Exit, crisis. Enter, surprise: it’s the most unexpected economic Nobel, bar none. Oliver Williamson and Elinor Ostrom are both scholars first and foremost of instutions — and as Paul Krugman has noted, this is an “institutional” Nobel. The crux of both Williamson’s and Ostrom’s work is that institutions are what make economics happen. Different institutional arrangements give rise to tremendously different modes of production and consumption, that, turn, differ in terms of efficiency, productivity, and growth. Williamson was a refreshing choice. His work suggested that the costs of interacting and transacting influence the choice between different modes of organization: markets, hierarchies, and networks. But Ostrom is a radical — and awesome — choice. Not just because of the “what” of her work, but, more deeply, because of the “how” of it.
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