One scholar studies how best to manage resources like forests, fisheries and oilfields. A fellow American looks at why some companies grow so large. Together they're winners of this year's Nobel Prize in economics for groundbreaking work that could affect efforts to prevent another global financial crisis.
Elinor Ostrom, 76, known for her work on the management of common resources, is the first woman to win a Nobel in economics. She shares this year's prize with Oliver Williamson, 77, who pioneered the study of how and why companies structure themselves and how they resolve conflicts.
Monday's final prizes of 2009 capped a year in which a record five women won Nobels. And it was an exceptionally strong year for the United States, too. Eleven American citizens, some of them with dual nationality, were among the 13 Nobel winners, including President Barack Obama, who won the Nobel Peace Prize on Friday.
The Royal Swedish Academy of Sciences said it chose Ostrom and Williamson for work that "advanced economic governance research from the fringe to the forefront of scientific attention." They will share the $1.4 million prize.
Ostrom showed how common resources _ forests, fisheries, oilfields, grazing lands and irrigation systems _ 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 _ as opposed to just having somebody in Washington ... make a rule," Ostrom, a political scientist at Indiana University, said during a brief session with reporters in Bloomington, Ind.
Williamson, an economist at the University of California, Berkeley, focused on how companies and markets differ in resolving conflicts. He found that companies are typically better able than markets to resolve conflicts when competition is limited, the citation said.
The academy did not specifically mention the global financial crisis. But many of the problems at the heart of it _ bonuses, executive compensation, risky and poorly understood securities _ involve a perceived lack of oversight.
"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.
Experts said the two scholars' research did not suggest that more government oversight was the way to prevent financial crises. Still, they said the work of both _ especially Williamson _ could help shape debate and inspire research to help prevent another debacle like the one that triggered the global recession.
It also could influence the thinking on other divisive issues, such as health care coverage and global warming, experts said.
"The one lesson from the financial crisis is that we have overconfidence in institutions that are important to the functioning of the economy," said Barak Richman, a law professor at Duke University who completed his doctorate under Williamson's supervision. "Both Ostrom's and Williamson's research reveal how critically important it is to understand these so-called non-market institutions such as companies, governments, regulators and courts."
Ostrom, also the founding director of Arizona State University's Center for the Study of Institutional Diversity, has devoted her career to studying the interaction of people and natural resources.
"Until her work, the thinking was, 'let the state intervene,'" said Paul Dragos Aligica, a political scientist at George Mason University. "'If you leave it to individuals to do whatever they want, resources will be depleted.' But she said `hold on' and found that's not the case." Aligica wrote his doctorate under Ostrom's guidance.
Ostrom told the academy by phone that she was surprised by itschoice.
"There are many, many people who have struggled mightily, and to be chosen for this prize is a great honor," Ostrom said. "I'm still a little bit in shock."
Williamson was cited for his studies on how organizations _ including companies _ are structured and how it affects the cost of doing business. According to his theory, large private corporations exist primarily because they are efficient.
"Large corporations may, of course, abuse their power," the citation said. "They may for instance, participate in undesirable political lobbying and exhibit anticompetitive behavior."
Williamson found it is better to regulate such behavior directly rather than with policies that restrict the size of corporations, the academy said.
Williamson, who said he thinks the committee was influenced "very little" by the recent financial meltdown, hoped that "organizations will play a more prominent role in the study of economic activity."
"The organization of the government itself is something which we ought to examine in a more self-conscious way _ the Federal Reserve and the Treasury and the Securities and Exchange Commission," Williamson said. "The mission that each of them has is mainly economic but should be informed by good organizational practices."
Williamson had worked as a consultant to the U.S. Federal Trade Commission from 1978-1980 and as a special economic assistant to the assistant attorney general for antitrust at the Department of Justice in 1966-1967.
"Whenever you are trying to figure out why companies are structured the way they are, you're going to turn to Williamson," said Charles Calomiris, professor of finance and economics at Columbia University.
Williamson's work could influence the debate over how to handle colossal financial companies whose failure could endanger the entire U.S. economy, Calomiris and other academics said. The Obama administration wants to place them under tighter regulation and create a mechanism to safely wind them down.
"The first thing you need to do is ask is why do we have such big financial institutions," Calomiris said.
"Williamson's analysis would be relevant in trying to answer that question."
In addition to the prize money, Nobel winners will receive gold medals and diplomas from the Swedish king on Dec. 10, the anniversary of Alfred Nobel's death in 1896.
The choice of Obama was the biggest surprise of this year's awards.
In other awards, American scientists Elizabeth H. Blackburn, Carol W. Greider and Jack W. Szostak shared the prize in medicine for discovering a key mechanism in the genetic operations of cells, an insight that has inspired new lines of research into cancer.
The physics prize was split between Charles K. Kao, who helped develop fiber-optic cable, and Americans Willard S. Boyle and George E. Smith who invented the "eye" in digital cameras.
Americans Venkatraman Ramakrishnan and Thomas Steitz and Ada Yonath of Israel shared the chemistry prize for their atom-by-atom description of ribosomes.
Romanian-born German writer Herta Mueller won the literature prize for her critical depiction of life behind the Iron Curtain.
Ostrom said it was 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.
Reflected Williamson: "You're sort of in the limelight for a day and then you're back to work."
Ritter and Moore reported from Stockholm. AP Writers Malin Rising in Stockholm, Martha Raffaele in Philadelphia and Michelle Locke in Berkeley, Calif., contributed to this report.
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