WEEKEND COLUMNISTS The Nobel judges got it spot on this year, I reckon. I have been waiting for them to honour someone sensible even if – yet again – it’s an American. Have you noticed how many Nobel laureates come from the US? But let’s not begrudge the man his award. It was well deserved. Mind you, from the press coverage, you would never have guessed so.
I am talking about Oliver Williamson, this year’s winner of the economics prize, for “his analysis of economic governance, especially the boundaries of the firm”. (Ha! Got you there.) I was excited to read that Williamson had won because not only is he something of a hero of mine (and extensively quoted in my PhD thesis) but also because the article in which I learnt of his honour did not mention it until the very end.
Acres of coverage, instead, went to the woman who had shared the prize with him, Elinor Ostrom. This seemed to be on the pretext that she was worth three times as many column inches as him because she was the first woman to win it. So? I have never heard of her, and Williamson I quote all the time, even (and this may have been a first for him) in an article I wrote about lapdancing for a Sunday newspaper three weeks ago. He turned 77 the other day – what a great birthday present. (The Nobel Prize, that is, not the mention in my article.)
Strictly speaking the Nobel Prize for economics is no such thing. It was not one of the five prizes established under the terms of Alfred Nobel’s will. The Sveriges riksbanks pris i ekonomisk vetenskap till Alfred Nobels minne, or Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, was set up in 1968 (72 years after Alfred went to join his maker) by the Swedish Central Bank, which was looking for a suitable way to mark the 300th anniversary of its establishment. Since there are almost 300 words in the name of the prize, it must have seemed spot on. (This, by the way, was the first and last time that the Nobel Foundation allowed anyone else to join in. It’s probably just as well. What next? The Abba Music Prize in memory of Alfred Nobel? The Ikea Design Prize in memory of Alfred Nobel? A procession of Swedish organisations inventing Nobel prizes is probably not a great idea.)
To make it look like a “proper” Nobel prize, laureates in economics are selected by the Royal Swedish Academy of Sciences, as are the laureates in chemistry and physics, and they get roughly the same amount of money (SKr10m, £909,000). I wonder what Williamson will do with his. At 77, he presumably has plenty of time for shopping. Indeed, his website says that his office hours are 3pm-4pm every Thursday. (I wish mine were!)
My all-time favourite Williamson article is 30 years old this month. “Transaction Cost Economics: The Governance of Contractual Relations” was published in the Journal of Law and Economics in October 1979. For those with little time to spare (in which case you should avoid reading Willamson’s CV, which even before his Nobel prize ran to 36 pages), I will sum up his theory for you: trust lowers transaction costs. In other words, if I know and trust you, it will cost me less money to do business with you, and therefore I am more likely to do so.
Oliver, your paper was very influential and is the reason why I work a four-day week at this time of the year. By regularly spending 24 hours a week in the countryside killing birds alongside captains of industry, I am able to get to know them and so build valuable relationships, thereby creating trust and lowering transaction costs. So, when you collect your prize in Stockholm on December 10 (which, by the way, is the last day of the grouse-shooting season here in the UK), please know that there is a small business owner in London who will be applauding like mad – which is no more than you deserve.
