Another Nobel for Market Economics

By Novak, Julie | Review - Institute of Public Affairs, December 2009 | Go to article overview

Another Nobel for Market Economics


Novak, Julie, Review - Institute of Public Affairs


Elinor Ostrom, winner of the 2009 Nobel Prize in Economic Sciences, is not your average Nobel winner, writes Julie Novak.

The announcement that Elinor Ostrom was the co recipient of this year's Nobel Prize in Economic Sciences attracted considerably greater attention than winners in previous years.

Yet some of the popular press coverage misrepresented what Ostrom's work means for the time tested ideas of market capitalism.

For a start, Ostrom was the first female winner of the prize placing her in an elite band of economic thinkers such as Friedrich Hayek, Milton Friedman and James Buchanan.

In the National Times the self styled 'econogirl' economics writer Jessica Irvine, praised Ostrom's 'traditionally female approach she has applied to studying systems of economic governance.' She took economies' traditional rational man, or 'homoeconomicus', and refreshed him to better resemble real humans.

In saying this, Irvine overlooked the century long refinement of the Austrian economics school which eschews the unrealistic neoclassical economic agent model. The Austrians favour more realistic settings where humans seek to discover their preferences, leading to economic cooperation and market growth, in real time, and with limited knowledge.

It is notable that the founders of Austrian economics were men such as Hayek and Ludwig von Mises, so no 'girl power' is needed there to add realism in economic analysis.

The Age newspaper stated that Ostrom's win, based on her original research on the management of common property such as fisheries, forests, water basins and other natural resources, was 'highly topical ... amid efforts to tackle climate change.'

Indeed, Elinor Ostrom's views on the climate change issue are highly topical but perhaps not in a direction that some readers of The Age might prefer.

After all, she once stated that 'when asked whether easy solutions are likely to be achieved for problems involving large, amorphous groups that face significant problems of communicating, such as the overuse of ocean fisheries or global warming, I always respond in the negative.'

Other media reports have attempted to leap on Ostrom's win as somehow representing another telling blow against economic freedom in the global financial crisis age.

However, even the idea that the intellectual output of Elinor Ostrom represents the latest permutation of anti-market thinking is a gross misrepresentation. To appreciate why this is the case, one must consider her work carefully.

One of the modern orthodoxies in economics is the idea that valuable common-pool resources that no single person technically owns will be consumed at a rapid rate by individuals who strive to get their share of the resource before it is depleted.

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Another Nobel for Market Economics
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