The Nobel Memorial Prize in Economic Sciences was given to its laureates over 80 times, with Ostrom and Duflo as the only female awardees.Growing up, American political economist Elinor Ostrom was challenged by the walls of gender stereotypes; nonetheless, being a woman did not stop her from setting a new milestone in economics. She was recognized for her scholarly work that addressed the economic dilemma, “tragedy of the commons.” Her analysis on economic governance led her not to win an award, but also to reveal methods on how community members can manage and share their common resources.

Women Making History in Economics: Elinor Ostrom

Economics

Elinor Ostrom’s work on Governing The Commons: An Appreciation

<ol><li>Accountability - The government and private actors are accountable under the law</li><li>Just Law - The law is clear, publicized, and stable and is applied evenly</li><li>Open Government - The processes by which the law is adopted, administered, adjudicated, and enforced are accessible, fair, and efficient</li><li>Accessible and Impartial Justice - Justice is delivered timely by competent, ethical, and independent representatives and neutrals</li></ol>The four universal principles constitute a working definition of the rule of law. These were developed in accordance to internationally accepted standards and norms.

The Four Universal Principles

Self Improvement

The four universal principles were further developed in the below factors:<ol><li>Constraints on Government Powers</li><li>Absence of Corruption</li><li>Open Government</li><li>Fundamental Rights</li><li>Order and Security</li><li>Regulatory Enforcement</li><li>Civil Justice; and</li><li>Criminal Justice</li></ol>

World Justice Project Rule of Law Index

The rule of law affects us all regardless of where we are or where we live. It is the foundation for communities of justice, opportunity, and peace -- underpinning development, acountable governments, and respect for fundamental rights.The rule of law correlates to higher economic growth, greater peace, less inequality, improved health outcomes, and better education.

How the Rule of Law Matters

The four universal principles of the rule of law, how we measure it, and what it means for you.

What is the Rule of Law?

It is a universally pervasive phenomenon where we misrepresent publicly what we really think or believe or want privately due to fearing the possible consequences or to a benefit we may receive.
It can happen in settings like in the government, the academe, and even just between a group of friends.

Preference Falsification

<ul>
<li>It brings upon discomfort to the falsifier -- which makes them feel like they are living a lie temporarily, sometimes chronically.</li>
<li>It also has a stabilizing and constraining effect where it serves to filter out inclinations that people consider illicit and would rather not have.</li>
</ul>

The distinguishing characteristic of preference falsification

Many studies were done to correlate conformity and social pressure with preference falsification and it turns out that:
People adapt to conform to the beliefs of other people because they lack the reliable information needed, and in the absence of trustworthy information, the only sensible reaction is to conform.

Conformity and social pressure on preference falsification

Fearing the social disapproval of others, some people will not always say what they think or believe.

What Is Preference Falsification?

A bureaucracy is an organization that has a complex structure of multilayered systems and processes in order to maintain uniformity and control within the organization. 
Conversely, how the bureaucracy runs, inevitably causes the decision-making process to be slow. The bureaucracy stems from the effort to govern and watch over these organizations through systems that are formal and rigid. They place high regard on procedural correctness and hierarchical procedures.

Bureaucracy

Money & Investments

Bureaucracy is not the same as governance or administration. Although they may seem synonymous, bureaucracy and administrations have different objectives.
<ul>
<li>Administration - they usually direct organizational resources towards a specific and objective goal like generating profits or handing out services;</li>
<li>Bureaucracy - they ensure procedural correctness at all times irrespective of the circumstances and goals.</li>
</ul>

Bureaucracy vs Administration

<ul>
<li>Bureaucratic methods are outdated and have a backward-looking perspective, which is causing conflict with entrepreneurs and innovators who prefer forward-looking methods</li>
<li>Having a hierarchical decision-making process slows down efficiency</li>
<li>They have a rigid system that encloses the practice of protectionism such as being unable to fire someone with low performances due to the arduous termination process</li>
</ul>

Criticisms Towards Bureaucracy

Money

Bureaucracy Definition

Political science professor Elinor Ostrom showed that common-pool resources, such as water supplies or fish, can be effectively managed collectively without government or private control.
But this is only possible if those using the resource are physically close to it and have a relationship with each other. They will self-police to ensure community rules are followed.

Management of Common Pool Resources

The economic theory of expected utility maximization says that people will act out of rational self-interest. But psychologist Daniel Kahneman showed that it is incorrect.
<ul>
<li>Common cognitive biases cause people to use faulty reasoning to make irrational decisions, such as the anchoring effect, the planning fallacy, and the illusion of control.</li>
<li>People make decisions by using irrational guidelines such as perceived fairness and loss aversion, which are based on feelings, attitudes, and memories.</li>
<li>People tend to use general rules, such as representativeness, to make judgments in contradiction to the laws of probability.</li>
</ul>

Behavioural Economics

<ul>
<li>In 2001, George A. Akerlof, A. Michael Spence, and Joseph E. Stiglitz won the prize &quot;for their analyses of markets with asymmetric information.&quot; </li>
<li>Economic models predicated on perfect information are often misguided. In reality, one party usually has superior knowledge, such as in the car market, where sellers know more than buyers about the quality of their vehicles and can lead to a market of lemons (adverse selection.)</li>
<li>Better-informed market participants can transmit information to lesser-informed participants. Job applicants can use educational attainment as a signal to prospective employers about their likely productivity; corporations can signal their profitability to investors by issuing dividends.</li>
</ul>

Asymmetric Information

<ul>
<li>In 1994 Nash, Selten and Harsanyi became Economics Nobel Laureates for their contributions to economic game theory. </li>
<li>Non-cooperative games are those where participants make non-binding agreements. They base their decisions on how they think the other participants will behave, without knowing how they really will behave.</li>
<li>The Nash Equilibrium is a method for predicting the outcome of non-cooperative games based on equilibrium. These findings have been applied to dynamic strategic interactions, and to scenarios with incomplete information to help develop the field of information economics.</li>
</ul>

Game Theory

<ul>
<li>James M. Buchanan&#39;s work within Public Choice earned him the Nobel Prize in Economic Science in 1986.</li>
<li>This theory shows that contrary to the conventional wisdom that public-sector actors act in the public&#39;s best interests, politicians and bureaucrats tend to act in self-interest, just like private-sector actors.</li>
<li>Using these insights, we can better understand the incentives that motivate political actors and better predict the results of political decision-making, then design fixed rules that will lead to better outcomes.</li>
</ul>

The Public Choice Theory

This is a key concept in modern financial theory used for valuing European options and employee stock options.
Investors can use an online options calculator to get results by adding an option&#39;s strike price, the underlying stock&#39;s price, the option&#39;s time to expiration, its volatility, and the market&#39;s risk-free interest rate. Robert Merton and Myron Scholes won the 1997 Nobel Prize in economics for the Black-Scholes theorem.

womenineconomics

Women Making History in Economics: Elinor Ostrom

Elinor Ostrom’s work on Governing The Commons: An Appreciation

The Four Universal Principles

What is the Rule of Law?