Oliver E. Williamson, an economist whose groundbreaking work on analyzing the structure of organizations was honored with the 2009 Nobel Memorial Prize in Economic Sciences, died on May 21 in Oakland, Calif. He was 87.
The cause was complications of pneumonia, his daughter Tamara Williamson said.
Professor Williamson had for many years taught economics at the Haas School of Business at the University of California, Berkeley, when he was awarded the Nobel, sharing it with Elinor Ostrom, a political scientist at Indiana University, who was the first woman to receive the economics prize.
By then he had had a rich and peripatetic academic career, studying or teaching at some of the nation’s most prominent universities, including the Massachusetts Institute of Technology, Stanford, Carnegie-Mellon, Yale and the University of Pennsylvania.
The Nobel came in the wake of the Great Recession, when banks “too big to fail” were being bailed out by the federal government. Professor Williamson suggested that it was better for the government to regulate big companies and institutions when they abuse their power rather than break them up or limit their size.
He had long been thinking outside traditional economic dogma, and many in the field thought the honor was long overdue. He had been retired from Berkeley for about five years when he received the Nobel.
Professor Williamson began his research on the economics of organizations in the late 1960s and early ’70s. His theories, which involved unconventional ways to analyze markets and business enterprises, were inspired by the work of another Nobel laureate, Ronald Coase, in the 1930s.
Professor Williamson, the Nobel committee said in its citation, “provided a theory of why some economic transactions take place within firms and other similar transactions take place between firms, that is, in the marketplace.”
“The theory informs us about how to handle one of the most basic choices in human organizations,” the citation continued. “When should decision power be controlled inside an organization, and when should decisions be left to the market?”
By challenging conventional wisdom that markets were always the most rational and efficient way to conduct business, Professor Williamson opened up economic theory to the social sciences broadly.
“Oliver Williamson’s work underlies a tremendous amount of modern economic thinking,” Paul Krugman, a fellow Nobel laureate in economic science, wrote in his column in The New York Times after the 2009 prize was announced. “I know it because of the attempts to model multinational corporations, almost all of which rely to some degree on his ideas.”
Professor Williamson based his theories on transaction costs and their impact on economic organization. He explored how one type of transaction might be better suited to one kind of organization and how another type might be more suitable for another kind of organization.
He pointed, for example, to what’s known as a make-or-buy decision: whether a company should manufacture a product in-house or purchase it from a supplier.
“I originally thought of ‘make-or-buy’ as a stand-alone problem,” he said in a 2010 interview for the Haas School website. “But now I think of it as being an exemplar. If you understand make-or-buy, which is a simple case, you can understand more complex cases.”
His theories thus extended beyond economics into decisions on designing joint ventures, privatizing industry, negotiating labor contracts and building antitrust cases. His influence has variously been felt in government bureaucracy, electricity deregulation, human-resource management and Silicon Valley.
“He took a really simple question, which is why do firms make some things and buy other things,” said Joanne Oxley, a professor of strategic management at the University of Toronto and a former Ph.D. student of Professor Williamson’s. “Why do some things happen in firms and some things happen in the market? By thinking hard about the way human nature works and the way markets work, he came up with a novel framework for considering that question.”
To make contracts and markets work, she explained, in a phone interview, “we need to build in these structures that create trust.
“This is key to making collaboration and innovation possible in a market economy,” she added.
Professor Williamson’s ideas resonated not only in schools of economics but also among management and legal scholars, reshaping how they thought about companies and markets.
“His theories inform a lot of modern-day concerns, like offshore outsourcing, distance work, antitrust policy, even crowdsourcing,” Professor Oxley said.
David Teece, an economics professor at the Haas School, said Professor Williamson deepened economists’ understanding of complex organizations and their management.
“Competition policy around the world was also significantly revamped because of the insights he gave us into business behavior and complex contracting,” Professor Teece said.
Oliver Eaton Williamson, who was known as Olly, was born in Superior, Wis., on Sept. 27, 1932, to Scott and Lucille Williamson. His father left a job teaching high school to join the family real estate business and served nine years as president of the Superior City Council. His mother had been a high school principal before she married.
After graduating from high school (he remained close to his high school friends throughout his life), Professor Williamson attended Ripon College in Wisconsin for two years and then spent three years at M.I.T., graduating in 1955 with a degree in management.
He went on to earn a master’s in business administration from the Stanford Graduate School of Business, where he discovered an appreciation for economics.
For a time he worked for the Central Intelligence Agency in Washington, where he met Dolores Celini. They married in 1957 and had five children.
Professor Williamson obtained his Ph.D. from Carnegie-Mellon University in Pittsburgh in 1963, having written a prizewinning dissertation. He then joined the economics faculty at Berkeley. In 1965, he moved to the University of Pennsylvania, where he wrote “Markets and Hierarchies,” his signature book, in which he further developed his transaction cost theory — the work that would lead to his Nobel. (During his time at Penn he was also a special economics assistant in the antitrust division of the Justice Department, from 1966-67.)
He joined the Yale faculty in 1983, but within five years he was lured back to Berkeley by the promise of an opportunity to teach across disciplines. He taught economics and law there until he retired in 2004.
Soft-spoken but occasionally gruff, Professor Williamson enjoyed metal sculpting and summers with his family at a Wisconsin lake. He mentored countless doctoral students, many of whom who have made their own marks on the field. He and his wife, who died in 2012, regularly hosted dinners for his students at their home.
In addition to Tamara, he is survived by another daughter, Karen Indergand; his sons Scott, Oliver Jr. and Dean; and five grandchildren.
“He was very much on the humble end of the spectrum,” said Prof. Rich Lyons, who was the dean of the Haas School when Professor Williamson won the Nobel. “Two days after the Nobel Prize was announced, he sent me an email asking to see me. He was awarded half of the $1.4 million prize, and he said, ‘My wife and I would like to gift the prize money back to the school to endow a chair.’ He always had a sense of stewardship for something larger.”
Published at Thu, 28 May 2020 05:19:05 +0000-Oliver Williamson, 87, Dies; Nobel Laureate Studied Organizations