Elinor Who?

As the Nobel Committee announced the Sveriges Riksbank Prize in Economic Sciences — popularly known as Nobel prize in economics — to Elinor Ostrom and Oliver Williamson, my first reaction was Elinor who? According to the popular betting company Ladbrokes, the odds favoured Eugene Fama, the father of modern finance; and the betting pool run by Harvard University’s economics department favoured another renowned macroeconomist Robert Barro to win the Nobel prize in economics. So the choice to award Elinor Ostrom, a political scientist at Indiana University, as a co-recipient of the Nobel prize was surprising to many pundits as well as those who follow economics in general.

In citing her contribution, the Nobel Committee said that Ostrom’s work in the area of economic governance, especially the commons, has challenged conventional thinking in economics literature regarding how to govern a common pool of resource. Especially, the Nobel Committee mentions, “Elinor Ostrom has challenged the conventional wisdom that common property is poorly managed and should be completely privatized or regulated by central authorities. Based on numerous studies of user-managed fish stocks, pastures, woods, lakes and groundwater basins, Ostrom concluded that the outcomes are often better than predicted by standard (economic) theories.”

During my years as a graduate student in economics both at the University of Virginia and the University of Maine, the name Elinor Ostrom never came up. That’s why when I first read about her on the internet as one of the co-recipients of the prize, I had to Google her name to figure out who she really was. While we were made to read numerous papers of Robert Barro and Eugene Fama as well as other Nobel favourites like Tom Sargent, Jean Tirole and Robert Taylor, Elinor Ostrom’s works in the areas of “economic governance” and “institutional economics” were neither analyzed nor mentioned. While we were taught how privatizing or regulating the commons could solve the “Tragedy of Commons”, Ostrom’s analysis that retaining resources as public property and letting the users create their own system of governance could solve the problem were never discussed in our graduate classes that analyzed externalities and market failures.

Puzzling! Isn’t it? Digging deeper, however, one can understand why Elinor Ostrom was a different breed of economist than those celebrated ones in the ivory towers of Freshwater and Saltwater economics department who largely managed to discount her (at least in their teaching). For one, Ostrom was a political scientist who delved into economics issues largely through her groundwork experiments. (She has visited Nepal to do extensive fieldwork on local irrigation systems and the Nobel Committee has cited her work here.)

Lately, much of economics research has become too theoretical and too computational. Extensive math proofs and too many equations dominate articles in leading journals of economics. This is particularly true at the doctoral level course. Many economics departments take pride in how mathematical and rigorous their course work is. Paul Krugman, last year’s Nobel laureate, calls this phenomenon “mistaking beauty (of math) for truth”. However, Ostrom avoided much of the hardcore math stuff. She used her experimental results to analyze economic problems. In other words she used “reality” rather than “assumptions” to solve problems.

The bottom line is Elinor Ostrom wasn’t a so called mainstream economist. For a mainstream economist, she wasn’t one of their own because she wasn’t technical enough. My, and others’, ignorance of Elinor Ostrom was not because of her value or volume of work but in spite of it. Thanks to how economics is taught these days at the best graduate economics department in U.S. universities, figures such as Elinor Ostrom, among others, are largely discounted by renowned professors and researchers. As a result, students who attend these schools are unaware of their work. By awarding the Nobel prize to Elinor Ostrom, the Nobel Committee has done a great service to the economics profession in general by embracing a different breed of economist and a different methodology of economic research.


This article was first published in The Kathmandu Post on Oct 16 2009

Link: http://www.ekantipur.com/tkp/news/news-detail.php?news_id=1126