Ostrom's work showed that "tragedy of the commons" problem can be solved by voluntary organizations, not just the heavy hand of the state.

The Nobel Prize in Economics were awarded Monday to two Americans. University of California, Berkeley economist Oliver E. Williamson and Indiana University Professor of Political Science, Elinor Ostrom. Williamson's work has centered on the theory of the firm and transaction cost economics while Ostrom's has focused on voluntary governance and the collaborative management of natural resources.

Ostrom, the first woman to win in the category, is best known for her work studying the non-governmental management of common-pool natural resources. Her seminal work, Governing the Commons (1990), is required reading for graduate students in environmental policy, environmental economics and natural resource management in universities around the world.

Ostrom's work showed that the best solution to managing the problem known as the "tragedy of the commons" — the economically deterministic "rule" of resource management that says economically rational individuals will abuse a common-pool natural resource because they have no direct economic incentive to play by the rules — may be voluntary place-based institutions, rather than the top down institutions of the state.

Ostrom, a self-described political economist, has said she hopes her work can help inform policy on climate change. Watch as Prof. Ostrom explains the "tragedy of the commons" and the voluntary institutions that can alleviate the problem (hat tip: Environmental Economics)

Image via Mr Wabu