Two Americans win Nobel economics prize

updated 6:12 p.m. ET Oct. 14, 2009

STOCKHOLM - Elinor Ostrom became the first woman to win a Nobel Prize in economics, honored along with fellow American Oliver Williamson on Monday for analyzing economic governance — the rules by which people exercise authority in companies and economic systems.

Ostrom was also the fifth woman to win a Nobel award this year — a record for the prestigious honors.

It was also an exceptionally strong year for the United States, with 11 American citizens — some of them with dual nationality — among the 13 Nobel winners, including President Barack Obama, who won the Nobel Peace Prize on Friday.

Ostrom, 76, and Williamson, 77, shared the 10 million kronor ($1.4 million) economics prize for work that "advanced economic governance research from the fringe to the forefront of scientific attention," the Royal Swedish Academy of Sciences said.

Ostrom, a political scientist at Indiana University, showed how common resources — forests, fisheries, oil fields or grazing lands — can be managed successfully by the people who use them, rather than by governments or private companies.

"What we have ignored is what citizens can do and the importance of real involvement of the people involved — versus just having somebody in Washington ... make a rule," Ostrom said during a brief session with reporters in Bloomington.

Ostrom said it's an honor to be the first woman to win a Nobel Prize in economics — and promised that she won't be the last. She said people discouraged her from seeking a Ph.D. when she applied for graduate school but she loved studying economics.

Williamson, an economist at the University of California, Berkeley, focused on how firms and markets differ in the ways that they resolve conflicts. He found that companies are typically better able to resolve conflicts than markets when competition is limited, the citation said.

The academy did not specifically cite the global financial crisis, but many of the problems at the heart of the current upheaval — bonuses, executive compensation, risky and poorly understood securities — involve a perceived lack of regulatory oversight by government officials or by corporate boards. The Nobel awards on Monday were clearly a nod to the role of rules, institutions and regulations in making markets work.

AFP - Getty Images Oliver E. Williamson, left, and Ostrom, right, won the 2009 Nobel Economics Prize. Williamson won the prize for his work on the organization of cooperation in economic governance.

"There has been a huge discussion how the big banks, the big investment banks have acted badly, with bosses who have misused their power, misused their shareholders' confidence, and that is in line with (Williamson's) theories," prize committee member Per Krusell said.

Ostrom, also the founding director of Arizona State University's Center for the Study of Institutional Diversity, devoted her career to studying the interaction of people and natural resources. One notable publication she wrote in 1990 examined both successful and unsuccessful ways of governing natural resources — forests, fisheries, oil fields, grazing lands and irrigation systems — that are used by individuals.

Ostrom's work challenged conventional wisdom, showing that common resources can be successfully managed without privatization or government regulation.

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