Our environment is filled with externalities

Not only do environmental problems refuse to conform to standard problems of conflicts between rights-holders, they often don’t even conform with our basic mental models of externalities. Sparks flying off a railway to start a fire in a field are imagined to affect the owner of that field more than everyone who breathes the air. (At least, they weren’t imagined to before wildfire smoke became such a prominent issue.)

When it comes to environmental damage, the solution to the problem isn’t the only thing that needs to be discovered. Often, even the appropriate scope of the problem is in play. Who contributed to a problem, who was affected, and who can provide a remedy, are not necessarily obvious. And often there’s not a single solution, but a solution with many contributing parts. 

This is where public choice and polycentricity, discussed by Jordan Lofthouse and Bobbi Herzberg on a recent Hayek Program Podcast, come into play.

“Polycentricity” is a technical term used to describe in which rules and plans for different groups of people exist at different levels that are overlapping, nested, and interacting. Polycentricity, says Herzberg, is not how people normally think of the world working. In the podcast she says,

We tend to think in terms that are simpler and more regulated or more regular—usually either central authority, top-heavy hierarchical relationships where power from the top is delegated down, or in decentralized arenas or confederation arenas where the power resides in the smaller or more localized levels and is aggregated up.”

But even though polycentricity is not how people think of the world working, it is how the world tends to actually work. The concept of polycentricity is an important one because it helps us to see order in otherwise chaotic-looking systems. What can look like a mass of undifferentiated activity in a neighbourhood might really be people operating under contracts, through community associations, running sports teams, on school councils, town councils, and for and through the municipal government—not to mention higher levels of governments. All of these relationships interact with, depend on, and adjust to each other. 

This is why in reality, most collective attempts to solve problems are neither top-heavy hierarchical relationships nor decentralized arenas, but also, they’re both. Different efforts operate parallel to one another or overlap and different initiatives collaborate. Some fail, but others succeed. In the process, the people involved can learn from their own experiences and from one another. 

People are people, people are political.

Herzberg and Lofthouse do not talk about to public choice explicitly until nearly the end of their conversation when they talk about behavioural symmetry. Behavioural symmetry means that people acting through government are just as likely to operate according to their interests as people acting in markets: people are people, wherever they’re operating in a market or a legislature. But public choice is baked into the study of polycentricity because of another of the key concepts of public choice: politics as exchange. 

Addressing the meta-problems mentioned above of deciding who is responsible, who is harmed, who can help, and what can be done to help before actually aiming for a solution to a social problem is the context in which politics as exchange takes place. It is through political exchange and negotiation that the answers to these questions are tested and discovered. 

People come together to tackle political problems because it is mutually beneficial for them to do so. Remembering that “people are people” and always motivated by self-interest puts some brackets on what we can expect from political action, but it doesn’t tell us political action isn’t worthwhile. 

Politics as exchange also explains one of the most important benefits of polycentricity: buy-in from participants. It is because governance is happening at a level at which people can effectively agree to a set of rules. Because those rules are generally agreed upon they are not only generally followed, but the people who have bought-in may monitor one another’s behaviour and even confront those who break the rules, making monitoring and enforcement cheaper and more effective than if it had to be accomplished through force. 

Adaptation, learning, and buy-in.

This is why polycentric approaches to addressing climate change matter. Lofthouse elaborates in the podcast: 

Climate change is not just one problem, it’s a multitude of problems that are overlapping and nested within one another. There are many causes of climate change. Burning fossil fuels…Well, that’s transportation and energy production, but it’s transportation in a whole bunch of different ways and energy production in a whole bunch of different ways…And the effects of climate change are also complex, overlapping, and nested. So sea level rise is a huge issue. Sea level acidification has different properties. Some places are going to be drier, some places are going to receive more rainfall. There are so many things going on at once when we talk about climate change. It’s this huge, complex social problem.

Climate change as an overarching, global problem is one that politics has struggled to solve. Different levels of wealth and technology, different levels of commitment to change, and different political motivations frustrate global, coordinated attempts to address the problem. 

But even if humanity could agree, it’s almost inconceivable that anyone could think it would produce a complete and effective action plan. No one seriously believes that cultural context, local knowledge, and economic realities aren’t relevant to how climate action is executed on the ground. 

And while there is disagreement about whether technology can “save us”, technology is certainly relevant. Complex, overlapping, and nested approaches to the problem of climate change allow different technologies to be tested, new technologies to be introduced, successful approaches to be adopted, and failed approaches to be discarded. This is in contrast to large-scale projects that buy into a single, existing technology that may not be especially effective, or may be overtaken during the lifetime of the project, but is harder to abandon because of the scale of the undertaking. 

Again, the advantages of polycentricity isn’t enough to rule out large, centralized approaches on its own. Global-scale approaches like the Montreal Protocol to combat global problems (in that case, fighting degradation of the ozone layer) can be useful. 

They just can’t be, and never will be, all there is.  



Quotations from the podcast are edited for clarity and flow. 


Read more: 

Elinor Ostrom: 1933–2012 at Econlib.

Adam Smith in the Anthropocene by Paul Crider at Adam Smith Works.

EconTalk: Peter Boettke on Elinor Ostrom, Vincent Ostrom, and the Bloomington School

James Buchanan Intellectual Portrait Series Part 1 and Part 2 at the Online Library of Liberty

Elinor Ostrom | Prize Lecture, Beyond Markets and States: Polycentric Governance of Complex Economic Systems.