Monday, October 12, 2009

Williamson, Ostrom Win

Well, the Nobel brand isn't worth what it once was, especially given the Peace prize, but it's still all harmless fun. Oliver Williamson wrote a bunch of interesting stuff about the value of the firm--Ronald Coase stuff--and transaction costs. For instance, he highlights the 'own' rate of interest for owning commodities because it allows one to avoid transaction costs delivering the underlying commodity. This has relevance to the contango and normal backwardization of futures contracts.

He reads a lot like Frank Knight to me, with a strong respect for markets, and not highly mathematical. Yet, like Knight, it's hard to develop models based on his work, which makes him a surprising result. An idea that generates a model, no matter how abstract, seems the economic ideal. I think Williamson's work is very good for undergraduates, so hopefully this will get him read more.

I honestly have never heard of Elinor Ostrom before.

Update: I seemed to have confused Jeffrey Williams with Oliver Williamson. The former wrote on contango and futures. This work was consistent with Williamson's work, and I remember relating some ideas directly, but to my knowledge Williamson never applied his work to futures directly.

12 comments:

J said...

You never heard of Ostrom because Third World community organization and crafting self-governing irrigation systems is not your field. It is almost as if Barack Obama won the prize.

J said...

Or her Mother.

tom s. said...

@J - not sure I'm reading your comment right. Do you think she has no achievements? Or that third world issues are not deserving of serious study and recognition? Or am I reading you wrong?

Franco said...

Got any pointers to papers or summaries of the "'own' interest" concept? Google is failing me (beyond bringing me back here)...

Thanks!

Brian said...

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?

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J said...

tom s

Development economics, her field, is a total failure. Billions have been and are being spent by the World Bank, NGOs and all kind of charitable organizations, basically for nothing. Self-governing voluntary irrigation systems, as studied and proposed by Dr Ostrom, do not exist anywhere in the developing world. Unfortunately, irrigation systems demand central management to work successfully, or they decay. The tragedy of the commons is an universal reality, if you dont believe it, look to African safari parks. I would love humanity to be different, but we are not.

As you know, President Obama's mother was a development specialist, and wrote about Indonesian artesanal village smiths that were being outcompeted by factories. Of course that was a generation ago, and in spite of the monies invested by the Ford Fundation, there are no more village smiths in Indonesia. Maybe a few.

tom s. said...

J. Following your link, it is obvious that you know a lot more about irrigation than I do, so I'll take what you say. But I'm surprised that you challenge Ostrom on empirical grounds. She's probably the most empirical winner of the prize in many years and her books and articles are often largely concerned with chronicling and documenting both successful and unsuccessful attempts by communities to manage common pool resources. So it's difficult for me to accept your statement that the systems she studies "do not exist anywhere in the developing world".

J said...

Many of his successful case studies relate to Japanese forests, Alpine meadows and other special (economically marginal) cases in the developed world. Irrigation (and water supply systems in general) are different. Tibor Mende wrote a book Hydraulic Despotism that documents the process how these systems "demand" centralized management.

I think it is unnecessary to insist that Third World communal development projects do not work nor promote development. China abandoned its village projects (like Mao's village iron foundries) and is developing very successfully under a private cum centrally managed regime.

tom s. said...

My reading of Ostrom is different. Yes, she looks at economically marginal cases, but I don't think she is arguing we should all run our health care like a Swiss pasture or that all third world development projects should be small-scale village enterprises. Rather, she is looking at conditions under which common-pool resources can be managed successfully - and conditions under which they can't as well.

These seem to me to be good and important questions. Institutional diversity is a good thing and she seems to have done an effective job at promoting possibilities that are neither state nor market, and being clear about their limitations as well.

Barry said...

"Well, the Nobel brand isn't worth what it once was, ..."

I agree - many of those Chicabo nobels don't look so hot anymore, do they?

J said...

tom s, My bete noir is the appropiate-technology sustainable community development doctrine that is being forced on powerless Third World peoples. Dr Olstrom is not one of the Doctors of that Church.

tom s. said...

Fair enough. Many of us have a bete noir that gets us moving in the morning; I know I do.