2002 Economics Nobel Prize Winner Vernon Smith on 2009 Winner Elinor Ostrom

In honor of the awarding of the Nobel Prize in Economics to Elinor Ostrom and Oliver Williamson, it’s worth recalling a mention of Ostrom’s work by a previous Economics Nobel laureate, Vernon Smith, then at George Mason Univeristy, whom I interviewed for CEI’s newsletter, the Planet (then Monthly Planet). Here’s the 2002 Economics Nobel Prize winner, on the future 2009 winner:

One of the best pieces of work on public choice was done by Elinor Ostrom of Indiana University, Governing the Commons. She’s looked at a huge number of commons problems in fisheries, grazing, water, fishing water rights, and stuff like that. She finds that the commons problem is solved by many of these institutions, but not all of them. Some of them cannot make it work. She’s interested in why some of them work and some of them don’t.

One example is the Swiss alpine cheese makers. They had a commons problem. They live very high, and they have a grazing commons for their cattle. They solved that problem in the year 1200 A.D. For about 800 years, these guys have had that problem solved. They have a simple rule: If you’ve got three cows, you can pasture those three cows in the commons if you carried them over from last winter. But you can’t bring new cows in just for the summer. It’s very costly to carry cows over to the winter—they need to be in barns and be heated, they have to be fed. [The cheese makers] tie the right to the commons to a private property right with the cows.

The entire interview is available in two parts. (Turn to page six of each issue; the Ostrom discussion is on page nine of part two.)

UPDATE: Vernon Smith comments on Elinor Ostrom’s Nobel Prize in Forbes today:

Previous Nobel laureates such as Ronald Coase (1991), William Vickrey (1996) and Leonid Hurwicz (2007) have also made significant contributions to investigating these big questions, but Ostrom brings a distinct style in applying her skill in different methodologies. She blends field and laboratory empirical methods, economic and game theory, the really important ingredient of scientific common sense, and she constantly challenges her own understanding by looking at new potentially contrary evidence and designing new experiments to challenge her understanding of the emergent historical rules and the theory used to explicate them.