[Voice of Blockchain] an analytical framework for solving the problem of "institutional supply" of Commons governance

No matter how well a set of rules works in a set of environmental and economic conditions, some important changes -- such as a fourfold increase in resource prices -- are a major challenge to whether the old set of rules can continue to produce effective and fair outcomes.
But the supply of institutions/new institutions is a profound problem, which is equivalent to the supply of another public good, with a second-order collective dilemma.Even if the returns are equal, rational people seek to secure their own interests for free, and the incentive to free-ride undermines the incentive to solve the collective dilemma.
According to the experiences and lessons of the public land resource occupiers in changing the system, Eleanor established a system selection analysis framework for system supply.
The framework to determine the "biggest influence decision making for people to change the rules," a set of variables and the relationship between the variables, but its role is not let us start from it to get accurate system supply, but determined in different environment and different economic incentive structure, institutional changes must answer the question.
Once the answers to these questions are clear, we can predict the strategies/institutions that people may choose and the possible consequences of that choice.
If the "8 design principles that should be included in the successful governance system of the Commons" solves the problem of "what should we do" when formulating the governance system of the Commons, this paper solves the problem of "how to do", that is, what specific rules should be selected under the condition of following the design principles.
Overview of the variables that affect institutional choice
A person's behavior choice in any particular situation depends on how he understands, views and evaluates the expected benefits and expected costs of the behavior, which in turn are affected by internal norms and discount rates.
Therefore, the variables that influence people to make institutional choice mainly include expected benefits, expected costs, internal norms and discount rate.
[Voice of Blockchain] an analytical framework for solving the problem of "institutional supply" of Commons governance
A better theoretical attitude is not to make institutional changes based on the results of a mechanical calculation, but to make institutional choices based on an informed assessment of uncertain benefits and costs.This is why Eleanor used this set of variables as an analytical framework rather than as a computational model.
How to evaluate the benefits?
In making institutional choices, how individuals evaluate expected returns depends on how the revenue (or loss) flows under the substitution rule compare with the revenue (or loss) flows generated by continuing to use the existing rules.Participants or analysts need to answer the following questions:

1. Compared with existing rules, how will the expected traffic of resource units change after using alternative rules?
2. Compared with existing rules, how will the predicted value of resource units change after using alternative rules?
3. Compared with existing rules, what will happen to resource quality after using alternative rules?
4. Compared with the existing rules, how long will the resource regeneration cycle be after the use of alternative rules?
5. Compared with existing rules, will conflicts be reduced, unchanged or increased after using alternative rules?
   How easy it is for participants to answer these questions depends on the following facts:
6. Objective conditions of public pond resources.
7. Types of information formed by the current system and made public to people.
8. Specific contents of existing rules and alternative rules.
   Furthermore, whether the participants can accurately assess the benefits after rule changes depends on the following variables:
9. Number of occupants;2. Scale of public pond resources;3. The variability of resource units in time and space;4. Existing conditions of public pond resources;5. Market conditions of resource units;6. Number and type of conflicts;7. Availability of relevant data of variables 1 to 6;8. Current rules used;9. Proposed new rules.
   To be clear, the profitability of a rule change is not a simple fact of life in the world. It must be found by searching, organizing, and analyzing.
   How are costs assessed?
   There are two important costs that affect people's choice of institution:
10. Rule switching cost: the upfront cost of switching from existing rules to alternative rules.
11. Cost of supervision and implementation: the net cost of supervision and implementation of new rules after switching to alternative rules.
    Conversion cost is the resource that needs to be invested in the process of rule conversion. If the cost is higher than the net profit after rule change, there is no need to do further cost calculation, and the occupant will retain the current rule whose profit is lower than the alternative rule.
    The current collective choice theory believes that many variables have an important impact on the evaluation of conversion cost, including:
12. The number of people making decisions.The conversion cost is positively correlated with the number of people making institutional choices;
13. Heterogeneity of interests.There is a positive correlation between conversion cost and the heterogeneity of stakeholders;
14. Rules used to change rules;
    Leadership skills and capital.When rule changes are led by insiders, switching costs are lower;Although the total conversion cost is not affected by the leader capital, the possibility of paying the conversion cost is positively correlated with the leader capital.
15. Types of proposed rules;
    6, change the rules of the strategy.If the occupiers start with low-cost reforms, they can gain experience in changing the rules before those reforms that require substantial switching costs;
16. Autonomy to change rules.If there is a substantial legal or illegal fee to be paid for permission to change the rules, the occupier may not attempt to change the rules.Occupiers living in systems where officials have a big say do not offer much institutional innovation or change compared with areas where people have more autonomy.
    If the cost of rule switching is acceptable, the cost of monitoring and implementing the new rules should be assessed.It takes time and resources to observe the behavior of the occupant, evaluate whether the result of the behavior is permitted by the rules, enforce the rules, and so on.
    Monitoring and implementation costs are mainly affected by the following variables
17. Scale and structure of public pond resources.The larger the resource scale, the higher the cost.
18. Exclusivity.The primary cost of exclusion is the operational cost of stopping unauthorized users from using resources.
19. Technology occupation.The design of strengthening the occupant to observe each other's resource occupation can help to reduce the cost of supervision and implementation.
20. Market arrangement.The easier a system is to document and disseminate information about daily activities, the lower the cost of oversight.
21. Proposed rules.The more frequently the rules require oversight, the more resources are expended.Rules that explicitly prohibit certain actions have lower oversight costs than rules that require more information to determine whether actions are prohibited.
22. Legality of rules.The government's recognition of the legitimacy of local rules in a given context affects costs.
    Identify internal norms and discount rates
    How people evaluate alternative rules also depends on the norms they internalize and the discount rate they use.
    The internal norm reflects the individual's evaluation of his own behavior and strategy, and it is often the internalization of the Shared behavior norm.In other words, a group of people who have been interacting together for a long time do not view what is perceived as wrong behavior as an alternative to the existing rules.
    The incidence/approval rate of a behavior in a group that strongly forbids it is lower than in a group that does not blame the behavior, even if the behavior is highly rewarding.
    The discount rate that people use, how individuals discount future earnings, is the time span over which they think.
    The discount rate depends on a number of factors, such as whether people expect their children to continue to benefit from public pond resources in the future, and whether people have an opportunity to get a faster return on investment in other environments.
    The discount rate for occupiers who enter economies with other opportunities is higher than that for occupiers who believe that their own and their children's main economic income will depend on a pool of public resources.
    The discount rate is also related to the degree of security in the economy in which the occupier is located.Occupiers who doubt there will be enough resources past the end of the year will be given a high discount rate for future returns;If no matter what the occupant does, the public pond resources may be destroyed by the actions of others, and the occupant will also give a high discount rate to the future.
    The discount rate is also influenced by the perception Shared by the particular society or local community in which the occupier resides in comparing the relative importance of the future to the present.
    What are the characteristics of effective system supply?
    The net benefits and costs resulting from the change in the rules for public pond resources are not calculated independently and directly, but are assessed by different individuals in highly uncertain and complex environments that are further complicated by the strategic behavior of others.
    All human assessments have a number of known and unknown biases.For example, people attach more importance to the potential loss than to the potential gain of the same amount. From this point of view, we can make a prediction about what kind of new rules people tend to choose.
    At the same time, when there are indicators of resource deterioration or people believe a "crisis" is imminent, they will be willing to accept even new rules that restrict their use of resources.
    The ability to make accurate estimates of events that occur on a frequency basis is also limited.They tend to pay much more attention to recent events than to previous ones.The rule change was supposed to take place after a series of relatively bad events in public pond resources, rather than at a relatively good time.
    By analyzing a series of variables that influence people to make institutional choices, and summarizing the experience and lessons of resource occupiers in public ponds in changing institutions, Eleanor summarized the characteristics of more effective institutional supply:
23. Most occupiers believe that they will suffer if alternative rules are not adopted;
24. Most occupants are related to proposed rule changes;
25. Most occupiers are willing to continue production activities on public pond resources, that is, their discount rate is low;
26. The information cost, conversion cost and implementation cost faced by the occupier are low;
27. Most occupiers have a mutually beneficial consensus and believe that this consensus can serve as the initial social capital.
    The above characteristics are weakly ordered, that is, from 1 to 5, the importance of the influence on people's choices is reduced successively, with 1 being the most important and 5 relatively less important.
    Look to the future
    An analytical framework for institutional provision illustrates the complexity of the variables that must be discussed when people in real-world situations attempt to formulate and update rules to improve their personal and common interests.However, no matter how complex, many successful cases show that the occupiers are capable of providing effective institutional supply for themselves, thus solving the problem of governance of Commons.
    The governance of public affairs provides a series of design principles and analytical framework for the governance system of the Commons, but this does not mean that we should limit our exploration in this field to specific levels and specific issues.
    Eleanor suggested we value at the end of the book Hobbes, montesquieu, Hume and Adam Smith, Madison, Hamilton, tocqueville and many other great scholars in their theory provided by means of analysis, in addition, should also be by means of public and collective choice theory, transaction cost economics and new institutional economics, law and economics, game theory and other research results.
    The governance of the Commons is a challenge, both for scholars working in the social sciences and for communities striving in reality to avoid the tragedy of the Commons.It needs to be further promoted under the guidance of theories and models in the empirical research of real scenes.