31 August 2015

Digital Economy transition: “must learn how to deal with Complexity”

The “Tragedy of the Commons” was elaborated by Garrett Hardin and published, for the first time, in the journal Science in 1968. The article described a dilemma in which multiple individuals, acting independently according to their self-interest, ultimately destroy a shared limited resource (commons) even when it is clear that it is not in anyone's long term interest for this to happen.

However, when economists began to look at ecosystems of commonly managed resources, he discovered that often they work quite well. At the end, Hardin admitted he should have called his article “The Tragedy of the Unmanaged Commons”.

There is another very interesting perspective. Professor E. Ostrom, (Indiana University) was awarded with the 2009 Nobel Prize in Economic Sciences (shared with Oliver E. Williamson) for the results she achieved in analysing how communities managed Commons (e.g., grazing lands, pastures and similar natural resources to their advantage.

The problem formulation was: in a world of depletable resources, where individuals have incentives for survival (that would undermine the long-term viability of such resources) how does coordination and cooperation emerge ?

E. Ostrom argued that, with the right information, productive discussion and trust-based institutions, communities can come up with win-win ways to manage commons, without being government-regulated or privatized. In synthesis, theory emphasizes how humans and ecosystems can interact to provide for long run sustainability and highlights how diverse arrangements (over resources) can prevent ecosystem collapse. Models can perfectly applied to future smart cities, as an example of use-case, or even – more broadly - to the ecosystems created by the Digital Economy subjected to the Softwarization transition.

The Nobel Prize lecture is available here. Among the main recommandations, conclusions: « Must learn how to deal with complexity rather than rejecting it; polycentric systems can cope with complexity »