Ostrom provides a framework through which to investigate specific collective action institutions. Her major contribution has been on studying collective institutions that work around for natural resource management, especially regarding how local communities in different parts of the world have managed common poor resources. Since savings groups are also collective action institutions, I examine this framework as it has the potential to offer a much more specific focus to the analysis of these groups. According to Ostrom (2005), the researcher has first to choose the action arena that is relevant for the analysis. In figure 2.1, the action arena consists of the actors (participants) and action situation, with exogenous variables also affecting this situation. Ostrom contends that the key exogenous variables are biophysical and material conditions as well as the attributes of culture and rules. The two foremost are important for Ostrom because, as explained, she deals mostly with common property resources like land and water. Evaluative criteria are being used to assess the performance of the system by examining interactions and outcomes. There is a feed-back loop from outcomes to
44 participants and action situations such that the outcomes over time can change both of these factors. Further, the outcomes can also change the exogenous variables. Nevertheless, when action situations are analysed, the framework treats exogenous variables as fixed. Ostrom claims that if the actors perceive that the outcomes arising from interactions are positive, they are more committed to sustain the structure of the action arena. Whilst if they are not content with the outcomes, they might want to change the structure of the situation or to leave the action arena.
Figure 2.1. A framework for institutional analysis
Source: Ostrom 2005, 15.
In order to better understand the action arena, an institutional analyst needs also to the exogenous variables. Ostrom (2005) claims that the key issues influencing the action arena are (1) “the rules that are used by the participants to order their relationships, (2) the biophysical/material conditions that the action arenas deal with and (3) the structure of the more general community within which any particular arena is placed” (Ostrom 2005, 15).
Rules: These and institutions are in Ostrom’s terminology very close to each other, regarding which she states that
“Institutions can be defined as the sets of working rules that are used to determine who is eligible to make decisions in some arena, what actions are allowed or constrained, what aggregation rules will be used, what procedures must be followed, what information must or must not be provided and what payoffs will be assigned to individuals dependent on their actions… All rules contain prescriptions that forbid, permit or require some action or outcome.
45 Working rules are those actually used, monitored and enforced when individual make choices about the actions they will take” (Ostrom 1990, 51).
She proposes that (working) rules are known to everybody in the groups or at least the majority and that they are, at least to some extent, monitored and enforced. If only a minority of group members is aware of a ”rule”, or certain ”rules” are not monitored or enforced, according to her definition then it is not a rule. She also emphasises the fact that rules do not have to be written or come from formal legal procedures. In reality, institutional rules are often created by individuals who want to get improved outcomes from the action situations that they are in, i.e.
people who are trying to solve their problems and to achieve this create rules (Ostrom 2005).
Norms are not mentioned in Ostrom’s (2005) framework, which might be because she usually tries to formalise the collective action situations and this is difficult to do with norms.
Elsewhere, Ostrom (2007) has defined the norms and rules in the following way: “Norms represent preferences related to prescriptions about actions or outcomes that are not focused primarily on short term materials payoff to self.” Rules are fairly close to norms, but “carry an additional assigned sanction if forbidden actions are taken and observed by a monitor. For rules to exist, a particular situation must be linked to a rule-making situation and some kind of monitoring and sanctioning must exist” (Ostrom 2007, 12-13). Probably, social norms fit better under the values of the community in Ostrom’s framework.
Values of community: Key attributes of the community that affect in important ways the action arena are the generally accepted values of the community, its equality or inequality and its size. According to Ostrom, the term culture is often used to describe the values of a community and cultures in turn have an impact on the mental models of the participants.
Ostrom claims that if all participants in a common pool-resource situation come from the same community, sharing some key values and following them, it is much easier for them to agree on certain key rules. However, if they come from different communities, speak different languages and do not share all the key values, agreeing on key rules for using common-pool resources is much more challenging (Ostrom 2005). Despite Ostrom (2005) stating that in some action situations participants may start from highly unequal positions and the more powerful might receive additional net benefits through their position, social institutions (e.g. class, gender) are not explicit in her framework nor does she discuss the power dimensions of social institutions.
Biophysical and material conditions: This is the third external element that according to Ostrom substantially affects the action situation, which is understandable since, as aforementioned, she deals mostly with common property resources. The relevance of material conditions is in some
46 action situations more important than in others. For example, in a chess game the rules define almost every aspect of the game and the material attributes of the game are fairly insignificant (Ostrom 2005). Ostrom (2005) claims that the structure of most of action situations can be explained and explored by using the variables presented in figure 2.2: (1) participants filling (2) positions, (e.g. chairperson of a group, secretary, member of the group etc.) (3) actions that participants in positions can take, (4) potential outcomes, (5) information that is available to the participants about the actions and outcomes, (6) the control that participants have over the actions and outcomes and (7) costs and benefits – incentives and sanctions that are assigned to the actions and outcomes (Ostrom 2005).
Figure 2.2. The internal structure of an action situation
Source: Ostrom 2005, 33.
Ostrom claims that if we need to compare different action situations and possibly improve the outcome of them, a coherent framework is required so as to be able to begin to think about the different types of rules in terms of whether and how they impact on or change the action situation. In figure 2.3, the different types of rules that affect the action situation in groups are presented.
47 Figure 2.3. Different rules affecting the elements of an action situation (Ostrom 2005)
Source: Ostrom 2005, 189.
• Position rules define what positions groups have (e.g. chair, secretary, treasurer, members)
• Boundary rules or exit and entry rules define who is eligible to enter a position, through what process potential participants enter and how an individual may leave a position
• Choice rules specify what a group member in a particular position must, must not or may do.
• Aggregation rules determine whether single participants can make the decision or whether several or all are needed to support the decision.
• Information rules determine how information should flow between participants, what information should be communicated to members and what should not be shared with non-members as well as in in what form the information should be communicated
• Payoff rules determine the rewards (incentives) and sanctions to specific actions that have happened.
• Scope rules are outcome targets that regulators set for the collective action situation Even though Ostrom considers the classification of rules important, she points out that it is not only the rules that impact on the different components of the action situation, but also the
48 attributes of the community. Ostrom (1990) also defines three different categories of rules:
operational, collective-choice and constitutional rules. Operational rules are nested in collective choice rules which are in turn nested in constitutional rules.
1. Operational rules deal with day-to-day operations of the groups, e.g. who gets resources (in savings groups e.g. who gets loans), who monitors others, what information should be shared with other group members and what are sanctions if someone does not follow the rules.
2. Constitutional-choice rules determine who is allowed to participate in the group and how operational rules are changed.
3. Constitutional-level rules determine how the lower level rules can be change. For example the rules that determine how the group’s constitution can be changed are rules at the constitutional level.
This categorisation has a lot of similarities to Williamson’s analysis of levels of rules, but lacks his embeddedness level. This demonstrates the observation made earlier that Ostrom’s framework does not deal with social institutions and norms.
Ostrom (2005) has also sought to identify design principles for robust collective action institutions. She suggests that the common features of successful group- based institutional arrangements required are:
1. Clearly defined boundaries. The boundaries of the resource systems as well as the individuals or households that are allowed to use the resource
2. Proportional equivalence between benefits and cost. The benefits for each resources users need to be in relation to the costs for resource users.
3. Collective choice arrangements which allow those affected by operational rules to participate in crafting and modifying them. “ These rules take time and effort to develop, try out, modify and then experiment again. Users who have been engaged in this process for some time understand the rules that they have crafted, agree why they are using one rather than another and tend to follow their own rules to a greater extent than those that are imposed on them “ (Ostrom 2005, 263-264).
49 4. Monitoring arrangements: Who is monitoring that the group rules are followed and do
they face appropriate incentives given the challenge of monitoring?
5. Sanctions and enforcement: What are the sanctions that the group is authorizing and can they be adjusted so that someone who makes an error that is a small rule infraction is sufficiently warned so as to ensure longer-term compliance without trying to impose unrealistic sanctions? Moreover, are sanctions graduated in the sense that the more serious the offence against the group, the more serious the sanction? In groups that apply graduated sanctions enforced by local monitors, the first sanction is not significant, since the main purpose is to notify both the rule breaker as well as all the other members that rules matter and that the leaders are aware that some members are not following them.
6. Conflict resolution: What local mechanisms exist to resolve conflicts arising over the use of this resource?
7. Minimal recognition of rights to organize. The rule-making rights of community members should respected by outside authorities.
In the case where resources are part of a larger systems a design principle of nested enterprises is needed
8. Nested enterprises: “Appropriation, provision, monitoring, enforcement, conflict resolution and governance activities are organised in multiple layers of nested enterprises”(Ostrom 1990, 90).
Initially Ostrom (1990) developed these design principles for common property natural resource institutions. However, later Ostrom (2005) broadened the institutional analysis to include all kinds of institutions including private associations.
These design principles suggest how better outcomes in terms robust collective action institutions can be achieved. Hence, while Ostrom does not propose how processes of long term institutional change do in fact take place, she does suggest under what conditions they might be effective.
50 Ostrom (2000) claims that rules developed within the group can operate as well as those externally provided on the condition that the above eight features are taken into account. She further claims that if external rules are imposed on the group, it does not develop internal rules and is not willing to enforce those from the outside. This might be one of the reasons why joint liability does not operate as well as has been suggested by some of the theoretical models.
However, Ostrom does contends that if external rules are not imposed on the group, they are able to develop their own that they themselves will be willing to enforce (Ostrom 2000).
To conclude on Ostrom, the fact that in her framework for institutional analysis (figure 2.1) there is a feedback loop from outcomes to action situation and to exogenous variables implies that it is dynamic and can be used for analysing change within institutions, although this does not operate for the rather longer term timescales of North’s approach. Further, the internal structure of an action situation (figure 2.2) and the different rules affecting it (figure 2.3) enable institutions (rules) to be analysed as distributional instruments in relation to power in action situations. However, because Ostrom does not deal with how change occurs, nor concentrate on politics and power or compliance, it is necessary to incorporate Mahoney and Thelen’s concepts into the analysis. The next section begins to address this by drawing on the work of Mahoney and Thelen.