Hundreds of Haas School faculty, staff, and students toasted Professor Oliver Williamson today after he was named a winner of the 2009 Nobel Prize in Economic Sciences.
Williamson shares the prize with Elinor Ostrom of Indiana University, Bloomington, Indiana. Both were recognized for their analyses of economic governance. The prize was announced in Sweden this morning by the Nobel Prize Economics Prize Committee. It is the fifth economics Nobel for UC Berkeley and its 21st overall in fields including physics, chemistry, and literature.
"It's undeserved I suppose," Williamson, 77, one of the world's most cited economists, told a crowd of more than 300 people packed into the school's Bank of America Forum to celebrate with Williamson. "I would describe myself as a conscientious teacher who had a lot of students who were tolerant and went on to do good work."
Williamson's work involves a multi-disciplinary field that he mapped out to study how varying organizational structures for markets and institutions affect economic activity. He is credited with co-founding "New Institutional Economics," which emphasizes the importance of formal institutions, as well as informal institutions such as social norms, and how they affect transaction costs.
Williamson has described his own work as a blending of soft social science with abstract economic theory. His insights have influenced everything from electricity deregulation in California to investment in Eastern Europe to human resource management in the technology industry.
Before making a toast to Williamson in the BofA Forum, Haas School Dean Rich Lyons said he "could not do justice" to the depth and scope of Williamson's contributions to the field of economics. "I don’t know how I'm going to contain myself," Lyons said. "I couldn't be more proud of the Haas School. I couldn't be more proud of Oliver Williamson. Olly, well done."
Williamson's son, Oliver Williamson Jr., visiting from Poland, handed his father the phone at 3:30 a.m., saying, "I think this is the call." The elder Williamson said he hopes this recognition "brings more attention and light to a field that has been largely overlooked in the world of economics."
UC Berkeley Chancellor Robert J. Birgeneau said, "We congratulate Oliver on this well-deserved honor for his groundbreaking work in economics. … This award showcases the faculty excellence that resides at UC Berkeley and the level of contribution this institution makes to the country and the world."
The Edgar F. Kaiser professor emeritus of business, economics and law at the Haas School and a professor of economics in UC Berkeley's College of Letters and Science, Williamson is the author of several books, including an economics classic, Markets and Hierarchies: Analysis and Antitrust Implications (1975), and 10 years later, The Economic Institutions of Capitalism: Firms, Markets, Relational Contracting. The latter is said to be the most frequently cited work in social science research.
In describing Williamson's work, the Nobel committee said he "has argued that markets and hierarchical organizations, such as firms, represent alternative governance structures which differ in their approaches to resolving conflicts of interest. The drawback of markets is that they often entail haggling and disagreement. The drawback of firms is that authority, which mitigates contention, can be abused.
"Competitive markets work relatively well because buyers and sellers can turn to other trading partners in case of dissent. But when market competition is limited, firms are better suited for conflict resolution than markets," the committee continued. "A key prediction of Williamson's theory, which has also been supported empirically, is therefore that the propensity of economic agents to conduct their transactions inside the boundaries of a firm increases along with the relationship-specific features of their assets."
Williamson is the Haas School’s second Nobel Prize Laureate. In 1994, the late John Harsanyi was awarded the Nobel Prize in Economics for his work in game theory, a mathematical theory of human behavior in competitive situations that has become a dominant tool for analyzing real-life conflicts in business, management, and international relations. He shared the award from with fellow game theorists Reinhard Selten of Rheinische Friedrich-Wilhelms-Universitaet in Bonn, Germany, and John Nash of Princeton University.