The awarding of the Nobel Prize in Economics to Elinor Ostrom and Oliver Williamson surprised many, and not just because Ms Ostrom is the first woman honoured with it. Observers are taken aback because Ms Ostrom is not an economist. She received a Ph.D in Political Science at UCLA, has taught for many years in the Political Science Department at Indiana University and was president of the American Political Science Association (APSA), one of the highest honours conferred by the profession. To say she was merely “trained” in Political Science, as much of the press has put it (at least those who have not described her, inaccurately, as an outright economist), or that she is “more of a political scientist than an economist,” as others have, implying that she later took up the discipline of Economics as her “true” vocation, is false. Ms Ostrom’s whole career took place within the boundaries of Political Science, where she excelled (she was the second woman to be elected president of APSA in the organisation’s 100-year history) and made significant contributions to our understanding of a number of key issue areas.
Like many political scientists, Ms Ostrom does research in political economy, albeit from a perspective very different from that of neoclassical economists. That is, as many of her fellow political scientists, she does actual field work and draws her conclusions from the findings of it, and not on the basis of abstruse models built on preconceived notions of human nature and how we behave. The reason she has enhanced so much of our knowledge of human behaviour is she sets out to find out what happens “out there” — as opposed to starting from the premise she already knows it and that it is just a question of building the mathematical models to prove it.
Last November, Queen Elizabeth visited the London School of Economics (LSE) and asked some of the top minds in that discipline in Britain why they had been unable to predict the Great Recession of 2008. Given that failure, the award of the Economics prize this year (strictly speaking, the Sveriges Riksbank Prize in Economic Science, established much later than the original Nobel awards, and not really a “Nobel Prize” as such) represents a refreshing change from the tradition of giving it to specialists in evermore abstract models of the workings of the financial system, many of whom had nothing to say about the global meltdown that hit us in 2008. As has been pointed out, there is no small irony in the fact that the odds-on favourite to win the Prize this year was Eugene Fama, the author of the efficient markets hypothesis. It was precisely such approaches that did so much to open the doors to the 2008 crash, as Alan Greenspan himself admitted in a testimony before the U.S. Congress.
In an impressive oeuvre of 20-some books and hundreds of articles in top journals, which she continues to churn out uninterruptedly at age 76 (Princeton University Press will publish her latest one, Working Together: Collective Action, the Commons and Multiple Methods in Practice, in 2010), Ms Ostrom has addressed that question from a variety of angles. And one of the most fascinating aspects of her by now classic book, Governing the Commons: The Evolution of Institutions for Collective Actions (1990), is precisely that it goes against one of the most ingrained dogmas among economists: the notion of the “tragedy of the commons.” That is, the belief that “property that belongs to all, effectively belongs to nobody.” The classic example is the alleged contrast between the fate of the wild buffalo that runs the risk of extermination because “it belongs to nobody,” and that of domestic cattle that survives happily because “it has an owner.” The economists’ typical response has been that the solution is to privatise, thus solving the problem (though it is not obvious how wild buffalos can be privatised).
In contrast to those who take the opposite tack, that is, having the government take over the commons, Ms Ostrom, in her extensive work in places as far apart as California, Switzerland, India and Nepal, has discovered that self-organised communities are perfectly able to manage their lands, forests, fishing resources or irrigation systems. At a time when many indigenous communities across the planet find themselves under heavy pressure to privatise whatever common lands they still have, this is highly pertinent.
As Ms Ostrom put it in her 1997 APSA presidential address, “the theory of collective action is the central subject of political science. It is the core of the justification for the state. Collective-action problems pervade international relations, face legislators when devising public budgets, permeate public bureaucracies, and are at the core of explanations of voting, interest group formation, and citizen control of governments in a democracy.”
At the core of Ms Ostrom’s work is her effort to explore the ways in which “social dilemmas,” that is, situations in which individuals make independent choices amid interdependence. In so doing, she presses beyond the rather simplistic rational choice approach followed by many of her colleagues, which also reduces human beings to homoeconomicus. In keeping with her notion that “political systems are complexly organised and that we will rarely be able to state that one variable is always positively or negatively correlated to a dependent variable,” she deploys a multipronged approach to establishing causal relationships. Through field work, laboratory experiments and such high-tech approaches as satellite photography, she tries to determine how self-organised communities devise rules that protect common property and public goods — without having to rely on privatisation or on the overarching power of the state.
In her work, she establishes such apparently unsurprising propositions as “face-to-face communication enhances cooperation,” something which the first-generation of rational choice theory had not contemplated, dismissing communication as “cheap talk.” There is no substitute for sitting in a meeting with someone and watching his or her face while he or she makes a commitment. An e-mail won’t do for these purposes, and that is one reason teleconferencing, though not quite the same as face-to-face meetings, is becoming so popular. But this is only the first step to her finding about human relationships and what she refers to as the second-generation of rational choice theory: the key links between reciprocity, reputation and trust.
Once human beings start to communicate with each other, they realise they are better off working together than by remaining in splendid isolation. They also become aware that developing a reputation for trustworthiness is an asset. People are more likely to cooperate with those who stick to their word than with those who “jump ship” at the first opportunity. The longer they are able to do this, the greater the benefits they derive. This mechanism is self-reinforcing. Teams of individuals who know they can rely on each other tend to be more successful than those riven by dissent, and given to backbiting and jockeying for position.
Beyond Ms Ostrom’s unquestionable merits, her award underscores a broader phenomenon. For too long, the economic profession has allotted to itself a quasi-monopoly of the vocabulary of public discourse and of the methodologies applied to analyse social problems, and the public policies designed to overcome them. The use of econometric models that make total abstraction of reality has become so dominant in many countries that the notion of undertaking field work, that is, genuine field research aimed at establishing how real human beings actually behave, has often been set aside, with disastrous results. The misplaced hubris of the economic profession, that has tended to look down on its sister disciplines in the social sciences, has partly been fed by its being the only one with a “Nobel Prize.”
Economics, like the other social sciences, has much to contribute to our understanding of social processes. Indian economists have certainly done so, and the worldwide recognition of such noted specialists as Amartya Sen and Jagdish Bhagwati reflects it. However, the analytical and methodological toolkit of economists is by no means the only one available to map out the road towards improving our comprehension of social problems. It also has considerable limitations, including the reluctance of its practitioners to engage in field work. This last year provided us with abundant evidence in this respect. Let us hope that this prize awarded to prominent political scientist Elinor Ostrom will open the doors for this “Nobel” to be the forerunner of a recognition given from now on to all social sciences, and not just one of them.
Jorge Heine holds the Chair in Global Governance at the Balsillie School of International Affairs and is a Distinguished Fellow at The Centre for International Governance Innovation (CIGI) in Waterloo, Ontario. His latest book (with Andrew F. Cooper), Which Way Latin America: Hemispheric Politics Meets Globalization, is published by United Nations University Press.