Economist won Nobel Prize
Work focused on organizations’ workings
I HAVE ALWAYS TOLD MY CHILDREN AND MY GOO D FRIENDS: ‘FO R GOD’S SAKE, NEVER GAMBLE HEAVILY AND IF YOU CAN AVOID IT, DON’T EVER GAMBLE’ — GAMBLING INDUSTRY MAGNATE STANLEY HO
Oliver Williamson, a Nobel Prize- winning economist who analyzed the inner workings of businesses, government institutions, joint ventures and other organizations, developing a powerful framework to examine the nature of firms and corporate decision- making, died May 21 at an assisted- living centre in Oakland, Calif. He was 87.
Williamson had taught for nearly three decades at the University of California at Berkeley. He had been in declining health after a bout of pneumonia in January.
In the wake of a global financial crisis and long recession, Williamson shared the Nobel Memorial Prize in Economic Sciences in 2009 with political scientist Elinor Ostrom, the first woman to receive the award. Both researchers were credited with shedding light on business regulation and the nature of trust in economic activity.
Williamson, known as Olly, was a one- time General Electric engineer who charted his own path in economics in the 1970s. At a time when most of his peers were studying market prices and quantities, he focused on sweeping and seemingly simple questions, including: Why do firms exist? And why are some industries dominated by one or two corporations, rather than numerous small companies?
In essence, he found that large companies are an efficient way to do business, if only under the right conditions. He also offered new insight into the “make or buy” decision, in which businesses choose whether to manufacture a product or outsource it to another organization.
“The novelty of Oliver Williamson’s thinking was to take economics as the base but then to expand beyond that, to say, ‘ There’s a bunch of behavioural characteristics that matter,’” said his former student John de Figueiredo, a professor of law, strategy and economics at Duke University. “Rather than start with a theory,” de Figueiredo added, “he started with a phenomenon. He was an economist, but he was fundamentally a social scientist.”
Long before behavioural economics became popular, Williamson drew on fields including law, psychology, sociology and political science, helping lay the groundwork for modern institutional and organizational economics. With two Nobel laureates, Douglass North and Ronald Coase, he co- founded what is now the Society for Institutional & Organizational Economics.
Williamson was most closely associated with transaction cost economics, which emerged out of a 1937 article by Coase, titled The Nature of the Firm. The theory analyzes “transaction costs” that might not be accounted for in the price of the good, such as the time spent researching a used car before making an offer, or the expense of hiring a lawyer to vet a contract.
For the most part, transaction cost economics was poorly regarded before Williamson began building on Coase’s work in the 1970s, said Scott Masten, a University of Michigan professor of business economics and public policy.
“It was often described as tautological — you could explain anything with it,” Masten said. “Williamson converted it into a testable theory and made it applicable, a framework for people to look at organizations and institutions.” Over the years, he added, the theory has been applied to groups as varied as public utilities, coffee chains and the U. S. Congress.
Williamson’s work often returned to the “make or buy” problem, which he called “a simple case” that could be used to “understand more complex cases,” from the negotiation of labour contracts to the privatization of industries.
“One way to think about it is if you just want the best of something that’s already out there, then the market works really well. There’s no reason to do it yourself and reinvent the wheel,” said Joanne Oxley, a vice- dean at the University of Toronto’s business school.
“But if what you want is idiosyncratic, for somebody else to make it you’re going to have to collaborate really intensely, and make investments,” she added. “What Williamson did is get into the nuts and bolts of why markets are not good for that …. He thought more systematically than anybody else had before about what markets are good for and what firms are good for.”
The middle of three children, Oliver Eaton Williamson was born in Superior, Wisc., on Sept. 27, 1932.
He received a bachelor’s degree in management from the Massachusetts Institute of Technology in 1955 and, attracted to math and science, initially worked as an engineer for GE and the federal government. He turned toward economics while studying at Stanford University, where he received an MBA in 1960. A Stanford professor, future Nobel laureate Kenneth Arrow, encouraged his interest in the field and “greatly whetted my appetite,” Williamson recalled in a biographical essay for the Nobel.
He went on to study at the Carnegie Institute of Technology, now Carnegie Mellon University in Pittsburgh, where his multidisciplinary approach was shaped by professors including behavioural theorist James March and economist Herbert Simon, a Nobel laureate and pioneer in artificial intelligence.
Williamson received his doctorate in economics in 1963 and taught at Berkeley before joining the University of Pennsylvania faculty in 1965. He later moved to Yale University before returning in 1988 to Berkeley, where he held appointments in business, economics and law before retiring from teaching in 2004.
His wife of 55 years, the former Dolores Celini, died in 2012. Survivors include five children and five grandchildren.
Friends recalled Williamson as gentle and soft- spoken, inviting students and colleagues to his home for long Italian dinners that served as a stage for his dry wit. At conferences, he sometimes sat silently in the audience while panellists debated his work on the stage, not realizing he was there.
Even after being named a winner of the world’s most prestigious economics prize, Williamson seemed somewhat bashful, surprised by the honour. “It’s undeserved, I suppose,” he told a crowd of more than 300 people at a Nobel Prize celebration at Berkeley’s Haas School of Business. “I would describe myself as a conscientious teacher who had a lot of students who were tolerant and went on to do good work.”