
they will not think in terms of a public economy comprised of
governments.
Vincents diagnosis of a second weakness was closely related. It
is the faith
people have in single-sovereign solutions and bureaucracy.
Vincent seems to have
paid the most attention to the analysis of bureaucracy in
writings by Tullock,
Weber, and Tocqueville. Tullocks The Politics of Bureaucracy
(1965) examines the
incentives that exist within bureaucracies, which explain that
unless constrained by
competition, which threatens their survival, bureaucracies are
unlikely to produce
efficient satisfaction for the clients they are supposed to
serve. It is a
straightforward public choice analysis that gets at the
incentives faced by
individuals within a bureaucracy instead of treating
bureaucracies as an organic
unit.
Webers analysis is different. He first describes bureaucracy as
one of his ideal
types. The ideal type is described as perfectly functioning with
efficient knowledge
transmission and appropriate decision making. However, Webers
ideal types are
not real-world descriptions; they are models analysts can use to
compare what
happens in the real world with the model and with other models.
Weber also had
an ideal type for democratic administration. Weber observed that
in operation, a
bureaucracy becomes rigid, mechanical, and unable to adapt to
changing
conditions. It is not an ideal way to organize government. In
contrast, his model
of democratic administration is more responsive to citizens and
more adaptable.
However, in spite of the desirable characteristics of democratic
administration,
Weber believed it was not feasible on a large scale, but rather
had to be limited to
smaller governments. He was pessimistic about large-scale
bureaucracies, but did
not believe there was an alternative. Weber does not seem to
have contemplated
Vincents polycentricity, or federalism, as the way to govern a
large society.
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Tocqueville was also pessimistic about the extension of
democratic administra-
tion to a large scale, but for a different reason than Weber.
Tocqueville did not
believe citizens understand how democratic administration and
multicentered
systems work; hence, citizens seek solutions to problems with a
single-sovereign
bureaucratic approach. Tocqueville believed that the faith in
single-sovereign
solutions would eventually suffocate the energy of citizens and
destroy democratic
administration. Vincent took Webers and Tocquevilles conclusions
seriously.
Vincent approached these problems with a belief that Webers
problem could be
overcome with the right institutional design in a polycentric
system. This involved
developing a much better understanding of how institutions
worked in the context
of what Tocqueville had called a science of association.
Furthermore, a science of
association had to be understood by citizens so they would not
always seek
recourse to single-sovereign solutionswhich were not actually
likely to work
because of the basic design of the American system and the
inability of large
bureaucracies to function efficiently. Vincent did not share all
of Tocquevilles
conclusions but Vincent was concerned with what he perceived to
be a decline in
public participation in civic life, something that went beyond
simply participation
in governance, and the increasing nationalization of activities
that had formerly
been left to civic associations or state and local governments
where citizen
participation was much more likely.
There are many elements to a science of association. However, it
is useful to
keep in mind that Vincents position always viewed institutional
arrangements and
innovations in institutional arrangements as human artifacts,
and not spontaneous
creations.7 Second, Vincent assumed that people acted in their
own self-interest
rightly understood, which means that people can agree on
operational and
constitutional rules for mutual long-run benefit and can have
motivations beyond
narrow self-interest. However, there was also a potential for
factions inimical to
the public interest as described in The Federalist. The analysis
of factions has
exploded under the rubric of rent-seeking, whereby special
interests use
government regulations and laws to create special privileges for
themselves
(Buchanan et al. 1980). Adam Smith had observed this in his
critique of the British
Crown granting exclusive licenses to particular businesses,
which created
monopolies and disadvantaged consumers. The Federalist thought
that the
democratic principle of majority voting would control factions,
but in the
United States at least, they were clearly wrong.8 This means a
science of association
must have within it an understanding of how to facilitate
cooperation among the
multitude of organizations in a public economy while also
preventing the collusion
of factions to the disadvantage of citizens. This is a huge
task.
Given the magnitude of the problems Vincent perceived in
America, he began to
explore the foundations of governance regimes in other
countries. He started with a
reanalysis of American federalism (V. Ostrom 1991), with several
articles published
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in Publius: The Journal of Federalism. He explicitly expanded
his focus on
Tocqueville and the need to consider all civic activities, which
he called res publica,
as a basis for a self-governing society. He continued to build
on Hobbes, Hamilton,
Madison, and Tocqueville, but also considered self-government in
other countries.
He did little writing on the issues in other countries, but
through the Workshop at
Indiana, he attracted comparativists and mentored a large number
of major books
by such authors as Mark Sproule-Jones (Canada), Filippo Sabetti
(Italy), Robert
Netting (Switzerland), Brian Loveman (Spanish America), James
Wunsch (Central
Africa), Dele Olowu (Nigeria), Sheldon Gellar (Senegal), Amos
Sawyer (Liberia),
Alexander Obolonsky (Russia), Antoni Kaminski (communist
regimes), and his
PhD student Tai-Shuenn Yang (China). Vincent moved distinctly
from smaller-
scale concerns into macro analyses of the nature of regimes and
their institutional
characteristics. Unfortunately, illnesses affecting his eyesight
and nervous system
precluded another comprehensive book on polycentrism. His last
book-length work
was pessimistic: The Meaning of Democracy and the Vulnerability
of Democracies: A
Response to Tocquevilles Challenge (V. Ostrom 1997). He remained
perplexed by
what he perceived as declining citizen self-governance and the
nationalization of
issues that he felt could be better dealt with at subnational
levels of government.
MovingToward a Science of Association
There is no mechanical way to move toward a science of
association. There are too
many potential variables to take into account, and an analyst
must select those that
are most relevant for any particular analysis. This is what
makes institutional
analysis an art as well as a science. As an art, it is like
having a box of tools. A good
mechanic must know how the machine is designed and operates and
then know
what tools to use in any particular situation. Institutional
analysis involves both
aspects.
First, one must understand the principles underlying the public
economy, which
in the United States are contained in The Federalist,
Tocqueville, and other works
described by Vincent. Next, one must identify the preferences of
the affected
citizens for a public service or the use of a natural resource.
Then one must look at
the institutional arrangements, which include how affected
individuals make their
preferences known (collective-choice rules), how provision
decisions are made
(organizational choice), and the rules under which
provision-decision organizations
operate (constitutional rules) (E. Ostrom 2005). As one proceeds
with this analysis,
additional critical concepts include fiscal equivalence,
transaction costs, principal-
agent problems, rent-seeking, and veto points. Finally,
normative criteria include
whether affected individuals think the arrangements and outcomes
are fair and
whether there are gross inefficiencies that could contribute to
mutual benefits that
are not being achieved. This sounds much simpler than it is in
practice because it
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must take place within a civil society where citizens play an
important role in both
governmental and nongovernmental institutions.
The most important scholar in the development of a science of
association to
counter the single-sovereign model has been Elinor Ostrom.
Elinor led empirical
work worldwide, beginning with her dissertation, studies of
citizen perceptions of
their local services, and the largest-scale study of a public
service industry, policing,
that has been done in the United States. After that, most of her
work was on
natural resources and commons problems. While Vincent and Elinor
developed
theory together, they did have a division of labor. Lin
developed empirical research
skills and had the management skills to implement projects in
cooperation with
both graduate students and colleagues from other universities,
often in other
countries. Vincent continued to examine the relationship between
political
economy and other scholarship, including Adam Smith on fiscal
equivalence,
additional history and thinking about American local government,
the parallels
between covenants and a constitution (V. Ostrom 1980), and the
liberal
continuation of European Austrian work by Eucken (1951). Vincent
did more
detailed analyses of the importance of language in thought as he
continued to
confront Tocquevilles challenge (V. Ostrom 1997). The success of
their work and
their codirection of the Workshop in Political Theory and Policy
Analysis is an
incredible achievement, but there is much more to be done.
Final Observations
As I complete this review, I have two observations. First, I am
disappointed that
Vincent and Elinors work, in spite of her Nobel Prize in
Economics, is not better
understood by economists. Much empirical work in economics is
not based on the
purely competitive model or devoted only to private goods
markets, although that
is what is commonly taught in most economics departments.
Econometrics was
developed in agricultural economics, and the largest economics
research
organization in the United States (and probably the world), the
National Bureau
of Economic Research, emerged from the old institutional
economics framework
associated with Commons and Ayres. In practice, there is little
difference between
the empirical work based on the IAD framework and much of the
empirical work
in economics.
A second observation is that Vincent gave only limited attention
to the role of
factions and rent-seeking in the American system. One of the
problems within
polycentricity, as well as within single-sovereign systems, is
that factions may get
organized and use legal means to exploit citizens and consumers.
This is exhibited
by a multitude of special interest grants, program expenditures
and tax concessions,
especially from the national government. Factions can discourage
the average
citizen from playing the role that is needed in a science of
association to help
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overcome Tocquevilles challenge, whereby citizens do not
understand how special
interests exploit the system and seek recourse in a single
sovereign.
It is with regard to minority factions and rent seeking where
Hamilton,
Madison, and Vincent are weakest in their analyses. Hamilton and
Madison
expected requirements for majority voting in Congress to control
minority factions
and did not devote the same effort to their analysis as they did
to constraining
majority factions with checks and balances within the federal
system. Vincents
analysis also focused on the overlapping that allowed citizens
to seek recourse to
another unit of government if results from one did not meet
their preferences. This
emphasis is maintained in Chapter 9 of the revised and expanded
Compound
Republic (2008), where it is also proposed to apply the concept
of a public sector
industry to national programs that would use state and local
governments to
deliver national programs.
This approach is consistent with the Ostroms earlier work, but
it assumes that
congressional decision making results in truly national
programs. This may not be
a good assumption given how Congress makes decisions. Congress
is divided into
many committees and subcommittees that are small enough for
individuals to be
potential holdouts before allowing legislation to reach the
floor unless their special
provision on behalf of a minority faction is included (Teles
2013). This
environment is an incredibly rich one for rent seeking where the
government
revenues end up being treated as if they are a commons for all
to draw upon with
no single special interest, in either taxation or expenditures,
being large enough to
draw attention when the legislation finally reaches the floor
for a majority vote. The
net result, however, is a labyrinth of special interest
provisions and organizations
that may not function like Warrens market model or Vincents
California water
industry because of the lack of fiscal equivalence.
Warrens and Vincents polycentric systems were comprised
primarily of
organizations characterized by fiscal equivalence. (Olson 1969).
Fiscal equivalence
exists when the organizations decisions reflect the preferences
of the beneficiaries
and those beneficiaries pay the costs. It can be extremely
difficult to create this
incentive system when the national government pays the costs but
smaller units
make the decisionsnot impossible, but very difficult. Neither
Vincent nor Elinor
were experts in legislative decision making and neither devoted
their energy to
evaluating the results of tax concessions or the performance of
nationally funded
but locally administered programs. I agree that the industry
approach is the place
to start, but the analyses will be undertaken in a different
environment than that of
previous work on local governments and the California water
industry. We all
would benefit from the work of scholars who take a political
economy approach to
this issue.
Finally, in spite of some weaknesses on rent seeking, Vincent
and Elinor Ostrom
helped restore the importance of federalism, and most important,
an expanded
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theory of federalism, in the American system. Their industry
approach extended the
analysis of Hamilton and Madison beyond just the study of
governments into the
public economy and civil society where we now have a framework
for looking at
both the governance and the production of public goods and
services in a
polycentric systemnot just a purely competitive market and not
just an integrated
bureaucracy, but rather in an industry, something in between.
Vincent also moved
federalism away from the study of levels of government in favor
of looking at
operational and constitutional-choice rules for different
governments, including
local governments. It was further along in his career that
Vincent added the
importance of nesting government institutions in the broader
civil society, which
he believed was a necessary condition for the trust required for
citizens to
understand their interdependencies and self-interest rightly
understoodnot the
narrow self-interest that makes many kinds of mutually
beneficial cooperation
unachievable.
Notes
I wish to thank Barbara Allen, Herman Boschken, Michael Fotos,
John Kincaid,
Patty Lezotte, Nancy Malecek, Mark-Sproule Jones, Robert Warren,
James Walker,
and referees for Publius for assistance in preparing this
article.
1 Many of the Ostroms publications are available on the site
thanks to the archival work
of Workshop staff and Professor Barbara Allen, who also assisted
Vincent with the last
editions of The Compound Republic and The Intellectual
Crisis.
2 POBSCORB is the acronym for the tasks of a public
administrator: Planning,
Organizing, Staffing, Directing, COordinating, Reporting, and
Budgeting. The focus is
on an organization, not interorganizational relationships.
3 Vincents work is very similar to that of the Austrian
economists, especially Mises (1949)
and Hayek (1945, 1960). Boettke and Coyne (2005), and Aligica
and Boettke (2009)
describe Vincent and the Bloomington School of Public Choice as
reaching the same
conclusions as Knight, Mises, and Hayek. However, Vincent cites
Knight on the
statistical properties of certainty, risk, and uncertainty in
earlier work and only refers to
Hayeks The Constitution of Liberty (1960) much later. Vincent
built on Hobbes,
Hamilton, Madison, Tocqueville, Ashby, and Weber to come to
conclusions that were
virtually the same as those of Mises and Hayek. The major
difference is that many
Austrians, especially Mises, did not believe that empirical work
was necessary to validate
their theories. Vincent, Elinor, and the Bloomington School of
Public Choice always
considered empirical work as critical to distinguishing the
usefulness of one theory and
paradigm from another.
4 A summary of police and other studies is presented in V.
Ostrom, Bish, and E. Ostrom
(1988, ch. 7). Many economists researched the differences
between in-house bureaucratic
production and contracted-out private production. That research
makes an important
contribution to the study of the public economy, but when one
looks more closely, it is
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the competitive bidding process that generates private
production efficiency, and private
firms under sole-source contracts are often much more expensive
than in-house
production (McDavid 1985).
5 The major critic of the mainstream approach was James M.
Buchanan (1960, 1967), but
at the time, most economists ignored his writings. Buchanan
insisted on methodological
individualism to analyze public finance and tax policy and
continued this approach with
Gordon Tullock as one of the founders of public choice. Buchanan
received the Nobel
Prize in Economics in 1986.
6 An important exception to the generalization about economists
is Gordon Tullock,
coauthor of The Calculus of Consent (Buchanan and Tullock 1962)
with James
Buchanan. Tullock has followed Vincents approach and even
includes home-owners
associations in The New Federalist (Tullock 1994).
7 McGinnis (2005) has emphasized that Vincent rejected the
concept of spontaneity that
was important in Austrian thought. I agree that Vincent rejected
the concept as
described by McGinnis, but do not believe that it is an accurate
characterization of the
Austrians. The Austrians believed that everyone planned, and
individuals in
organizations planned on behalf of their organization; however,
unanticipated
innovations could emerge from such planning and be viewed as
spontaneous from
the perspective of the larger system. McGinnis also seems to
view spontaneous as leading
toward an equilibrium, but that is not a general characteristic
of Austrian economics, as
with Adam Smith, it is innovation that drives the economy and
again there is no
assumption of an equilibrium.
8 Smith was most likely aware that in 1641 during the Glorious
Revolution in England,
more than 700 monopolies granted by the Crown were eliminated,
freeing up
competition for basic goods desired by consumers. Vincent did
not devote research to
factions, but research by others (Olson 1982; Acemoglu and
Robinson 2012) indicates
that special interests that The Federalist would label factions
can cause a significant
reduction in economic growth in an economy. Vincent includes
many examples of what
economists would label rent-seeking under the title of Newspeak
and Doublethink
where conscious mislabeling is used to describe government
programs (V. Ostrom 1997,
ch. 3). Vincent was also frustrated by the increasing
nationalization of what had been
state and local government issues, especially through the use of
the spending power
whereby the national government assumed regulatory authority as
a condition of
providing financing in areas beyond its constitutional
jurisdiction. An important analysis
of this problem is Robert Higgss Crisis and Leviathan (Higgs
1987), where each time
there is a crisis the national government (or state in the case
of local issues) intervenes
but never leaves. Higgs labels this the ratchet effect. Vincent
did not treat this in 1971,
but did in the 1987 Compound Republic.
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