She’s the first woman to win the prize and (much more controversial for some) a political scientist. The best way to understand the impact of Ostrom’s work is to look at what it displaced. In 1968, Garrett Hardin wrote a highly influential article in Science called “The Tragedy of the Commons”.

Hardin started with the story of how the medieval commons in England had collapsed under the pressure of overgrazing, and used this as a metaphor for modern environmental problems. The solution he argued was “enclosure”, that is, the conversion of the commons into private property. Hardin’s work was influenced by, and encouraged the further development of, the “property rights” school of economic thought, which saw the expansion of private property rights as the central engine of economic progress.

Hardin took his analysis to its logical conclusion in his Lifeboat Ethics: the Case Against Helping the Poor, which suggested that having seized enough property rights to support themselves, the rich should (metaphorically) throw the poor overboard.

Decades of careful empirical work on actual common property institutions, in which Ostrom has played the leading role has shown that Hardin’s description of the commons was totally inaccurate, and that the policy prescriptions he derived were likely to be counterproductive. That said, Ostrom is not romantic about common property institutions, and observes that they need not be egalitarian and may be rendered ineffective by changing circumstances.

The message from Williamson and Ostrom that a mixed economy can involve not just private and public ownership but a range of other possible institutional structures, interacting through markets, contracts, regulations and direct collective management. Ostrom shows how the historical example common property in resource management may be applied modern problems involving externalities, local public goods and pollution.

There’s a lot more coverage around the traps; notably in the New York Times, Scientific American and org.theory.net.

Update: Paul Romer:

Cheers to the Nobel committee for recognizing work on one of the deepest issues in economics. Bravo to the political scientist who showed that she was a better economist than the economic imperialists who can’t tell the difference between assuming and understanding.

“An Indian born economist once explained his personal theory of reincarnation to his graduate economics class,” Paul Krugman writes in the opening paragraph of his Preface to Peddling Prosperity. “‘If you are a good economist, a virtuous economist,’ he said, ‘you are reborn as a physicist. But if you are an evil, wicked economist, you are reborn as a sociologist.’” Krugman then continues, “A sociologist might say that this quote shows what is wrong with economists: they want a subject that is fundamentally about human beings to have the mathematical certainty of the hard sciences . . . . But good economists know that the speaker was talking about something else entirely: the sheer difficulty of the subject. Economics is harder than physics; luckily it is not quite as hard as sociology.” (1994:xi)

Elsewhere: Tyler Cowen has an exhaustive post on Krugman with links galore … followed by a hilarious comments thread [ht: CT]

Joshua Gans has some personal reflections, and Peter Martin comments