October 12, 2009, Really old school
As last year's winner Professor Paul Krugman tells us, with its choice of two social scientists, Indiana University's Elinor Ostrum (first female Nobel economics laureate) and U.C. Berkeley's Oliver Williamson for the Nobel economics medal, the Nobel committee was recognizing the preeminence of economic thought that dominated the field prior to World War II (and the Great Depression), to wit, a view that how institutions are formed, legal structures, incentives and so forth... matter, and that it's not a bunch of mathematical econometric models (most of which don't work anyway).
In short, it seems, that with the world's currently being on an economic precipice has convinced the Nobel economics committee to be creative (not exactly in the same way as the peace prize committee) and recognize that, in fact, contrary to how economic science tells it, business and economic activity don't... wait for it... they don't operate in a vacuum.
This is all peculiarly fascinating to me, as a nostalgia thing if nothing else, as the one class in college in which I remember Barack as a fellow student... was political theory (or perhaps "modern political thought" or some such course title). The entire grade (and, naturally, whether true or not, I distinctly remember that I got the only "A"!) was based on a 25-page paper, and I did mine comparing and contrasting (and there was more comparing and less contrasting than one might have first thought) between the work of modern lefty socio-political-economic oberver Karl Polanyi and his masterwork "The Great Transformation," and Adam Smith's work on moral philosophy, particularly The Theory of Moral Sentiments. The point being that... well... economic institutions and actors...wait for it... don't operate in a vacuum. The legal, cultural, political, etc. structural frameworks matter, and they matter a lot. Unbridled "free market" capitalism, assuming it ever existed, if disengaged from its legal, cultural, political and moral underpinnings... looks like a rather perverse beast. Which kind of takes us to the present, does it not?
For example, if we set up crazy-ass profit motivation incentive structures in the wrong places, we will get perverse results (such as... 18% of our GDP and growing in the "health care" sector). Just studying economic activity as if engaged in by robots-- the sort of thing for which Nobel economics prizes are usually given-- misses the all-important big picture, a big picture that, at least this year, the Nobel committee (at least for economics) no longer wants to ignore... social structures, legal structures, "moral" incentives as well as brute economic ones... all matter. How about that?
As many (including myself) question some Nobel choices this year, the economics award was, in addition to awarding genius, itself, an act of genius. Congratulations to Professors Ostrum and Williamson, and hopefully, to the idea of reengaging knowledge in general and realizing that our industrial era mania for compartmentalization and hyper-specialization might not be serving us as well as we would like to believe.
Just saying.