The 12 Economists of Christmas: Elinor Ostrom

The Christmas tree is one of the most enduring symbols of the holiday season. It’s noteworthy that this tradition has lasted for so long, particularly when you consider the resource constraints that could have imperiled its future.

When resources are shared communally, things like fish in a lake or lush forests of Douglas firs can quickly become depleted. That’s because it’s often difficult to control or limit others’ use of the resource, which leads to a “race to bottom” as everyone tries to get his or her fair share before the resource is completely exhausted.

Traditionally, economists deem this issue a “tragedy of the commons.” The interests of private actors and the public good are pitted against each other, as every individual fisher, trapper, or lumberjack has an incentive to gather as much of a resource as possible, as quickly as possible. When it comes to Christmas trees, the lumberjacks in a communal forest who can cut down the most trees may profit for a few years, but eventually they, as well as the public, will be out of luck. It takes nearly a decade to grow a Christmas tree; so once they’ve all been cut down (even if a new tree is planted for every tree cut), there will be no Christmas trees available for years.

Of course, this doesn’t typically happen with Christmas trees. And it’s not because the government regulates the buying and selling of Christmas trees or because a private company has a Christmas tree monopoly. Understanding how communities are able to overcome problems like the tragedy of the commons was a focus of today’s “economist of Christmas,” Elinor Ostrom.

Ostrom and her husband, Vincent, who both taught at the Indiana University at Bloomington, spearheaded the development of the “Bloomington School” of economics, which examined how communities use trust, collective action, and cooperation to overcome institutional failures. Notably, the Ostroms identified a coordination approach that was neither “private” nor “public,” but a bottom-up kind of blend of both.

Elinor Ostrom’s work demonstrated exactly how humans find ways to behave that don’t require either heavy-handed government interventions or corporate privatization schemes. Through the years, communities develop their own bottom-up, trust-based mechanisms—such as social monitoring, reputation systems, and cultural norms—to conserve resources and manage the commons. For example, the small mountain village of Törbel, Switzerland, developed communal rules on grazing and tree-felling rights that have preserved its pasture and forest resources since around the 13th century without government or “private” monopolization. The end result is enduring traditions like the Christmas tree, which are supplied in adequate numbers so we can all enjoy them.