So it's Williamson and Ostrom this year.Seems an interesting choice -- an overview ("Scientific Background"):http://nobelprize.org/nobel_prizes/econ ... mlSelected fragments:"Williamson’s theory of vertical integration clarifies why firms are essentially different from markets. As a consequence, it challenges the position held by many economists and legal scholars in the 1960s that vertical integration is best understood as a means of acquiring market power. Williamson’s analysis provides a coherent rationale for, and has probably contributed to, the reduction of antitrust concerns associated with vertical mergers in the 1970s and 80s. By 1984, merger guidelines in the United States explicitly accepted that most mergers occur for reasons of improved efficiency, and that such efficiencies are particularly likely in the context of vertical mergers.""Although Williamson’s main contribution was to formulate a theory of vertical integration, the broader message is that different kinds of transactions call for different governance structures. More specifically, the optimal choice of governance mechanism is affected by asset specificity. Among the many other applications of this general idea, ranging from theories of marriage (Pollak, 1985) to theories of regulation (Goldberg, 1976), one has turned out to be particularly important, namely corporate finance.Williamson (1988) notes that the choice between equity and debt contracts closely resembles the choice between vertical integration and separation. Shareholders and creditors not only receive different cash flows, but have completely different bundles of rights. For example, consider the relationship between an entrepreneur and different outside investors. One class of investors, creditors, usually do not acquire control rights unless the entrepreneur defaults, whereas another class of investors, stockholders, typically have considerable control rights when the entrepreneur is not in default. Williamson suggests that non-specific assets, which can be redeployed at low cost, are well suited for debt finance. After a default, creditors can simply seize these assets from the entrepreneur. Specific assets on the other hand are less well suited for debt finance, because control rights lose their value if they are redeployed outside the relationship."---"More than forty years ago, the biologist Garrett Hardin (1968) observed that overexploitation of common pools was rapidly increasing worldwide and provided the problem with a catchy and relevant title: “The Tragedy of the Commons”.In her book "Governing the Commons: The Evolution of Institutions for Collective Action" (1990), Elinor Ostrom objects to the presumption that common property governance necessarily implies a “tragedy”. After summarizing much of the available evidence on the management of common pools, she findsthat users themselves envisage rules and enforcement mechanisms that enable them to sustain tolerable outcomes. By contrast, governmentally imposed restrictions are often counterproductive because central authorities lack knowledge about local conditions and have insufficient legitimacy. Indeed, Ostrom points out many cases in which central government intervention has created more chaos than order.""A final lesson from the many case studies is that large-scale cooperation can be amassed gradually from below. Appropriation, provision, monitoring, enforcement, conflict resolution and governance activities can all be organized in multiple layers of nested enterprises. Once a group has a well-functioning set of rules, it is in a position to collaborate with other groups, eventually fostering cooperation between a large number of people. Formation of a large group at the outset, without forming smaller groups first, is more difficult."Thoughts/comments/rants?

Someone told me that Ostrom’s work was on the solutions to the problem of overfishing, which doesn’t seems sufficiently revolutionary for a Nobel Prize in Economics; but it seems her work has much wider application and implications which could explain the decision.