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The ‘Daisy Duke’ Criterion

August 21, 2011
by

In the lead essay of her 2006 book Linking the Formal and Informal Economy, Nobel Laureate Elinor Ostrom has bad news: you, and I, and she, and everyone else are incurably ignorant.

Any social scientist can only know so much about their ‘subject-matter’. Popular methods often betray a fraudulent simplicity to the study of living, breathing, dreaming human beings with model-unfriendly traits like inconsistent utility functions and ever-shifting expectations about the future. The circumstances of any person’s time and place are forever hidden, no matter the view from a corner office at the World Bank.

Ostrom writes at length about these many (and deeply layered) complications facing anyone concerned with economic development:

We have repeatedly learned from many studies of policy processes that no single institutional arrangement works across diverse policy areas or even diverse subtypes within a broad policy area. Copying interventions that worked well in one country may lead to a major failure in another. ( p 8 )

But the good news is that we can still figure out ways to help those that need it most. Ostrom suggests: “a key is devolving authority to the lowest level that can take effective action related to the scale of a particular collective action problem… Go as close to the problem you are trying to solve as feasible.” (p 11)

But more than just advocating political decentralization, she offers one simple criterion for evaluating the effectiveness of policy changes and interventions: allow people to vote with their feet:

If people try to move out the net of an intervention in significant numbers, its presumed efficacy for their well-being must be questioned. If on the other hand people move into the net of an intervention (including when that intervention is reduced), this is a signal of its efficacy.

In other words, what development needs is a healthy infusion of Jessica Simpson (or maybe Nancy Sinatra): singer-starlet of the popular rendition of “These Boots Are Made for Walking.” For Ostrom, this ‘Daisy Duke’ criterion should be the guiding light of reform.

The study of informal markets and development has shown, time and time again, that people will adjust their lives to the incentives of their institutional environment. For instance, slum relocation efforts have been thwarted when people rent out subsidized suburban apartments and return to the cardboard shanties at the city center. Community ties, the proximity to their place of work, and access to credit and arbitration (often informal and community based) are powerful attracting forces. The same is true for efforts to formalize property rights or force legal reform:

The growing literature on informal trade provide examples where traders prefer to remain outside the ambit of official trade, because it is too costly and often beyond their logistical capacity to comprehend, and hence comply with ‘rules.’ … we can see street vendors, small businesses, and people who might gain formal ownership to their structures voting with their feet. If they decide to register, pay whatever taxes there are to, etc. they are voluntarily coming within the net and this is a good sign… A good test of whether an intervention is helpful or not is to know how many of the relevant population try to be outside of the net…  (p 15)

The ‘Daisy Duke Criterion’ is also endorsed by the experts in Ostrom’s Linking because it provides us with a means of overcoming our ignorance. To evaluate most policies, we would need to know impossibly detailed information about people’s motivations, skills, social ties, their plans and expectations. But if we apply the ‘Daisy Duke criterion,’ we can bypass this trouble. People’s preferences and expectations are revealed by their actions. We can ‘know’ more than we could possibly discover by using the ‘vote-with-your-feet’ heuristic. This becomes our data: the ruler by which we measure the success of institutional reform.

Advocates of competitive governance should rejoice in this tacit endorsement by Ostrom. In essence, proposals like Seasteading and Free Cities are asking only to set our institutions to Ostrom’s ‘Daisy Duke’ test: allow entrepreneurship in legal systems, and let people (with cowboy boots or otherwise) foot-vote their allegiance.

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4 Comments
  1. August 27, 2011 12:46 pm

    Ostrom “offers one simple criterion for evaluating the effectiveness of policy changes and interventions: allow people to vote with their feet . . . .” Caceres: “allow entrepreneurship in legal systems, and let people . . . foot-vote their allegiance.”

    This is an extremely good argument for open immigration and emigration. But why not reduce the costs of choice even further and deterritorialize legal systems, so people can simply vote with their consumer dollars while remaining in the same physical location?

    • Z. Caceres permalink
      August 27, 2011 4:55 pm

      Professor Chartier,

      Thanks so much for your comment. I absolutely agree with your overall point, as I suspect would many of the other writers here. I am personally a big fan of Bruno Frey’s work on Panarchism, with de-territorialized governance in which small units contract out separate services to any other jurisdiction in a federation.

      Unfortunately I don’t believe that nation-states will prove willing to open their borders regardless of how inhumane the consequences. For the same reason, they are unlikely to adopt panarchistic proposals which erode their ability to form coalitions of power through the selective provision of various goods.

      That’s why I think proposals like Free Cities and Seasteading are the best bet.

      Best regards,
      Zach

  2. September 15, 2011 12:47 pm

    Dear Zach,

    Thank you for the Daisy approach blog. I was just about to put out an e-mail suggesting the article on “Tlingit Property Law’ to a person who might like to think outside the box on how other cultures perceive and have dealt with property for thousands of years. I happened on your work after reading your response to Mark Lutter’s blog on Somalia. I passed that on to Spencer just yesterday. Keep up the good work we are reading, thinking and encouraging you–Emi

    • Z. Caceres permalink
      September 15, 2011 9:05 pm

      Dear Mrs. Maccallum,

      Thank you so much for your kind words and encouragement. I’m so glad to hear that you liked the article. I am a big fan of the “Heath MacCallum” tradition of entrepreneurial communities and multiple tenant properties and I wish you and Spencer all the best in your endeavors.

      Sincerely,
      Zach

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