WASHINGTON – Two Americans won the Nobel Prize in economic sciences Monday for their research in the way economic decisions and transactions are made outside of the market.
Elinor Ostrom, 76, who teaches at Indiana University in Bloomington, Ind., became the first woman to win the prize for economics since it was established 40 years ago.
She shares the $1.4-million award with Oliver E. Williamson, 77, a professor at the University of California, Berkeley.
Ostrom and Williamson were cited for their work beginning in the early 1970s that expanded economics beyond the traditional analysis of market prices. Specifically, the Royal Swedish Academy of Sciences said the pair established “economic governance” as a field of research that had “greatly enhanced our understanding of non-market institutions.”
Ostrom, who received a Ph.D. in political science from UCLA in 1965, was recognized for her research demonstrating how common property, particularly natural resources such as pastures, woods and lakes, can be successfully managed by user associations and other forms of institutional arrangements. She “has challenged the conventional wisdom that common property is poorly managed and should be either regulated by central authorities or privatized,” said the Nobel economics committee.
The panel said Ostrom based her conclusion on case studies, including her own fieldwork that began with her doctoral dissertation that studied institutional entrepreneurship and saltwater intrusion into a groundwater basin in the Los Angeles area.
Williamson, who received a Ph.D. in economics from Carnegie Mellon University in 1963, “proposed a theory to clarify why some transactions take place inside firms and not in markets.” The committee said his research offered insights into conflict resolutions at businesses and other organizations.
He “has argued that markets and hierarchical organizations, such as firms, represent alternative governance structures which differ in their approaches to resolving conflicts of interest,” the Nobel panel said. “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.”