Two brilliant women who made extraordinary contributions to economics died recently. Elinor Ostrom, a political scientist and the only woman among the 69 Nobel laureate economists named since 1969, died at age 78. Nine days later, Anna Schwartz, an economic historian who collaborated with laureate Milton Friedman on his most important works, died at 96.
The ways in which these two women's work is similar and different says much about the state of the discipline right now, as do the reasons why Schwartz did not win a Nobel while Friedman did get it in 1976, and why Lin Ostrom did in 2009.
Start with what these scholars did. Schwartz specialized in detailed histories of how economies developed, chock-full of data often never before assembled or published. Her first book, co-authored with two other scholars, was the two-volume "Growth and Fluctuations in the British Economy, 1790-1850: An Historical, Statistical, and Theoretical Study of Britain's Economic Development." W.W. Rostow, later often criticized for his role in shaping Lyndon Johnsons Vietnam War policies, was one co-author.
She then partnered with Friedman on their 1963 magnum opus, "A Monetary History of the United States, 1867-1960." This was followed by "Monetary Statistics of the United States" in 1970 and "Monetary Trends in the United States and the United Kingdom: Their Relation to Income, Prices, and Interest Rates, 1867-1975."
In all of these, she and Friedman argued that the money supply played a far greater role in economic history than their contemporaries believed, that errors by central banks with large discretion over the money supply often caused problems and that, in particular, the Federal Reserve's missteps had caused the Great Depression.
Their last work, which covered Britain up to 1975, laid the fault of British high inflation, high unemployment and economic stagnation squarely at the foot of the Bank of England, then under great political control, and at the feet of governments led by successive prime ministers, Tory as well as Labor. It was precisely the policies identified by Friedman and Schwartz that Margaret Thatcher, who came into office in 1979, determined to reverse.
Moreover, it is the bad policies of the Fed in the 1930s, indicted in great detail, that Chairman Ben Bernanke is determined to avoid repeating right now. Ironically, Schwartz disagreed with his diagnosis of current problems. She was harsh in her criticism of Bernanke and positively scathing in her opinions about former chairman Alan Greenspan. Schwartz dealt with macroeconomic history, that of nations. Lin Ostrom got her Nobel for microeconomics, examining how relatively small groups of people decided how to manage a piece of property that was most productive when held in common.
Her work was in great part a reaction to a highly influential essay, "The Tragedy of the Commons," by Garrett Hardin, that argued any common property system was doomed to failure and destruction of the resource in question. Sociologists, anthropologists and economists who actually worked with such systems in developing countries knew Hardin was wrong. Common property regimes not only can be successful and durable, they are in many cases more economically efficient than if the resource were somehow divided into private plots.
Ostrom was a key scholar in a growing group in the 1980s and 1990s that changed how social scientists looked at this question. In particular, she argued that under certain circumstances, no formal government action was needed to achieve fair and efficient resource management. Groups can and do self-organize to manage resources. While their specific subjects were very different, there are striking similarities between the two women. Neither was an abstract theoretician of the types that have won most Nobels. Both expressed their ideas in well-written English, not mind-numbing sets of simultaneous equations. Yet both understood fundamental economic relationships, perhaps better than some of the technicians with razzle-dazzle math.
Both believed that you had to start with what actually happened in the real world, with what ordinary men, women and businesses do today or had done in the past, rather than assuming some abstract, hyper-rational human, and then asking, "What would a rational person do in this case?"
Schwartz worked with historical data about money and banking. It was her patient archival research, her mastery of the most arcane and dusty files, that made possible the three encyclopedic books she and Friedman published together from 1963 to 1982.
Ostrom would start research by talking to peasant farmers or fishermen who jointly managed some common-pool resource like grazing lands, an in-shore fishery, a village woodlot or an irrigation system. She made no assumptions about humans as satisfaction-maximizing rationalists. Instead, she asked people: "What do you do in your village?"
While not a household name, Schwartz was famous among economists. In contrast, except for a few people working with environmental and natural resource issues or "public-choice" theorists, hardly any economists even knew who Ostrom was. Some still grumble about her getting the prize.
So why did little-known political scientist Ostrom get an economics Nobel while well-known economic historian Schwartz did not? Much of it has to do with the evolution over time of attitudes toward social science research by women. Schwartz was only 18 years older than Ostrom. However, her partner Friedman got his Nobel 33 years before Ostrom. If the attitudes and values of 2009 had prevailed in 1976, Schwartz might well have joined her collaborator in Stockholm.
There also is the factor of the wavering attitudes of the selection committee of the Swedish Academy toward abstract theorizing versus real-world research. The scales still tilt toward abstraction, but Ostrom's award, like that of experimental psychologist Daniel Kahneman in 2002, demonstrates that some people do appreciate the value of coloring outside the lines of the discipline's prevailing methods.
Write to Edward Lotterman at firstname.lastname@example.org.