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The New Nobels: Small steps toward integrated social science

David Zilberman

I got a kick out of learning that Eleanor Ostrom and Berkeley’s Oliver Williamson won the Nobel in Economics. I had a similar response when the Psychologist, Dan Kahneman, won the prize. These are important steps in the expansion of economics and establishing an integrated social science based on rigorous logical thinking and empiricism.  This integrated new social science will provide insight on how people think and interact and how to improve the human condition.

It is useful to contrast the evolution of economics and biology. Research in the biological sciences first identifies and documents various organisms and only later develops a general theory, Darwinian evolution theory, that explains how species interact and evolve. In economics, Adam Smith developed a theory first. For years, economists considered only two institutions: the firm and the government. But, we know that not all firms are alike and that there are many other organizations that are neither government nor firms. Political scientists and sociologists are very good in identifying different types of organizations and Williamson and Ostrom marry the organizational complexity with basic behavioral principles that are emphasized in economics.

Williamson’s work is based on the realization that different firms have different types of physiology (structure) and transactions occur in many ways outside of the market. These organizational structures are reflective of diverse product characteristics, market situations, technologies, and consumer preference, etc. His work suggests that economic research shouldn’t strive only to explain choices of prices, quantity, and product quality, but more than that. It should aim to explain institutional design and evolution of different types of organizations.  Furthermore, good policymaking and effective legal structures require balancing the desire for simplicity with capacity to address the multitude of considerations that lead to the diverse institutional outcomes that we see in everyday life.

Ostrom’s work made the notion of governance operational. It doesn’t only apply to states, but also to communities, which are creative in their design of institutions to manage and sustainably utilize community assets. So, traditional organizations that have been sustained over time, managing water resources or forests, are not arbitrary, but reflect social optimization that has to be comprehended and any institutional reform has to be based on the understanding of why things are the way they are in the first place. Ostrom’s research suggests that reforms based on good intentions, but with ignorance of institutional setup may push things backwards. Policy makers need to understand not only natural forces, but also social processes in order to make changes that would be for the better.

Many of Williamson’s insights came from his understanding and appreciation of legal institutions. Ostrom is first and foremost a political scientist. But they established a two-way road, exporting economics to legal studies and political science. Coming back to Kahneman, his work started bridging economics and psychology, explaining some behavioral patterns that perplexed economists by developing behavioral rules that are more appropriate to bumbling human beings than to the uber-rational economic man and ushering in the new field of behavioral economics. Economics, as a result of these influences, has become richer and sometimes overwhelming, but more realistic. We realize that in spite of our scientific progress we are in the beginning and have a long way to go before we are able to explain effectively social systems. At the same time, we are encouraged that the vantage points of different disciplines start to converge and we may, one day, reach an integrated narrative that will allow us to make better sense of society and people.

Best wishes to Williamson and Ostrom. This selection of the Nobel committee was well deserved and by making this bold choice, the committee enriches economics and makes it more exciting and relevant.



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Comments to "The New Nobels: Small steps toward integrated social science":
    • David Hopkins

      I am pleased that the Nobel Prize to go to some worthy recipients. It is hoped that the Nobel Committee will raise standards and to return to give rewards to those who deserve it.

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    • Brenda Williams

      I think it’s a great idea that would never be able to better understand the society and individuals. Good to see Ostrom and Williamson were rewarded for their efforts. Smile!

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    • Casey Hamilton

      I think it’s a good idea that would never be able to better understand the society and individuals. Nice to see Ostrom and Williamson were honored for their work. Smile!

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    • Tim Smith

      I’m also not sure how their work is going to help solve the major problems of worldwide famine, global warming, international financial crises etc. Rather than trying to understand the inherent defects in our present system, may be its time to change the system?

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    • Lexi

      After reading the article, I fail to see how the achievements of the two Nobel prize winners will help to correct the direction our global economy is taking. The discussion seems far removed from the fate of our planet, people, and all living things. Has any considered the work of Prof Jack Weatherford, The History of Money.

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    • Safari

      “At the same time, we are encouraged that the vantage points of different disciplines start to converge and we may, one day, reach an integrated narrative that will allow us to make better sense of society and people.”

      Cant agree More. Great insight.

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    • James Locke

      ‘Policy makers need to understand not only natural forces, but also social processes in order to make changes that would be for the better.’ This is a statement that every lawmaker has to now by heart, and understand truly. It would be impossible for lawmakers to implement new laws and ask for complete cooperation without this.
      James Locke

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    • Jamie Lore

      In one of his recent speeches, I recall Williamson state that lack of proper control measures has led to the current financial crisis. He also pointed out the importance of employing research and analysis as well as reviewing past experiences in dealing with problems besetting the financial industry. Indeed, the financial sector may benefit well from taking note and reflecting on Williamson’s views and insights.

      Jamie Lore

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    • quinoa recipes

      “Ostrom’s research suggests that reforms based on good intentions, but with ignorance of institutional setup may push things backwards.”

      I agree with Ostrom. Every detail should be considered. Failure due to lack of information should not be an excuse.

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    • quinoa recipes

      It is important that people who serve in the government truly understand how the society works so that in the end, they will truly serve the people and improve human condition.

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    • Egbert Donovan

      Very interesting reading. I agree with the statement that economic research should show how businesses grow, and not just be about price, amount and quality. Will be keeping up with more information on this topic.

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    • Marcy Home Gym

      “good policymaking and effective legal structures require balancing the desire for simplicity with capacity to address the multitude of considerations that lead to the diverse institutional outcomes that we see in everyday life.”

      Focusing on a certain thing is good but always remember to have a balance in everything to provide a better result for everyone concerned.

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    • Online Income

      Congratulations to Williamson and Ostrom. I especially like Williamson’s approach to the fact that one size doesn’t fit all. We need to start investigating the background of how enterprises do business and then base our policy making accordingly.

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    • Louis Zhang

      “These are important steps in the expansion of economics and establishing an integrated social science based on rigorous logical thinking and empiricism. This integrated new social science will provide insight on how people think and interact and how to improve the human condition.”

      I have long been thinking that the study of how people interact with each other is very important in order to attain harmony. Now that it is integrated with science, this would be a better way to understand the process of socialization in a scientific way. Information is the key to success so we must continue to update ourselves with ongoing education which can either be formally or in an informal way.

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    • Jen Jolan

      What a lovely post. Yes, if we have more people like Eleanor Ostrom and Berkeley’s Oliver Williamson this world will be a much better place to live in. I salute them and they deserve it.

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    • “good policymaking and effective legal structures require balancing the desire for simplicity with capacity to address the multitude of considerations that lead to the diverse institutional outcomes that we see in everyday life.”

      I strongly believe in what it says.. there’s should always be a balance in everything we do to be able to provide an excellent outcome…

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    • Where are the leaders of great worth with integrity and intelligence. I see none of them on the scene anywhere. There are no statesmen as we once had, but only politicians looking to build a power base to control as many folks as they can and get as rich as they can along the way.

      There may be great thinkers, but thinking will never get the job done. Give me a doer every time that is honorable.

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    • I loved Social Science class when I was in college. I never get bored with the subject, especially when we had debates concerning social issues and leadership. If leaders today could have Williamson and Ostrom’s ideas, we would be more likely to have good governance.

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    • @John,

      You are indeed correct. They are in fact very contrasting. As Professor Zilberman points out, “Research in the biological sciences first identifies and documents various organisms and only later develops a general theory….. In economics, Adam Smith developed a theory first.”

      It is indeed fascinating!

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    • Social Science is one of my favorite subjects when it comes to listening/watching TV and or Radio programs/news. This is the reason on why I really liked reading this post and because of it, I will keep on visiting this site. It simply satisfies my cravings about sensible social science information updates.

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    • Prof. Zilberman, I was hoping to find a discussion of the specific relevance of Prof. Williamson’s work to developing countries such as Kenya. The point about traditional organizations natural resources would probably better apply to developing than developed countries but what other analogies can be drawn?

      [Report abuse]

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