Today Elinor Ostrom and Oliver Williamson were awarded the Nobel prize in economics. So I got it half right but it was the easy half. And I was more than ready to blog about Williamson’s contributions (and will do so later). But I have to say that I had not heard of Elinor Ostrom before today and, as I am considered rather well-read in economics, and in particular, institutional economics, that is going to let lots of my colleagues off the hook for being of similar ignorance. But there is a broad issue here. For instance, her name does not appear in economics textbooks on the subject (including Milgrom and Roberts famous one or, for that matter, this). (Kudos to Peter Klein though for getting it right).
So on Ostrom, I have only read the brief commentary on her contributions and will have to order her book (which has shot up today to 170 on Amazon!) and is on the kindle. (By the way, that book has over 7000 cites on Google Scholar compared to Williamson’s best at around 5000). She is a political scientist (albiet towards the economics side). This award brings her work to the attention of economists which can only be a good thing. Economists are known for having too narrow a field of inquiry and the Nobel Committee can serve a role on countering that. And I must say, that the Committee has surprised before. Consider Maurice Allais whose contributions in French pre-dated many, more famous English writing counterparts but had been unknown prior to getting the prize in 1988. And consider Sir Richard Stone who won the prize in 1984 specifically for the national accounts (an award many of us think he should of shared with Australia’s Colin Clark). So surprises are not new.
But let me offer some other thoughts on this. First, I disagree with Steve Levitt that economists will be upset about this. Economics is not simply what economists define it to be but has a broader scope. This is not unprecedented. Danny Kahneman, a psychologist, won the prize although he did publish much of his best work in economics journals. This opens the field to more.
Second, in terms of that open field, while there is lots of talk about prediction markets for Nobel prizes (in this case, getting it wrong) the true prediction market is in academic’s salaries. Whose permanent income rose today as a result of this? (That is, whose odds of getting a Nobel prize at some point went up). I think we can start with the formal contributions that build on Williamson including Oliver Hart, Sanford Grossman, Paul Milgrom and Bengt Holmstrom. But I think that more critically, Avner Grief, whose contributions to understanding how institutions work at a micro-level look, at first glance to be easily on a par with Ostrom, is now looking very good; indeed, there is a case to say he missed out on this round. (This is good to me as Avner along with Paul Milgrom and Ken Arrow make up my PhD supervising Committee.) But, finally, there are others who have made contributions in a similar manner to Ostrom. Specifically, I am thinking here of Nathan Rosenberg whose work on how technological change really occurred has been incredibly influential. Don’t be surprised to see him sharing a Nobel prize with Paul Romer before this decade is out. (Actually, I’d also add Michael Porter as someone with a similar level of contribution to the field of strategy as Williamson had to institutional economics).
Third, what will political science make of all this? In theory, Ostrom has just received a extra-disciplinary award and that is surely worth some kudos. In actuality, will political scientists now see the economics Nobel as their Nobel? Some winners have crossed the divide, most notably, Arrow, Myrdal, Sen, and Schelling. Does that field care more about the economics Nobel than internal awards?
Finally, a woman winning the economics Nobel prize has been long overdue. I should say that the Committee erred prior to 1984 in not awarding the prize to Joan Robinson. But new ground has been broken today.