Connotations of institutions: implications for governing natural resources

Institutionalism is a widely debated term across various disciplines. It is rooted in the traditional old American economists and the new institutionalism, involving individual choices and transaction costs in economic settings. However, institutionalism has been used in many other disciplines, evolving from economic studies to studies on institutions for governing natural resources. This paper aims to review the theoretical concepts of institutions as argued by Douglas North regarding economic performance, and the contrasting sociological point of view linked with the approaches elaborated by Elinor Ostrom in governing the commons. While North points out that formal and informal constraints constitute the instances of institutions, Ostrom contends that institutions are the set of rules that humans use to organize repetitive activities within a community. Although there are some differences in their postures, the similarity of their approaches on institutions as drivers to solve problems leads to the assumption that informal rules, transmitted through generations, can help sustain communities’ organizations for governing natural resources overtime.