Surprising Nobel in Economics

I have an admission to make—I had never heard of Elinor Ostrom before this morning’s Nobel prizes in Economics were announced. Ostrom, the 2009 winner along with Oliver Williamson of the “Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2009”, was honored “for her analysis of economic governance, especially the commons.” Williamson—whose work I had read extensively in graduate school—received his Nobel “for his analysis of economic governance, especially the boundaries of the firm.”

So I’ve spent the past few hours reading up on Ostrom and Williamson’s work. The two of them share a common thread: They have both spent their careers studying alternatives to markets and government. Williamson focused on a simple question: If markets are so good, why is so much economic activity organized within businesses, which are run as hierarchies?