Oliver E. Williamson

Who Is Oliver E. Williamson?

Oliver E. Williamson was an American economist who received the Nobel Prize in Economics in 2009 and one of the most cited authors in the social sciences. Sharing the Nobel with Elinor Ostrom, Williamson was honored for "his analysis of economic governance, especially the boundaries of the firm." Williamson taught throughout the world and spent much of his career as a professor of business, economics, and law at the University of California, Berkeley. Williamson did groundbreaking research in organizational economics and transaction cost economics.

Understanding Oliver E. Williamson

Born in Wisconsin in 1932, Williamson received his BS in Management from the Massachusetts Institute of Technology. He held an MBA from Stanford and a PhD in economics from Carnegie Mellon. He received numerous awards, honors, and fellowships over his career. After a long and brilliant career, Williamson passed away in 2020.

Williamson served as Special Economic Assistant to the Head of the Antitrust Division of the U.S. Department of Justice from 1966-67, where he would gain valuable insight into the conflict between the idealized "blackboard economics" models of neoclassical price theory and the way real-world businesses and transactions actually work.

Williamson taught and served as a professor at the University of Pennsylvania and at Yale before assuming his long standing post as professor of business administration, economics, and law at the University of California, Berkeley. In 1999, as a Fulbright Distinguished Chair, he taught economics at the University of Siena. He also held honorary degrees from a host of economics departments worldwide, including Nice University in France, the University of Chile, the Copenhagen Business School, and St. Petersburg University.

Contributions

Williamson developed fundamental work in transaction cost economics, which bridges gaps between microeconomics, organizational theory, and theories of contract law, with major contributions to the theory of the firm, the way voluntary organizations can be used to overcome certain market failures, and applications to antitrust law. He wrote five books and numerous academic research articles.

Transaction Cost Economics

Williamson's key fundamental insight is to distinguish between arms-length, spot transactions and deeper, ongoing economic relationships. By shifting the focus from the prices and quantities of goods to the characteristics of transactions, transaction cost economics reflects on how real-world markets do not resemble the idealized, atomistic, perfect competition of traditional neoclassical price theory except in rare cases. Williamson explored how the concepts of asset specificity, uncertainty, costly and asymmetric information, and bounded rationality shape economic transactions and the organizations that carry them out.

Theory of the Firm and Applications

Williamson was best known for his contributions to the theory of the firm as a basic unit of economic organization. Following the work of Ronald Coase, Williamson explained the existence and boundaries of business firms as a means to economize on transactions costs. Transactions costs thus explain why some economic transactions occur between firms and others occur within firms, how this determines the size and organization of firms and industries, and how the existence of business firms can solve problems and resolve conflicts that would otherwise occur in markets if they really resembled the idealized conditions of the classroom blackboard model.