When Elinor Ostrom won the Nobel Prize in Economics in 2009, she was the first woman to claim the award. Many in the Economics field had never heard her name. What she devised was a set of principles to help us govern the ungovernable—the resources we all share and rely on. These eight design principles tell us what it takes to manage “common-pool” resources on a local scale in a stable way.
Why is that so compelling? And how does it relate to IoT?
When there’s a common-pool resource—one shared by many people and/or institutions—it can be difficult to assign property rights to it and figure out how to manage it. Take water, for example. If there’s a lake bordered by houses and farms, who decides who can fish in the lake? Who decides when someone can dump farm waste into the lake? The lake doesn’t “belong” to anyone. In many situations like this, lakes are overfished and polluted because of poor resource management.
Political economists used to think that this “tragedy of the commons” was inevitable without strict property rights and regulation. If people were all allowed to graze cattle in a field, the field would inevitably become overgrazed; or—perhaps closer to home for many of our readers—if everyone were allowed to drive on a freeway, it would inevitably become congested at times when everyone deems it worthwhile to use. Without rules, how could it not? Even if there were rules, who would make and enforce them? This outlook seems grim in an era of stonewalled legislation for environmental protection.
However, Ostrom’s principles suggest that common-pool resources can be managed on a local level and without formal regulations.
Here are her 8 design principles:
When these principles are applied together, Ostrom observed that communities are able to achieve some “collective governance” over a shared resource like water or land. When citizens have the means to monitor their own impacts on a shared resource, they have more capacity to control it. Good communication and mutual trust between citizens is, of course, helpful if not critical to long-term stability and cooperation.
IoT and Blockchain Can Bolster Stable, Localized Conservation Efforts
IoT as a monitoring tool will only aid larger-scale conservation efforts when those closest to the effects of conservation have access to the data. There are two main ways in which IoT can aid the stable decentralization of conservation efforts:
Smart Monitoring of Conservation, Usage and Behavior
Recently, IBM has been the news for their work with real-time remote monitoring of groundwater usage in California. By installing sensors and collecting data about water extraction, IBM works with local partners to monitor one of the most vulnerable aquifers in North America. Accurate, real-time monitoring can help establish transparency protocols, build trust amongst stakeholders and provide critical data to measure against sustainability projections.
One approach to environmental conservation is the introduction of “permits” that users of a common resources can purchase and/or trade. For example, groundwater usage could be limited to X tons of water extraction per month. Each home or business in an area may receive the rights to a subset X tons of water per month; alternatively, one body (like the government, in some cases) may own all the permits and sell them to individuals and firms. If you don’t need to extract much groundwater this month, you can sell your permit to someone else. Often, these permits are capped to make sure water shares aren’t being sold at extortionately high rates.
In cases like these, it’s especially important that stakeholders have insight into the status of a common resource (like an aquifer), the rate at which it’s depleted, and who is using it. Remote monitoring technology can be hugely beneficial to this end, and it can help ensure that those affected by environmental policy have a say in how it’s constructed. Blockchain, as we’ll see below, can help secure the verification process of user behavior.
Using Smart Contracts to Verify Actions and Address Violations
Blockchain can be used to create a secure network of smart contracts that monitor environmental “transactions.” When someone uses their groundwater permits, for example, that usage is posted to a ledger and is verifiable by third parties. The “rules of the game,” per se, can be crafted on a local level. The method of verification, however, is respected by outside authorities.
Smart contracts can be introduced in many aspects of conservation. For example, incorporating smart contracts as a voting mechanism can allow local stakeholders to vote on new rules, vote on usage limits, vote on sanctions, or vote on reparations. What’s more, because it’s easier to identify violations of agreements, sanctions (if someone violates the rules of the group) can be made automatic. Penalties imposed on violating parties can not only be deducted automatically (using smart contracts), but they can also be intentionally graduated—in compliance with Ostrom’s 5th design principle.
IoT and blockchain together cannot make up for the flawed execution of other design principles. However, with a mind toward stable conservation, they can be wielded by communities in such a way that they facilitate and accelerate economic cooperation toward a shared future.