The "Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel"* was awarded to Elinor Ostrom (Indiana University) and Oliver Williamson (UC Berkeley), and I can't be more pleased!
Lin Ostrom is a political economist who did her PhD dissertation at UCLA on the institutions of groundwater management. She has gone on to explore and explain why and how communities create and manage institutions to govern natural resources (water, trees, fisheries, forests, etc.) in sustainable ways. Her Workshop in Political Theory and Policy Analysis is highly regarded as a place where people learn and get things done. I rely heavily on her work.**
Oliver Williamson is famous for his work in transaction cost economics, a topic that matters in non-market situations. The most obvious application of TCE is to the operations of bureaucracies and firms, where price signals and competition are weak/absent. Williamson is (with Doug North and Ronald Coase, both Nobel Laureates) considered as one of the intellectual founders of "new institutional economics, an economic perspective that attempts to extend economics by focusing on the social and legal norms and rules that underlie economic activity." In other words, NIE pays attention to the way that economic organizations and norms evolve.
As an economist who spends most of his time on natural resources (water!) and the the institutions that govern them (political economy!), this award seems to be directed to me (and my colleagues).
I also see one "reason" for awarding it -- Ostrom and Williamson's work is directed at the messy realities of how we really get things done in less-than-perfect markets. You couldn't ask for a body of work that was more different than the theoretical financial and macroeconomics that gave intellectual support to the idiots who played big roles in the global economic disaster that has hurt so many people; see this post and this post
Bottom Line: Ostrom and Williamson deserve the Nobel for doing the best kind of economics -- the economics that enlightens us and gives us ways to improve our lives.
Addendum: Lynne Kiesling, Alex Tabarrok (Ostrom) (Williamson) and Tim Haab on the prize.
* The original Nobel Prizes are in the sciences;*** some people dislike the economics prize being called a Nobel because economics is not a science. I agree, but it's out there.
** Her husband (Vincent Ostrom) wrote the first monograph (1953) on Metropolitan Water District!
*** The Peace Prize is an original but aimed at "current work" rather than work of proven value. I'm still shocked at Obama's prize. Totally political.