Eugene Fama will have to wait. And your fantasy of seeing Nassim Taleb accept his much-reviled Nobel Prize won’t happen either.
Elinor Olstrom and Oliver E. Williamson have split the 2009 Nobel Prize in economics.
We’re eager to see the opinion of more academic economists on this one, but at first blush, it doesn’t look like the organisation tried to be trendy this year, though it’s clearly been a great year for US winners. Ostrom is also the second female winner this year. Ada E. Yoneth won a third of the chemistry prize.
Here’s the full announcement from the Nobel Committee:
Economic governance: the organisation of cooperation
Elinor Ostrom has demonstrated how common property can be successfully managed by user associations. Oliver Williamson has developed a theory where business firms serve as structures for conflict resolution. Over the last three decades these seminal contributions have advanced economic governance research from the fringe to the forefront of scientific attention.
Economic transactions take place not only in markets, but also within firms, associations, households, and agencies. Whereas economic theory has comprehensively illuminated the virtues and limitations of markets, it has traditionally paid less attention to other institutional arrangements. The research of Elinor Ostrom and Oliver Williamson demonstrates that economic analysis can shed light on most forms of social organisation.
Elinor Ostrom has challenged the conventional wisdom that common property is poorly managed and should be either regulated by central authorities or privatized. Based on numerous studies of user-managed fish stocks, pastures, woods, lakes, and groundwater basins, Ostrom concludes that the outcomes are, more often than not, better than predicted by standard theories. She observes that resource users frequently develop sophisticated mechanisms for decision-making and rule enforcement to handle conflicts of interest, and she characterises the rules that promote successful outcomes.
Oliver Williamson has argued that markets and hierarchical organisations, such as firms, represent alternative governance structures which differ in their approaches to resolving conflicts of interest. The drawback of markets is that they often entail haggling and disagreement. The drawback of firms is that authority, which mitigates contention, can be abused. Competitive markets work relatively well because buyers and sellers can turn to other trading partners in case of dissent. But when market competition is limited, firms are better suited for conflict resolution than markets. A key prediction of Williamson’s theory, which has also been supported empirically, is therefore that the propensity of economic agents to conduct their transactions inside the boundaries of a firm increases along with the relationship-specific features of their assets.
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