Date of submission : 04-04-2015.

PRACTICUM

Submitted by
SIMI OLIVER.
Social Science.

THEORIES OF
ECONOMISTS THAT
WON NOBEL PRIZE.

CONTENTS
1. Bertil Ohlin (1977).
2.Elinor Ostrom (2009).

Bertil Ohlin.

In 1933 Ohlin published a work that made him world renowned,

Interregional and International Trade. In this Ohlin built an
economic theory of international trade from earlier work by
Heckscher and his own doctoral thesis. It is now known as the
HeckscherOhlin model, one of the standard model economists use
to debate trade theory.
The model was a break-through because it showed how
comparative advantage might relate to general features of a
country's capital and labour, and how these features might change
through time. The model provided a basis for later work on the
effects of protection on real wages, and has been fruitful in
producing predictions and analysis; Ohlin himself used the model to
derive the HeckscherOhlin theorem, that nations would specialize
in industries most able to utilize their mix of national resources
efficiently. Today, the theory has been largely disproved, yet it is still
a useful framework by which to understand international trade.
The HeckscherOhlin Theorem, which is concluded from the
HeckscherOhlin model of international trade, states: trade
between countries is in proportion to their relative amounts of
capital and labor. In countries with an abundance of capital, wage
rates tend to be high; therefore, labor-intensive products, e.g.
textiles, simple electronics, etc., are more costly to produce internally.

In contrast, capital-intensive products, e.g. automobiles, chemicals,

etc., are less costly to produce internally. Countries with large
amounts of capital will export capital-intensive products and import
labor-intensive products with the proceeds. Countries with high
amounts of labor will do the reverse.
The following conditions must be true:
The major factors of production, namely labor and capital, are not
available in the same proportion in both countries.
The two goods produced either require more capital or more labor.
Labor and capital do not move between the two countries.
There are no costs associated with transporting the goods between
countries.
The citizens of the two trading countries have the same needs.
The theory does not depend on total amounts of capital or labor,
but on the amounts per worker. This allows small countries to trade
with large countries by specializing in production of products that
use the factors which are more available than its trading partner.
The key assumption is that capital and labor are not available in
the same proportions in the two countries. That leads to
specialization, which in turn benefits the countrys economic welfare.
The greater the difference between the two countries, the greater
the gain from specialization.
Wassily Leontief made a study of the theory that seemed to
invalidate it. He noted that the United States had a lot of capital;
therefore, it should export capital-intensive products and import
labor-intensive products. Instead, he found that it exported products
that used more labor than the products it imported. This finding is
known as the Leontief paradox.

Elinor Ostrom.

Elinor "Lin" Ostrom (born Elinor Claire Awan;[2] August 7, 1933

June 12, 2012) was an American political economist[3][4][5] whose
work was associated with the New Institutional Economics and the
resurgence of political economy.[6] In 2009, she shared the Nobel
Memorial Prize in Economic Sciences with Oliver E. Williamson for
"her analysis of economic governance, especially the commons".[7]
To date, she remains the only woman to win The Prize in Economics
Common property regimes or systems of management arise when
users acting independently threaten the total net benefit from
common-pool resource. In order to maintain the resource system,
such regimes coordinate their strategies to keep the resource as a
common property instead of dividing it up into bits of private
property. Common property regimes typically protect the core
resource and allocate the fringe resources through complex
community norms of consensus decision-making.[3] Common
resource management has to face the difficult task of devising rules
that limit the amount, timing, and technology used to withdraw
various resource units from the resource system. Setting the limits
too high would lead to overuse and eventually to the destruction of
the core resource while setting the limits too low would unnecessarily
reduce the benefits obtained by the users.

In common property regimes, access to the resource is not free and

common-pool resources are not public goods. While there is
relatively free but monitored access to the resource system for
community members, there are mechanisms in place which allow
the community to exclude outsiders from using its resource. Thus, in
a common property regime, a common-pool resource appears as a
private good to an outsider and as a common good to an insider of
the community. The resource units withdrawn from the system are
typically owned individually by the appropriators. A common
property good is rivaled in consumption.
Analysing the design of long-enduring CPR institutions, Elinor
Ostrom identified eight design principles which are prerequisites for
a stable CPR arrangement:[4]
Clearly defined boundaries
Congruence between appropriation and provision rules and local
conditions
Collective-choice arrangements allowing for the participation of
most of the appropriators in the decision making process
Effective monitoring by monitors who are part of or accountable to
the appropriators
Graduated sanctions for appropriators who do not respect
community rules
Conflict-resolution mechanisms which are cheap and easy of access
Minimal recognition of rights to organize (e.g., by the government)
In case of larger CPRs: Organisation in the form of multiple layers of
nested enterprises, with small, local CPRs at their bases.
Common property regimes typically function at a local level to
prevent the overexploitation of a resource system from which fringe
units can be extracted. In some cases, government regulations

combined with tradable environmental allowances (TEAs) are used

successfully to prevent excessive pollution, whereas in other cases
especially in the absence of a unique government being able to set
limits and monitor economic activities excessive use or pollution
continue.