Ed Glaeser does a great job describing the work of the two Nobel Laureates.  But I’m with Jeff and Levitt is never having heard of or read the work of Elinor Ostrom.  Looking at the Nobel Committee’s blurb, you do get the feeling of familiarity, as if you’ve read it subconsciously.  That’s partly because Ostrom works on a classical economic issue, the free-rider problem that arises when players use common property resources.  The main reason though is that she uses experiments and field work to evaluate her theories.

Many researchers (e.g. Ernst Fehr) use experiments and some simple theory to study how cooperation may arise in the absence of monetary incentives.  Others (eg Kremer and Duflo) do field research in development.  Someone might ask “were these researchers the first to study these issues”?  The Nobel Committee takes this question very seriously.  And the answer, if I read the Nobel report correctly, appears to be “No,” as Ostrom pioneered this sort of thing.  While that may be true, it is odd that Ostrom’s name is not on mainstream courses in econ courses.  Williamson would appear on reading lists for contract theory.  Many Econ Departments do not have courses in experimental economics and I wonder if Ostrom would appear on them anyway?  This would make her different from John Nash – he is a mathematician not an economist but his solution concept is used every day by many, many researchers in the economics (not mathematics) and his existence proof for equilibrium provides a key approach economists still use (and again it would be old hat for mathematicians).

No-one finds it strange that Williamson won the Prize.  Names that would normally be paired with Williamson are: Alchian, Demsetz, Grossman, Hart, Holmstrom, Kreps, Milgrom, Tirole etc, etc.  All of these individuals have made significant contributions to the “theory of the firm” and more broadly to contract theory, decision theory, game theory and industrial organization.  Perhaps they are being saved for future Prizes.  For example, the Nobel blurb is careful not to give too much credit to Williamson for the “hold up” problem.  But why wait for the future, why not now?  It seems more natural than Ostrom to me.  I’m puzzled.