Companies' self-regulation doesn't have to be bad for the public
Posted by admin on 12th June 2019

If Boeing is allowed to certify that a crash-prone aircraft is safe, and Facebook can violate users’ privacy expectations, should companies and industries ever be allowed to police themselves? The debate is heating up particularly in the U.S. tech sector with growing calls to regulate – or even break up – the likes of Google, Apple and Amazon.

It turns out to be possible, at least sometimes, for companies and industries to govern themselves, while still protecting the public interest. Groundbreaking work by Nobel Prize-winning political economist Elinor Ostrom and her husband Vincent found a solution to a classic economic quandary, in which people – and businesses – self-interestedly enrich themselves as quickly as possible with certain resources including personal data, thinking little about the secondary costs they might be inflicting on others.

Elinor Ostrom in 2009, when she won the Nobel Prize in Economics.
Holger Motzkau/Wikimedia Commons, CC BY-SA

As the director of the Ostrom Workshop Program on Cybersecurity and Internet Governance, I have been involved in numerous projects studying how to solve these sorts of problems when they arise, both online and offline. Most recently, my work has looked at how to manage the massively interconnected world of sensors, computers and smart devices – what I and others call the “internet of everything.”

I’ve found that there are ways companies can become leaders by experimenting with business opportunities and collaborating with peers, while still working with regulators to protect the public, including both in the air and in cyberspace.

Tragedy revisited

In a classic economic problem, called “the tragedy of the commons,” a parcel of grassland is made available for a community to graze its livestock. Everyone tries to get the most benefit from it – and as a result, the land is overgrazed. What started as a resource for everyone becomes of little use to anyone.

For many years, economists thought there were only two possible solutions. One was for the government to step in and limit how many people could graze their animals. The other was to split the land up among private owners who had exclusive use of it, and could sustainably manage it for their individual benefit.

The Ostroms, however, found a third way. In some cases, they revealed, self-organization can work well, especially when the various people and groups involve can communicate effectively. They called it “polycentric governance,” because it allows regulation to come from more than just one central authority. Their work can help determine if and when companies can effectively regulate themselves – or whether it’s best for the government to step in.

A polycentric primer

The concept can seem complicated, but in practice it is increasingly popular, in federal programs and even as a goal for governing the internet.

Scholars such as Elinor Ostrom produced a broad swath of research over decades, looking at public schools and police department performance in Midwestern U.S. cities, coastal overfishing, forest management in nations like Nepal, and even traffic jams in New York City. They identified commonalities among all these studies, including whether the group’s members can help set the rules by which their shared resources are governed, how much control they have over who gets to share it, how disputes are resolved, and how everyone’s use is monitored.