Oliver Williamson, a University of California-Berkeley professor emeritus, and Elinor Ostrom, an Indiana University professor, share the 2009 Nobel Prize in Economic Sciences.
Oliver Williamson, a University of California-Berkeley professor emeritus, and Elinor Ostrom, an Indiana University professor, share the 2009 Nobel Prize in Economic Sciences. - 
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Kai Ryssdal: Today's Nobel Prize in economics came in two parts. Elinor Ostrom at Indiana University and Oliver Williamson from the University of California-Berkeley were recognized for their separate but related work in something called economic governance: How groups are organized and how decisions can be made outside the market.

Professor Ostrom is a political scientist by training, but she calls herself a political economist. Earlier today she explained her work in how groups manage common resources to our Marketplace Morning Report colleagues.

ELINOR OSTROM: We've studied how farmers organize irrigation system, how fishermen organize some fisheries -- not all. And now we have a major study of forestry around the world, where we're studying government forests and local-managed forests and forests that are being depleted.

Oliver Williamson at Berkeley shares the economic prize for his study of companies and how, and why, economic decisions are sometimes better made in the boardroom than in the open market.

Professor Williamson good to have you with us.

OLIVER WILLIAMSON: Thank you. Good to be here.

Ryssdal: I imagine this is not a bad phone call to get at 3:30 in the morning, if you have to get a phone call then.

WILLIAMSON: Nah, it was received with great pleasure. I and my family was overjoyed.

Ryssdal: Your work, professor, looks at why some decisions happen in the market, and some happen inside corporations. Is there a practical example you might give of when it might make sense to do one thing in the market, and another thing perhaps inside a firm, inside a corporation.

WILLIAMSON: A really crucial feature is what are the nature of the assets that are being used. Are they easily redeployable to other uses, or are they highly specialized to this particular use? If they are easily redeployable, markets are going to work well. If, however, the assets are highly specialized to this particular need, now you run the risk that I engage in this transaction in good faith, unanticipated consequences present themselves. I want to bail out, I leave you high and dry, that's a risk that the supplier here would be reluctant to undertake, without a risk premium that reflects the added risk that is associated with it. As a buyer, do I want to pay that premium, or am I better off taking it out of the market, sacrificing competition, but nevertheless having a common bottom line to look at, rather than two separate firms looking at it from their own point of view.

Ryssdal: Is there a lesson to be drawn from your work, and how it applies to some of the big banks and the actions that they took, you know some of the actions that they took out of the market place, behind closed doors, without people really knowing what was going on and that decision making.

WILLIAMSON: I think that more attention to organization, so yes, you tell the SEC, you tell the Fed, that new forms of risk taking as they come along are something that you should get a deeper understanding at and if there are lurking hazards, uncover them, and work out what the public policy ramifications are.

Ryssdal: I understand, professor, that parking there on the Berkeley campus is quite at a premium, but one of the benefits of this award is that you get a special parking permit, is that right? You win a Nobel, you get a parking space?

WILLIAMSON: That's correct. That's the whole incentive program wrapped up...

Ryssdal: Now, have you filled out the paperwork yet?

WILLIAMSON: I haven't. And the chancellor is traveling today, so I'm not going to get this earmarked for a day or two, maybe a week or two. Bureaucracy turns over at its own pace, and I can manage in between.

Ryssdal: Oliver Williamson is a professor emeritus of economics at the University of California-Berkeley. And also as of this morning, a Nobel Laureate in that field. Professor, thanks so much for your time.

WILLIAMSON: Thank you.

Follow Kai Ryssdal at @kairyssdal