Rehashing the Ostrom Nobel

This statement in Barkley Rosser's post about Ostrom jarred me a little:

"The first woman to win the Nobel Prize in Economics (I know, I know, the Swedish Bank Prize, blah blah), she was officially a political scientist, and there were some who complained about her receiving the award because of that and because she had "never published in a top 5 economics journal," although she did so after receiving the prize.  Also many fussed about not having heard of her, including people as prominent as Paul Krugman.  As it is, her most famous work, her seminal 1990 book, Governing the Commons, has been cited more than 13,000 times, more alone than the entire citations received by more than half of the other economics Nobelists."

This was news to me, and a little bothersome (bothersome that people would say this about her, I mean). I was particularly curious about the claim that Paul Krugman "fussed about not having heard of her". This is what Krugman actually wrote:

"Congratulations to Elinor Ostrom and Oliver Williamson. What a day for them! [Hmmm... such a suspicious opening!]

The way to think about this prize is that it’s an award for institutional economics, or maybe more specifically New Institutional Economics.

Neoclassical economics basically assumes that the units of economic decision-making are a given, and focuses on how they interact in markets. It’s not much good at explaining the creation of these units — at explaining, in particular, why some activities are carried out by large corporations, while others aren’t. That’s obviously an interesting question, and in many cases an important one. For example, in my own home field of international trade, the basic models don’t assign any particular role to multinational corporations; how do we get them into the story, and what difference do they make?

There was an old tradition of economics that focused on the origins and nature of economic institutions. This tradition was very influential before World War II.

But it proved not at all helpful during the Great Depression. My caricature version is that when the Depression hit, institutional economics, asked for advice about what to do, replied that well, it’s all very complicated, and has deep historical roots, and … Meanwhile, Keynesian economists, using very simple mathematical models, basically said “Push this button — we need more G”.

And this had a somewhat perverse effect. The rise of Keynesian economics also meant the rise of the equations guys (Samuelson in particular), and in the end the equations crowded out institutional economics even as Keynes fell into disfavor.

But the questions didn’t go away. And institutional economics has been making a quiet comeback for the past several decades.

Oliver Williamson’s work underlies a tremendous amount of modern economic thinking; I know it because of the attempts to model multinational corporations, almost all of which rely to some degree on his ideas. I wasn’t familiar with Ostrom’s work, but even a quick scan shows why she shared the prize: if the goal is to understand the creation of economic institutions, it’s crucial to be aware that there is more variety in institutions, a wider range of strategies that work, than simply the binary divide between individuals and firms.

The prize is also, of course, a happy reminder that most of the profession is not caught up in the macro wars!

Add: Don’t tell Senator Coburn, but the NSF Political Science program has supported a lot of Elinor Ostrom’s research."
So clearly he seems more familiar with Williamson's work than Ostrom's, but other than that I don't really understand what Rosser is talking about. Krugman is practically gushing over the award.

That, I should note, is more than can be said for the reaction to Krugman's prize. Economists we read and talk about hear every day were vocal in denouncing him and to this day question his sincerity or dedication to objective analysis.

I did poke around to see if anyone else was criticizing Ostrom's award. I haven't turned up anyone notable yet, although there is a fair amount of obnoxious comments in certain posts (mostly talking about how "nobody reads her"). I guess you won't reader her if you take certain classes. I first heard of Ostrom when I was assigned to read her in the same institutional economics class at GWU where I was assigned to read Williamson, Coase, Greif, and North as well. If you're not taking institutional or public economics it's not surprising you're not going to read her.