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The Nobel Prize in Inscrutability (i.e. Economics) goes to...

Ostrom & Williamson

News that Americans Elinor Ostrom and Oliver Williamson have won the Nobel Prize for economics sent the already contentious community of social scientists into a predictable tizzy.

Several factors seem to have catapulted the two, who were separately lauded for their respective work, to the top ranks of a beleageured profession. "We primarily recognized each for the inscrutability of their contribution," said an unnamed representative of the Nobel committee, who made himself available from a phone booth in Stockholm. "Of all economists now working in the world, these two are among the least comprehensible to the general public and even their peers, especially in their native English."

The sheer opaqueness of each to the untutored observer is best conveyed in the news reports announcing their selection. The NY Times, for instance, reported that:

In its announcement, the committee said Ms. Ostrom “has challenged the conventional wisdom that common property is poorly managed and should be either regulated by central authorities or privatized. Based on numerous studies of user-managed fish stocks, pastures, woods, lakes, and groundwater basins, Ostrom concludes that the outcomes are, more often than not, better than predicted by standard theories.”

Mr. Williamson’s research, the committee said, found that “when market competition is limited, firms are better suited for conflict resolution than markets.”

What? Other reports are not much more illuminating, nor is the Wikipedia entry for Mr. Williamson, which states:

His focus on the costs of transactions has led Williamson to distinguish between repeated case-by-case bargaining on the one hand and relationship-specific contracts on the other. For example, the repeated purchasing of coal from a spot market to meet the daily or weekly needs of an electric utility would represent case by case bargaining. But over time, the utility is likely to form ongoing relationships with a specific supplier, and the economics of the relationship-specific dealings will be importantly different, he has argued.

Eh? One thing is clear: The ability to generate a large body of work on matters whose importance are shrouded in mystery is a key attribute of all world-class economists, and Ostrom and Williamson are clearly in the vanguard here.

Economists, of course, are a testy and opinionated bunch, and the selection of these particular practitioners of the dark art engendered the predictable sniping and grousing among the white-socks-and-Birkenstocks cognoscenti.  "I don't know why I didn't win," said Max Farbush, who lives near Stanford and often visists the neighborhood around Wharton for its cheese steaks. "I'm as incomprehensible as they are."  When pressed, Mr. Farbush revealed that his work centers on the relationship of markets to their produce. "There's no rational reason that eggplants should cost as much as they do," he stated. "It's clear that subjective perceptual issues enter into such transactions."

Speculation has already begun as to the 2010 winner, and a short list is now making the e-mail rounds. It's too early to pick a favorite, of course. But while professionals like Mr. Farbush are clearly being considered, the smart money remains on game changers who are right now shaping the world recovery, which places one name at the top of any prospective list. When called to respond to their rumors, the White House declined to offer a comment.

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16 Comments Add Comment

When Farbush figures out why eggplant costs so much, maybe he will get the Nobel. Until then, it's back to supply and demand.

Confusing to some, clear as mud to others. I understand their concepts, others may not,,because quite simply,, few people accept anything other than what the majority of average people can digest mentally between half time on monday night football.

Bottomline: They got the prize, be happy,, at least they were Americans,,,could have gone to some other foreign economic genius...

Did I mention I came in a close second to these two,,,with my book on the relationship between earnings on wallstreet stocks and the smoking of Mary Jane...

Proves that some highs are better than others...cheaper too.

I don't know, Jack. Both may have gone up in smoke, but one seems to have left a certain gummy residue in your brain pan. Just hard to tell which one.

"All Economics is Home Economics."

Galbraith said that. Kenny Galbraith, in my middle school class. Then his cake fell and he got a C minus.

Uh-oh, now I'm really nervous. Did the outcomes of those numerous studies of user-managed fish stocks, pastures, woods, lakes, and groundwater basins factually demonstrate they are more often than not better, or was that merely Ms Ostrom's personal conclusion?

And how can the economics of relationship-specific dealings actually be importantly different from repeated spot purchasing when a utility is only likely to form such a relationship? And is the difference really important or merely urgent?

Know what I mean?

Inscrotumability: The inability, due to lack of huevos, to call it like it is.

This condition is shared by numerous professionals and is not peculiar to economists alone.

Bing,,that harsh after taste you get is from the fertilizer used to grow it,,,be it stocks or Mary Jane...

The sticky residue on the brain pan is natures way of protecting you from the effects falls,,,in stocks or otherwise....

Thank god I was blessed with extra brain cells,,,so booze and that other stuff cannot effect me as much as a normal everyday type person....I can afford to lose a few brain cells and still be normal...

Yep,,,it's great to be me...

Forgive me for not getting too excited about the awards. I haven't seen any great accomplishments since the polio vaccine.

If we could find someone who cures cancer or ends the recession before the 11:00 PM news, then break out the awards. Until then, it's just the brainy types patting the other brainy types on the head.

Then again, it might be the fine French wine we had with dinner.

Economics is about resource allocation - how does society allocate its resources. Many societies allocate resources through markets (a market for sub-prime mortgages comes to mind). Other societies allocate resources through other mechanisms (the decision by Soviet Union to maintain 5 million standing army comes to mind).

Elinor Ostrom studies a very interesting process of resource allocation - what happens to commonly managed resources. Think - lobster in Maine. If I fish out almost all lobsters this year, I will be rich. What will happen to the community next year? So what do we all do together when EACH one of us has an incentive to overfish? Do we need the government tell us what to do? What happens?

People pay very little attention to Nobel awards of any kind; they fail to register with the common person what a clear definition of achievement is.

These professionals get paid to perform in their respected professions; they get paid for services rendered.

A promise for a promise: You do the job that's expected of you; then we'll pay you for your services rendered.

Where is the risk? What type of marathon is being waged?
What's so overwhelming about these outcomes? How will this affect the growing homeless problem and the apathy toward it? How fail-safe is it? Please advise!

These men and women are paid to do a job, Like many men and women in industry, management's creativity develops ingenius ways to bribe people to do what they get paid to do.

When passion isn't there, smoke and mirrors can create a cosmetic inert display of outstanding achievement to feign the passion.

Some time ago people felt that real achievement was making a million dollars without getting their hands dirty. Has this bit of inspiration embedded it self into today's culture? Sounds like?

Eggplants and eggheads. Who really cares about a couple of eggheads who have not left there ivory tower since Nixon was president? How do we nominate BING for 2010 prize in Economics for his study on martini prices in 5 star hotels?

Make fun of these two if you like, but at least they logged some years working towards their moment.

Obama won the Nobel Peace Prize for being the 10th caller.

The work of these two nobel laureates may be quite inscrutable, but it's no doubt a lot less harmful than the arcane sophistry of the over-paid quants that led us down the path to mismanaging aggregate derivative risk.

We'd all be better off if those particular 'applied science' egg-heads had stayed in their ivory towers.

As for private greed managing the much abused 'commons' of resource management better than the government....good luck with that. The natural world really doesn't give a rip about our physical survival (let alone our economic success), and we abuse its immutable laws at considerable risk. Even Adam Smith (and certainly Friedman) understood that the invisible hand does not work well in all situations (in fact they look positively Keynesian compared to the free market lunkheads still singing the gospel of complete deregulation).

Business, left to its own greedy devices, will plunder any common good....which is well demonstrated through countless ravaged resource stocks.

I've known many macro-economists, and almost to a man (and woman) they have an inordinate faith in science and technology (generally subjects they have very little knowledge or experience)to successfully overcome any resource deficit in a timely manner.

Of course, they're depending upon RSG's (Really Smart Guys) just like themselves, but in different disciplines, to sort everything out....and we know where that led us.

Well put, Mike. I think the two recipients are relatively progressive people working in a reactionary profession.

And Leeroy, I suspect nobody is more mystified about his Nobel prize than Obama, and that the self-ingratiating Obama acolyte who initiated the nomination is not very popular in the inner circle right now. We've all seen them; the toadying and shameless senior vp who pushes the butt-kissing to the point of embarrassing the CEO.

I also suspect that Bing, given his phenomenal corporate and literary success, understood long ago what differentiates useful (and dignified) brown-nosing from craven self-immolation. My wife's chihuahuas even understand that distinction.

Just to add a postscript - the following might help make less inscrutable the works of Williamson and Ostrom: