Three Economic Nobel Laureates In A Row Recognizing Power Of Infinite Goods
from the this-is-a-good-thing... dept
With the Nobel Prize in Economics being awarded to Elinor Ostrom (as well as Oliver Williamson) this year, plenty of people are noting that Ostrom’s seminal work has to do with how the concept of “the tragedy of the commons” isn’t really true in many cases, and how that “commons” can often self-regulate itself. And, Ostrom definitely recognizes how this applies to the “commons” that is the public domain. I didn’t want to comment right away on this. While I’ve read Ostrom’s work in the past, I wanted to revisit some of it, to refresh myself on it.
But what comes out in reading through her work is that she recognizes that government intervention — such as with monopoly rights — really doesn’t make sense in many situations of “public goods.” In a recent discussion on this site, people pointed to the concept of a “public good” as something that needs government intervention — and I noted that more recent economic analysis showed that wasn’t true at all. Ostrom’s work is much of what kicked off that line of analysis (Coase deserves credit as well…). Her key finding was that in commons situations, the players can often work out perfectly reasonable solutions on their own, that don’t involve regulatory efforts to put up fences or restrictions. The idea that a commons will automatically get overrun simply isn’t true in practice. And that’s exactly what we’ve seen in areas where there isn’t intellectual property protections. The supposed fear of a “tragedy of the commons” never seems to show up. Instead, the markets adjust.
What struck me as really interesting, however, is that this is the second time in three years that the Nobel committee has awarded someone whose research highlights this point. In 2007, the award went to Eric Maskin, who has done work showing why patents can often be harmful (his focus was on software) — again, suggesting that government intervention can be harmful in cases of “public goods.” And, while it’s less tied to the reasons why he got his Nobel or his core areas of research, last year’s award winner, Paul Krugman, has recently come around to recognizing that “infinite goods” or public goods aren’t a problem, but a potential opportunity as a market shifts.
It’s nice to see the Nobel committee helping to get these ideas out there — and highlighting the research that debunks the old wisdom that the answer to any public good is to create a gov’t regulated monopoly system, rather than letting the market work out a solution on its own.