In 2008, after a competitive bidding process, UC Berkeley, LBNL and University of Illinois-Urbana-Champaign started a ten-year research partnership with BP called the Energy Biosciences Institute (EBI). The goal in creating the EBI was to establish a research program where modern tools of biology are applied to generate new and improved fuels. I contributed to the proposal and am currently serving on the Executive Board of the EBI. I believe that this initiative is important for the world, the nation and our university.

Organisms like plants and algae can provide an alternative source of fuel, which is desperately needed due to climate change and the exhaustibility of fossil fuels. So, when I heard about the competitive bidding process started by BP about four years ago, my first response was, “it’s about time.” For me, it was an indication that major oil companies finally realized that they needed to begin looking for renewable fuel alternatives.

At the time I was doing research on the first generation of biofuel: the production of ethanol from sugarcane and corn. My research suggested that diversion of food crops to biofuel is likely to increase food prices. I was also aware that corn ethanol led, at best, to a modest reduction of greenhouse gases emissions compared to oil. However, research on biofuel was in its infancy, and with a strong track record of crop science to increase crop yields and the evolution of new tools of modern biology, I was convinced that if we made a concerted effort to develop efficient and environmentally friendly biofuels, we had a good chance of succeeding.

As an economist, I maintain that the best policy to address greenhouse gases and energy scarcity is to raise the price of fuel by introducing fuel taxes. The revenue generated by these fuel taxes would allow a reduction in either sales or income taxes, and higher fuel prices would lead to conservation and innovation. Another good policy is introducing product and zoning standards that can lead to energy conservation and are actually cost-effective.

But there is a limit to what conservation can do; even many ardent environmentalists drive cars. Furthermore, there are billions of people in the developing world who will increase their fuel use, so we will need new sources of fuel. The growing global demand for fuels will be met one way or another and some of the sources, including oil from tar sands and drilling from deep in the ocean, are not very pretty. When we consider new sources of energy, biofuels are among the most technically feasible, least expensive and renewable. This inherent renewable quality is what makes biofuel such an attractive alternative to fossil fuels. As such, I thought it was great that a major energy company decided to invest in biofuel. Energy companies have the resources, supply chains and knowledge required to commercialize biofuels. What they lack is a basic knowledge in biosciences, which is why they chose to work with and learn from universities that have top programs in the field.

In spite of our current economic problems, America is a huge success; one of the secrets to it is the “educational industrial complex.” Namely, we have many of the best universities that build human capital that allows industries to address new challenges. Moreover, university research provides the foundation to many cutting edge industrial initiatives nationwide. It also results in new concepts that are mostly proven in the lab, but require a large amount of money in development, regulatory research and commercialization to translate these innovations into the creation of new products.

Frequently, companies get the rights to university patents and invest in their development and commercialization, and university professors develop some start-ups*. Google, Yahoo, Hewlett Packard and Intel among others benefited from transfer of human capital and technologies from universities. Two university professors, Herb Boyer and Stan Cohen, invented the technique for recombinant DNA, a key building block of the medical biotechnology industry. Herb Boyer was a co-founder of the biotechnology giant Genentech of South San Francisco. Amgen, of Thousands Oaks is another biotechnology giant co-founded by a university professor. Every summer I organize a program called the Environmental Leadership Program where people mostly from developing countries come to California for a three-week period of learning and exchange on sustainability and development issues. What they want to learn most about is the innovative genius of California, Silicon Valley and modern life science, recognizing that universities are spawning much of the new industries and are the engines of growth.

In the past we neglected investing in alternative energy. Even now, government support for research in alternative energy is insufficient. Both public and private money is needed to catch up and enable universities to start the process of the co-evolution of university research capabilities and industrial capacity that would lead to a clean and affordable renewable energy.

Some people worry that when private companies give universities money, the company will take advantage of the intellectual property. In many cases, technology is a buyer’s market and one of the problems with much of university research is that a lot of great ideas are not commercialized, and having an interested party involved in the process is likely to increase commercialization. Furthermore, the outcomes of research of university projects like the EBI are uncertain. There is a high likelihood that some of the most important innovations would not be utilized by BP but would actually be of use to anther company. Finally, universities develop procedures to protect their own and their professors’ interests, and there is ongoing research that scrutinize the process of technology transfer and hopefully lead to their improvement.

I am really excited that the EBI has been established in Berkeley. Academia is competitive and to be successful you need resources. Berkeley is a public university, and though the state does a fabulous job providing us resources, that can only get us so far. The donations and contracts we receive from federal agencies and private companies, such as the support we received to manage the national labs, are crucial in making Berkeley a world-class university. They allow us to upgrade our infrastructure and recruit the best professors and top-notch students. Especially given the recent financial crisis and the resulting decline in state support, we have a choice between being “pure” and slowly becoming mediocre, or engaging in partnerships that will allow us to maintain excellence and to contribute to solving major global problems.

Some people ask me how I feel about the EBI in light of the recent BP Deepwater Horizon rig accident. Obviously this was a major disaster and even though I don’t have first-hand knowledge, I’m sure that BP made a lot of mistakes. However, BP does not own Berkeley, they are only partners, and we are not responsible for our partners. We collaborate with many organizations that get into trouble. We are not responsible for mistakes made by the USDA, mismanagement by the Federal Reserve, monopolistic practices of Intel and Microsoft, etc. Actually in the case of the disaster in the Gulf of Mexico, Berkeley faculty provided knowledge that helped BP and the government to analyze the situation that will improve the final outcome.

Another stated concern is that BP will control the research agenda of the Berkeley faculty. The range of issues that are included within the EBI is well-defined. My experiences on campus have taught me that a key criteria in getting tenure and being promoted as a Berkeley professor is research excellence and publication in top journals. How much money you bring and from where it is derived is much less important than the quality of your research. Professors will engage with the EBI as long as its agenda is consistent with their own research agenda. The EBI expanded the resource base in Berkeley and provided new opportunities, but overall it is a small part of a large portfolio.

Thus far, I have enjoyed my experience with the EBI. The EBI is hardly three years old, yet its research has provided new knowledge for more efficient and sustainable management of a perennial grass – Miscanthus – that is likely to be a very productive feedstock for cellulosic ethanol. EBI researchers have also identified a new class of fungal enzymes that increases the efficiency of converting cellulosic material into fuels. The EBI has allowed me to pursue my research that analyzed the impacts of biofuels on food prices, land use and greenhouse gas emissions; suggested that the best solution to our energy problem is taxing fuels (which would not serve the interest of BP); and raised concerns about various forms of biofuel farming in developing countries. The point is that BP has not controlled and is not likely to control our research agenda and findings because they didn’t come to the university knowing the answers and looking for refinements. They came because they expect the university to conduct studies and generate knowledge that will lead to new opportunities.

Recent developments like the accident in the Gulf of Mexico, the crumbling of the global negotiation on climate change in Copenhagen, and the failure of U.S. Congress to enact a meaningful climate policy, all emphasize the importance of initiatives that aim to produce efficient and green alternative energy solutions. We need more initiatives like the EBI to provide a knowledge foundation that will trigger a change in our energy and climate situation.

*If you would like more details on technology transfer from universities to the private sector, please see:

Graff, Gregory, Amir Heiman, and David Zilberman. “University Research and Offices of Technology Transfer,” California Management Review, Vol. 45, No. 1 (Fall, 2002), pp. 88-115

Graff, Gregory D., Susan E. Cullen, Kent J. Bradford, David Zilberman, and Alan B. Bennett. “The Public-Private Structure of Intellectual Property Ownership in Agricultural Biotechnology,” Nature Biotechnology, Vol. 21, No. 9 (September, 2003), pp. 989-995

During 2009 I was a member of a National Resource Council (NRC) committee assessing the impact of genetically engineered (GE) crops in US agriculture. When I joined the committee I thought that the main finding will be those of economists, like myself, who realize that GE crops did a lot of good by increasing yields and reducing costs. The two main types of GE crops that have been adopted widely are pest resistant varieties that control insects and herbicide resistant varieties that allow the use of herbicides like RoundUp to control weeds. GE varieties have been adopted to a large extent in corn, soybean and cotton in the US, Canada, Brazil, Argentina and to some extent in India and China and they haven’t been adopted in wheat and rice and the European Union has practically banned the use of GE varieties. As expected, we found that the use of GE varieties reduce the cost of pest control, losses from pests, and enhanced flexibility in farm management. We also found that use of GE varieties increased workers’ safety. Many economic studies also documented that adoption of GE varieties has a significant impact on yield, especially in developing countries where they solved pest problems that couldn’t have been solved otherwise and this increase in yield led to significant reduction in commodity prices. In other words, consumers especially poor ones benefitted from GE crops because food products become cheaper. An important example is expansion of soybean production in Argentina, frequently as part of a double cropping system, which was feasible because of the adoption of herbicide tolerant varieties. This increase in production enabled meeting the increased demand for meats in Asia associated with their economic growth mitigating increases in prices or expansion of agricultural land that would have occurred otherwise. Another example is cotton – a crop where adoption of GE varieties was widespread globally (US, China, India, South Africa, Mexico, Brazil, and many more). The yield effect in developing countries was spectacular. Actually acreage in many countries declined and during the food crisis of 2008 and 2009 this was the only agricultural commodity whose price was low by historical standards. Moreover, the economic gains from GE varieties were shared between the seed companies, farmers, and consumers (it varies by crops and countries).
To my surprise the main results of the report were not the economic ones, but rather the environmental ones. In addition to the obvious benefits of control of agricultural expansion because of higher yields, the report suggests that adoption of GE has fewer adverse effects on soil, water, and biodiversity than the non-GE varieties. That adoption of herbicide resistant varieties enhance the adoption of conservation tillage practices that improved the soil retention and quality and probably improved surface water quality. Adoption in insect resistant crops led to replacement of broad spectrum insecticides and their impacts on health and may lead to favorable impacts on beneficial insects. There is very little evidence of gene flow problems. Obviously there are concerns over the emergence of resistance, mismanagement of GE crops, but this is part of the challenge of further improvement in practices and regulations that face agriculture.
The report suggests that both on economic and environmental grounds, GE varieties provide significant benefits and that these applications of modern knowledge in molecular and cell biology should expand to other crops. My own research suggests that if some of the barriers for the adoption of GE crops in European countries as well as some African countries would be removed, the increase in supply would enable us to counter some of the significant food commodity price rises that occurred in 2007 and 2008. Furthermore, the report and my own research documented that there are many other beneficial traits in different stages of development such as improved nutritional quality, drought tolerance, and increased shelf life. New traits can improve the digestibility of soybean to reduce the GHG emissions of animal production (less land and less farts). However, the European banning of GE varieties in 1999 and excessive regulation seems to slow the development of new traits and especially their commercialization. Thus, GE varieties have significant unrealized potential.
GE crops are applications of some of the basic tools of modern molecular and cell biology to agriculture. They take advantage of our better understanding of the DNA and the inner workings of the cell. These technologies became the major tools in medicine, but in agriculture they got a bad name – “Frankenfood”. A lot of the traditional techniques in crop breeding were much slower and much more crude. People replace one variety with another without understanding all of the consequences, whereas with GE varieties we replace one gene at a time. The demonization of GE crops is tragic because of their potential and the challenges that face humanity. Population growth and increased incomes are likely to increase the demand for food. Energy shortages may lead to increased demand for fuel produced from crops (modern biofuels as well as good ol’ wood). Adaptation to climate change will require the capacity to quickly and accurately modify crop systems. Agricultural biotechnology provides an incredible arsenal of tools to address these challenges with much less deforestation and scarcities than otherwise. Of course, biotechnology is not the only solution. It can complement organic farming that relies much less on pesticides. It can provide new tools that enable multiple cropping. It can be part of systems that enhance precision in farming that utilize less input, minimize pollution and result in more productivity.

In the beginning of May 2010, the MacArthur Foundation announced that UC Berkeley will receive a grant to establish a Master’s in Development Practice (MDP), or as it was referred to, a Master’s in Sustainability Studies. This grant is both a wish come true and the beginning of a new challenge.

I appreciate development. I grew up in Israel when it was a “developing country.” My father was chopping wood once a week so we could take a warm shower. We got our first radio when I was 10, but by the time I was 22 I was working in a very sophisticated computer company. During this period the country made a quantum leap and to me it was associated with the emergence of new generations of competent managers and experts, mostly locally trained by teachers who studied abroad (that’s where I first learned about Berkeley). I moved to Berkeley to do my Ph.D. in agricultural economics and I was assigned to a project on dairy waste. Studying cow manure wasn’t my dream when I applied to Berkeley, but actually it was my golden opportunity. I didn’t know it at the time, but research in animal waste is really “multi-disciplinary.” You need to know about cows and milk production, you need to understand waste generation and disposal, as well as water and hydrology, and you need to know the economics of agriculture and the complexity of environmental policy. I was able to write some papers that landed me a job at UC Berkeley and unintentionally I became an expert on economics, the environment, and agriculture.

Being a Ph.D. student Berkeley taught me much more than the intricacies of cow waste. In most people’s mind (including mine, since my official introduction to Berkeley was through The Graduate) Berkeley is about protests and hippies. But, what I realized was that beyond the protests and fun we had a university that emphasized rigor and diversity. Our professors were tough and uncompromising in their desire to be the best. But, most of my learning was from other students from all over the world. When I compared my experience with people who were educated elsewhere, I felt fortunate. I also felt that the world would be a better place if more people will be exposed to intellectual chaos and creativity that we have here. When I was appointed to run my college’s (CNR) Center for Sustainable Resource Development one of my priorities was to establish a training for environmental leaders to provide many with the flavor of Berkeley and to establish a network of virtual alumni. I was fortunate that one day an incredible benefactor, Dick Beahrs, provided us with the initial contribution to establish a summer program, the Environmental Leadership Program (ELP) that I have been co-directing with Robin Marsh for the past 10 years.

The program has already more than 300 alumni from all over and it continues to grow and evolve. The participants were much more fantastic than I could have dreamed and we really learned a lot about what we can contribute. Future leaders need management skills that incorporate basic science with the practical reality of development, society, and the economy, which will lead to effective action. They appreciate being connected and being able to interact with collaborators all over the world. We are now living in a world where globalization is a personal experience and we depend upon mechanisms that connects the dots. As the program grew we realized its limitation. What was really needed is scaling up – a real professional master’s program that will combine the management training of an MBA with emphasis on environmental and development issues and will mix learning in the classroom and training in the field. During the last 10 years Berkeley established many other centers and activities that were geared towards solving problems of development and the environment.* When the MacArthur Foundation put a request for proposal for universities to develop a Master’s in Development Practice, we were ready to go.

Our proposal is for a campus-wide program centered in CNR. We will have about 50 students that will take two years of classes and two stints of about four months of internship in the field (or international organization). The classes will include training in environmental and development economics, decision theory, project management, basics in science and public health and will emphasize a lot of interaction between the students with a wide network of experts and activists that frequent Berkeley. The Berkeley program will be part of an emerging network of at least 20 universities that will have similar programs of Master’s in Development Practice all over the world and I expect that our program will be central in setting much of the direction of this emerging field. The world needs competent well-trained leaders that are driven by ambition and desire to solve environmental and complex societal problems globally, while at the same time are pragmatic and rigorous. The MDP will strive to help such leaders to emerge and grow. The diversity, excellence, and passion of Berkeley make it uniquely situated to house this effort.

* For example, the Berkeley Institute for the Environment, the Energy Biosciences Institute, Center of Evaluation for Global Action, the Claussen Center for International Business and Policy, the Blum Center for Developing Economies, and the program on Global Health and the Environment to name a few.

David Edward Buschena (1964-2010)

Recently I lost a dear friend, collaborator, and one of our most beloved alumni as Dave Buschena past away after a valiant struggle with cancer. I first heard about Dave when his professor at University of Minnesota and our alumni, Claudia Parliament, called me to recommend him for our graduate program. She described Dave as “super bright, hard working, and a really nice guy that really cares about agriculture and the world.” This was an apt description. Dave took my first year class and even though he lacked in mathematical training, he caught on really fast and was one of the best students. I was teaching risk at the time and he would always approach me after class to ask me questions about risk management and what the theory implies for trading and farming. Many times I didn’t understand his questions and in most cases I couldn’t answer what he asked. It was clear to me that I was teaching risk, but he was managing risk. And indeed he was a practitioner of risk management, and he was a wonderful advisor to people who were interested in agricultural risk management.

Dave has had incredible intellectual curiosity and he was interested in many topics, including industrial organization of agriculture, consumer preferences for food and what affects it, and international trade and international relationships. His dissertation was on the economics of risk management. Dave realized the limitations of traditional expected utility theory that was being used to manage risk and was fascinated by new behavioral theories that modified it. He got the insight that people make different choices when alternatives are similar or dissimilar, they use more rigorous rules between choices that are different, while using almost random choices when things are similar. His dissertation was set to test this theory. While he came with this idea, it started appearing in the literature so his main contribution was to show that the similarity approach really worked empirically. In order to do it, he became an expert on experimental design working with Barbara Mellers in the psychology department to develop an “industrial strength” experiment to test his hypothesis, and indeed the data proved him right, and he went on to publish several influential papers. His work on risk was so good that one of the papers that we submitted to Journal of Risk and Uncertainty was accepted “as is,” the only time that it ever happened to me. Dave was one of the key people to introduce modern behavioral and psychological risk analysis to agricultural economics and at the same time was crucial in developing practical and simple rules for risk management. `

Dave was a wonderful friend. He loved nature, sports, and people. I really enjoyed many trips with him, and working with him was always fun. I enjoyed learning from him about life in the West and got a new perspective on hunting and adventure. I took my sons to Montana to visit him and his wife, Maire, and they really enjoyed it. Dave was the best guide for Yellowstone that you could ask for. The kids really appreciated it when he introduced them to guns and target practice. For years they bugged me to take them back to Dave and emphasized that the time and location would be modified to have less Yellowstone and more guns.

Dave’s expertise with guns came in handy. One of the strange visitors in our department was always complaining that Irma Adelman stole his big idea by developing the CGE models that made her famous. (He was wrong.) One day this fellow came to the office with a wooden box and to all of us it looked like an exotic lunch box. Dave realized that it was a box for a weapon. We notified the police, and indeed the guy had a loaded gun.

Dave and Maire visited us in Berkeley just a couple of months back and Dave looked good. Leorah and I had a glimmer of hope that this brave man would overcome this terrible affliction, but it didn’t happen. I feel fortunate to have known him and to have collaborated with him. He made the world a better place and had a huge and lasting impact on the many people he touched. He made a lasting contribution to agricultural economics, and we will always treasure his memory.

As the world is preparing for a big environmental summit in Copenhagen, knowing that an agreement is very unlikely, it’s become apparent how difficult it is to reach an environmental agreement that can stick and change the course of history. People that can bring about such agreement are really rare, and last week we lost one of them, Tom Graff.

Tom was an environmental lawyer who opened the west coast office of the Environmental Defense.

Water is the most precious resource of the west. The west was built by the diversion of water from wild lands to mine gold, build cities, and irrigate farmland. Some were cheering these activities that “make the desert bloom,” but in the meantime many regions, like Owens Valley, were ravaged. The legal establishment provided tools, like the prior appropriation doctrine, that enabled these diversions. This legal doctrine allowed diversions as long as the water provides “beneficial use,” was based on the principles of “first in time, first in right,” and “use it or lose it,” and restricted trading in water.

One strategy that has been pursued by many environmental groups to stop water diversion was a continuous protest and fight against any new project and any proposed reform. Sometimes it worked, but as demand for development increased, more water was diverted.  Tom was quite good as a protestor and fighter. I witnessed it once in a conference in Oregon when he told Al Gore the inconvenient truth that the Clinton Administration, at least in 1995, was more talk than action when it came to environmental waters in the west. But, Tom’s strategy had another dimension: he supported efforts to encourage more efficient uses of water that were diverted away from agriculture. This increased efficiency of water use would reduce the demand for new diversion and actually would provide opportunities to return water from cities and industry to the environment.

Tom realized that market forces could be crucial to pursue a strategy of enhancing water use efficiency and transferring water for environmental services. He realized that markets could work for everybody, including the environment. So, he made EDF. He was an initiator and broker in water trading between various agencies, for example between Imperial Water District that had large excesses of water and Metropolitan Water District, that had an insatiable appetite for water. His major accomplishment was in 1991 when water contracts between the federal government, the Central Valley Project, and farmers in California were supposed to be renewed. Tom was a behind the scenes architect of an agreement that resulted in the Central Valley Project Improvement Act that recognized the diversion of water for environmental purposes to be a “beneficial use,” diverted 10% of the Central Valley Project water to such environmental activities and allowed farmers to sell some of the water to the cities as well as to environmental entities. I provided some of the calculations that helped Tom in this endeavor. The key point that he realized was that if farmers are allowed to sell some of the water rights they will adopt modern irrigation technologies, so that their output wouldn’t decline, make some extra money from selling the water to pay for the conservation, and at the same time, the availability of water will quench the thirst of the cities. This Act stabilized the water situation over the last 15 years and provided a blueprint for future agreements, where market forces and creative trade can be used to increase the efficiency of existing water resources and reduce the need for diversion.

I learned a lot from speaking with Tom and I enjoyed his humor and his warmth. In 1990, I was involved in a debate regarding a proposition called “Big Green” that aimed to eliminate pesticide use from California agriculture. While I am in favor of regulation of pesticide to attain safety and economic prosperity, banning pesticides seems to me an extreme act that would lead to nowhere and likely increase the price of food and harm the poor.  I made some statement along these lines and boy, was I attacked! Tom invited me to lunch one day and he said first, don’t be afraid, say what you think and secondly, we have to use much less pesticide, but sometimes we don’t have a better alternative. He also told me that that while sometimes he gets mad at California farmers and their production practices, he would never forget that these are the people that prepare our food.

California water problems and for sure pesticide issues pale in their complexity and significance to climate change. But, we can address Kyoto if we will have more Tom Graffs. Leaders that can recognize that the other party also holds a reasonable point of view and that will know that in order to gain something, you have to give up something in exchange. Tom will be missed.

The $40,000 investment in the Warriors paid off!

After 7 years tonight I was SEASON TICKET HOLDER OF THE GAME. The Warriors lost (nothing new) so I was robbed from getting a signed ball. Yet there where significant material gains – a stringy but elegant exclusive back pack, a unique white t-shirt (they knew that I collect them), a foldable loud-speaker (With the appropriate CD you can bring the Arena’s sound to your bed room) and 4 volumes of the Warriors Year book – more elegant and with better pictures than most journals – and article that are easy to comprehend.

The highlight of the evening was the live appearance in front of 15000 excited fans (that is the official count – half the seats were empty but who counts). The award and the attempted dances that follow were invigorating- I had a mini Monta (the local Jordan) moment without flying. It was filmed and coming to my facebook page soon.

But the best part was the reviews. I got instant face recognition- 23% of the patrons of the bathroom acknowledged my celebrity. Comments ranged from “ I saw you on TV” to “Great Moves (I never thought I will hear this- but if you live enough everything is possible)

It was great – but I would rather meet Pele.

Biofuel policy must evaluate environmental, food security and energy goals to maximize net benefits

Model estimates food-versus-biofuel trade-off

http://www.agbioforum.org/v12n1/v12n1a12-zilberman.htm

I got a kick out of learning that Eleanor Ostrom and Berkeley’s Oliver Williamson won the Nobel in Economics. I had a similar response when the Psychologist, Dan Kahneman, won the prize. These are important steps in the expansion of economics and establishing an integrated social science based on rigorous logical thinking and empiricism.  This integrated new social science will provide insight on how people think and interact and how to improve the human condition.

It is useful to contrast the evolution of economics and biology. Research in the biological sciences first identifies and documents various organisms and only later develops a general theory, Darwinian evolution theory, that explains how species interact and evolve. In economics, Adam Smith developed a theory first. For years, economists considered only two institutions: the firm and the government. But, we know that not all firms are alike and that there are many other organizations that are neither government nor firms. Political scientists and sociologists are very good in identifying different types of organizations and Williamson and Ostrom marry the organizational complexity with basic behavioral principles that are emphasized in economics.

Williamson’s work is based on the realization that different firms have different types of physiology (structure) and transactions occur in many ways outside of the market. These organizational structures are reflective of diverse product characteristics, market situations, technologies, and consumer preference, etc. His work suggests that economic research shouldn’t strive only to explain choices of prices, quantity, and product quality, but more than that. It should aim to explain institutional design and evolution of different types of organizations.  Furthermore, good policymaking and effective legal structures require balancing the desire for simplicity with capacity to address the multitude of considerations that lead to the diverse institutional outcomes that we see in everyday life.

Ostrom’s work made the notion of governance operational. It doesn’t only apply to states, but also to communities, which are creative in their design of institutions to manage and sustainably utilize community assets. So, traditional organizations that have been sustained over time, managing water resources or forests, are not arbitrary, but reflect social optimization that has to be comprehended and any institutional reform has to be based on the understanding of why things are the way they are in the first place. Ostrom’s research suggests that reforms based on good intentions, but with ignorance of institutional setup may push things backwards. Policy makers need to understand not only natural forces, but also social processes in order to make changes that would be for the better.

Many of Williamson’s insights came from his understanding and appreciation of legal institutions. Ostrom is first and foremost a political scientist. But they established a two-way road, exporting economics to legal studies and political science. Coming back to Kahneman, his work started bridging economics and psychology, explaining some behavioral patterns that perplexed economists by developing behavioral rules that are more appropriate to bumbling human beings than to the uber-rational economic man and ushering in the new field of behavioral economics. Economics, as a result of these influences, has become richer and sometimes overwhelming, but more realistic. We realize that in spite of our scientific progress we are in the beginning and have a long way to go before we are able to explain effectively social systems. At the same time, we are encouraged that the vantage points of different disciplines start to converge and we may, one day, reach an integrated narrative that will allow us to make better sense of society and people.

Best wishes to Williamson and Ostrom. This selection of the Nobel committee was well deserved and by making this bold choice, the committee enriches economics and makes it more exciting and relevant.

Our latest conference about bio-fuel in the developing world.

http://www.berkeleybioeconomy.org/index.html