Rules-in-Form vs. Rules-in-Use

In the AI Story

The distinction cuts against the common assumption that governance is a matter of having the right rules. The right rules, unenforced or unenforceable, produce worse governance than imperfect rules that actually function. Ostrom's empirical work consistently found that communities with simpler, imperfect rules that were genuinely followed outperformed communities with sophisticated rule systems that existed only on paper.

The rules-in-use concept is foundational to the Institutional Analysis and Development framework. Any analysis of institutional performance must examine not just what the rules say but what the participants actually do — the actual behavioral regularities that constitute the operating governance of the system.

For AI governance, the distinction is urgent. An organization may have a formal policy requiring human review of AI-generated output. In practice, the time pressure of actual work may reduce "review" to a cursory glance. The formal rule exists. The rule-in-use does not match. If this gap is not tracked and addressed, the governance system is systematically weaker than the rulebook suggests.

Effective monitoring must examine both dimensions. It must verify not just that the formal policy is in place but that the behaviors it prescribes are actually occurring. Organizations that measure policy compliance by checking for policy documents — rather than by observing practice — are producing the rules-in-form/rules-in-use gap that Ostrom identified as a primary failure mode.

Origin

The distinction emerged from Ostrom's observation that commons governance was almost never accurately described by its formal rules alone. The operating rules, discoverable only through extended fieldwork, often diverged substantially from the written ones — sometimes in ways that improved governance (informal adjustments that solved problems the formal rules did not address) and sometimes in ways that degraded it (rules that were ignored because enforcement was impractical).

Key Ideas

Formal vs. operating. Written rules and enacted rules are rarely identical; the gap is analytically and practically consequential.

Legitimacy at stake. Wide gaps between form and use erode the entire governance system's legitimacy.

Monitoring implication. Effective monitoring requires examining actual practice, not just formal compliance.

AI application. Corporate AI policies frequently exhibit large form-use gaps that organizational governance ignores at its peril.