Oliver E. Williamson, the Edgar F. Kaiser Professor Emeritus of Business Economics and Law at the University of California, Berkeley, and a Ph.D. Alumnus (’63) of Carnegie Mellon University’s GSIA/Tepper School of Business, has been honored as co-recipient of the Nobel Prize in Economics. The 2009 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel was announced by the Royal Swedish Academy of Sciences and the Nobel Foundation in Stockholm, Sweden.
Editor's Note: The Dec. 8, 2009 Prize Lecture by Oliver E. Williamson (38 minutes) is available via the nobelprize.org website.
The Nobel Foundation announced that Williamson was selected for: “his analysis of economic governance, especially the boundaries of the firm.” As co-recipient of this year’s Prize, Elinor Ostrom, of Indiana University, has also been selected for: “her analysis of economic governance, especially for the commons. The Scientific Background compiled by the Royal Swedish Academy of Sciences stated that the two contributions are complementary: “Williamson focuses on the problem of regulating transactions that are not covered by detailed contracts or legal rules; Ostrom focuses on the separate problem of rule enforcement.”
“On behalf of Carnegie Mellon University, I congratulate Oliver Williamson on this great honor,” said Jared L. Cohon, president, Carnegie Mellon University. “We are always pleased to see our alumni succeed, and in this case Dr. Williamson has achieved international recognition at the highest level. His work in economic governance has been groundbreaking, and this Nobel is well deserved.”
At Carnegie Mellon, Williamson developed focus for his research under the instruction of several academic pioneers who, during the 1960s, were revolutionizing the principles of accepted economic theory. These included the late Richard Cyert, former Carnegie Mellon President, dean of the business school and faculty member; and former Carnegie Mellon faculty member James March, now at Stanford University, who were co-authors of the book A Behavioral Theory of the Firm. Published in 1963, this research profoundly changed how researchers and managers worldwide understood the decision-making process within organizations. Continuing in this area, Williamson published his first book: The Economics of Discretionary Behavior: Managerial Objectives in a Theory of the Firm in 1964 which was followed by his seminal paper and book in 1971 titled: Markets and Hierarchies.
“Williamson was truly a pioneer in recognizing the limits of markets and the limits of firms,” said Chester Spatt, the Pamela R. and Kenneth B. Dunn Professor of Finance and director of the Center for Financial Markets at the Tepper School of Business and who attended the graduate program at the University of Pennsylvania, where Williamson was on the faculty. “He has made many contributions to the field of economics in determining the nature and boundary of firms and determining whether transactions are better mediated through markets or internally within a firm.”
Williamson studied and conducted research at Carnegie Mellon University at a pivotal time in the history of modern business management education, an academic discipline that had been created only a few years earlier. He was an integral part of a group of students and faculty that forged a new path in business research and education. The introduction of management science, a quantitative based academic approach integrating fundamental business disciplines such as business management, computer modeling, organizational behavior and economic theory, was first pioneered and introduced in the late 1950’s/early 60’s at Carnegie Mellon. Faculty and doctoral students were noteworthy in their reluctance to utilize the then-common reliance upon traditional case studies in developing solutions to problem solving and decision-making. Today, some form of Carnegie Mellon’s management science model is taught at leading business schools worldwide.
The members of this group and their work have been linked to the Nobel Prize in Economic Sciences on other occasions, including three-winners in the past six-years and three Ph.D. graduates from Carnegie Mellon. Among faculty members, Carnegie Mellon University’s Tepper School of Business boasts six Nobel laureates: Herbert A. Simon (1978), Franco Modigliani (1985), Merton H. Miller (1990), Robert E. Lucas, Jr. (1995), Finn E. Kydland (2004), and Edward C. Prescott (2004). No business school worldwide has surpassed the distinction of seven Nobel laureates.
The Prize in Economic Sciences was created in 1968 by, Sveriges Riksbank, Sweden's central bank, memory of Alfred Nobel, founder of the Nobel Prize. It has been awarded annually since it creation and is administered by the Royal Swedish Academy of Sciences. Additional information on this prize and the report titled “Scientific Background on the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2009, ECONOMIC GOVERNANCE, compiled by the Economic Sciences Prize Committee of the Royal Swedish Academy of Sciences” can be found at nobelprize.org.