The Ostroms on funding municipal services

I’ve tagged this post “from the archives” because I intend to draw attention to old but useful work that is no longer in broad circulation.

Vincent and Elinor Ostrom gave their 1977 chapter the less-than-exciting title of “Public Economy Organization and Service Delivery,” but the work is important for two reasons.

First, it’s the earliest publication (that I’ve found) that describes, defines and compares the four types of goods in the 2×2 matrix* that I use all the time:

In this blog post, I explain how excludable goods are best managed in markets (via economic tools) while non-excludable goods are best managed through political (top down) or community (peer-to-peer) processes where people can be (and must be) jointly obligated to fund public goods (via taxes) or constrained from over-appropriating common pool goods (via regulation). Besides that difference, it’s also important to know that many goods can end up in any of these boxes, depending on governance and the (im)balance between supply and demand. In this paper, we explored how drinking water in the Netherlands cycled among them. 

Second, the chapter’s theoretical discussion is used to set up the case study of interest, i.e., how falling tax revenue may make it difficult for Detroit to offer municipal services (public goods), especially when those goods are “subtractable” (common pooled goods) and insufficient in supply to meet demand. Detroit’s decline — under the twin influences of white flight to the suburbs (where politicians did everything possible to keep tax revenues to themselves) and rising poverty and crime — is well known by now, but this paper’s date suggests that the decline was decades in the making and clearly understood. I wonder how the chapter (or the book that included it) was received by local citizens and policy makers.

It’s nice to learn from the wisdom of the past.

What’s in your drawer that’s worth a read?


  • Their 2×2 is turned on its side, and they are still a bit vague about the difference between public and common pooled goods — as they were in their 1971 paper that doesn’t really mention those latter goods.

Author: David Zetland

I'm a political-economist from California who now lives in Amsterdam.

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