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Nobel gongs in economics

I was not surprised that Oliver Williamson won the Nobel Gong in economics though I had never heard about the other prize winner Elinor Ostrom

From my perspective as a teacher of microeconomics I think Williamson deserves the prize – he, along with Ronald Coase, changed the way microeconomics looks at firms by redirecting attention away from technologies toward issues of internal organisation in a natural economic framework.  It is a decisive advance although I have to admit I find Williamson’s closely argued writings hard going – The Economic Institutions of Capitalism is very good on things like vertical integration but the prose style is difficult.

I have worked on issues concerning common property quite a bit and have not heard of Ostrom.  So I Googled a bit to find out about her. It seems a major point is that she thought common property was not necessarily a destructive institution because those jointly using a resource could apply rules toward its use. That is probably an excessively bald statement but reflects my lack of exposure to Ostrom’s work.

The notion that common property can perform effectively as a institution is  in fact quite old.  It is the basis for resource and environmental distinctions between “open access” resources (resources that are consumed in a free-for-all without any sharing) and “common property” (resources that are consumed on a shared basis by a small enough group of users.  There is a vast difference between how gold is extracted in a “claiming rush” and how a small enough rural village manages a communal woodlot.  Indeed in work I did in the 1980s I argued (along with many others) that many developing country forestry problems might best be addressed by converting open access forest resources into common property.  The forests of Nepal for example were managed sustainably as common property for centuries – their destruction followed a government decision to (inadequately) enforce public property rights on them.  

As numbers of users increase the efficiencies of common property can disintegrate. The contents of the refrigerator in my household are often better managed as “common property” (with occasional enraged tantrums) than using some kind of market mechanism.  However I would not make the same observation about communally-used coffee facilities in university departments – these often tend to be subject to chronic abuse!

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