Resource Institutions Research Paper

Despite variations in approaches to institutional analysis, resource institutions can be defined as sets of rules that can be crafted collectively or individually, and that have the power to shape actions related to the conservation and use of resources. Resource systems and institutional arrangements are distinct entities, and it is important to pay attention to the factors that lead to a better fit between a given resource and the rules that govern the management of that resource.

However, it is only in the second half of the twentieth century that the role of institutions in resource management has found substantial recognition in the scholarly and policy world. Part of the reason institutions are recognized as important is that many resources critical to human existence and subsistence are becoming increasingly scarce, and are difficult to manage under some universalizable institutional form. Very different institutional regimes may be necessary for different types of resources. Consider, as examples, wildlife species that need hundreds of square miles as their habitat, scattered forest patches upon which thousands of households depend for their livelihood, or irrigation systems that are too small to require government intervention, but too large to be managed by a single user. International agreements among governments may be appropriate institutional mechanisms to restrict the production of ozone depleting chemicals because they are mostly generated by a few major industrial producers. But for reduction in the levels of greenhouse gases, a far more widespread program of restraint may be necessary because of the nonpoint nature of the production of these gases. Another reason for the importance of getting institutions right are transactions costs that are associated with the allocation, processing, and exchange of resources, and that vary with institutional arrangements. Institutions that rely on external enforcement may require higher levels of expenditure to ensure that users conform to rules in comparison to those situations where it is in the interests of users to monitor each other and enforce institutional provisions directly.

The range of rules that comprise institutions is potentially infinite. But three institutional forms are possibly the most familiar: markets, states, and communities. Within each of these categories it is possible to find many variations; other forms span these categories. The precise combination of rules and how rules influence human behavior and outcomes are the basis on which it is possible to judge the performance of institutional arrangements. Typically, the objective of creating or forming institutions over resources is to enhance the efficiency, equity, or sustainability of resource use. However, a truly enormous and highly complex set of factors are at play. At the same time, the application of institutional analysis to resources is a relatively new field. It also requires collaboration across disciplinary boundaries. These are two reasons why the precise nature of the relationship between social and physical biological systems, signified by the phrase ‘resource institutions,’ still requires considerable scientific research.

1. A Brief History Of Institutions And Their Place In Resource Management

Contributions to institutional theories have flowed from economists, sociologists, and political scientists (Goodin 1996). Such contributions resonate with larger themes in social theory about the relationship between social structure, agency, and outcomes. In explicit counterpoint to the neoclassical paradigm in economics that finds little role for institutions or organizations in social life, advocates of institutions such as North (1990) and Williamson (1985) emphasize the unavoidable influence of institutional constraints on all social action. New institutionalists, property rights theorists, and scholars of the commons have been the most influential in providing insights about the nature of resource institutions. Efforts aimed at understanding institutions have drawn from rigorous mathematical approaches as well as more descriptive and interpretive orientations.

Although resource institutions may serve as constraints upon certain groups and individuals, or certain kinds of actions, they also facilitate and advantage others. In addition to facilitating or constraining actions, and advantaging some people over others in terms of power and benefits (Knight 1992), resource institutions may also help shape desires, motivations, and preferences of groups and individuals. They are rooted in past human actions, and are the result of choices made by individuals and groups. It is easy to see, therefore, that institutions are seldom stationary; they change over time because of human choices.

For a long time, scholars viewed markets and states as the appropriate institutional mechanisms to address externalities that result from the collective goods nature of a vast class of resources. Advocates of market solutions argued for privatization of collectively owned and managed resources such as fisheries and forests, and argued that without privatization collective goods are likely to be overexploited. Voluntary exchanges among private owners on the basis of pricing signals, they held, would lead to the most efficient use of resources. Advocates of state control and ownership, pointing to asymmetric allocations that often result from the operation of market mechanisms, suggested that centralized control of resources was far more likely to promote conservation and sustainable use. Without centralized enforcement, according to them, attempts to manage resources could turn out to be futile. Through much of the 1950s and 1960s, writings on resource use and management viewed community institutions as backward, inefficient, and likely to promote overexploitation.

From the late 1970s, and especially since the mid- 1980s, there has been a significant shift in views about the role of community as a resource management institution. This is partly because resource management strategies that rely exclusively on exchange (market) or enforcement (coercive, state-based) have obvious deficiencies. One tends to benefit a small group or a few individuals, and the other tends to create highly asymmetric relations of domination and dependency. Both have shown a tendency to dis- advantage and exclude rural residents relying on local resources, who then do not cooperate in management of these resources. Both at the level of policy initiatives, and in terms of theoretical developments, the option of collective management of resources through new types of resource institutions based in communities has found wide appeal (National Research Council 1986, Ostrom 1990).

Despite heated assertions about the superiority of one type of resource management institution over another, in real life most resource institutions do not easily fit the mold of market, state, or community. For the operation of each of these forms of institutions, implicit or explicit understandings that shade into other forms are necessary. For example, often markets and private property arrangements work better only when the force of the state is available to enforce the security of property.

2. Resource Institutions, Rules, And Power

Since resource institutions are sets of rules and norms that shape action, it is necessary to understand the broad types of rules that are most important in making institutions effective. Effectiveness implies three categories of rules: the ability to create new rules and modify old ones pertaining to resources; the ability to implement and ensure compliance to existing and new rules; and the ability to adjudicate disputes that arise in the effort to create rules and ensure compliance. Rules pertaining to resources define who gets to access a resource, who gets to use them, who is excluded from a resource, and how and when a resource can be transferred from one individual or group to another. Institutional arrangements are likely to be ineffective when human beings can make these above rules but not enforce them, or enforce existing rules but not change them in case of deficiencies. Mechanisms that allow adjudication of disputes among resource users and managers are necessary if resource institutions are to retain their force over time. These three categories of rules correspond to a more familiar division in government: executive (making, implementing, and enforcing of decisions), legislative (creation of rules), and judicial (adjudication of disputes).

The constituent parts of all resource institutions are born as a result of human choices. Three important determinants of human institutional choices are scarcity, risk, and redistribution. Greater scarcity of resources in a group creates incentives to define institutional arrangements ever more precisely so that benefits from resources are not dissipated. Indeed, some scholars have seen this dynamic of induced institutional change to be prominent enough to argue that it is universal (Netting 1981). Institutions may also change in response to higher levels of risk in the environment. Collective action necessary for institutional emergence can be conceptualized as a response that addresses the need to smoothen intertemporal fluctuations in production (Wade 1994). These views of institutional change are insufficiently attentive to variations in the incentives of group members, and to the politics that such variations generate. A more political view holds that institutional change need not occur only in response to greater scarcity in a group, nor lead to greater efficiency (Knight 1992, North 1990). Instead, individuals and groups often act to create new resource institutions that would benefit them, rather than address problems of scarcity or risk. Particular institutions reflect existing distribution of power and wealth in a society or a group.

3. Sustainability Of Resource Institutions

Perhaps the most critical question about resource institutions is how and under what conditions do they lead to sustainable management and conservation of resource systems. Group size, heterogeneity within groups, migration levels and population change, technological innovation, changing levels of demand for resources, uncertainty and sudden shocks, and cross scale effects play an important role in determining the sustainability of institutions and resource systems (Keohane and Ostrom 1995). For certain kinds of resources, especially global commons, new institutional mechanisms have emerged to address issues of complexity and heterogenous subpopulations (Haas 1997).

Writings on resilience and adaptive management have generated important insights about the extent to which resource institutions can be sustainable in the long run (Holling 1973). Human institutions perform best when environments are predictable, yet many resource systems are characterized by potentially highly uncertain and variable processes. To date, research on institutions has not incorporated all the lessons learnt in risk-hazard studies on how sudden variations and uncertainty affect resource management needs. In part this is so because a formal theory of resource institutions requires a theory of human behavior that is mathematically rigorous and tractable, withstands empirical testing, and fits into a model of resource systems that can address fluctuations and surprise.

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