The announcement of Elinor Ostrom as a co-winner, along with Berkeley economist Oliver Williamson, of the 2009 Nobel Prize in Economics came both as a surprise and a breath of fresh air. None of the participants of Harvard University’s (informal) annual betting pool for the winner of the Nobel Prize in Economics staked their claim on Ostrom.
This is not all that surprising. Ostrom is a political scientist and not an economist. Thankfully, Swedes had the foresight to yet again balk convention by awarding the prestigious award to a non-economist. Ostrom is also the first woman to win since the founding of the Nobel Prize in Economics in 1969.
While highly regarded among political scientists and policy scholars, the Indiana University professor is not widely known in the economics profession. In fact, Paul Krugman, last year’s Nobel Prize winner in Economics, confessed that he was not familiar with Ostrom’s work in his comments on The New York Times’ Economix blog. Economist Paul Romer—one of the favorites of this year’s Harvard betting pool— speculates that the widespread ignorance is due to the fact that mainstream economics consists of “economic imperialists who can’t tell the difference between assuming and understanding.”
Indeed, Ostrom is a scholar who has sought to understand rather than assume human behavior. She is most famous for her research on natural and public resources management, as laid out in the 1990 book Governing the Commons: The Evolution of Institutions for Collective Action. Ostrom’s key insight is that there are a variety of institutions to solve problems of resource allocation and depletion. Neither the government nor the market may be the best allocator of public resources, particularly when governments are seen as illegitimate, or their rules cannot be enforced. Corporations may also not do better when their objectives depart from those of local communities who have managed natural resources for decades or centuries.
To understand how individuals and communities—particularly in developing countries—manage forests, lakes, groundwater basins and fisheries and resolve conflicts, Ostrom goes out into the field and performs case studies of human and ecological behavior. Moreover, Ostrom conducts satellite analyses of resource levels to measure amounts of degradation. When she returns from her fieldwork she conducts behavioral experiments to see if random subjects replicate her findings in the field.
What Ostrom has learned from her extensive field and experimental work is that under certain conditions, when communities are given the right to self-organize they can democratically govern themselves based on trust, reciprocity, shared norms and mutual monitoring to preserve the environment without the intervention of governments, the parceling of private property or the creation of markets.
Ostrom is indeed a breath of fresh air in a profession where rules of the game and institutions are assumed rather than understood. The hope is that the unconventional induction of Ostrom by the Nobel committee will send a clear message to the economics profession that it is time to become more realistic about the economy and human behavior at large. How fitting that the reality check begins with a woman.
Lily Hsueh holds an M.Sc. in Economics from the University College London. She is currently pursuing her PhD focusing on environmental economics, public policy, and political economy at the University of Washington.
