Arild Vatn

characterisation of the relationship between deliberation and institutions by turning to the work of Arild Vatn.

The anecdote is important for several reasons. First: the Ostrom quote. Vatn here is referring to Governing the Commons (Ostrom 1990, pg. 44), stressing the role of specific behavioural assumptions (opportunism) for the analysis of institutional arrangements in New Institutional Economics. This aspect has been dealt with above. A second important aspect is that other approaches may exist and explain behaviour and that “circumstances” may dictate that – Standard Economics treat all circumstances in the same way, postulating opportunism all the way through. This aspect too has been addressed above, while introducing multiple rationalities. Here we attach however to the third point: exposure. It’s not just that Standard Economics deals with only one type of rationality (opportunism): it considers it as the only kind of rational behaviour. It may be that nobody wants to be a ‘sucker’ because nobody wants to be irrational and being a sucker implies just that.

In the anecdote, the exposure of the student Arild Vatn to Standard Economics over the years seems to have strengthened exactly that kind of syllogism, at the cost of an (otherwise commonsensical) circumstance-dependent approach. This is a new

element: many of the authors and schools of thought portrayed so far have stressed that there’s more in life than opportunism; none has stressed that the motivation one applies may be the product of the motivation one is exposed to, be it in words or in deeds. Finally, brain science has worked as an eye-opener. Differently from Dan Bromley, Arild Vatn grounds much of his work on institutions on experimental findings from behavioural sciences, Experimental Economics in particular. Let us therefore briefly introduce a few, paradigmatic experimental settings relevant for Vatn’s theory of economic institutions.

1) The Ultimatum Game – The ultimatum game consists of a series of bids between two actors. One actor obtains a certain endowment (usually money) and has to decide how to share it with his/her partner (the other actor). In turn, the other actor has the option to accept the share or refuse it – in which latter case none of the two actors gets anything. “Rational” individuals would be expected on one hand to accept whatever offer, as something is always better than nothing, no matter how little.

Based on this reasoning, actors deciding on the sharing can be expected to share as little as possible, since, rationally, their likely aim is to maximise their own benefit.

Empirics reveal instead that “unfair” shares are refused systematically more often than balanced ones and that individual are ready to make sacrifices so as to sanction

“unfair” behaviour (Bowles and Gintis 2000; Gintis et al. 2005, pg. 11-13; Fehr and Fischbacher 2004). The maximisation of the material payoff seems therefore not to be what best describes the actors’ behaviour, unless hypothetical repetitions in the future with swapped roles are taken into account¹¹. A less convoluted way of

describing what individuals seem to be after is instead a certain blend of the material payoff and the immaterial benefit of “fairness” – what Bowles and Gintis define strong reciprocity (Bowles and Gintis 2000, pg. 1416; Gintis 2000; Gintis et al. 2005).

Interestingly, results get closer to the “rational” prediction if actors play against a computer.

2) The Common Pool Games – Common pool games foresee actors harvesting a simulated public good in the form of a fishery, a forest, a water reservoir etc. The simulated good presents a certain regeneration rate, so that, in theory, actors can coordinate and achieve a sustained harvest over a plurality of rounds. The actors’

ability to harvest is, in total, higher than the regeneration capabilities of the resource at stake, so that a coordination problem arises so as to limit the pressure on the resource and avoid its depletion. The outcomes of these type of games generally show that Hardin’s prediction holds true only to the extent actors are isolated from one another: as soon as they have the ability to talk, see one another and possibly devise their own rules, the depletion of the resource is at least slowed down if nor halted and reversed (Cardenas et al. 2008; Sethi and Somanathan 2005).

3) The Day Care Fees – A Day Care centre in Haifa, Israel, introduced a fee so as to disincentive the late arrival of parents picking up their children. As an effect, the number of late arrivals increased instead of decreasing: parents felt more

comfortable with arriving late as they could make up for it by paying the fine. What is more, the fine was perceived as a price for additional minutes of child care, a price one doesn’t mind spending if that frees more valuable time. Interestingly, an increase

11 Experimental settings control for that too, though.

of the fine eventually reduced the late arrivals, but it never brought it back to its original, pre-fee level. See Gneezy and Rustichini (2000).

4) Protest Bids and Valuation – Monetary Valuation of environmental features is an equally central and controversial branch of Environmental Economics. It consists in the elicitation of the monetary values of given species or entire ecosystems via questionnaire (stated preference), functional equivalence (revealed preference, hedonic pricing) or similar methods (e.g. travel costs method). This approach generally assumes specific characteristics of the preference sets and overall motivation of the respondents. In particular it assumes that payments are always possible and sensible. Spash and Hanley (1995) and Spash (2000; 2006) have dealt with the analysis of “protest bids”, that is, of those questionnaires left blank or

providing unlikely figures in the fields meant for bids. The studies show that

respondents with a stronger environmentalist attitudes have also a stronger tendency towards protest bids. A possible interpretation is that monetary figures make little sense for this category of people or, conversely, that the values those respondents attach to the environmental features at stake can hardly be expressed as bids in monetary figures (Clark et al. 2000).

A few tenets have general value for all settings: a) opportunistic utility maximisation is seldom a convenient description of the way individuals can be expected to behave;

b) the settings in which individuals interact seem to determine the way they structure their interaction; c) exposure to different “logics” and “incentives” for action can change the way individuals interact; d) assuming opportunism may lead to surprises in the way individuals react to those incentives and thus to arrangements performing differently then expected. Consequently, Vatn builds up a theory of economic

institutions with specific reference on resource use and environmental governance arrangements which sees the latter as fora for diverse, competing logics for action (Vatn 2007) feeding back on the rationality structure of those individuals exposed to the institutions at play (Vatn 2005b, 2009).

In Vatn’s work, institutions emerge from internalised logics for action, producing habits which may, over time, blur the original functional rationale behind the institution itself (Vatn 2005a, pp. 31-32). Along with Crawford and Ostrom (1995), institutions translate into conventions, norms and socially sanctioned rules. What is more, institutions produce regularity in life, transfer meaning to things and actions and allow for the structuring of expectations (Vatn 2005a, pp. 82-83). Finally,

institutions represent the collective definition of which/whose interests are to count in a specific situation. They thus perform as social devices for conflict resolution in a world of scarcity and of interconnected resources.

All assumptions enlisted above while “setting the stage” for Institutional Ecological Economics play a role in Vatn’s idea of institutions. The one concerning multiple rationalities is probably the most prominent, given the intensity of his critique of rationality as maximising and his focus on the existence of a “We-rationality” next to an “I-rationality” (Vatn 2005a pg. 113-118; pg. 122-126; Vatn 2005b; Vatn 2007). This attaches to an idea of context-dependent rationality as a product of the diversity of institutions by which human life is surrounded. On the valuation side, as a direct implication of institutions that entail meaning and therefore value to things, the idea of a limited comparability of values also plays a role, while the interconnectedness of the environment strongly affects Vatn’s take on externalities (Vatn and Bromley 1997) and more in general on resource regimes (Vatn 2005a, Vatn 2007).

Through a similar approach we can derive insights directly at the level of RQ3, dealing with those concepts and criteria distributing entitlements and obligations among actors, with reference to a specific ecosystem. The idea that specific

situations are dealt with functionally by ad-hoc institutions that foster ad-hoc types of rationality among individuals leads us to consider resource regimes as bundles of heuristics aiming at producing a contextually defined “common good”. Based on available knowledge, the latter may encompass the preservation of a given resource or even represent values such as competition or individual achievement. Institutions define what people are after in specific situations and thus how they read goals and allowable actions out of the set of entitlements and obligations that they see for themselves in the given situation.

What we take from Vatn’s work for RQ3 is that the concepts and criteria distributing entitlements and obligations are usually functional to “something”. This “something” is a context-dependent definition of which particular interests counts as the common good. Out of that common good, an acceptable individual behaviour is spelled out which is more than an endowment of resources and goes as far as to define the type of rationality an individual shall (heuristically) apply to the given situation. As we deal with natural resources for which knowledge is usually imperfect, the heuristic value of the practices emerging from given institutions is enhanced. The functional ties

between an institution and its performance on the ecosystem are therefore likely to be blurred, to become invisible over time, or to be understood only ex-post.

From the point of view of RQ3, this suggests that the concepts and criteria

distributing entitlements and obligations among the actors, however functional, will have no more value than a heuristic strengthening a certain, specific management practice. The goals thereby entailed are not likely to reveal the full chain of reasoning that makes up their original rationale. Furthermore, as individuals are embedded in a thick web of institutions, partly overlapping and partly contradicting one another, they are constantly exposed to different rationales and different heuristics for similar situations. This introduces a dynamic element, triggering changes in the heuristics connected to specific situations.