muhammad osama

7/25/2019 Muhammad Osama

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MUHAMMADOSAMA

150042


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Governance and

Institutions

BY

Oliver Williamson andElinor Ostrom


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Oliver Williamson


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Born on September 2! "#$2 &a'e ($) atSuperior! Wisconsin*

B*S* in mana'ement +rom t,e MI- SloanSc,ool o+ Mana'ement in "#..*

MBA +rom Stan+ord Universit/ in "#01*

,*D* +rom 3arne'ie Mellon Universit/ in"#0$*

4rom "#0. to "#($ ,e 5as a pro+essor att,e Universit/ o+ enns/lvania*

4rom "#($ to "#((! ro+essor o+ Economics o+6a5 and Or'ani7ation at Yale Universit/*

I8-9ODU3-IO8


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ro+essors,ips in business

administration! economics! and la5 att,e Universit/ o+ 3ali+ornia! Ber:ele/*

Since "#(( ro+essor at t,e Haas Sc,oolo+ Business*

In "### ,e tau',t Economics att,e Universit/ o+ Siena*

In 211#! ,e 5as a5arded t,e 8obelMemorial ri7e in Economics +or ;,is

anal/sis o+ economic 'overnance!especiall/ t,e boundaries o+ t,e


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Elinor Ostrom


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I8-9ODU3-IO8 Born on Au'ust ! "#$$ at 6os An'eles!

3ali+ornia! United States*

B*A* and ,*D* +rom U36A*Ostrom lived in Bloomin'ton! Indiana! and

served on t,e +acult/ o+ bot, Indianauniversit/ and Ari7ona State Universit/*

9an: o+ distin'uis,ed pro+essor at IndianaUniversit/*

3o>director o+ t,e Wor:s,op in olitical-,eor/ and olic/ Anal/sis at IndianaUniversit/*


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S,e 5as a lead researc,er +or t,e

Sustainable A'riculture and 8atural9esource Mana'ement*

Died on ?une "2! 21"2 &a'ed () atBloomin'ton! Indiana! United States*


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I8-9ODU3-IO8Williamson and Ostrom bot, advanced ne5

t,eories o+ economic 'overnance! but +romver/ di@erent perspectives*

-,e economic problem Ostrom andWilliamson address is resource 'overnance*

Williamson o@ers a top>do5n contracts>basedsolution to t,e incentive problems o+

opportunism in corporate 'overnance*Ostrom o@ers a bottom>up communication>

based solution to t,e 'overnanceopportunities o+ communit/ resources*


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Williamson +ocuses on based institutional solutions

to t,is problem*Ostrom +ocuses on emer'ent communit/

norms as institutional solutions*


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O6IE9 WI66IAMSO8Economic Strate'ies -o limit 'uile+ul be,aviorWilliamsons 5or: +ocuses on t,e set o+

contractual arran'ements t,rou', 5,ic,economic activities are or'ani7ed

His 5or: covers contractual relations,ipsbet5een


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-,e essence o+ Williamsons t,eor/ o+ t,econditions under 5,ic, mar:et +ailure is li:el/

to be anticipated and lead tointernali7ation involves t,e simultaneouspresence o+ +our conditions!

Bounded rationalit/*

Opportunism* Small numbers o+ alternative tradin'

partners*

Asset speci


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In a 5orld o+ bounded rationalit/! transactionscan become problematic i+ disputes arise

about 5,at t,e state o+ t,e 5orld actuall/ isor 5,et,er 5,at 5as promised +or deliver/ isactuall/ bein' delivered*

In t,e real 5orld! ,o5ever! contracts 5ill

tend to be incomplete because transactors+ail to anticipate eventualities and attemptto avoid incurrin' t,e costs o+ tr/in' to t,in:o+ eventualities and ne'otiate over t,em*

Bounded rationalit/ 5ould not be a problem+or t,e 5or:in' o+ contractual relations,ips i+tradin' partners could be relied upon not toact 5it, opportunism in t,e presence o+in+ormation impactedness


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In t,e absence o+ opportunism! 'aps in contracts5ould be dealt 5it, in 'ood +ait, 5it, bot, sides

tr/in' to ensure t,at t,e/ a'reed somet,in' t,at5as +air and reasonable rat,er t,an tr/in' tomaimi7e t,eir o5n returns*

Williamson ma:es no claim t,at all economicactors are prone to be,ave 5it, opportunismrat,er ,is ar'ument is essentiall/ t,atopportunists used in+ormation advanta'es as acover +or sel+>servin' be,avior*

One 'eneral deterrent to 5ould>be opportunists is

t,e abilit/ o+ t,e ot,er transactor to s5itc, toalternative tradin' partners in t,e event t,atopportunistic be,avior is detected! ,enceWilliamsons small numbers condition +or mar:et+ailure bein' epected*


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Williamson came to reali7e t,at a transactor5,o 5as dealin' 5it, a monopolistic supplier

5ould ,ave no reason to 5orr/ about +allin'+oul o+ t,e tradin' partners opportunistictendencies i+ t,e/ could easil/ redeplo/ t,eirassets to t,e production o+ ot,er outputs*

Aside +rom t,e possibilit/ o+ a 'eneral lac: o+demand +or output due to recession! it isFasset speci


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E6I8O9 OS-9OM-,e opportunit/ o+ commons

Ostroms earl/ 5or: emp,asi7ed t,e role o+ publicc,oice on decisions inuencin' t,e production o+

public 'oods and services*Amon' ,er better :no5n5or:s in t,is area is ,er stud/ on t,e pol/centricit/

o+ police +unctions in t,e Greater St* 6ouis areas* Her later! and more +amous! 5or: +ocused on ,o5

,umans interact 5it, ecos/stems to maintain lon'>

term sustainable resource /ields* 3ommon poolresources include man/ +orests!


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Her 5or: ,as considered ,o5 societies ,avedeveloped diverse institutional

arran'ements +or mana'in' naturalresources and avoidin' ecos/stem collapsein man/ cases! even t,ou', somearran'ements ,ave +ailed to prevent

resource e,austion*Her 5or: emp,asi7ed t,e multi+aceted

nature o+ ,umanecos/stem interaction andar'ues a'ainst an/ sin'ular =solution; +or

individual social>ecolo'ical s/stem problems


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Design principles for Common

Pool Resource (CPR) institution") 3learl/ dec,oice arran'ements t,at allo5most resource appropriators to participate int,e decision>ma:in' process

J) E@ective monitorin' b/ monitors 5,o arepart o+ or accountable to t,e appropriators*


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.) Mec,anisms o+ conict resolution t,at are c,eapand o+ eas/ access*

0) A scale o+ 'raduated sanctions +or resourceappropriators 5,o violate communit/ rules*

) Sel+>determination o+ t,e communit/ reco'ni7edb/ ,i',er>level aut,orities and

() In t,e case o+ lar'er common>pool resources!or'ani7ation in t,e +orm o+ multiple la/ers o+ nestedenterprises! 5it, small local 39s at t,e base level*

-,ese principles ,ave since been sli',tl/ modior'ani7ed 'overnance s/stems! includin' e@ectivecommunication! internal trust and reciprocit/! andt,e nature o+ t,e resource s/stem as a 5,ole*


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3O836USIO8-,e 211# 8obel ri7e to Oliver

Williamson and Elinor Ostrom 5as aF'overnance and institutions pri7e* -,e/

bot, s,o5ed 5,/ institutions o+'overnance matter to t,e buildin' bloc:so+ economic or'ani7ation*

Williamson 5it,


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Ostrom sa/s t,at 'overnance is a solution

because sel+>interest can be coordinated5,en appropriatel/ +ocused*

4or Williamson most people are 'ood! butsome are sel+>servin' and 5ill 'ounpunis,ed unless institutions are desi'nedabout t,is latter 'roups 'overnance*

Ostrom ,o5ever believes t,at trust pla/s amaCor role in ,o5 common pool resourceproblems are ,andled*

Williamson is reluctant to consider people as,avin' natural tendenc/ to trust in ,is vie5trust is credibilit/ o+ commitments t,attradin' partners are prepared to ma:e*


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At t,e level o+ t,e


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9ic,ardson sa5 communication andcooperation as means b/ 5,ic, customers

and suppliers can en'a'e in mutuall/bene


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Williamson is 5ell a5are o+ 9ic,ardsonscontributions! ,e even provides an

endorsement on t,e dust Cac:et o+ t,esecond edition o+ 9ic,ardsons "#01 boo:!callin' it Fan earl/ and importantcontributionL*

8obel committee mi',t t,ere+ore ,ave beento a5ard t,e 211# 8obel ri7e on economic'overnance and t,e institutions t,atunderpin it to Elinor Ostrom! Oliver

Williamson and Geor'e 9ic,ardson! 5it,si'ni


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9E49E83E

Oliver Williamson and Elinor Ostrom* &">2J)* Governance and Institutions* Peter E.

Earl & Jason Potts! 211#*


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