STOCKHOLM — Americans Elinor Ostrom and Oliver Williamson won the Nobel economics prize on October 12th for their analyses of economic governance — the way authority is exercised in companies and economic systems.
Ostrom, a professor at Indiana University, was the first woman to win the prize since it was founded in 1968, and the fifth woman to win a Nobel award this year — a Nobel record.
The academy cited Ostrom "for her analysis of economic governance," saying her work had demonstrated how common property can be successfully managed by groups using it.
Williamson, the academy said, developed a theory where business firms can serve as structures to resolve conflicts.
"Over the last three decades, these seminal contributions have advanced economic governance research from the fringe to the forefront of scientific attention," the academy said. It said the American winners' research shows that economic analysis can shed light on most forms of social organization."
Elinor Ostrom has challenged the conventional wisdom that common property is poorly managed and should be either regulated by central authorities or privatized," the academy said. One notable publication Ostrom wrote in 1990 examined both successful and unsuccessful ways of governing natural resources — forests, fisheries, oil fields, grazing lands and irrigation system — that are used by individuals.
Williamson of the University of California at Berkeley was cited for arguing that markets and hierarchical organizations, such as firms, represent alternative governance structures that differ in their approaches to resolving conflicts of interest. Issues of governance, or the rules by which authority is exercised in companies and economies, have been at the heart of the ongoing world economic crisis. The failure by boards of directors, for instance, to police excessive compensation, or prevent bonuses that reward excessive risk taking, can be considered a corporate governance issue.
I think that the honoring of these two individuals and their unique and timely theories is outstanding. Studying non-governmental structures and corporate organizations, and translating into useful models is worthy.