Ostrom's Prize, and Ellickson on Cattle

I know next to nothing about the work of the new Economics Nobelist, Elinor Ostrom, but I must not be alone, seeing as how the oddsmakers booked her at fifty to one (in fairness, the same ranking they gave to her co-winner, Oliver Williamson, about whom I can claim to know a bit more). Her work on showing that the common pool problem is richer and more nuanced than the theorists supposed--that work sounds like wonderful stuff, just the sort of thing to which you would want to give a prize.

But it does remind me of a parallel epidode in the very loosely related field of law and economics. I grew up in the generation schooled on the work of Ronald Coase, taught that adjacent landowners could solve nuisance problems by bargaining to a Pareto-superior result. If I heard it once, I heard it 100 times -- well then, the parties will bargain. It was like saying King's X to call time out in a schooyard rumpus (why does do much of modern economics sound like a schoolyard rumpus).

But then along came Robert Ellickson with what is, to my mind, one of the true classics of modern econ scholarship--his little book, Order Without Law, about how they settle disputes over straying cattle in just up the road from Palookaville in Shasta County. Ellickson had pulled what should have been the simplest and most obvious of stunts--he took the canonical Coase hypothetical and went out to learn how it actually played out on the ground. You can see where this is going: Ellickson found, of course, that life on the ground was not remotely like life in the library--that it was far more nuanced, rich and generally unexpected than, well, than anything we expected.

Ellickson published in 1991. I suppose if I were an ordinary story-teller, I would say that his book "went unnoticed" in the economics profession, but of course that would be entirely wrong: the book was warmly received in all relevant quarters.

But still, here's the important point. So far as I can tell, nobody was embarrassed. That is: Ellickson demonstrated that a generation of Coasean theorizing was pretty much of an empty shell. No apologies were uttered, no recall notices were dispatched; so far as I can tell, not one single person among the culpable ever said "oops."

In fairness, the profession did do something just as good, perhaps even better. That is: it assimilated Ellickson and made him part of the mainstream. You could say that he was in some sense an initiator of the "new behaviorial economics" whose whole premise is that economic life on the ground is far richer and more nuanced then we thought it to be before. But just once, it would have been nice to hear somebody say "oops."

Just bye the bye, I think there is a rough parallel here in the work of Professor Ostrom. She, too, can be seen as taking a simplistic old story and showing that it was more complicated than reigning theory asserted. Meanwhile, even as Professor Ostrom was languishing at 50-1, I note that the odds-on favorite for the prize (at 2-1) had been Eugene Fama, he of the "efficient capital market" hypothesis. Fama is another whose work is often travestied and vulgarized (maybe this is true of everybody's work)--I don't think it is fair to characterize him as anywhere near as simplistic as he is often characterized. Still at the end of the day, Fama has to stand with the older, more naive, largely discredited conventional wisdom. If had won the prize 10-20 years ago, he might have deserved it. To give to Professor Ostrom now seems pretty good proof that life moves on.