Political theorists assume away the problems of political control, but the problems are real. There is no reason to believe that bureaucrats and politicians, no matter how well meaning, are better at solving problems than the people on the spot, who have the strongest incentive to get the solution right. Unlike bureaucrats, they bear the costs of their mistakes. Moreover, as the prize committee pointed out, "Rules that are imposed from the outside or unilaterally dictated by powerful insiders have less legitimacy and are more likely to be violated."
Some of Ostrom's readers think that she is as critical of the free market as she is of government management. She writes, "(N)either the state nor the market is uniformly successful in enabling individuals to sustain long-term, productive use of natural resource systems." But what those readers miss is that the resource-management arrangements Ostrom documents are voluntary agreements that people themselves devise, monitor and enforce. These agreements are part of the free market, even if the resource is not formally divided into privately owned units. Fundamental for advocates of freedom is not "the market" narrowly conceived, but the broader realm of consent and contract.
I was amused to see the lengths to which The New York Times went to spin Ostrom's (and Williamson's) selection in an anti-free-market direction. Reporter Louis Uchitelle wrote, "Neither Ms. Ostrom nor Mr. Williamson has argued against regulation. Quite the contrary, their work found that people in business adopt for themselves numerous forms of regulation and rules of behavior -- called 'governance' in economic jargon -- doing so independently of government. ..."
Please. Rules of behavior that are independent of government are not what anybody means by "regulation." Advocates of regulation say people can't devise methods of "governance" that leave politicians out of the picture, but Ostrom shows they are wrong.
We libertarians aren't against rules -- we are against top-down rules imposed by out-of-touch bureaucrats. People generate better rules when the state leaves us alone.