In the aftermath of Elinor Ostrom winning the Nobel Prize in Economics for studying issues relating to economic governance (resource allocation issues) of the commons, there have been a number of commentaries claiming her theories as a vindication of the decentralized and traditional governance approaches to managing community resources. However, such sweeping generalization and reliance on community-based decision making does not do justice to Prof. Ostrom's work and is a gross simplification of complex socio-economic and socio-political challanges in addressing such issues.
It is undoubtedly true that, absent institutional constraints and transaction costs, community management of resources like canal water for irrigation, forest resources, and even common civic assets is the most fair, economically efficient, and sustainable means of managing such resources. However, in many developing countries where effective management of such common resources is a major challenge, the socio-political environments are riddled with institutional constraints and substantial transaction costs.
Further, many of the traditional governance arrangements are driven by unfair and inequitable decision making structures, most often dominated by kinship and ethnic loyalties. As Gadde Swarup pointed out in one of the comments, "some of the laws of common resource governance has caste elements in it (like fishing, temples etc) and these implicit understandings of the past may not be desirable or viable now".
In the very recent past, many Indian states like Andhra Pradesh have experimented extensively with the community management model for common resources and assets and even delivery of public services. Accordingly, utilization of irrigation water and forest products; management of schools, health sub-centers, and anaganwadi centers; maintenance of village drinking water schemes etc, were all handed over to the local community stakeholders. However, the results have not been very encouraging, and many of these internventions have subsequently been abandoned or scaled back. Admittedly, many of these decisions were with constraints attached (eg. no control over teachers) and with a thin veneer of democracy (elections to select the monitoring group etc) that may not have been conducive to the local socio-political environment.