Members of the Yale School of Management faculty were delighted to learn yesterday that Oliver E. Williamson, an emeritus professor at the University of California, Berkeley, had been named to share the 2009 Nobel Prize in Economic Sciences.
Williamson was the Gordon B. Tweedy Professor of Economics of Law and Organization at Yale from 1983 to 1988. Said Rick Antle, the William S. Beinecke Professor of Accounting, and a former colleague of Williamson’s, “Although he left Yale for UC Berkeley in 1988, we are proud that SOM was his academic home during the time that he was doing some of his path-breaking work, including the publication of his seminal book, The Economic Institutions of Capitalism.”
In making its announcement, the Nobel Prize organization posted a report from the Economic Sciences Prize Committee of the Royal Swedish Academy of Sciences (available for download here) that outlines the significance of Professor Williamson’s work. In part, the report states:
One important class of institutions is the legal rules and enforcement mechanisms that protect property rights and enable the trade of property, that is, the rules of the market. Another class of institutions supports productions and exchange outside markets. For example, many transactions take place inside business firms. Likewise, governments frequently play a major role in funding pure public goods, such as national defense and the maintenance of public spaces. Key questions are therefore: which model of governance is best suited for what type of transaction, and to what extent can the modes of governance that we observe be explained by their relative efficiency?...
In a series of papers and books from 1971 onwards, Oliver Williamson has argued that markets and firms should be seen as alternative governance structures, which differ in how they resolve conflicts of interest. The drawback of markets is that negotiations invite haggling and disagreements; in firms, these problems are smaller because conflicts can be resolved through the use of authority. The drawback of firms is that authority can be abused…
“In many ways,” said SOM Dean Sharon M. Oster, also a former colleague of Professor Williamson’s, “Ollie’s work poses the fundamental intellectual question that still lies at the heart of Yale SOM’s multi-sector focus: what mode of governance — private, not-for-profit, or public — is best under what circumstances? And, as is central to SOM’s integrative philosophy, the Prize Committee cited his contribution ‘to eliminating many of the barriers to intellectual exchange among different disciplines of the social sciences.’ ”
Yale SOM aims at educating leaders for business and society who understand the complexities, responsibilities, and range of the institutions they will encounter in their professional lives and who will help lead these organizations to maximize their economic potential and social impact.