Elinor Ostrom becomes the first Woman to get Nobel Prize for Economics

So the award is finally out. It goes to Oliver Williamson (of UC Berkeley) and Elinor Ostrom (of Indian Univ) for their work on governance. Most predictions I have seen got it wrong. I don’t want to take any credit but had mentioned instituional economics in my predictions post. When I said instiutional economics it was very much Williamson that was on my mind. 

What is more amazing is Elinor Ostrom ( of Indiana Univ) becomes the first woman to get Eco Nobel. What is more embarrassing is  I haven’t read any of her work. This is like 2007 for me when I woke up to mechanism design theory.

Press Release says:

Elinor Ostrom
Indiana University, Bloomington, IN, USA,

“for her analysis of economic governance, especially the commons”

and

Oliver E. Williamson
University of California, Berkeley, CA, USA,

“for his analysis of economic governance, especially the boundaries of the firm”

There is basic information for the public and advanced information for the budding economists/other interested. Both are usually excellent and something I wait more than the name of the recepient. It teaches you so much. It would be out with a speed read soon. Speed read is here

I would post more as I find out more about their work. I have read a bit of Williamson. Someone told me when North/Fogel got it in 1993 some people cringed that Williamson didn’t get it. And would have to wait longer. It took 16 years!!

Now get on to some reading.

Update:

As expected there is tons of material. And quite a few top econs are not familar with the work of Ostrom. Ostrom has created a storm really.

• Interviews of Ostrom and Williamson (in both media and text files)
• MR has many excellent links (as usual) as of the works/interviews – Ostrom on climate change, Good news for GMU, Cowen on Ostrom, Cowen on Williamson, Tabarrok on Williamson, Tabrrok on Ostrom
• Paul Krugman
• Paul Romer
• Michael Spence (via Greg Mankiw)
• Vernon Smith (has worked closely with Ostrom)
• Edward Glaesar
• John Taylor
• Mark Thoma
• Summary of economists reactions- WSJ Blog, Economix Blog
• Newspapers- WSJ Article, Another WSJ article, NYT, FT
• WSJ Blog – lessons for regulation

Public Trust on Central Banks does a dive in this crisis

This is what I feared but has come true. All these years, Central Banks have worked  very hard to achieve public’s trust on them.  The Central bank credibility has been very crucial. But in this crisis, the way central banks have  acted and reacted, credibility was bound to take a hit. Their initial interventions were highly opaque  and central bankers were completely caught off-guard.

Daniel Gros and Felix Roth in voxeu write that Central Bank credibility has declined within the public. Infact, it has plummeted.

Most observers agree that central banks can claim partial credit for the stabilisation that have been achieved and the prospect of a recovery. This column warns that the general public seems to hold a completely different opinion; trust in central banks has declined and the reaction of central banks to the crisis is generally judged as unsatisfactory. Central bankers all over the world should redouble their efforts to regain the trust of the people towards their institution.

The authors study bi-annual Eurobarometer (EB) Surveys which polls people in Euroarea over trust in ECB etc. The Jan-Feb 2009 survey shows trust index for ECB at -ve.

The fall in trust in the ECB occurred in almost all euro area countries. However, as one would expect, the level remains significantly higher in the eight smallest euro area countries (including Ireland) than the three largest (Germany, France and Italy), which account for about two-thirds of the population (Figure 2). In the three large euro area countries, more people mistrust the ECB than trust her, where as the opposite is true in all but one of the smaller euro area member countries. This relatively higher trust in the ECB is what one would expect given that the experience of Iceland (and that of the Baltic states) has shown the potential benefits of belonging to the euro area.

But there are also interesting differences among the three largest economies – Germany, France and Italy. It is apparent that trust in the ECB was always lowest in France, but it was still usually in positive territory. However, between October-November 2008 and January-February 2009, it fell from 6% to -21%. Trust in the ECB used to be highest in Italy (close to +40% at the start of EMU) but even there it is now negative, as it is in Germany.

The problem is not unique to ECB:

The last poll (from July 2009) is particularly instructive. In this survey, respondents were asked: “Do you feel the European Central Bank/Bank of England/Federal Reserve has responded appropriately to the challenges of the economic downturn and its consequences?”

In the case of the US, 18% more answered “no” than answered “yes”. In continental Europe the verdict on the ECB was even more negative, with a balance of 24% for those answering “no”. In this poll, the Bank of England scores best with a negative balance of only 6 percentage points.

In three of the four large euro area countries surveyed in continental Europe, citizens are more negative towards the ECB than US citizens are towards the Federal Reserve. See Panel A in Table 1 for details. In analysing each of the four European cases individually (Panel B), one sees that Spanish and Italian citizens hold an even lower opinion of the ECB (-39% and -30%) than French or Germans (-22% and -11%).

Not great news at all. I don’t know whether central bankers have seen these results. Most speeches I have read/been reading seem to be ignorant of these developments. Most think they have done a great job in mitigating the crisis and talk about reforms in financial stability & regulation. But the recent survey results point to different ideas. The public trust in central banks has waned and requires urgent attention.

Economics of idlis

Idli is a rice-lentil based snack that originated in South India and has become hugely popular all around India and world as well.

Niranjan Rajadhyaksha has an interesting post on the economics lessons a plate of idli offers.

I always feel remembering menu prices is a very good way to track food inflation.  So, Niranjan is bang on target with this one – You do not need to follow the government’s weekly inflation release to know that high food prices are pinching.

However, Niranjan points to some other economics lessons one could learn while buying idli (or any other food item) from  a food joint.  The point about restaurant owners slicing the market into two segments is pretty commonly seen in Mumbai – most Restaurants offer you 2 seating facilities- AC and non AC. AC ones are charged more for the same dish.

And I have also noted, this charging of extra for an extra bowl of sambhar/chutney differs across restaurants. It is not always related to inflation alone.  Some expensive restaurants charge you a bomb for a dosa/idly  and all extra servings of sambhar/chutney are free.  Like I have visited quite a few in Delhi who do this. The cheaper Udupi style ones (more frequently seen in Mumbai) who serve to all and have a very quick services as their business depends on more footfalls, are the ones who charge you for extra  sambhar/chutney.  I asked an owner of one such Udupi once this question, and he told me that people then keep ordering bowls of sambhar/chutney, making it costly for the restaurant. One extra serving is fine with all, but people always want more. Hence, the rule of asking people to pay up for anything extra.

I had earlier pointed how restaurants nudge you to buy salads ahead of meals (which was not really appreciated/understood  properly by the visitors). Simple eco lessons are seen at quite a few places. You just have to sit and notice it.