Student handout 5.2: Basic questions to consider in institutional design

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When you design a framework of rules, you make some basic choices. You decide which model of governance (decision making) you prefer and who is to own the fish that are caught. You can create different combinations with these basic forms and arrive at very different solutions.

Property \ Governance Hierarchy (state authority) Co-operative network
Private property
Public property

The sections below give some more information on the different options.

1. Choosing a model of governance

Key agent State Local networks
Key concepts Power and authority Personal relationships, communication and shared interests
Design principle of framework Hierarchy (top down) Partnership (equal eye-level)
Strengths Peace and Security
Laws clearly permit or forbid how people behave
Laws can be enforced if they are broken		 High expertise and flexibility in solving problems and serving people’s interests
Freedom to improvise and react quickly
Weaknesses and risks Danger of abuse of power
Inflexibility
Weak incentives for personal initiative		 “Veto-players” can block decisions
Rules are difficult to enforce if they are broken
Remedies Democracy and human rights
Rule of law
Checks and balances in the constitution		 Moral sanctions
Culture of responsibility

2. The issue of property: who owns the fish harvest?

Two basic options, and some criteria to think about:

Private property Public property
Property rules Each fisherman owns what he catches
He can make use of his catch as he pleases		 Each fisherman delivers his catch to a public representative
The fish are then distributed to the community members
Incentive for fishermen
Effect on total output of fish
Effect on fish stocks

3. Further questions to consider when designing institutions

  • Do you want to define a goal that must be achieved?
  • Who has the power to make decisions?
  • Do you want to provide tools to enforce rules?
  • Is there a danger of the abuse of power?
  • …
Student handout 5.1: Preparations for the conference on a framework of rules
Student handout 5.3: Comparing frameworks of rules
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