Toward Political Economy? Elinor Ostrom Wins the Nobel Prize
Well, I must say that I am pleased that Lin Ostrom has won the Nobel Prize in Economics.* This is important, for several reasons. First, Lin's work adresses crucial substantive matters and is very, very good. More on that below. But, second, this is the first time the Nobel Committee has given the award to a woman. Pretty astounding. Third, Lin is not a credentialed economist - her doctorate in in political science - and that is important too.** Why? Because, not only will it irritate economists but, more to the point, much of her work undermines the presumption that most economists take as basic, that markets are the primary instrument for coordinating our ongoing interactions and that other sorts of institutions are important more or less solely to the extent that they are functional to the operation of markets.
Lin's research is concerned with how to think about ways to use institutions to coordinate our ongoing political-economic interactions - and she shows that markets are not nearly as useful for that task as economists typically suppose. Insofar as Lin is correct about how the world works, for instance, the Chicago approach - as promulgated by Gary Becker and his acolytes - turns out to be laughably false. There simply is not, as the Chicagoans, assume, markets for everything. The option, of course, is not necessarily to turn to states and assume that they work well in all or even most instances; that is a lesson Lin has offered in a robust way. There is a plurality of institutional forms on which we might rely across different domains of interaction. That is perhaps the most important lesson of Lin's work. Insofar as she provides large amounts of reliable evidence to support it, Lin pretty dramatically decenters the place of markets in thinking about political economy.
Nevertheless, a lot of people are going on in predictably 'libertarian' ways about how Lin's work vindicates their view that the state is unnecessary to resolve problems of what she calls 'common pool resources.' So it does. But insofar as libertarians not only prize markets above all else and insofar as they have a private property fetish, Lin's work ought to be quite discomfiting to them. Why? Because she establishes that - in theory and in practice - common property regimes can not only operate well, but, in specifiable instances, they outperform private property regimes. And, of course, there is a second order role for the state that the libertarians don't mention, namely in providing a means for determining which among the plurality of possible institutional forms might be most appropriate for coordinating interactions in any given domain. We may, as I have suggested here and here before, want to experiment with a variety of institutional forms, but we will still need some agency to insure that the conditions necessary for reliable experimentation are at least approximated. Markets won't do that.***
* Actually she is sharing it with Oliver Williamson, an economist at UC Berkeley, who works on transaction cost models of economic organization. To be honest, I think his work is significantly less interesting and less important than Lin's.
** Quick, someone tell Tom Coburn. I cannot say for certain, but I think Lin has regularly received funding from the NSF.
*** For the truly nerdy, you can find my views on such things in Jack Knight and James Johnson. 2007. “The Priority of Democracy: A Pragmatist Approach to Political-Economic Institutions and the Burden of Justification,” American Political Science Review, Volume 101, Issue 01, pages 47-61. This essay is an advertisement for the book Jack & I are writing.