COLLOQUIUM II

Ostrom, V., C. Tiebout, and R. Warren (1961)

The organization of government in metropolitan areas: a theoretical
inquiry
A metropolitan region is a legal non-entity. There is no general instrumentality of government available to
deal with the range of problems which they share in common. Instead there is multiplicity of federal and
state governmental agencies, counties, cities and special districts that govern within a metropolitan region
(Polycentric political system). The paper is about how this polycentric system governs and distributes public
goods and services to the area. The paper and the summary mention the term Gargantua, this means a
political system with a single dominant center for making decisions, it is considered the ideal model for
metropolitan government.
I The nature of public goods and services
There are three conditions why provision of public goods can be distinguished from provision of private
goods:
1. The control of indirect consequences as public goods
The basis criterion for distinguishing public and private affairs is the extent and scope of the consequences
of acts which are important to control. These consequences can also be described as externalities or spill
over effects and can be both positive and negative. (Example of negative spill over effect is the emission of a
factory which pollutes the surrounding area)
2. Packageability
The economist criterion for distinguishing public goods from private goods is that a private goods must be
packable and therefore can be sold and purchased in the private market. Those who do not pay for a private
good can be excluded from enjoying its benefits.
Most governmental (public) goods such as fire and police protection are not easily packageable,
either the cant be sold to those who are willing to pay. This suggest two problems for public organizations.
Public goods are generally not measurable
Benefit from public goods without paying tax (free-riders)
3. Public goods as the maintenance of preferred states of community affairs
This is about a public good which is provided on a neighbourhood or community scale. It means the service
or good is packaged within a specific boundary (example: household heating & the restriction to only use a
park if you are a local tax-paying citizen).
II Scale problems in public organization
Viewing the boundaries of a local unit of government as the package in which public goods are provided, so
that those outside the boundaries are excluded from use, we may say that where a public good is adequately
packaged within appropriate boundaries, it had been successfully internalized. For this appropriate
packaging, several criteria should be considered.
1. The criterion of control
All phenomena can be described in relation to specifiable boundary conditions and the criterion of control
requires that these be taken into account in determining the scale of a public organization. If the phenomena
cannot be controlled properly by a specific governmental unit, a likely result is the transfer to another
governmental unit which has the right boundaries (scale) to deal with the phenomena.
2. The criterion of efficiency
The most efficient solution would require the modification of the boundary conditions so as to assure a
producer of public goods and services the most favourable economy of scale, as well as effective control.
(Example of municipalities which share machinery)

3. The criterion of political representation

Specification of the boundary or scale conditions of any political jurisdiction is important in determining the
set of interests which are to be internalized within the organization. Three elements of scale require
consideration:

The scale of the formal organization

This indicates the size of the governmental unit which provides the public good or service
The public
Those who are affected by the provision of the public good or service
The political community
Those who actually decide whether and how to provide the public good or service

4. The criterion of local self-determination

The local government has to be approved by its citizens. In that way the chosen officials will attend to the
municipal affairs they were chosen for and can they be held responsible for their acts.
III Public organization in Gargantua
Gargantua unquestionably provides an appropriate scale of organization for many huge public services.
Gargantua should be best able to deal with metropolitan-wide problems at the metropolitan level.
However, with its single dominant center of decision making, it will most likely become a victim of
its complexity of its own hierarchical or bureaucratic structure. Therefore Gargantua may be insensitive and
clumsy in meetings the demand of the local citizens.
The problem of Gargantua is to recognize the variety of smaller sets of publics within its boundaries.
IV Public organization in a polycentric political system
The multiplicity of interests in various public goods sought by people in a metropolitan region can only be
handled in the context of many different levels of organization. The polycentric system is confronted with
the problem of realizing the needs of wide community interests or publics beyond the functional or territorial
bounds of the formal entities within the broader metropolitan region. It is doubtful that sub-optimization in
Gargantua is any easier to accomplish that supra-optimization in a polycentric political system.
The performance of a polycentric political system van only be understood and evaluated by reference
to the patterns of cooperation, competition and conflict that may exist among its various levels of governing.
Competition or variety in service among various independent local government agencies may give
rise to a quasi-market choice for residents in permitting them to select the service or good they desire. In
some cases, like street sweeping or garbage collection, private parties can undertake services to compete
with the governments. As the number of vendors increases, competition brings pressures towards greater
responsiveness and efficiency.
Sometimes a provision of a public good cannot be confined to boundaries of the existing units of
government. This leads to serious spill-over effects and therefore arrangements must be available. Usually
this means that each individual community pays the same share of the costs the service requires (example:
fire-fighting capabilities in an area).
More difficult problems arise when benefits of services and costs are not shared equally. This
happens when communities differ in their perception of the benefits they receive from the provision of a
common public good. These kind of situations ask for effective governmental mechanisms from a higher
level. Negotiation between different governmental agencies usually resolves the problem, if not suitable
sanctions or even changes in the state law are the solution.
Avoiding conflicts is the best solution and most metropolitan areas have a rich
framework for negotiating and deciding on how to deal with problems of public interest.
However, much more careful attention needs to be given to study this metropolitan
framework.

Ostrom, Elinor (1986)

A Method of Institutional Analysis

Good to know
In the colloquia we discussed with Willem Salet the concept of institutionalism related to
metropolitan areas, as the other article of Ostrom & Ostrom was specifically about. It seemed
that in many polycentric political systems (instead of the Gargantua variant) of metropolitan
areas there are basically three conditions for political decision making which should be taken
into account: cooperation, conflict, competition. These can occur all at the same time, which
makes politics at the level of the metropolitan city a bit complex. What Salet said, was in the
current movement of decentralization, it may happen that local communities struggle for
power and incentives, for instance when issues at the regional level have to be discussed and
positive and negative effects of this certain issue (for instance building a power plant) have to
be distributed by these municipalities. This is where this article comes in. Salet mentioned
that it is very important to have a set of rules (decision rules) which sort of lead the complex
process of cooperation between local parties. This element of rules is one of the inputs of the
action arena which I will explain in this summary.

Introduction
This article provides an initial framework for analysing all types of institutional arrangements,
and tries to figure out whether man can use a common set of variables that can be used to
analyse all types of institutional arrangements. Actually such sort of standardized set is
needed in order to guide, control and evaluate institutional arrangements and its behaviour. A
set of such variables would provide a framework for comparing institutional arrangements as
different as hierarchies and markets or as similar as monopolistic and oligopolistic markets.
This kind of framework can identify the major types of structural variables present to some
extent in all institutional arrangements, but whose values differ from one type of institutional
arrangement to another (the action arena).

Rules
States of the
World and Their
Transformations

Action arena
Situation

Actions

Results

Actor

Community

The action arena

The final goal of doing this is the ability to identify classic types of situations which may occur
in any and all types of institutional arrangements. For example, a particular combination of
values for these variables yields an action situation which has variously been called a
Commons Dilemma situation, a Prisoners Dilemma situation, or a Free rider situation.
Once an action situation is identified as having the structure of one of these dilemma
situations, predictions about likely behaviour can be made no matter whether the participants
are relating to an ocean fishery, an overcrowded bridge, or a classroom
Action arenas are this identified as an initial conceptual unit of importance for explaining
behaviour in diverse types of institutional arrangements. The values of the variables in an

action arena are viewed as dependent upon other factors. These factors (on the left side of
the first arrow) include three clusters of variables:

The rules used by participants to order their relationships

The attributes of states of the world which are acted upon in these arenas
The structure of the more general community within which any particular arena is place

Often these rules, states of the world and structure of the community are implicitly assumed
in models of action arenas. But in the real world few action arenas exist totally isolated from
other arenas. Thus you should always keep in mind the linkages with other arenas or
institutional arrangements. The term action arena refers to a complex conceptual unit
containing a set of variables called an action situation and a set of variables called an actor.
Both are needed to derive predictions about likely behaviour and results.

The action situation

This term refers to an analytic concept that enables an analyst to isolate the immediate
structure affecting an action process of interest to the analyst for the purpose of explaining
human actions and results. A common used set of variables to describe the structure of an
action situation include the following, these elements are necessary and sufficient to describe
the structure of most simple but interesting action situations in the public sector:

1. Set of participants: can always vary

2. Specific positions to be filled by participants: but there must always be participants in position to
have any structure to analyse
3. States of the world which can be affected (outcomes)
4. The set of allowable actions and their linkage to outcomes: similarly there must be sets of potential
actions that actors are authorized to take.
5. Level of control each participant has over choice
6. The information available to participants about the structure of the actions situation: all participants
must share some information about the situation before an analyst can even state that the
participants are in an action situation.
7. The costs and benefits assigned to outcomes and actions: how cost and benefits affect actions, and
thus, results, depend also on the resources and valuation patterns of participants
8. Number of times an action situation will be repeated
A change in any of above variables produces a different action situation. Within a particular
situation, a participant can only attempt to act in light of the opportunities and constraints of
that situation and the actors resources and values.

Actor
This can be a single individual or as a group functioning as a corporate actor. The term actions
refers to those human behaviours for which the acting individual attaches a subjective
meaning. At the most general level, the analyst puts himself into the position of each of the
actors in a situation and tries to reason through the objectives that the actor would pursue,
what resources they would bring to the situation, how much knowledge they have, how to
learn from experiences and so on. These assumptions about the actor become the
components of an analytical engine that gives motion in a model of an action arena, and
enables an analyst to predict the actions of participants and how these cumulate to produce a
set of likely results. An example of such an actor model is the rational choice model, which
assumes that human beings can process enormous amounts of information and calculate
them in order to make a rational choice. In real life, this extreme model is inadequate in

predicting behaviour of people in the complex and interesting action situations we live in,
instead of the perfectly competitive market. So instead of using one institutional analysis, one
should experiment with different approaches.
Dependent on the analytical structure of a situation and the particular model of the
actor used, the analyst can make strong or weak inferences about results. In tightly
constrained action situations with little uncertainty and strongly motivated participants in
selecting strategies of actions the analyst can make strong inferences and specific predictions
about likely patterns of behaviour and outcome. BUT, many situations are not like this. This
means: broader and changing strategies as a learning process of past actions. The situation
itself determines most of the behaviour. At this moment, predicting what will not occur, is the
only thing an analyst can do.
Action arenas as intermediate conceptual units
Underlying the way analysts model action arenas are implicit assumptions about the rules
individuals use to order their relationships, about attributes of states of the world and their
transformations, and about the nature of the community within which the arena occurs.

Rules
Rules are linguistic entities that refer to prescriptions about what behaviors (states of the
world) are required, prohibited, or permitted. You have to know the rules before you
understand the game. All rules are the result of implicit or explicit efforts to achieve order and
predictability among humans by creating classes of persons (positions) who are then
required, permitted, or forbidden to take classes of actions in relation to required, permitted,
or forbidden states of the world. Rules are linguistic entities that are contextual, prescriptive
and followable. You cant apply them everywhere. The game provides the context. Some
rules exist everywhere, independent of the context. Rules are prescriptive in the sense that
those who know the rules are accountable for following them. Rules provide information about
the actions an actor must perform, must not perform or may perform. Viewing rules as
affecting the values of variables in an action situation, rather than as directly controlling
behavior, helps one to understand hoe riles can be prescriptive while defining a set of
permissible actions. Rules are followable in the sense that it is possible for actors to perform
obligatory, prohibited, or permitted actions as well as it is possible for them not to perform
these actions. So, it is physically possible for actors to follow or not to follow a rule.
There are two types of rules: working and formal rules. The first are in use by
participants in on-going action arenas. They are the set of rules to which participants would
make reference if asked to explain and justify their actions to fellow participants. Over time a
rule may become a social habit. Formal rules are more dictated to a community of
participants. The relation between them varies from action arena, in time and place. Because
rules are not self-formulating, self-determining, or self-enforcing, it is human agents who
formulate them, apply them in particular situations, and attempt to enforce performance
consistent with them.

It is a great task to classify the different rules which influence the variables in the action
arena. Seven types of working rules can be said to affect the structure of an action situation
(for the explanation check table 1 in article, and table 2 for example):

1.
2.
3.
4.
5.
6.

Boundary rules: affect number of participants

Scope rules: delimit the outcomes and the actions which lead to them
Position rules: establish positions in the situation
Authority rules: assign sets of actions that participants in positions must, may or may not take
Information rules: affect the information sets of participants
Aggregation rules: affect the level of control that a participant in position exercise in the selection of

a node.
7. Payoff rules: affect benefits and costs that will be assigned to particular combinations of actions and
outcomes and establish the incentives and deterrents for actions.
Substantial changes in any one of these rules affects the structure of the situation. The set of
working rules is a configuration in the sense that the effect of a change in one rule depends
upon the other rules in use. These are all interdependent

States of the World and their Transformation

While the rule configuration affects all of the elements of an action situation, some of the
variables of an action situation are also affected by attributes of the states of the world and
their transformations. They affect the outcomes and actions and the linkages between them.
The same set of rules may yield entirely different types of action situations depending upon
the types of events in the world being acted upon participants. You can see the different
states of worlds as the difference between an American and European football, the size of the
field and the type of equipment. Sometimes, these physical attributes (states of the world)
are less important (like playing chess), in these cases the rules have a bigger influence on the
outcomes of the action arena.

The community
A third set of variables that affect the structure of an action arena relates to the community
within any action situation and set of actors occurs. These include the norms of behavior
generally accepted in the community, the level of common understanding potential
participants share about the structure of particular types of action arenas, the extent of
homogeneity in the preferences of those living in a community, and the distributions of
resources among those affected. The term culture is frequently applied to these variables.
Rules and the cultural context influence each other.

Linking action arenas

While the concept of a single arena may include large numbers of participants and complex
chains of action, most of social reality is composed of multiple arenas linked sequentially or
simultaneously.

Conclusion
The public sector is composed of many different types of situations in which individuals are
differentially led to engage in highly productive or, at times, grossly counterproductive and
destructive actions. Institutional analysis provides some of the tools needed for guiding and
controlling at least some aspects of the complex chains of action which compose the public
sector. But first we have to understand how complex systems work. Identifying the key
working parts of action arenas provides the 1 st step in a systematic effort to predict the likely
pattern of results to be obtained by individuals in particular types of arenas. This article has
attempted to provide a brief overview of a method of institutional analysis that can be used to
examine the question of how rules, in combination with other variables, affect the structure of
action situations and through this transformation affect the incentives and deterrents faced
individuals, the actions they select, and the cumulated results produced.

Urban Transformation and Strategic Planning

Kiser. L. and E. Ostrom (1982) The Three Worlds of Action: A Metatheoretical

Synthesis of Institutional Approaches. In: Ostrom, E. (ed.) (1982), Strategies
of political inquiry, Beverly Hills. Sage, pp. 179-222. (Blackboard)
Ostrom, E., J. Burger, C.B. Field, R.B. Norgaard, D. Policansky (1999) Revisiting
the commons: local lessons, global challenges. Science, Vol. 284, Issue 5412,
pp. 278-282. http://www.jstor.org/stable/2898207

This literature was under the Public Choice and Rational Actors theory paradigm.
Kiser & Ostrom

The papers intent is to show how individual behaviors create institutional change. To provide
metatheoretical framework to understand the complex links between institutional
arrangements (rules) and behaviors, microinstitutional analysis = emphasis on the
individual.
3 levels (Three Worlds):
Operational level: individual action
Collective Choice level: decision-making
Constitutional level: collective choice
5 working parts that explain individual behavior in institutional structures and the
aggravated outcomes.
1. Decision maker
a. Decision makers choose different strategies based on attributes of the situation.
2. The effected
a. Institutional arrangements are comprised of the rules that govern decision makers and
decision situations. Rules effect decision situations and individual choice based on those
situations.
3. Events/goods/services produced/consumed
a. Attributes of goods and events that help shape an individuals decision-making:
i. Jointness of use: Are the goods equally consumed or individually consumed?
ii. Exclusion: Public goods, once made attainable to all can no longer be exclusionary.
iii. Degree of Choice: Public goods force individuals to make some sort of choice either to
accept or reject it.
iv. Measurability: Public goods are hard to measure. Producers know imprecisely what theyre
producing, and consumers know imprecisely what theyre consuming. Private goods are easier
to measure because theres more control.
4. Institutional arrangements
a. There needs to be institutional rules developed to help regulate individual behavior in the
realm of public goods. Production of public goods requires the sanction of conditions which
require the public to share the costs so as to mitigate the free riders
5. Decision situations
a. Attributes of decision situations: # of decision makers involved, types of choices available,
linkages between actions and results, complexity, repetitiveness, types of outcomes,
possibilities of communication and interaction among decision makers

b. Changes in the attributes of decision situations will alter the attributes of the individual
decision maker.
Kiser & Ostroms analysis of the 3 worlds
1. Operational level Action- Individuals either take direct action or adopt a strategy for future
actions.
2. Collective choice Decision Making- collective decision making is made by officials
(including citizen officials) to determine, enforce, continue, alter, current institutional
arrangement and future actions (authority to impose sanctions)
3. Constitutional Choice Decisions about decision rules.
Only at the operational level does action flow directly from decision. 2+3 deal with planning
on future actions.
The nature of how situations are modelled, in turn, model individual action.
Ostrom 1999: Revisiting the Commons
Common Pool Resources CPR
The term common pool resource is used to refer to resource systems regardless of property
rights. CPR include natural and human constructed resources which 1) exclusion is costly and
2) exploitation by one user reduces the resource availability for other users.
When CPR users interact without rules (limiting access, defining rights/duties), 2 freeriding
forms arise: 1) selfish overuse, 2) all taking, no giving.
Methods to solve CPR problems: 1) restrict access; 2) create incentives (i.e. assign individual
rights/shares to the property)
Users perceive the benefits/costs of resourcesusers have to see the importance of
sustaining resources joint collective, self organize
National governments can help and hinder efforts to preserve CPR. For it to work, people have
to feel like the government is helping/facilitating their efforts, not completely taking over it.
Three Words of Action

ONLY INDIVIDUALS ACT ON THEIR DECISIONS WHILE A GROUP OF INDIVIDUALS DO NOT.

Set of transformative models that link institutions to the individual, to aggregate then analyze
their results-Simon Model:

Individual producers do not have enough information about decision situation

o Knows less about their environment
The outcome produced from an individuals profitability is most important
Producer satisfies own needs
o Not as focused on maximizing profits

Neoclassical Model:

More precise in decision making

o Knows more about environment
The range of profitability produced by an individual is most important
In a competitive market an individual values only profitability and works to

o Perfect the production of goods

o Maximize their profit

Institutions composed of

Decision makers
Community affected by decision
Goods// services for production and consumption
Institutions creating social norms// restructure decisions
Actual situation where the individual has to make their own choice
o Decision Situation: An array of choices that confront a decision maker
When choosing an alternative// unfamiliar choice, a pattern of
consequences usually develops, which generate aggregated
results: Transformation of individual acts into group results.
Hurwicz (1973): Decision Mechanism: Institutions are viewed as
devices that constrain or guide choices that individuals make

Institutional Arrangements: A set of rules that governs the number of decision makers
involved based on rules, events and community.

These arrangements classify how institutions or organizations operate

They help the predictability of decisions
Working Rules: Rules that evolve with institutional change

Organization: Participants involved follow rules to understand particular outcomes//outputs.

Rules are apart of ever institution

Consumption: Use of goods by one individual has an effect on other individuals

Howard Bowen (1943-44)

Separable Consumption: Consumed by one individual

o Reduces the availability of goods to others
o Choose to buy this product
Joint Consumption: Consumed by multiple individuals. Public good that is
simultaneous used.
o This good becomes highly accessible or non-excludable.
o Non-excludable Goods: Usually consumers do not have the option to
consume this good because it is easily accessible and low-priced.
Little choice about consumption
All consumers get the same product even if the want different
Little choice about the quality of public service associated with the
goods production
Little incentive to change this cycle

Once becomes public good// available to all consumers, almost impossible to make exclusive.
Level of Common Understanding: Can be achieved in a community if the market has
policies and rules that show universal cohesion

Lack of cohesion or agreement can distort costs and the success of a specific
market

The World of Action: Decisions at market level.

In a free society based in individuality, political and economic actors will create
and implement policies or reformation without public cohesion//no agreement
because consensus would take to much time
Plan for future:
o Schematic Framework: Considered an essential//vital element in
creating individual vision.

This framework is used to develop and define rules through

constitutional, collective and operational choice.
Collective Choice: Decisions made my officials that enforce
or alter actions within institutions
Constitutional Choice: Once decisions are made through
collective choice, rules are created to monitor and authorize
these decisions
Operational Choice: Action created as result of the decision
o Do not have to be implemented or enforced like
collective and constitutional choice do
These rules are used to test or check the validity of a institutions
principles
Institutional arrangements, the commodification of resources and the structure
of communities all limit individual choice.