UC Berkeley professor wind Nobel Economic Prize - Do they deserve it?

[liberal N proud]

STOCKHOLM — Americans Elinor Ostrom and Oliver Williamson won the Nobel economics prize today for their work in economic governance.

Ostrom, of Indiana University, was the first woman to win the prize since it was founded in 1968, and the fifth woman to win a Nobel award this year -- a Nobel record.

The Royal Swedish Academy of Sciences cited Ostrom "for her analysis of economic governance," saying her work had demonstrated how common property can be successfully managed by groups using it.

UC Berkeley's Williamson, the academy said, developed a theory where business firms serve as structures for conflict resolution.

"Over the last three decades, these seminal contributions have advanced economic governance research from the fringe to the forefront of scientific attention," the academy said.


http://www.latimes.com/news/la-fgw-nobel-economics13-2009oct13,0,4049502.story


Do we ask the question, do they deserve it of every winner, or just when it is a Democratic President?

[malaise]

1. Friedman and Kissinger deserved it

:puke:

[MrModerate]

2. Well, one of them was a woman after all. It must have been a sop to the feminists. n/t

[MoJoWorkin]

3. Elinor Ostrom is a SHE, and because of that, I imagine the Pukes think she doesn't deserve it either

Ah, I see you have corrected the "he" in your subject line.

However, my premise still holds.

[MrModerate]

4. Alternatively, they weren't George Bush either! n/t

[exboyfil]

5. Three decades versus 11 days

you decide.

"Over the last three decades, these seminal contributions have advanced economic governance research from the fringe to the forefront of scientific attention," the academy said.

[Hubert Flottz]

7. We decided last November.

Get Over It...Move On!

[liberal N proud]

15. 11 days?

Where did you get that from?

[demmiblue]

17. I think he is refering to this:

February – Deadline for submission. The Committee bases its assessment on nominations that must be postmarked no later than 1 February each year. Nominations postmarked and received after this date are included in the following year's discussions. In recent years, the Committee has received close to 200 different nominations for the Nobel Peace Prize. The number of nominating letters is much higher, as many are for the same candidates.

http://nobelprize.org/nomination/peace/process.html

[elias7]

16. Way too concrete

Obama's message of hope had already touched the world in a way you clearly do not understand. As the world's most dangerously powerful nation, the US was in grave danger of a dismantling of its so-called democracy. One additional terrorist attack during the neo-con regime might have resulted in some serious paradigm shift in our county's history.

Obama's influence started well before he took office. Using "eleven days" is inaccurate enough, but comparing the apple of the peace prize to the orange of the economic prize (where life work is often cited as economic cycles can have a considerably different periodicity than political ones) is truly disingenuous.

[blondeatlast]

19. I traveled to Malaysia, singapore, and Germany in the summer of '08.

Verrrrry interesting; the contrast between '06 and '08. From cabbies to CEOs, everyone was excited about Obama, who got LOADS of press. We were actually asked to please, please, get him elected (from people who understood our electoral process better than some Americans).

He's made a tremendous impact on the peace process, but in too fine a way to be visible. In many, many ways--it IS enough that he is not GWB.

[HamdenRice]

6. They're both very, very influential and their win reflects a continued move to the left by Nobel

The Nobel Prize for decades was just University of Chicago right wing free marketeers congratulating each other.

About 10 years ago, things began to shift when Amartya Sen won for his work on poverty and famines.

There has been a shift from micro economics (how firms and individuals act, formulas for manipulating stocks) to macro economics (how the government can improve the welfare of the population and manage its taxes and spending).

Ostrom is very important in an esoteric way for the left. Before her, there were these economic models out there that said that all resources should be owned as private property because only individual owners and corporations could manage them without a "tragedy of the commons" outcome. According to the people before Ostrom, the idea was there should be no village owned property in the third world, no government owned utilities, and so on. Those economists' work was the justification behind the massive privatizations that took place in the 80s and 90s, especially in the third world.

Ostrom is really more of a "game theorist" than an orthodox economist. She showed using pretty difficult game theory math (mostly some form of "prisoners' dilemma") that when resources are managed by groups, like cooperatives, villages, governments and so on, if there was "repeat play" in decisions, then they could manage just as well as private owners. That's a really simplified explanation of what she said, but it basically justifies a roll back of the Thatcherite/Reaganite privatization mania.

Williamson is kind of the flip side of Ostrom. If the privatizers said that only individuals and corporations should own everything, Williamson showed that corporations are often somewhat irrational owners. He was part of a tradition iirc to model corporations not as a single entity but as a "place" where competing groups bargained for money and power over resources. A corporation wasn't in his view a single thing, but a place where managers, shareholders, employees, suppliers, customers and other "stakeholders" carried out transactions better than if they were doing one off deals. Corporations are places where these relationships become stable and transaction costs are reduced.

So yeah, they both deserve it.

[Braulio]

8. What massive privatizations in the 1990's?

I'm sorry, but which massive privatizations in the 1990's are you referring to? The ones in the former Soviet Union and Eastern Europe?

[HamdenRice]

9. Yes, as well as in South Africa and other parts of Africa

China chose not to privatize all their industries in order to reform, and if you compare Russia's development to China's it looks like China was right.

There was also a lot of privatization of utilities in South America during the 90s, usually required by the IMF, and ultimately based partly on the theories of the pre-Ostom economists.

In Africa a lot of land is owned collectively by village councils and parceled out by chiefs. The international financial institutions tried to force them to privatize the fields and give them out permanently to families, again because of the pre-Ostom theories.

[Braulio]

11. Privatization here and there

I was living in Russia in the 1990's, and saw first hand how the privatization wave was mismanaged by the Yeltsin regime. I remember meeting a high government official and asking him, how come Yeltsin was allowing the oligarchs to steal everything? And he told me Yeltsin was so afraid communism would return, he wanted to create a powerful caste of capitalists who would have the power to stop the communists.

Poor Yeltsin had been poorly educated, brainwashed into thinking all capitalism was the robber capitalism as seen in Upton Sinclair's "The Jungle", or Engel's "The Conditions of the British Working Class". So he drove them into a poorly designed transition.

The Chinese have been somewhat smarter as they drift away from communism. But statistics show private Chinese enterprises contribute the bulk of economic growth and are the engine transforming China into an economic giant. I also have first hand knowledge about China, and my daughter has worked there, and in their case the transition has been hurt by corruption. Today's Chinese communist party is closer to a fascist entity, seeking rent for party officials and their relatives.

Regarding Latin American privatizations, maybe they privatized too much, but I've lived in Latin America as well, and it seems services such as telecommunications and electricity generation should definitely be privatized, they have improved enormously in countries were privatization has been carried out properly. The key is to privatize wisely (ie rather than seek instant rents, seek lower long term pricing for the public) AND create QUALITY regulations including proper training and salaries for the authorities who enforce the rules.

[HamdenRice]

14. I've worked in China also, and in particular on environmental projects advising ...

an environmental organ of the government, and my take is quite different. China may have a fast growing "private sector" but it is very essentially a "socialist market" economy exactly as they describe it. The government owns almost all urban land, and the rural collectives own almost all rural land. They use that ownership to manage development, including by private enterprises which are only allowed conditional land use permits, in a way that is not possible in a purely capitalist country, including using a great deal of planning.

As for privatization in Latin America, I think Ostrom's and Williamson's theories answer some of your objections to how utilities were managed. They were poorly managed because they were poorly managed, not because of some essentialist aspect of being government owned. Here in this country, private telecoms like WorldCom have hardly been paragons of efficient management.

To put it more broadly, pre-Ostrom collective resource theory basically said that any collective ownership other than the corporation was doomed to failure because of the tragedy of the commons. Critics would ask, but corporations are also a form of collective ownership; why are they exempt from that iron rule? The answer was that they had unified management, which acted like a single person.

Well, Williamson showed that they really don't -- they are a place where transactions occur between competing interests, and management often takes advantage of other stakeholders.

The pre-Ostrom notion that all collective ownership other than the corporation is bad, and corporate ownership is good, is now officially dead. The reasons include the comparison of Russia and China, the disastrous effects of privatization in Latin America (the attempt to privatize water having led almost to revolutions), and the collapse of the global financial sector.

These Nobels point to the fact that the world is searching for new modes of management that are more democratic and collective than the model that has dominated since the Thatcher/Reagan era.

[Braulio]

18. Capitalism thrives in China

But the fact is that most of the economic growth in China is attributable to private enterprise, not to the state owned companies. Also, the land is cultivated by individual farmers who are looking out for number one. It was the end of collective farming which led to the agricultural boom and the end of hunger in China. As for the world seeking new models of management, that's fine, we should always look for new models. But Marx isn't the answer, that's for sure.

By the way, how did you like the air in China? Did you get nervous when you went to buy food and wondered what chemical soup had been used on it before you bought it?

[HamdenRice]

20. I think you misuderstand how the Chinese economy works

One of our projects was to try to help the Chinese stop the loss of agricultural land to industrial uses. We had to do an intensive study of how Chinese agriculture works.

Agricultural land is owned by rural collectives. Those collectives allocate the land to individual families using the "family responsibility system." Each family does get to produce and sell its own crops, but it also has to contribute some of that produce to the collective. The family responsibility system did indeed end famine and food shortages, but it is embedded in the collective system. (Btw, it was Deng Xiaoping who invented the system in Sichuan when he was a provincial official, where he ended the famine, and it was expanded to the rest of the country.) The families do not own the land, and during the life cycle of families (eg parents getting older, and children moving to the city), the collective re-allocates land to those who need it. A study of peasant attitudes carried out by a New Zealand research team found that the re-allocation system was one of the most popular aspects of the system among the peasantry. They also collectively manage some of the resources, like forests and ponds, that would be private in the west. There are also many collective projects undertaken at the village level -- such as decisions to engage in mass terracing to prevent erosion, and replanting of bamboo and other forests -- taken by the collective and carried out by the farmers. They also get together under collective organization to launch collective owned enterprises, eg in small scale manufacturing. I wouldn't compare China's agricultural sector to say American capitalist agriculture. It's its own thing.

As for capitalist enterprises, I did not say they are not there. But when they operate within a system that regulates them, that owns the property they operate on, that prevents windfall gains through "rents" of land (in the sense Henry George described it, not lease rent), and subordinates capitalist enterprises to state management through economic planning, then what you have is socialism. Socialism is not the ownership of all enterprises by the state; it's state ownership of the "commanding heights" of the economy, and often of the most important collective resources like land. Socialism has always been consistent with a large, flourishing private sector. China by that measure is exactly what it says it is -- a "socialist market" economy. Moreover, considering we owe them trillions of dollars and not vice versa, it's pretty difficult to say that the "socialist" model is a failure.

As for the air and water, I'm not sure what that has to do with the issue. A lot of pollution is caused by the private enterprises, as well as collective ones. That was one of the things we were trying to help them change.

[HamdenRice]

10. To follow up: Ostrom's degrees are in political science, not economics

so it's even more interesting. But her field is collective management of economic resources.

Her math is really, really hard to follow because it's not formulas, iirc, but these prisoner's dilemma decision boxes.

[jeffbr]

13. Laffer wuz robbed

Him and the other eminent economist Reagan. Also.

[jeffbr]

12. Outrage!! That prize was made for white male conservative laissez-faire economists

like the RW cabal at UChicago