COPYRIGHT NOTICE:
Elinor Ostrom: Understanding Institutional Diversity
is published by Princeton University Press and copyrighted, © 2005, by Princeton
University Press. All rights reserved. No part of this book may be reproduced in any form
by any electronic or mechanical means (including photocopying, recording, or information
storage and retrieval) without permission in writing from the publisher, except for reading
and browsing via the World Wide Web. Users are not permitted to mount this file on any
network servers.
Follow links for Class Use and other Permissions. For more information send email to:
permissions@pupress.princeton.edu
One
Understanding the Diversity of Structured
Human Interactions
TO UNDERSTAND institutions one needs to know what they are, how and
why they are crafted and sustained, and what consequences they generate
in diverse settings. Understanding anything is a process of learning what
it does, how and why it works, how to create or modify it, and eventually
how to convey that knowledge to others. Broadly defined, institutions are
the prescriptions that humans use to organize all forms of repetitive and
structured interactions including those within families, neighborhoods,
markets, firms, sports leagues, churches, private associations, and govern-
ments at all scales. Individuals interacting within rule-structured situa-
tions face choices regarding the actions and strategies they take, leading
to consequences for themselves and for others.
The opportunities and constraints individuals face in any particular
situation, the information they obtain, the benefits they obtain or are ex-
cluded from, and how they reason about the situation are all affected by
the rules or absence of rules that structure the situation. Further, the rules
affecting one situation are themselves crafted by individuals interacting
in deeper-level situations. For example, the rules we use when driving
to work every day were themselves crafted by officials acting within the
collective-choice rules used to structure their deliberations and decisions.
If the individuals who are crafting and modifying rules do not understand
how particular combinations of rules affect actions and outcomes in a
particular ecological and cultural environment, rule changes may produce
unexpected and, at times, disastrous outcomes.
Thus, understanding institutions is a serious endeavor. It is an endeavor
that colleagues and I at the Workshop in Political Theory and Policy Anal-
ysis have been struggling with for at least three decades.
1
After designing
multiple research projects; writing numerous articles; developing ideas in
the classroom; learning from eminent scholars in the field, from students,
and from colleagues; and making diverse attacks on this problem, it is
time to try to put thoughts on this subject together within the covers of a
book, even though I am still not fully satisfied with my own understand-
ing. Consider this a progress report on a long-term project that will be
continued, I hope, by many others into the future.
4
C H A P T E R O N E
Diversity: A Core Problem in Understanding Institutions
A major problem in understanding institutions relates to the diversity of
situations of contemporary life. As we go about our everyday life, we
interact in a wide diversity of complex situations. Many of us face a morn-
ing and evening commute where we expect that others, who are traveling
at great speeds, will observe the rules of the road. Our very lives depend
on these expectations. Others depend on our own driving behavior con-
forming in general to locally enforced rules about speeding, changing
lanes, and turn-taking behavior at intersections. Those of us who work
in large organizations—universities, research centers, business firms, gov-
ernment offices—participate in a variety of team efforts. In order to do
our own work well, we are dependent on others to do their work cre-
atively, energetically, and predictably, and vice versa. Many of us play
sports at noontime, in the early evening, or on the weekends. Here again,
we need to learn the basic rules of each of the games we play as well as
find colleagues with whom we can repeatedly engage in this activity. Dur-
ing the average week, we will undertake activities in various types of mar-
ket settings—ranging from buying our everyday food and necessities to
investing funds in various types of financial instruments. And we will
spend some hours each week with family and friends in a variety of activi-
ties that may involve worship, helping children with homework, taking
care of our homes and gardens, and a long list of other activities under-
taken with family and friends.
Somehow as individuals we implicitly make sense of most of these di-
verse and complex situations. We do so even today, with all of the new
opportunities and risks that were not even conceivable a few generations
ago. We now expect to watch the Olympic games and other international
competitions as they happen, no matter where they are located or where
we are in the world. We have become accustomed to buying bananas,
oranges, and kiwi fruit at any time of the year in almost any market we
enter around the globe. Not only do millions of us drive to work regularly,
many of us also fly to other parts of the globe on a regular basis, trusting
our lives to the knowledge and skills of pilots to know and utilize the
many do’s and don’ts of flying airplanes.
If we are considered to be adults and sane, we are expected to be able
to reason about, learn, and eventually know what to do in many diverse
situations that we confront in today’s world. We know that when we are
shopping in a supermarket that we can take a huge variety of goods off
the shelf and put them in a pushcart. Before we put these same goods in
our car, however, we need to line up at a counter and arrange to pay for
them using cash or a credit card (something else that was not so widely
available a few years ago). When we are shopping in an open bazaar in