The Royal Swedish Academy of Sciences has today awarded The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for 2009 to Elinor Ostrom of Indiana University, Bloomington, Indiana for "for her analysis of economic governance, especially the commons" and Oliver E. Williamson University of California, Berkeley, California "for his analysis of economic governance, especially the boundaries of the firm." Ostrom is the first female economist to win the Prize.

UK betting firm Ladbrokes had tipped University of Chicago Booth School of Business economist Eugene Fama, an adherent of the efficient-markets hypothesis but it would have been a controversial choice given the criticism of the model in recent times.

The prize is worth about $1.5 million.

The Academy said Elinor Ostrom has demonstrated how common property can be successfully managed by user associations. Oliver Williamson has developed a theory where business firms serve as structures for conflict resolution. Over the last three decades these seminal contributions have advanced economic governance research from the fringe to the forefront of scientific attention.

Economic transactions take place not only in markets, but also within firms, associations, households, and agencies. Whereas economic theory has comprehensively illuminated the virtues and limitations of markets, it has traditionally paid less attention to other institutional arrangements. The research of Elinor Ostrom and Oliver Williamson demonstrates that economic analysis can shed light on most forms of social organization.

The citation reads:"Elinor Ostrom has challenged the conventional wisdom that common property is poorly managed and should be either regulated by central authorities or privatized. Based on numerous studies of user-managed fish stocks, pastures, woods, lakes, and groundwater basins, Ostrom concludes that the outcomes are, more often than not, better than predicted by standard theories. She observes that resource users frequently develop sophisticated mechanisms for decision-making and rule enforcement to handle conflicts of interest, and she characterizes the rules that promote successful outcomes.

Oliver Williamson has argued that markets and hierarchical organizations, such as firms, represent alternative governance structures which differ in their approaches to resolving conflicts of interest. The drawback of markets is that they often entail haggling and disagreement. The drawback of firms is that authority, which mitigates contention, can be abused. Competitive markets work relatively well because buyers and sellers can turn to other trading partners in case of dissent. But when market competition is limited, firms are better suited for conflict resolution than markets. A key prediction of Williamson's theory, which has also been supported empirically, is therefore that the propensity of economic agents to conduct their transactions inside the boundaries of a firm increases along with the relationship-specific features of their assets."

Information on research and bios.

President Harry Truman once famously remarked, if he could be advised by a one-handed economist.

The Financial Times trade editor Alan Beattie, an economist, commented today before the award: "These are dismal times for the dismal science, or so the complaint goes. The main charge is that economics failed to predict the financial crisis and has few ideas about how to prevent a repetition.

Today, the annual Nobel prize for economics is awarded (not technically a Nobel, in fact, but let that pass), and with it a prominent plinth of credibility from which to preach to the world. Given the state of the discipline, should the Nobel be awarded at all?

Being an economist, I am going to assume the answer is yes without feeling the need to prove it. But it might be helpful to accompany the award with a judicious downgrading of the spurious certainty with which economists make their pronouncements."

He concludes: "It is not oblivion that economics needs: it is a dose of humility. And anyone that says otherwise is an idiot."

Alfred Nobel (1833-1896) timeline.

In 1867, Nobel won a patent for dynamite.

On November 27, 1895, Alfred Nobel  signed his last will in Paris. When it was opened and read after his death, the will caused a lot of controversy both in Sweden and internationally, as Nobel had left much of his wealth for the establishment of a prize! His family opposed the establishment of the Nobel Prize, and the prize awarders he named refused to do what he had requested in his will. It was five years before the first Nobel Prize could be awarded in 1901.

Every year since 1901 the Nobel Prize has been awarded for achievements in physics, chemistry, physiology or medicine, literature and for peace. The Nobel Prize is an international award administered by the Nobel Foundation in Stockholm, Sweden.

In 1968, Sveriges Riksbank, the Swedish central bank, established The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, founder of the Nobel Prize. Each prize consists of a medal, personal diploma, and a cash award.

Excerpt of will

Nobel prize amounts

All laureates in economics until today, have been men.

LIST

Up to 2008, 40 Prizes in Economic Sciences hade been awarded every year since 1969.

22 Prizes in Economic Sciences had been given to one Laureate only.
14 Prizes in Economic Sciences had been shared by two Laureates.
4 Prizes in Economic Sciences had been shared between three Laureates.

Before the announcement: “First thing is that we have to totally disregard the predictions made by the betters; every time they are wrong,” Richard Portes from the London Business School told CNBC Monday. The Nobel Prize for economics is unlikely to be awarded to someone from the financial sector, he added: