Holonic Institutions for Multi-scale Polycentric Self-governance

Effective institutions are key to the success of self-governing systems, yet specifying and maintaining them can be challenging, especially in large-scale, highly dynamic and competitive contexts. Political economist Elinor Ostrom has studied the conventional arrangements for sustainable natural resource management and derived from these eight design principles for self-governing institutions. One principle, nested enterprises, is straightforwardly expressed, but is arguably structural rather than functional, and so is more resistant to declarative specification; yet it also appears to be critical to the effectiveness of complex compositional systems. In this paper, we converge the ideas of holonic systems with electronic institutions, to propose a formalisation of this principle based on holonic institutions. We show how holonic institutions provide a structural framework for nested enterprises, which can be designed as composite systems of systems. This, we believe, is compatible with Ostrom's ideas for polycentric governance of complex systems. We use a case study in energy distribution to illustrate these ideas.