Bravo to the Swedes for selecting Oliver Williamson and Elinor Ostrom as econ Nobellers. (Nobellians? Nobelistas?) Williamson was on everyone’s short list; transaction cost economics is largely traceable to him. (Coase of course was already honored, but Williamson did more to develop and apply the germinal ideas.) Ostrom was a big surprise. She rarely publishes in economics journals (she’s officially a political scientist), and her approach is antithetical to mainstream economic thinking in almost every particular of content and method. The two make a balanced pair: Williamson uses institutional analysis to argue that hierarchy is needed if we are to uphold market discipline, and Ostrom uses it to support collective action. Much will be made of the fact that Ostrom is the first woman to win this prize, a true scandal that is not erased by moving from N=0 to N=1. It is revealing that this pioneer operates largely outside the realm of professional economics.
Incidentally, whether consciously or not, the Nobel committee has endorsed Paul Krugman’s point that, to move forward, economics has to abandon its obsession with mathematical elegance at the expense of genuine insight and usefulness. Not every economist has to be non-mathematically oriented as Ostrom and Williamson, but the discipline suffers if it cannot accord equal respect to those who do the sort of work exemplified by these two winners.