Wednesday, October 14, 2009

More Comments On The Nobel Prize in Economics

Stephen Walt, "A More Rational Choice for a Nobel Prize."
Ostrom (and the co-winner, organization theorist Oliver Williamson) join a group of recent winners chosen more for theoretical insight and real-world relevance than for mathematical scholasticism. Others in this same group would include economic historians Douglass North and Robert Fogel, behavioral economist Daniel Kahneman, game theorist/strategist Thomas Schelling, and economist-philosopher Amartya Sen. Scholars with an international orientation have been doing pretty well in recent years too: Schelling was awarded for game-theoretic work on international conflict, Paul Krugman for his work on international trade, and Sen's work on poverty and famines has clear international implications. Kudos to the prize committee for their eclectic approach to the award--if only more economics departments thought this way.

A typical conclusion was that rules that assign property rights and rules that let people trade lead to good outcomes. What’s the skyhook? That people will follow the rules. Why would they respect the property rights of someone else? We had no idea. We might have had in mind something like this: police officers will arrest people who don’t follow the rules. But this is just another skyhook. Who are these police officers? Why do they follow rules? This is not an idle concern. Elinor showed that there are lots of important cases where people follow rules about ownership without police officers. One of the central challenges in understanding failures of economic development is that in many places, police officers don’t follow the rules they are meant to enforce.

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