UC Berkeley’s Oliver Williamson has shared this year’s Nobel prize for economics* with Elinor Ostrom of Indiana University. Williamson was awarded the prize “for his analysis of economic governance, especially the boundaries of the firm”.
Williamson is the fifth Berkeley economist to win the prize, and the university’s 21st Nobelist. The eight Nobelists currently on the faculty are unique in the university in that they get the greatest award of all: a reserved parking place on the campus.
The best quick analysis of Williamson’s contribution to economics is at Marginal Revolution. Read the whole thing, but the intro gives some of the flavor:
In Adam Smith there is the pin factory and the market and from that beginning we trace the long literature in economics focused on the twin questions, What price to set? How much to produce? Following Coase, Williamson asks different questions, Why a pin factory? Why are the 18 steps to make a pin performed by a single firm rather than two or more? Why are there many firms instead of one large firm? Why does the pin factory not vertically integrate upwards to buy the steel factory and downwards to buy the retail hardware shop?
For those who believe in the wisdom of crowds, both Williamson and Ostrom were 50:1 in the betting at Ladbrokes on this year’s prize.
Update You can also read a good analysis by Paul Krugman. And one by Steve (Freakonomics) Levitt. Also Ed Glaeser.
Update 2 The headline I should have written.
* For any pedantic readers, the economics prize is not one of the traditional Nobel prizes. It’s awarded by the Swedish central bank in memory of Alfred Nobel, rather than by the Nobel Foundation. The official name is The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.