Challenges in social dilemmas

"Institutional arrangements can be understood as responding 

to a world in which there are some sociopaths and some saints, 

but mostly regular folks who are capable of both kinds of behavior."

Colin Camerer (in Ostrom, 2005: 124)

We are reading Understanding Institutional Diversity by Lin Ostrom (2005) in my institutional economics class. It is a slow read, specially the first two chapters where she sets up the theoretical framework. The framework is a guide to analyze social dilemmas (where there are incentives for individuals to pursue actions that are not socially beneficial -- prisoner's-dilemma-like situations). As the book evolves it gets deeper and very interesting. I am still on chapter four, and these two paragraphs called my attention especially:

Without farther progress in developing our theories and models of human valuation in social dilemma situations, those convinced that all human behavior can be explained using rational egoist models will continue to recommend Leviathan-like remedies for overcoming all social dilemmas. . .

And

In focusing on social dilemmas, we need to address how to focus on the role of norms and other-regarding preferences. Simply explaining puzzling findings post hoc, as "they must somehow share some norms," is not a satisfactory strategy in the log run. Focusing on norms and other-regarding preferences is not enough, however, to explain fully how individuals do overcome social dilemmas. Rules are needed to back up these norms (or counteract dangerously escalating negative reciprocity). We then need to dig into the analysis of institutions so that we can understand how individuals adopt norms as well as rules to overcome social dilemmas.

Both are in page. 120. 

In chapter four she explains what she means by norms. In the literature you will find many definitions of norms, institutions, and rules, and frankly in it can be quite confusing. Ostrom defines norms as "prescriptions held by an individual that an action or outcome in a situation must, must not, or may be permitted." p. 121. I see that definition as a clear starting point. She adds "[n]orms can definitely change behavior but may do not. Whether norms have an impact on behavior depends both on the strength of the norm and the context of the situation." p. 123

Addendum:
Chapter four ends with this:

When individuals learn the artisanship of crafting rules, they can experiment and learn to create more productive outcomes (as well as participants) over time. Learning to craft rules that attract and encourage individuals who share norms of reciprocity and trustworthiness, or who learn them over time, is a fundamental skill needed in all democratic societies.