Polycentric Institutions: A Robust Governance Framework

1. Polycentric Institutions:A Robust Governance Framework KAM Morshed Assistant Country Director MDGs and e-Development Cluster

2. Context We witnessed plethora of �sure fire� models Many Panacea�s Recommended Centralize to insure building one nation Invest in physical infrastructure Create Integrated Rural Developments Sell off State Owned Enterprises Decentralize to reduce public sector The Past Half Century - Many Efforts to Jump Start Development Processes resulting Many authoritarian regimes Multiple civil wars or armed rebellions Reduction of food sufficiency in some countries Poverty has remained constant or worsened in many countries Some notable successes, but not the average The Past Half Century - Many Efforts to Jump Start Development Processes resulting Many authoritarian regimes Multiple civil wars or armed rebellions Reduction of food sufficiency in some countries Poverty has remained constant or worsened in many countries Some notable successes, but not the average

3. Need serious re-thinking of the fundamentals behind the �ideas� Policy alternatives can be categorized under market versus state centralization versus decentralization One �right� solution to complex problems Communities needs to be regulated A single set of rule is sufficient Where as every set of rule is experimentation, a single set of rules doesn�t have the capacity to adopt changing realities A single set of rule is sufficient Where as every set of rule is experimentation, a single set of rules doesn�t have the capacity to adopt changing realities

4. Polycentrism: A framework not a Panacea In contrast to a �Model�, Polycentrism argues that Complex systems needs quick adaptation Local knowledge is critical for adaptation Communities need independence to form and self-enforce rules To attain this objectives, communities need to and are able to self-organize The goal is to attain �unity in diversity� Polycentric governance literally means having many centers, especially of authority and control. It consists of many small-, medium- and large-scale democratic units that each have considerable independence in making and enforcing rules for their specific sphere of operation. Composed of multiple units at multiple scales of organization, polycentric governance arrangements are less vulnerable to shocks (both biophysical such as floods and droughts, and social political upheavals), and more open to experimentation and learning than more centralized systems. Polycentric governance literally means having many centers, especially of authority and control. It consists of many small-, medium- and large-scale democratic units that each have considerable independence in making and enforcing rules for their specific sphere of operation. Composed of multiple units at multiple scales of organization, polycentric governance arrangements are less vulnerable to shocks (both biophysical such as floods and droughts, and social political upheavals), and more open to experimentation and learning than more centralized systems.

5. Polycentric Institution vs. Firms Polycentric institutions are like �social firms� created either spontaneously or through deliberate interventions that has Legal or quasi legal entity Rights over resources Own rules and enforcement mechanism Independence to distribute gains/costs Structured decision making process Most of these institutions are formed around common interest over resources Building polycentric institution involves a political process and is not well served by defining a universally valid rationality (whether economic, technical, efficiency oriented or otherwise) that whisks the political nature of this process off the table. Building polycentric institution involves a political process and is not well served by defining a universally valid rationality (whether economic, technical, efficiency oriented or otherwise) that whisks the political nature of this process off the table.

6. Elements of a Polycentric Structure Clearly defined boundaries (ownership rights) Proportional equivalence between benefits and costs Effective participation Monitoring Graduated sanctions Conflict resolution Rights to organize Nested enterprises Defining boundary address the free-rider problem. Well understood attributes are necessary�so that the boundary is natural not artifically imposed by say donor-funded project, engineering feasibility, etc. The gain received by being a member must be proportional to the effort. There has to be quid-pro-quo Participatory and local decision making to take into account change in local realities, they also benefit most people/members Monitoring must be done locally and based on local tools. The monitors must be selected locally but accepted legally. Graduated sanctions�information to person �withdraw Conflict resolution mechanism locally resolve�and if required system wide mechanism of arbitration�arenas must be made available at a level above the local level Minimal recognition of rights�Own organization, legal recognition, For large resources, multiple layers of nested institutions can be formed. If three irrigation system shares the same source of water, for example, then we would need institutions at all three distribution level and one at a level higher up comprised of all three institutionsDefining boundary address the free-rider problem. Well understood attributes are necessary�so that the boundary is natural not artifically imposed by say donor-funded project, engineering feasibility, etc. The gain received by being a member must be proportional to the effort. There has to be quid-pro-quo Participatory and local decision making to take into account change in local realities, they also benefit most people/members Monitoring must be done locally and based on local tools. The monitors must be selected locally but accepted legally. Graduated sanctions�information to person �withdraw Conflict resolution mechanism locally resolve�and if required system wide mechanism of arbitration�arenas must be made available at a level above the local level Minimal recognition of rights�Own organization, legal recognition, For large resources, multiple layers of nested institutions can be formed. If three irrigation system shares the same source of water, for example, then we would need institutions at all three distribution level and one at a level higher up comprised of all three institutions

7. Role of Larger Regimes Has to play the same type of role that it plays to counter �market failures� to correct �group failures� Facilitate self-organizing by providing accurate information, conflict resolution arenas, effective technical assistance, mechanisms to back up local monitoring and sanctioning efforts

8. Advantage of Polycentric Institutions Better tailored rules using local knowledge Lower enforcement costs Increase in trust and reciprocity Lowered risk through redundancy

9. Limitation of Fully Decentralized Institutions Failure to organize in some localities Stagnation Inappropriate discrimination Limited access to scientific information Conflict among groups Inability to cope with large-scale problems

10. Thank you for your attention