From Real Time Economics (Wall Street Journal):

The main lesson is that common property is often managed on the basis of rules and procedures that have evolved over long periods of time. As a result they are more adequate and subtle than outsiders — both politicians and social scientists — have tended to realize. Beyond showing that self-governance can be feasible and successful, Ostrom also elucidates the key features of successful governance. One instance is that active participation of users in creating and enforcing rules appears to be essential. Rules that are imposed from the outside or unilaterally dictated by powerful insiders have less legitimacy and are more likely to be violated. Likewise, monitoring and enforcement work better when conducted by insiders than by outsiders. These principles are in stark contrast to the common view that monitoring and sanctioning are the responsibility of the state and should be conducted by public employees.

From the official press release:

Elinor Ostrom has challenged the conventional wisdom that common property is poorly managed and should be either regulated by central authorities or privatized. Based on numerous studies of user-managed fish stocks, pastures, woods, lakes, and groundwater basins, Ostrom concludes that the outcomes are, more often than not, better than predicted by standard theories. She observes that resource users frequently develop sophisticated mechanisms for decision-making and rule enforcement to handle conflicts of interest, and she characterizes the rules that promote successful outcomes.

As if to demonstrate the narrow conception of economics that many people hold, Ostrom’s work has been described as studies in nonmarket activity. See “Another Non-Market Nobel.” But there is no reason to regard voluntary cooperative activity in the management of resources, outside of traditional firms, as nonmarket!Indeed, the basic division in human affairs is not market versus nonmarket, but voluntary/cooperative versus coercive, or society versus State.  (Does that make us socialists and them statists?)As Freeman columnist Don Boudreaux points out at Cafe Hayek, Public Choice pioneer James Buchanan has rejected the narrow view of economics for a long time. Writes Buchanan:

Suppose that the local swamp requires draining to eliminate or reduce mosquito breeding.  Let us postulate that no single citizen in the community has sufficient incentive to finance the full costs of this essentially indivisible operation.  Defined in the orthodox, narrow way, the “market” fails; bilateral behavior of buyers and sellers does not remove the nuisance.  “Inefficiency” presumably results.  This is, however, surely an overly restricted conception of market behavior.  If the market institutions, defined so narrowly, will not work, they will not meet individual objectives.  Individual citizens will be led, because of the same propensity, to search voluntarily for more inclusive trading or exchange arrangements.  A more complex institution may emerge to drain the swamp.  The task of the economist includes the study of all such cooperative trading arrangements which become merely extensions of markets more restrictively defined.