On a summer's day in 2008 I was walking around Reykjavik when I heard football chanting. Following the sounds, I located the ground of KR Reykjavik and went in to watch the match. Without knowing a word of Icelandic I was able to understand immediately what was happening in the game and to respond to the local fans around me. Football is a universal language, shared everywhere, and participating in a game whether as a spectator or a player creates mutual understanding.

Football has become a global sport and is subject to the forces of globalization that have shaped the world economy over the last 40 years. The experience of globalization has sparked considerable debate and led to the creation of a variety of theoretical perspectives that seek to explain the phenomenon and understand its effects on the economy and society. Globalization itself is a contested concept, not least because it has been used normatively as well as analytically. Competing definitions of globalization abound and it is important to note that it has a number of dimensions: principally economic, cultural and political. In broad terms, it is a process that reduces the significance of national boundaries as an impediment to the free movement of capital, goods and services and (to a far lesser and more contested extent) of labour. It is a process in which international trade grows faster than national output; foreign direct investment grows faster than national trade; and there is a transformation in response of international financial markets. These trends have been facilitated by advances in communication and digital technology, which Goldblatt (2019: 26) argues “have been the key to the economic globalization of football, multiplying the game's audience many times over, and forging the basis of the phenomenal income it now generates”. However, it is more than a single economic dynamic, or even a set of them, but “a syndrome of changes of social relations that also produce deep tension” (Markovits & Rensman 2010: 27n).

How far football has been globalized is a more complex and nuanced question than it may first appear.

The impressive work of Vincent and Elinor Ostrom is commonly regarded as relevant for practitioners of policy analysis and also for more theoretically-minded scholars who are concerned with the functioning of institutional arrangements in small or larger communities. In recent years their accounts of phenomena like polycentricity and co-production came to enjoy a central place in discussions about the nature and the working of government and of contemporary democratic societies.

However, their views and reflections on more abstract, foundational issues – epistemological (what is the structure of scientific inquiry?), ontological (what does the stuff of our social world consist of?) and methodological (in what sense do individualistic assumptions matter?) – are less prominent among scholars who have studied their work. In our view, these issues – particularly questions related to ontology – are of crucial importance for a correct understanding of the Ostroms’ intellectual inheritance. Ontological issues pertain to the very core of all theoretical approaches to social reality and invoke deep philosophical presumptions, of which Vincent and Elinor Ostrom were well aware. Their good acquaintance with the political philosophy of Thomas Hobbes, David Hume and Adam Smith grounded some of the positions they adopted. Other sources of their views can be traced back to American pragmatism (Aligica 2014: ch. 6) and to the comprehensive theoretical conception of politics of Lasswell (Lasswell & Kaplan [1950] 2014). Some different, albeit extremely pertinent insights came from the philosophy of language (Barwise & Perry 1983; Searle 1969, 1995, 2002). Vincent Ostrom was particularly impressed by John Searle's work. He greatly admired Searle's account of the role of language in the constitution of social reality and used it in setting the foundation of his own perspective on it. Having recognized the foundational role of language in the way humans think, communicate, associate, and work with others, he developed his social theory of institutional order as a language-based knowledge process (Aligica & Boettke 2011). Elinor Ostrom (2006) followed Vincent in acknowledging the influence of Searle and elaborated a profound and specific analysis of the way language informs our thought as well as the social reality we live in.

To place this chapter in an analytical context, we need to consider two alternative versions of economics. Conventional or mainstream economics has developed a set of theories and terminologies based around such concepts as rational utility maximizing actors, supply and demand, and efficient markets. In the wake of the global financial crisis the adequacy of mainstream economics has been widely challenged. The central doctrines of economics “have encouraged the deregulation and de-institutionalization of markets, especially financial markets, thereby increasing volatility” (Skidelsky 2018: 384). An alternative perspective focuses on the reduction of inequality and the promotion of a more fulfilling life, which may not be captured by statistics such as growth in GDP.

Mainstream economics is not irrelevant or outdated, to discard it would be to lose valuable insights and ways of thinking about problems, but it is insufficient. Skidelsky admits that economics is “micro-efficient, but macro inefficient” (Skidelsky 2018: 387). A risk arises in aggregating micro decisions into a belief that a macro model can be built on “the optimizing decisions of well-informed, forward-looking rational agents, subject only to the logic of competitive markets” (Skidelsky 2018: 386). Behavioural economics, using the insights of psychology and experiments on cooperation, offers a corrective to oversimplified assumptions of rationality, but can lead to behaviour being labelled as irrational when it “may be perfectly reasonable in the circumstances” (Skidelsky 2018: 389).

Some classic concepts of economics have been shown to be applicable in this book. Football shows a tendency towards oligopoly as far as the big clubs are concerned. What has emerged “is a handful of really big winners with quasi-monopoly status at the top, and a very long tail with everyone else earning a fraction of their returns” (Lonergan & Blyth 2020: 99). There is cartel-like behaviour in an attempt to erect barriers to new entrants and to a significant extent competition law has been evaded. All this might suggest the familiar phenomenon of market failure and the need for a resort to the usual corrective remedies.

As the preceding chapters may have suggested, the regulation of football is not very effective. Football has largely regulated itself, reflecting the extent to which it is a closed policy community with its own norms, values and largely unchallenged assumptions. It sees itself as a special world that can isolate itself from wider societal trends with external interventions regarded as unwanted and inappropriate. “In a country obsessed with football” (Cameron 2019: 571), politicians are often willing to tolerate this distinctiveness if they can bask in the reflected glory of success by national and club teams and pretend that they are “one of the lads” by supporting a particular team. This can, of course, lead to mistakes. David Cameron insisted that he was an Aston Villa fan, but mistakenly identified himself as a West Ham supporter in the 2015 general election campaign (Cameron 2019: 571–2). This led to social media jokes about “West Ham Villa” and “Aston United”. Politicians also appreciate hospitality offered at big matches. This combination of internal self-satisfaction, cosy relationships and external benign neglect has meant that in general the governance of football is inadequate at a national and international level.

Government and legislative interventions have been largely ad hoc with calls for the game “to get its own house in order”. It rarely does and no systematic pressure is placed on it to do so. The EU did start to use its capacity and mission as a regulatory state at one stage, but this faded with personnel changes and the arrival of new and more pressing challenges. FIFA has been beset by problems of corruption, while UEFA has been unable to put in place an FFP system that can withstand legal challenges. At a national level, the FA has been seen as ineffective and conservative while the EFL seems unable to deal with “rogue owners”. The US commissioner and franchise system centralizes control in a way that means a lot depends on the probity and good judgement of the person in charge.

The joint work of Elinor and Vincent Ostrom sought to address the possibility for individuals to establish a set of institutional conditions that would allow them to self-govern, rather than to be governed. Fundamental to their analysis was the idea that institutions are not only an artifact of deliberate human choice, but also that institutions facilitate learning about the behavior of individuals within society. Human beings must craft institutions in order to create reliable expectations for peaceful and productive interaction. In so doing, they are able to learn about the behavior of individuals within a set of institutions. Yet, individuals do not passively respond to their own constraints: they also learn how to better utilize those constraints for their own betterment, using their own particular and tacit knowledge. As a result, learning gives rise to the possibility for a greater variety of human behavior, the possibility of which can generate social instability. The role of institutions, then, in an Ostromian framework, is to order such adaptive human potential in such a way as to create reliable expectations about how others will behave and adapt to changing circumstances of time and place. Reflection and choice occurs on the margin with regard to institutional change. Individuals are grounded and shaped by the institutional framework within which they interact, but are nonetheless artisans that both tinker and adapt to the institutions that are the artifacts of their creation.

The particular focus of this chapter will be to analyze institutional change from an Ostromian perspective by analyzing the relationship between selfgovernance, polycentricity, and federalism. Throughout the work of Elinor Ostrom and Vincent Ostrom, there exist two consistent themes regarding the importance of federalism for polycentric governance. First, the Ostroms emphasized that the institutional conditions of federalism are a human artifact, based upon choice and deliberation. However, given their emphasis on processes of learning among human beings, this second theme suggests, as I argue in this chapter, a bi-directionality in institutional analysis. Although federalism and polycentric governance may be based on deliberate choice, such an institutional framework facilitates learning and the adaptive potential of human beings, leading to unintended innovative institutional changes to reinforce social cooperation between individuals.

According to FIFA there are some “five billion football fans around the world, with Latin America, the Middle East and Africa representing the largest fan bases”. Over three billion people watched some of the 2018 World Cup with more than a billion tuning in for the final (Goldblatt 2019: 551). However, the money in the game is concentrated in Europe. No club from outside Europe ranks in the top 30 for revenue generation. In the 2018–19 season the top 20 clubs in the world were all European, raking in a combined revenue of €9.3 billion (FIFA 2020).

Football's consumer appeal is huge, with its younger consumers being the most important commercially. It is ostensibly an industry, and some clubs attempt to operate in a business-like fashion, but with one important exception: it is a business unlike any other. The overwhelming majority of football clubs do not make any profit. As a result, many conventional forms of economic analysis do not apply. When interrogating the data, however, it should always be remembered that this is “a unique industry because the investments made are frequently emotional or political instead of just financial” (Maguire 2020: 169).

The absence of profits

In a capitalist or free market economy businesses are normally run with the expectation of making a profit. Stock markets pass judgement on companies and increasingly feature predatory hedge and private equity funds. Companies that are seen to make insufficient profits are highly vulnerable to buy-outs and takeovers.

Often an investor or company specializing in acquisitions takes over the company for a nominal amount in the hope of securing a turnaround by disposing of underperforming assets, as in the case of Mike Ashley and the UK department store House of Fraser. Hedge and private equity funds may perform a similar role. Whether this is good for the company, its employees or the wider economy is beyond the scope of this book. It is, however, worth noting that an economy without mechanisms for dealing with failing companies would soon start to underperform at a macro level.

Vincent Ostrom's The Meaning of Democracy and the Vulnerability of Democracies (1997) is in many ways his scholarly manifesto, and as such provides a window into his world view and the scholarly task he set for himself throughout his career. Critical to his effort was a quest to understand the human condition, and in particular the conditions that would make possible a self-governing democratic society. Democracy for Ostrom was not primarily about the mechanisms of political selection, that would no doubt be part of the machinery that would be analyzed, but about ways of relating to one another as free, equal, and dignified individuals. Citizens in a democratic society would need to shoulder the burden of the “cares of thinking” and the “troubles of living”, as Tocqueville put it, in order to be capable of self-governance. But institutions of governance must also be structured in such a manner that they exhibit neither dominance, nor acts discriminatory. “Democratic ways of life,” Ostrom tells us at the very beginning of his book, “turn on self-organizing and self-governing capabilities rather than presuming that something called ‘the Government’ governs” (1997: 3–4). Democratic societies are at risk, Ostrom states clearly, when relationships are grounded on the “principles of command and control rather than on principles of self-responsibility in self-governing communities of relationships” (ibid.: 4).

It is often forgotten in the aftermath of Elinor Ostrom's Nobel Prize, how their respective projects shared this fundamental commitment to the exploration of self-governing democratic society. They embarked from the mid-1960s onward on their “long polycentric journey” as she put it on more than one occasion. This included not just the more philosophical explorations of Vincent's meaning of democracy, and the relationship between political theory and policy analysis, but the nuts and bolts of institutional arrangements that made self-governance possible even in the face of difficult initial conditions. This was most famously seen in the acts of public entrepreneurship associated with managing common-pool resources, but it was also evident in the local provision of public goods such as roads, police, schools, etc.

The economic theory of markets could be called “private choice” since it analyzes the way property rights generate incentives for individual action. Public choice, by contrast, uses that same theoretical framework to explain political behavior. There are distinct streams of thought within the broader field of public choice (Mitchell 1988). The Rochester school places a heavy emphasis on the use of mathematical and statistical techniques to formally model collective choice problems of elections and voting behavior. The Virginia school of public choice adopts an approach that foregrounds institutions, and treats politics not as primarily conflictual, but cooperative, with an emphasis on exchange. This contractarian and normative tradition is echoed in the Bloomington research agenda, but enriched through an interdisciplinary and empirical approach of its own.

This chapter explores the deep connections between the Virginia and Bloomington schools of political economy, focusing on three main figures: James Buchanan, Vincent Ostrom, and Elinor Ostrom. Buchanan and the Ostroms have led separate, but related, research programs with key areas of overlap and a distinct theoretical approach. Although diverging in important ways, they stem from shared core principles, developed by Buchanan and Tullock in The Calculus of Consent (1962), which later inspired the Ostroms’ approach to political economy.

The Ostroms’ work prepared the way for starting the Workshop in Political Theory and Policy Analysis at Indiana University Bloomington in 1973. The further studies developed through the workshop helped flesh out the Bloomington school's own distinct and rich framework of public choice. Although developed along distinct lines from the Virginia public choice tradition, the Ostroms recognized a debt of gratitude to Buchanan and Tullock's Calculus of Consent, and remarked that their own important works Governing the Commons, The Intellectual Crisis in American Public Administration and The Political Theory of a Compound Republic “resulted from the stimulus created by the organization of the Public Choice Society” (Aligica & Boettke 2009: 143). But, more generally, as Elinor Ostrom points out (E. Ostrom 2011b: 372), James Buchanan's influence permeated all of the Bloomington workshop's research program and was a driving influence in its development:

This chapter explores similarities, contrasts, and connections between the Bloomington school of institutional analysis established by Vincent and Elinor Ostrom and new institutional economics (NIE). Although NIE was not included among the three “schools” or research traditions Mitchell (1988) identified as closely related but distinct approaches to the study of political economy active at that time, new institutional economics can also claim a common origin in the mid-twentieth century public choice movement, in which scholars from various disciplines brought concepts and methods from economics to bear on explicitly political subjects (Mitchell 1999; Aligica & Boettke 2009). As shown in this chapter, these two traditions of research have since gone in quite different directions.

In a nutshell, NIE and the Bloomington school offer complementary perspectives on the origins and sustainability of institutions, political economy, and social order. NIE sees the institutional order as primarily constituted in a network of organizations, and focuses on the principal–agent problem within formal organizations as the key difficulty in building a stable social order. By contrast, the Bloomington school sees the institutional order as a network of action arenas in which political, economic, and social actors work together to realize shared interests while acknowledging that each will nonetheless continue to also pursue self-interested goals. For those working in the Bloomington tradition, the key problem becomes reducing the frequency of free-riding or other behaviors that undermine trust within and across social groups.

This chapter examines a series of similarities and differences between NIE and the Bloomington school in their understanding of basic concepts and their tendency to rely on different, but related, methods of analysis. After this introductory section, I highlight their shared foundations in the basic tenets of methodological individualism and bounded rationality. The following section details how scholars working in these traditions interpret core concepts of institutions, organizations, and property rights in subtly different ways. I then show how these differences underlie more dramatic contrasts in their approach to broader issues of social order. The final section concludes by suggesting ways scholars from these two research traditions might combine their respective strengths to improve our collective understanding of important aspects of political, economic, and social order.

Environmental policy is an arena characterized by extremes. On one hand, there are calls to take decisive, global action to resolve daunting environmental problems. Global climate change potentially threatens billions of people. Many fisheries around the world are collapsing (Worm et al. 2006). Groundwater in many areas is being overexploited, and some scholars predict that water quality and depletion problems will become more acute and widespread (Shah et al. 2001). Deforestation continues at rapid rates across parts of the developing world, and air pollution poses health problems for people in industrializing economies (Miettinen et al. 2011; Ravindra et al. 2016). On the other hand, there are those who argue that some concerns are not as serious as they may seem, or that the economic and social impacts of environmental policy are too severe (Lomborg 2001). Regardless of one's view on the seriousness of any particular environmental problem, it is an undeniable fact that any proposed solution will have a cost. Both natural resources and the resources it takes to resolve environmental problems are scarce. Putting resources into addressing one environmental concern often means diverting them from other uses, including potentially from the resolution of other environmental problems. Consequently the decision as to whether or not the benefits of an environmental policy justify the cost thus represent an inevitable trade-off that demands serious consideration. These tradeoffs could include unintended consequences of misguided or poorly implemented policies, population control measures that impinge on human rights, and attempts to avoid potential environmental consequences that could wind up disproportionately harming the poor (Lewison et al. 2019; Hampton 2003; Bruegge et al. 2019).

The result of this tension is that environmental policy discussions can become more of a battle between two warring factions than a collaborative effort to understand the full complexities of the situation, taking seriously both the health of the environment and our world's natural resources while also taking seriously the human and social impact. However, as has been seen in earlier chapters, the Bloomington school is not generally inclined to extremes of any sort. Elinor Ostrom and Vincent Ostrom rejected dichotomies, including the belief – false, in their view – that complicated issues like environmental resource management can be resolved through easily identifiable, single-best solutions.

Vincent and Elinor Ostrom's work focused on how communities self-organize to solve collective problems. Together with their collaborators, they identified various institutional conditions that make self-governance possible and likely to lead to good outcomes (E. Ostrom 1990, 2005a, 2010a; V. Ostrom 1997; Aligica 2014; Cole & McGinnis 2015a,b; Tarko 2017). Their approach grew out of the public choice revolution, and, as such, is rooted in rational choice theory. However, they have never subscribed to a narrow view of rational choice, building instead on Herbert Simon's idea of “bounded rationality”, i.e. the idea that people are broadly rational, but make decisions subject to imperfect information and time constraints (Grüne-Yanoff, Marchionni & Moscati 2014).

The vast majority of the behavioral economics literature focuses on individual cognitive failures, and the aggregate social issues that may emerge as a result (Ariely 2009; Kahneman 2011). Most of this literature is institutionally shallow, jumping to conclusions from individual cognitive biases to broad conclusions about social-economic consequences. Furthermore, a significant part of this literature has been affected by the replication crisis in psychology (Rizzo & Whitman 2019: ch. 6). For example, much of Kahneman's book, relying on priming effects, has turned out to be mistaken (Chivers 2019). Even effects once considered well-established, like the endowment effect, have recently come under serious doubt, and may reflect the choice of experimental procedures rather than the preferences of the participants (Plott & Zeiler 2005; Isoni et al. 2011, Loomes & Sugden 2011; Zeiler 2011).

In contrast with this, and similar to fellow Nobelists Vernon Smith (2007) and Richard Thaler (1991, 2008), Elinor Ostrom has emphasized not just our cognitive limits, but also the institutions that people create to overcome them. But, while Vernon Smith or Thaler still focus primarily on private choices, and the institutions within which such choices happen, for example, private financial or health choices, Elinor Ostrom has expanded the realm of inquiry by exploring how bounded rationality also enters the picture in collective action problems.

Part of what is at stake here is the recent reframing of paternalism.