The great student of transaction costs, Oliver (Olly) Williamson, has died.
Here's the Berkeley obit:
Nobel laureate Oliver Williamson, pioneer of organizational economics, dies at 87
"His multidisciplinary approach to analyzing organizational structures was unconventional in economics at the time—he described it as a melding of soft social science with abstract economic theory. He looked not only at formal firm structure but at culture and social norms. Prof. Ernesto Dal Bó, the Phillips Girgich Professor of Business, called Williamson’s work “a fountain of vocation-shaping epiphanies.”
“After reading his work, we could no longer think of markets, organizations, and legal or political institutions in the same way. And so we didn’t,” Dal Bó said. “His insights are now part of the common sense of social scientists.”
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He won the Nobel prize in economics in 2009: here's his autobiographical statement on the Nobel site. I was struck by this paragraph:
"Although I would not come to appreciate this last until later, there was a major difference between engineering and economics with respect to hypothetical ideals. Thus whereas assumptions of weightlessness or perfect gas laws or frictionlessness etc. served the purpose of simplification in engineering, these assumptions would give way to realities (in the form of friction, resistance, turbulence, and the like) as engineering applications were attempted. In economics, however, assumptions of frictionlessness (of which the standard assumption of zero transaction costs was one) often went unquestioned or, even worse, were invoked asymmetrically. Thus whereas markets were subject to “failures” for which corrective public policy measures were prescribed, there was no corresponding provision for failures in the public sector. A more symmetrical approach would be to recognize that positive transaction costs were the economic counterpart of friction and that all forms of organization experience such costs – albeit in variable degree (depending on the attributes of the transaction to be organized). I credit my engineering background with giving me a receptive attitude toward transaction costs, to include an interest in pinning down and working out the organizational ramifications of such costs."
Here's the Berkeley obit:
Nobel laureate Oliver Williamson, pioneer of organizational economics, dies at 87
"His multidisciplinary approach to analyzing organizational structures was unconventional in economics at the time—he described it as a melding of soft social science with abstract economic theory. He looked not only at formal firm structure but at culture and social norms. Prof. Ernesto Dal Bó, the Phillips Girgich Professor of Business, called Williamson’s work “a fountain of vocation-shaping epiphanies.”
“After reading his work, we could no longer think of markets, organizations, and legal or political institutions in the same way. And so we didn’t,” Dal Bó said. “His insights are now part of the common sense of social scientists.”
***********
He won the Nobel prize in economics in 2009: here's his autobiographical statement on the Nobel site. I was struck by this paragraph:
"Although I would not come to appreciate this last until later, there was a major difference between engineering and economics with respect to hypothetical ideals. Thus whereas assumptions of weightlessness or perfect gas laws or frictionlessness etc. served the purpose of simplification in engineering, these assumptions would give way to realities (in the form of friction, resistance, turbulence, and the like) as engineering applications were attempted. In economics, however, assumptions of frictionlessness (of which the standard assumption of zero transaction costs was one) often went unquestioned or, even worse, were invoked asymmetrically. Thus whereas markets were subject to “failures” for which corrective public policy measures were prescribed, there was no corresponding provision for failures in the public sector. A more symmetrical approach would be to recognize that positive transaction costs were the economic counterpart of friction and that all forms of organization experience such costs – albeit in variable degree (depending on the attributes of the transaction to be organized). I credit my engineering background with giving me a receptive attitude toward transaction costs, to include an interest in pinning down and working out the organizational ramifications of such costs."
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