The Meaning,Prospects, and Future of the Commons: Revisiting the Legacies of Elinor Ostrom and Henry George

Elinor Ostrom's work on the commons has convinced mainstream economists that “collective” governance of the commons can overcome the “tragedy of the commons” and “free‐rider problems.” Yet, a more systematic appraisal of Ostrom's work shows that it contains no concept of justice. Her idea of rights is extremely limited, often tied to the notion of joint, rather than equal, rights. Indeed, for Ostrom, the notion of the commons is socially separatist and not ecological. Ostrom uses historical examples, but without analyzing how common possession historically evolved and was undermined by external forces. Hence her proposed “collective action” to save the commons actually accelerates the real threats to the commons. A strikingly different and more holistic approach to the commons is offered by Henry George, who posits the commons as the most important path to social, economic, and ecological sustainability. Unlike Ostrom, who studied the commons “scientifically” to show that some goods are neither private, public, nor club‐based, George studied the commons to understand and remove injustice at the roots. His approach is more critical and certainly more relevant today in showing that another world is possible. However, George's work too, requires significant changes to update its framing of the meanings, prospects, and future of the commons.     

When territory matters: Employer associations and changing collective goods strategies

Recent research shows employer associations strategically responding to external challenges, from collective bargaining decentralisation, by altering their offerings of “selective” goods (to directly address threats to membership levels) and of “elective” goods (to revenues). Implicit is that traditional “collective goods” are irrelevant for achieving sustainability. That literature also suggests that territorial associations are more vulnerable than sectoral ones. In this qualitative, longitudinal comparative case study, we explore why and how two territorial associations, the largest each in Italy and Australia, have pursued sustainability by also innovatively enlarging their collective goods activities. This has involved shifting from bargaining leadership to promoting economic dynamism within their territories. Using metaorganisation theory and the resource‐based view, we explain how these associations realised their strategic advantages. Our evidence suggests that innovatively developing new collective goods may be another important way associations can improve their competitive positions.     

Taxation: The Lost History

Regular, periodic taxation is a function of modern government, a practice that arose only because the rent of land and natural resources was transformed from the traditional source of public revenue in the Middle Ages to private property, starting in the 17th century. In the earlier era, taxes (special exactions on ordinary income and daily necessities) were imposed only under unusual circumstances, usually to fight wars. The French Physiocrats and their student, Adam Smith, proposed that the best form of modern taxation would be based on the same principle as the medieval system—a fee derived entirely from surpluses, not imposed as a burden on production. This was actually what Adam Smith meant by “ability to pay.” Smith's sophisticated understanding of economic rent was, however, simplified and distorted by numerous economists throughout the 19th century, who buried the concept under layers of obfuscation. In particular, the substitution of “Paretian rent” for “Ricardian rent” committed the fallacy of composition by shifting rent from a social concept to a private, unit‐level concept, which caused social surplus to simply “disappear.” Bringing this “lost history” to light permits us to re‐evaluate how modern societies might benefit from Smith's physiocratic concept of taxation. This work not only traces debates about rent—for example, whether rent arises from risk‐taking, or whether a tax on rent raises commodity prices—but also discusses the practical benefits of taxing it today.     

Tragedy of the Partnership: A Critique of Elinor Ostrom

Elinor Ostrom thinks she has discovered a third way apart from private and government property: the commons. In her view, there is no “tragedy” associated with this third option. The present article takes strong issue with her. Our claim is that she has not properly distinguished between a commons and partnership arrangements. In the former case, outsiders cannot be excluded from entry; in the latter, they can. The reason for this confusion between the commons and private property in Ostrom's work is that she believes private property is possible only if government protects and enforces it. We show by using various historical examples that this assumption is wrong, and hence the central tenet of Ostrom's model of the commons fails.     

Simon Patten on Public Infrastructure and Economic Rent Capture

Reflecting the Progressive Era's reform agenda Simon Patten (1852–1922) argued that freeing markets from one source of economic rent (by taxing land rent) would merely leave the surplus to be taken by other monopolists and rent extractors (railroads, Wall Street trusts, and basic privatized utilities). To prevent unearned income (economic rent) from adding to the economy's cost of living and doing business, potentially rent‐yielding infrastructure should be kept in the public domain as a “fourth factor of production.” Instead of rentiers making a profit by charging access fees and user fees, the return to public investment should take the form of reducing the economy's overall price structure.     

Schumpeter's Challenge to Economists: History,Theory, and Statistics as Key Competencies and Sociology as a Vision for the Future

Schumpeter wrote that a “scientific” economist is competent in three “techniques”: economic theory, economic history, and statistics. In addition, he mentions economic sociology. The current interpretation is that theory, history, and statistics refer to aspects of research that can emerge in any field of science. Their content and relations can be clarified with Mach's writings. Economic sociology is not a technique within economics, but a part of general sociology. The rationale of economic and general sociology becomes clear by considering Schumpeter's interpretations of Marx's ideas. Schumpeter's ultimate ambition may have been a grand theory following Marx's vision.     

Racial Fractionalization and School Performance

The literature on racial “peer effects” suggests that diversity improves at least some students' school performance. However, a literature in economic development posits that diversity may negatively affect school performance by undermining the efficient provision of education. This article empirically tests this claim, which we call the “public goods channel,” by examining the relationship between racial diversity and student performance in Ohio's school districts. We find that moving from a completely homogenous school district to one in which two racial groups have equal population shares is associated with a 7–17.5 percentage point decline in the passage rate on the state math exam, holding per pupil spending across districts constant. These results suggest that racial diversity is negatively associated with school performance but that the public goods channel is not responsible for this relationship.     

Resource concentration,institutional quality and the natural resource curse

Employing panel data from 14 regions in Kazakhstan, this investigation aims to discover the effect of energy (point-source) and agricultural (diffuse) resource abundance on economic growth through institutional quality. A fixed effects panel data model and Roger's standard errors model are used to consider the possible endogeneity problem. Kazakhstan has two major export products, oil (point-source) and wheat (diffuse), and in theory these two products have different impacts on growth. Auty (1997), Woolcock et al. (2001) and Isham et al. (2005) found that it is the composition of resources, rather than any kind of natural resource, which is problematic for economic growth. The novelty of this research is that the natural resource endowments are considered as a nonlinear function of institutional quality. In contrast to others, we observe that it is not the type of natural resources that breeds economic failure, but rather their “overabundant” or excess production that is often associated with rent-seeking activities.     

Can Good Apples Be Mixed with Bad Economics? A Mengerian Critique of the Alchian and Allen Theorem

Abstract . The Alchian and Allen Theorem has been a popular staple of many economics classes since Armen Alchian and William Allen first introduced it in their well‐known text University Economics. The Theorem says that the addition of the same fixed cost to two similar goods will result in an increase of demand for the higher‐priced, “higher‐quality” good relative to the lower‐quality item. Response to the Theorem ranges from an informal comment that it is a “parlor trick” to it being called the “Third Law of Demand.” We review some of the literature, and use Carl Menger's economic analysis to challenge the Theorem's validity. Based on Menger's analysis, we conclude that the Theorem is not, in fact, a theorem because it is does not describe a general case, but instead only applies in some cases, thereby becoming, at best, a special case of Menger's more general analysis. Further, we find evidence that Alchian and Allen themselves unwittingly contradict their own argument elsewhere in one of their texts.     

Learning bad habits across generations: How negative imprints affect human resource management in the family firm

Organizational learning can be a key shared value that perpetuates the family's and the family firm's culture across generations. Imprinting theory helps to explain the impact that lessons learned and transmitted can have on the development of human resources in the family firm. However, the results of imprinting may not necessarily be positive, particularly when imprinting manifests itself in negative processes and expectations. Whereas imprinting and organizational learning are often associated with a “positive halo effect,” they have the potential to result in negative behaviors and deleterious firm-level outcomes. Employing imprinting theory as a framework, we highlight the potential dark side of imprinting within the family firm context and how it can damage human resource efforts and threaten company performance and firm survival. Finally, we suggest how bad habits may be broken and replaced with more effective routines so as to ensure the family firm's continuity and success.     

Value capture in hierarchically organized value chains

We study how the structure of negotiations in a value chain affects the distribution of value among its members. To this end, we generalize the Shapley value and the core to hierarchical bargaining situations. While the core yields no concrete predictions, the Shapley value analysis suggests that positions most conducive to value capture are those that allow to realize large complementarity gains. If the game exhibits “supercomplementarity,” then it is advantageous if a firm's negotiation partners are grouped into clusters. Using examples from the aircraft and white goods industries, we assess whether the firms’ actions are consistent with model predictions.     

Land Value Taxation in Vancouver: Rent‐Seeking and the Tax Revolt

At the beginning of the 20^th century, Vancouver obtained international acclaim as a “single‐tax” city. Supporters claimed that land value taxation was responsible for the spectacular growth of the city. Even critics believed that it had produced a building boom and declining rents. Yet, over several decades, the system was scaled back and ultimately ended in 1984. This article argues that the property tax revolt can be understood with Mancur Olson's model of collective action. Property owners are better organized than other parties impacted by housing policy because they have financial resources and a salient economic concern in housing. Thus, the special interests of property owners in higher values and unrestricted use prevailed over the interests of tenants and prospective buyers. While the property tax revolt was often articulated in the progressive language of ability to pay, when confronted with progressive counterarguments, it collapsed into explicit arguments for rent‐seeking.     

Modes of innovation,resources and their influence on product innovation: Empirical evidence from R&D active firms in Norway

Evolutionary theory of the firm argues that firms follow different approaches to innovation with implications for their performance. Consistent with evolutionary theory, this paper develops a taxonomy of innovation modes which capture the variation in firms' approaches to product innovation. The taxonomy is based on the open/closed innovation and exploration/exploitation literatures and identifies the following modes: “Open exploration”, “closed exploration” “open exploitation”, and “closed exploitation”. The paper theorizes that the identified innovation modes influence product innovation through their effect on the firms' technological and market resources. Using survey data from over 1000 R&D active firms in Norway analyzed with structural equation modelling it is shown how four modes of innovation are related to actual product innovation.     

A Dynamic Study on Ecological Disaster,Government Regulation,and Renewable Resources

This article develops a dynamic model to investigate renewable resource markets under different property rights. We find that different property rights regimes in renewable resource markets yield very different equilibria. Under private property rights, the valve point increases with the natural growth rate, productivity, number of firms, and marginal costs. Under common property rights, “the tragedy of the commons” inescapably occurs. This study suggests how to avoid ecological disaster by implementing a set of public policies.     

On the Economics of Moral Preferences

Abstract . The long‐standing critique of the “economic model of man” has gained new impetus, not least due to the broadening research in behavioral and experimental economics. Many of the critics have focused on the apparent difficulty of traditional rational choice theory to account for the role of moral or ethical concerns in human conduct, and a number of authors have suggested modifications in the standard model in response to such critique. This article takes issue with a quite commonly adopted “revisionist” strategy, namely, seeking to account for moral concerns by including them as additional preferences in an agent's utility function. It is argued that this strategy ignores the critical difference between preferences over outcomes and preferences over actions, and that it fails to recognize that “moral preferences” belong in the second category. Preferences over actions, however, cannot be consistently accounted for within a theoretical framework that focuses on the rationality of single actions. They require a shift of perspective, from a theory of rational choice to a theory of rule‐following behavior.     

Voluntary income clustering and the demand for housing and local public goods

Economists have suggested that wealthy communities use “fiscal zoning” in order to protect their tax bases. Such zoning would be unnecessary if tastes for local public goods were sufficiently correlated with tastes for the taxed good, residential property. The common notion of “bid rent” can be extended to derive a formula to show under what conditions fiscal zoning is redundant. Our information about the values of the relevant parameters is not sufficiently precise, however, to determine whether these conditions are met.     

A theory of supplier network-based innovation value

To understand how a supplier helps a buying company create value through innovations, studies have focused on a supplier's internal resources or its relationship with a buying company. Building upon this body of literature, we develop a theory of supplier network-based innovation value in this conceptual paper. This theory explains how a supplier's upstream and downstream value network can be a source of competitive advantage for a buying company. Specifically, it proposes that the levels and types of supplier innovation value is contingent on the configuration of a dual-ego value network, characterized by the locus and degree of buyer-supplier structural equivalence. This theory also explains how a supplier's ties with a buying firm's competitors can pose both opportunity and risk to buying company innovation. This theory contributes to the literature by showing when “seemingly undesirable” suppliers, due to a lack of technical capability or strong relationship with a buying company, might still be valuable to a buying company's innovation.     

The effect of the minimum wage for tipped workers on firm strategy,employees and social welfare

Millions of workers derive much of their income from tips and are subject to the “tipped minimum wage” that differs from the regular minimum wage. This article examines the implications of the tipped minimum wage and shows that increasing it may lead restaurants to adopt a compulsory service charge in lieu of tipping to extract the economic rent enjoyed by waiters under tipping. Because servers are better off with tipping, this implies that increasing the tipped minimum wage in an attempt to increase servers' income may achieve the opposite result. Moreover, increasing the tipped minimum wage may reduce social welfare.     

The CAPITAL in Social Capital: An Austrian Perspective

In recent decades economists started discovering the importance of the social dimension of economic interactions. Contemporary economics has borrowed several sociological concepts for its own use, among the most important being the concept of social capital. However, this transfer within disciplines did not occur without a loss—the nature of social capital in economics remains confused and obscure. The purpose of this article is to clarify it, specify the possibilities for its use, and discuss their limits. It is argued that economics once also possessed a view of human beings that was more “socialized” than the modern neoclassical Homo oeconomicus, and that this more “socialized” view still exists in the Austrian school of economics. Because this tradition of economic thought has also developed an elaborate capital theory, it can serve as an ideal source where we can look for inspiration in the current social capital debate. First, social capital is (re)defined along these lines as an individual's asset connected with recognized reciprocity (as opposed to interactions usually classified as “altruistic”). Then major critical claims about the relation between social and physical capital are answered and the connection between social capital, trust, and social norms is described.     

Analyzing companies' interactions with the Sustainable Development Goals through network analysis: Four corporate sustainability imperatives

The alignment between corporate strategies and the Sustainable Development Goals (SDGs) can be an indicator of long-term sustainability success. But which types of companies are most, and which are least, aligned with the SDGs? This paper scores how 67 economic activities—as a proxy for companies' operations and the goods or services they deliver—interact with 59 SDG targets. It then uses network analysis to define which activities are most and least aligned with the SDG Agenda. The results reveal four types of corporate activities, each having a strategic sustainability imperative: (i) “core activities” predominantly generate positive, while having few negative, impacts on the SDGs, challenging companies to scale their contributions to further align with the SDG Agenda; (ii) “mixed activities” have moderate/high degrees of both negative/positive impacts, posing a decoupling imperative; (iii) “opposed activities” provide few benefits yet cause significant adverse impacts, implying that companies must transform in order to better align with the SDGs; and (iv) “peripheral activities” have immaterial positive and negative impacts, creating an imperative to explore innovative avenues for creating SDG contributions. Detailed network graphs are presented that map companies' interactions with the SDGs and guide the creation of corporate sustainability strategies. Policy implications include the potential for using companies' activities as a lever for adopting a “nexus approach” to the SDGs.