Rethinking local commons dilemmas: Lessons from experimental economics in the field

A rather recent development in economics is the formal study of how human groups device ways of governing the coordination of actions that produce externalities without the need of a Leviathan with perfect information and costless ways of enforcing rules, or without the need to individualize the property rights over the resource to allow the invisible hand to coordinate choices and results. Social Capital is one of the terms proposed by leading authors like Putnam (1993) to explain those means (e.g. norms or rules) that groups use to govern themselves. SelfGovernance Institutions has been an alternative notion proposed by others like Ostrom (1990). Or a synonymous, Community Governance (Bowles, 1999) which also conveys the same notion. In general, economic analysis is now recognizing that individuals may put in place self-governed material and non-material incentives, which induce changes in behavior from self-oriented actions to group-oriented ones, which may produce outcomes that are collectively Pareto superior than those resulting from the purely selfish and short-sighted behavior of individuals. Usually these institutional arrangements achieve the result of correcting the failures of externalities without the intervention of an external agent or the rearrangement of property rights.