by Peter G. Klein

I was Oliver Williamson’s best PhD student. I know this because, after I graduated from UC-Berkeley in 1995, he never chaired another dissertation committee in economics. (He continued to advise PhD students in the Haas School’s Business and Public Policy program.) I take this to mean that, after working with me, he didn’t want to taint the memory of that perfect experience. Well, that’s my story and I’m sticking to it.

Williamson’s pathbreaking analysis of alternative organizational forms — markets, hierarchies, and hybrids — and how they emerge, perform, and adapt has defined the modern field of organizational economics. As Jacques Crémer put it, Williamson’s 1975 book Markets and Hierarchies is “at the same time a survey and a users’ manual for incentives theory, written before the theory was even developed.” Transaction costs are now central to the analysis of firms, contracts, and organizations. Williamson’s contributions to industrial organization, antitrust analysis, and the theory of the firm were recognized by the Nobel committee in 2009; his influence today may be even greater in strategic management, organization theory, international business, entrepreneurship, public administration, and law. His insight, originality, and ability to synthesize a staggeringly broad range of ideas and arguments puts him in the first rank of interdisciplinary social scientists along with his own intellectual heroes Arrow, Chandler, Coase, and Simon (to whom he dedicated his 1985 book The Economic Institutions of Capitalism).

I first encountered Olly as a new PhD student. Like most first-year graduate students in economics, I was a bit overwhelmed by my courses, which emphasized mathematical and statistical technique over — well, over everything. I was beginning to lose sight of what had gotten me interested in economics in the first place, namely the amazing and powerful ability of economic reasoning to shed light on how the world works. I wanted to know — to use a favorite Williamsonian phrase — “What’s going on here?” At a brown-bag lunch, Olly shared his syllabus for Econ 224, “The Economics of Institutions.” I was blown away. There was Hayek, Commons, Simon, Arrow, Alchian, Demsetz, Coase, Chandler, Hirschman, Jensen, Meckling, Holström, Fama, Stigler, Peltzman, and many more. I took the course in my second year, was hooked, and never looked back.

Olly was a great mentor, helpful and encouraging, but not a hand-holder. He provided basic guidance and expected students to work out the details by themselves. I remember my first academic presentation, a paper delivered at IDS 270, Olly’s Institutional Analysis Workshop. I was still a student and more than a little nervous. The first question, just a few minutes into the presentation, raised a fundamental objection, the kind that makes you wonder if the entire project is misguided. It was from Olly! There would be no softballs that day.

Unlike many PhD advisers, Olly didn’t hand out dissertation topics. He planted seeds and encouraged students to go where they would. Knowing my interest in Mises and Hayek, he once suggested I write a dissertation on the Ordo School, the influence of Hayek on Eucken and Röpke, and the role of ideas in shaping economic policy. He cautioned me that writing on such a topic would not be an advantage on the job market, but urged me to follow my passions, not to follow the crowd. I ended up writing on more prosaic topics (1, 2, 3) but never forgot that advice, and have passed it along to my own students.

Olly had a penetrating mind but even he had limits. He was once asked to write an essay on John R. Commons and invited me to coauthor. Olly credited Commons with the idea of making the transaction the unit of analysis and referred often to the “Commons triple” of conflict, mutuality, and order. However, after immersing ourselves in Commons’s wider oeuvre, we quickly agreed that Commons’s thought and writings were largely incomprehensible, and project was dropped. (As Olly’s other students can attest, he had little patience for constructs he considered mushy and overly elastic, including “power” and “trust.”)

Throughout my career Olly was a trusted advisor, an honest critic, and a friend. It was a privilege to know him and to carry forward his legacy, albeit imperfectly. He will be greatly missed.

May 24, 2020