What This Year's Nobel Prize in Economics Says About the Nobel Prize in Economics

Earlier today, Elinor Ostrom and Oliver Williamson were awarded the Nobel Prize in economics for their work on the role of institutions. Congratulations to both of them!

When I was a graduate student at MIT back in the early 1990’s, there was a Nobel Prize betting pool every year. Three years in a row, Oliver Williamson was my choice. At the time, his research was viewed as a hip, iconoclastic contribution to economics — something that was talked about by economists, but that students were not actually trying to emulate (and probably would have been actively discouraged from had they tried to do so). What’s interesting is that in the ensuing 15 years, it seems to me that economists have talked less and less about Williamson’s research, at least in the circles in which I run. I suspect most assistant professors of economics have barely heard of him. Yet I suspect the older generation of economists will applaud this choice.

The reaction of the economics community to Elinor Ostrom’s prize will likely be quite different. The reason? If you had done a poll of academic economists yesterday and asked who Elinor Ostrom was, or what she worked on, I doubt that more than one in five economists could have given you an answer. I personally would have failed the test. I had to look her up on Wikipedia, and even after reading the entry, I have no recollection of ever seeing or hearing her name mentioned by an economist. She is a political scientist, both by training and her career — one of the most decorated political scientists around. So the fact I have never heard of her reflects badly on me, and it also highlights just how substantial the boundaries between social science disciplines remain.

So the short answer is that the economics profession is going to hate the prize going to Ostrom even more than Republicans hated the Peace prize going to Obama. Economists want this to be an economists’ prize (after all, economists are self-interested). This award demonstrates, in a way that no previous prize has, that the prize is moving toward a Nobel in Social Science, not a Nobel in economics.

I don’t mean to imply this is necessarily a bad thing — economists certainly do not have a monopoly on talent within the social sciences — just that it will be unpopular among my peers.


Science Minded

Well, that 's a start. True- Economists may not seem to like it--It might appear as if Physicists (except one) will like it even less and Mathematicians, Astronomers, Chemists, and Biologists. Perhaps there are some who will and until 2010 most who won't. Need I say more.

Yes, as far as I know, Psychologists and other so-called softee scientists may not love me, but they will love it-- and Women--Met a bio-chemist at the flee market yesterday. She formally got out of our kitchen. As it seems, she couldn't take the heat. Is making and selling organic soaps. I bought the one in the shape of a pig. Despite their reputation for scavengery, they are so cute and this one smells real natural like oat meal. So who said, "health is wealth!" Now you know.

Robyn Ann Goldstein, 2003

Jeff Darcy

I suspect that many economists will also hate the award because Ostrom dares to recognize the notion of a strong commons which may need to be governed as such instead of relying on privatization and profit motive to guarantee optimal outcomes. I'm no economist myself, but from what I've been able to observe of economists that has been an extremely unfashionable view until this year.

charles

I'm curious what was the reaction to Kahneman's win was like.

Eric A

Her work is much more in the realm of economics than I believe you give her credit for, regardless of whether economists have heard of her. She did work in the allocation of resources and how economic institutions and situations are formed. Her work is incredibly important in understanding that. The majority of economists just postulate the existence of economic institutions and the matters of economic decision making and then study the behavior - without ever questioning where the institutions and units that permitted that behavior ever came from. Her work is helpful in explaining that because she gets away solely from the economic perspective and looks at it from what circumstances and how we as humans function allows us to set up those institutions.

It's a failure of economists to not recognize some of the implications for her work; not the failure of the Nobel committee for honoring her insights into "New Institutional Economics."

Also, take a look at yourself. You've won a Clark medal and most of your work could easily be classified as sociology. If you had a degree in sociology and did the same work, you could make the same case that the Clark medal is becoming a prize for "social sciences"; but because your degree is in economics it's without notice.

I'm curious though, were economists upset by the prize being awarded to Thomas Schelling who's most impressive work is arguably just political science with insights from economics and game theory? Or because he's an economist by training and manner that his prize is still considered an "economics prize"?

Perhaps the award will act as a wake up call to economists - just because it's not called "economics" doesn't mean it's not applicable to your field. The natural sciences figured this out decades ago when the fields started to converge upon one another (see: the line between areas like physical chemistry and physics) - perhaps economist needs to start looking at the advantageous of political science research when it is clearly applicable to their area of study, rather than just ignoring it. One of the reasons the natural sciences have seen an explosion in information and advancement in the 20th century is because of the breaking down of barriers between fields and using insights of other areas in a synthesis - economics should do the same where applicable in fields of political science, sociology, and psychology.

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Topias

No facts - just plain old prejudice and guesswork...

Looks to me like it was cool to pick a woman; for such a nobel intent, what is a few bent boundaries?

Tim

If you can tell me where economics end and sociology (or poly sci) begins, then YOU will probably win the Nobel Prize. This, as you point out, is simply confirmation that these disciplines lie on the same spectrum. One might even add cultural anthropology to the mix!

Enda

Actually Jeff, my interpretation of Ostrom's work is the polar opposite of yours. The Tragedy of the Commons is essentially a tale that private motives do not always provide optimal outcomes: deterioration of the land, etc. Ostrom's work suggests that this is not necessarily the case.

Although I agree with you that many economists may be nervy about her award. But for the opposite reason that you might think: it goes against the entire grain of public economics, a large (the largest?) sub-field of micro.

Margaret D

Political 'science' ... social 'science' ... even economics? Just because a field occasionally cites statistics, use regression analysis or linear programming, doesn't make it science. You can't predict anything, you can't conduct an experiment subject to boundary conditions, you can't control you variables, and you can't explain nature. I'm sorry to be iconoclastic, but stuff like this gives me the vapors.

kate s

I personally believe we are entering into a paradigm change...this is going to be hard to accept for the 'status-quo' who still believe that we live in a world segmented and fragmented.
Wake up boyz, the world is becoming more and more understandable as holistic - connected - global. We need to connect the dots (between disciplines) otherwise we will not move forward...
I salute the prize...

Joyce

same with the chemistry prize -- it's turning into a biology prize rather than strictly chemistry. This year's prize is essentially the chemistry of biology

james

This is a total rip off! Everyone knows that Obama should have won the Nobel in Economic Science. Obviously the Nobel committee did not realize that Obama should win in every category. He has been just as successful in economics as he has in peace…I wonder is racism is involved?

http://www.4insure.net

john kenny

She is not the first pol sci practitioner to get a nobel prize. Herbert Simon's work on bounded rationality also won a nobel. Economists risk losing more than just nobel prizes if they continue to be so orthodox in their views of human nature

zflynn

NEWS ALERT! The Nobel Committee has announced that the economics award was given prematurely but rather should be given to President Obama because of:
1) His promises to "do good" for the economy
2) The fact that he can figure out the change you owe him when he gives you a dollar at the 99 cent store and
3) He is able to read these three reasons in their correct numerical order.

Sebastian

The people who feel the need to comment on Obama here should be ashamed: This is an amazing day for two highly original, fascinating scientists. Why can't you talk about their work or shut up? (And the Obama nobel jokes were old on Saturday, already).

I actually don't think that economists are going to hate this quite as much as Levitt thinks. I think Krugman is right that this is a price for institutional economics and I think many people can relate to that, especially as it's also timely - institutional economics is very good in addressing regulation - be it of CO2 emissions or of the financial system.

Certainly no begrudging from Alex Tabarok at MR, Krugman on his Blog and Michael Spence at Forbes (via Mankiw).

Too bad you don't say a little more of their work. Readers who want to learn something should go to MR, which has two fantastic short posts.

Andrew

Economists might be self-interested, but that would not explain why they would care if the prize went to a political scientist. Sure, the economists who were under consideration, or whose work might be worthy of consideration, for the Nobel Prize might care, but why it make a difference to those who have zero chance of getting that prize?

tendai kamba

Elinor Ostrom's work is superb and legendary. She deserved to win the Nobel Prize period. Ask development economists and environmental economists, they will tell you that her work revolutionalized the field.

Science Minded

Dear Tim:

I already have added Anthropology (physical and cultural) .
So, in answer to your question--That's easy-- but you don't have it altogether right. It's the same plain or plane. It's where the real possible science of Sociology or Social science ends the debate between the sciences of observation and all the sciences (including Economics (plural), Anthropology, Sociology etc., begin or have begun somewhat renewed.

See Goldstein, 1995 Essentials of Sociology and Goldstein (copyright 2003, unpublished)

As far as your questions about economics and politics and sociology -- went back to the books- seems to me-- with the Economist, Talcott Parsons analysis (The Structure of Social Action, p. 130 and discovery of Marshall's idea and with my own understanding, as Parsons left to be inferred, of his' own discovery of the law of "Marginal Utility" as in the real incremental or just noticeable difference of the relationship or connection that this idea offers betwen "value in exchange" and "value in use" that my own claim of economics "emphasis on the production, distribution and consumption of goods and services" (Goldstein, 1995) left open. And that perhaps the most recent Nobel Laureate left out.

Robyn Ann Goldstein, 2009

Tim- I need your full name to pay to you this credit- Please.

Sorry- for details of Politics and Anthropology --later this afternoon perhaps - family calls.

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Bengt

I am not sure the "Nobel" in economics would have survived giving it to Fama and then some. The price is considered a shame by many people in the Swedish academy; it is not a real Nobel and if you look at the motivations, well, they have a point. The pressure is real on the economics committee. The Ostrom-Williamson price is great, like the Vogel price to economic history and the Kahneman price. And this time I think I can watch "Nobel minds" without feeling awkward. Usually, the economists come out badly compared to the real scientists. Not this time, I predict.

Science Minded

before I forget and make mention and credit Professor Merton of Economics - the other one-- for his patience and understanding..

Roger Sweeny

Jeff Darcy,

There are many economists who love Ostrom--and lots of them are on the right.

Garrett Hardin's paper (not the earliest but the best known) on "the tragedy of the commons" said there were two possible solutions: 1. break up and privitization, or 2. being run by "the government." Ostrom has found numerous examples where local co-operative solutions are possible, and in fact where they work better than either of Hardin's alternatives.

I don't think any economist is foolish enough to think that "privatization and the profit motive ... guarantee optimal outcomes." But most know that it is just as foolish to think that governments are always wise and benevolent, and thus should get more power whenever there is a problem.

Two fairly prominent "right-wing" economists who like this year's choice can be found at marginalrevolution.com