johnny won

American economists Elinor Ostrom and Oliver Williamson, who study the way economic decisions are made outside markets, were awarded the Nobel Prize in economics Monday.

Ms. Ostrom’s work challenged the view that when people share a finite resource, they will end up destroying it — what is known as the tragedy of the commons. That view argues that resources that are important for the common good need to be highly regulated or privatized.

As a graduate student in the early 1960s at the University of California, Los Angeles, Ms. Ostrom researched the way water was being managed in Southern California. Groundwater levels were falling, and saltwater was seeping into the system. But rather than collapsing into a tragedy of the commons, communities and water producers hashed out a solution. That led her to explore situations throughout the world where resources were commonly held, and she found that people often developed institutions, networks and other ways of interacting that solved problems.

Mr. Williamson’s work is driven by two key ideas. The first is that a contractual agreement can never be complete; there are always contingencies that haven’t been accounted for. The other is that people act opportunistically within the gray area of contracts to make sure they benefit the most, and that can lead to problems.