As I've mentioned here before, I have a peculiar interest in economics, despite my complete lack of any numerical competence. They awarded the Nobel Prize in economics this week. For the first time in its history, a woman, Dr. Elinor Ostrom, of Indiana University won the prize. She shared the honor with Dr. Oliver E. Williamson of California, Berkeley. Hooray! to both.
A couple of things struck me about this award. First, neither winner is technically an economist. Williamson teaches in a school of business while Ostrom is a political scientist. The NYT article that I linked to above, in fact, introduced them as "two American social scientists" and Robert Shiller of Yale had a nice comment: "This award is part of the merging of the social sciences. Economics has been too isolated and too stuck on the view that markets are efficient and self-regulating. It has derailed our thinking." Indeed--in his interview, Williamson takes a nice little shot at Alan Greenspan, always a good thing.
Second, both winners studied institutional economics, the effect that, duh, institutions and social structures have on economic activity. Here at the Dept. of Comm Illinois, we had a reading group last year (in addition to our rhetorical studies group; we're a beehive of intellectual activity) on institutional research and the ways in which the NYT and other sources explain Ostrom's work, in particular, sounds a bit familiar.
She studies what I would call the normative and regulative rules that govern institution formation when people confront a "commons"--a shared resource that a number of people have an interest in preserving. In other words, what values and behaviors evolve to maintain a resource that provides a living for the people concerned? Her work seems to skip from one side of the political aisle to another. Internal norms, she argues, work better than external rules in such situations. Let parties come up with their solutions rather than impose government regulations. But the old market theory example of the "tragedy of the commons" (that greedy individuals will destroy a shared resource and it should be sold to self-interested private owners) is also wrong. Cooperative behavior evolves to preserve the resource, she argues. An institution, shared sets of rules for common beliefs and actions, emerges and the resource is preserved.
Which is quite cool. Except for the column that appears on the same page, detailing the ways in which Goldman, Sachs intends to cock a snook at American taxpayers. The semi-private economic giant, which appears to run the Treasury Department, New Jersey, and the Democratic Party on the side, is setting aside more than $23 billion for its annual bonus pool--the largest in its history and more than twice the size of its 2008 pool.
Please recall three pertinent facts. First, the government bailed out Goldman to the tune of $10 billion last year. GS paid that money back and claimed it was unnecessary, but somehow liked the very public govt. endorsement received at the time. Second, the government allowed GS to reorganize as a bank holding company which, in turn, offers it cheap financing. Finally, given those two events, GS is now implicitly backed by the full faith and credit of the United States of America. So, when it takes the chances it takes, it knows it's not going to be allowed to fail. Heads, GS wins. Tails, taxpayers lose. All the thrill of rooting for the house in Vegas or the Yankees in the playoffs. But highly profitable. For GS employees.
I understand that Dr. Ostrom researches "relatively small forests in undeveloped countries." But I'd sure like to turn her loose on Goldman, Sachs and come up with some way to preserve our commons and give those people a conscience. Sadly, that may require a Nobel in genetic engineering.
Congratulations to both.
Posted by: Lisa | October 13, 2009 at 05:24 PM