Nobel Prize Winners in Economics ...
Evolutionary economic theory originates outside the orthodox neo-classical tradition, however that tradition is enriched not contradicted. Neo-classical theory becomes a special case in a much more complex reality.
The Nobel Prize winners have a deserved position of acclaim and influence and the evolution of neo-classical economics can be traced through their work. The orthodox laureates emphasise rational, efficient, designed, equilibriums but heterodox economists emphasising evolution, behaviour, institutions and history are represented also.
The Nobel Foundation website contains a wealth of information ... so here we go with a list of the greats from last year to the first award in 1969 ...
2016 Oliver Hart & Bengt Holmstrom - the economics of contracts involved co-operation & synergies ... contracts were necessarily incomplete and always seemed to involve conflicts of interest. Institutions needed carefully designed contracts in areas like bankruptcy & constitutions, shareholders & executives, insurance companies & car owners, public authorities & suppliers.
Angus Deaton - micro empirical studies are required to explain macro
aggregates; famine, disease, poverty, inequality, happiness as real jobs
create income streams and trades. The key to greater wellbeing is to promote
economic growth rather than to support consumption though western aid
Development economics cannot be based solely on charity nor bailouts of bad government.
2014 Jean Tirole - regulating monopoly power. Political whims and market outcomes can both 'fail' but can regulators do better? Anti trust can't cope with 'natural monopolies'. Independent case by case reasoning from game theory & information assymetries. And what about 'patents'? And 'deserved' & 'licensed' monopolies? Rent seeking?
Efficient market theory and rationality. Behavioural economics and institutional restrictive influence.
Policy affects the economy, but the economy also affects policy. And expectations about policy affects expectations about the economy.
Peter A Diamond
Dale T Mortensen
Christopher A Pissarides - Markets
with Search Costs.
Benefit levels, unemployment insurance or rules in regard to hiring and firing impact on search costs.
Perhaps more generous unemployment benefits give rise to higher unemployment and longer search times.
Problems of the commons can be alleviated by user associations. Leaders resolve conflicts within firms.
2008 Paul Krugman - Global Trade Patterns. Trade & Globalisation, Synergies of specialisation & scale.
2007 Leo Hurwicz - Mechanism Design & Moral Hazard. Rent seeking & incentives to cheat. Not winner takes all but if you cut the pie, I choose which piece.
Roger Myerson – ‘Democracy can’t come by edict, only by institutional mechanisms that ensure politicians compete for the trust of voters’.
2006 Edmund Phelps – Short / Long term Tradeoffs.
The expectations augmented Phillips curve indicates low inflation today leads to expectations of low inflation in the future and informs policy. Long-run rate of unemployment depends on the functioning of the labour market. Short term/long term tradeoffs also influence investment decisions. By foregoing consumption for investment in physical as well as human capital, today's generation can raise the welfare of future generations, raising possible distributional conflicts between generations.
People act today in a way that is consistent with what they expect to happen in the future. In a dynamic game a player's best plan for some future period will not be optimal when that future period arrives because of time inconsistencies. Economic policy should delegate decisions consistently to markets through independents central banks and privatisation. And interference in the business cycle is invariably counter productive.
Instinctively risk averse when a benefit is involved, and risk seeking when a loss is involved. An irrational tendency to be less willing to gamble with hard earned profits than with losses ... utility functions depend on changes in the value rather than the absolute value. Put another way, utility comes from returns, not from the value of assets. 1. gut feel is honed by evolution and usually very efficient but reasoning skills, testing in the imagination is more difficult = bat + ball = $1.10, bat = $1, ball = 10 cents 2. risk averse = - £1,000 tails, + £1,500 heads? No way unless 2:1. 3. status quo = losses loom larger than gains. 4. endowment = hard won stamp collections are valued in excess of their market value. 5. negotiations = hard won customs and practices are valued in excess of their market value. Cultural Learning = recognise the bias, counterintuitive behaviour which secures economic benefits survive. Frank Field, work, thrift, honesty & Doha not apocalypse now, Armageddon, global warming, resource depletion, slavery, welfare states, collateral damage, AIDS, BSE, foot & mouth …
2001 George Akerlof – Adverse Selection. Only lemons will be on sale.
Joseph Stiglitz – Monopolistic Competition. Market equilibrium is not the norm.
Michael Spence - Contract Theory. Under asymmetric information Educational qualifications as a signal of competence in the jobs market.
Michael Spence chairs the Commission for Growth and Development 2008 which has reviewed World Bank policy based on the 'Washington Consensus' 1989. The benefits of 'globalisation' have been reconfirmed with the important qualification that policy is never 'one size fits all' but always context and time specific. Nurturing human capital and social institutions is essential for bottom up evolutionary growth based on increasing returns from specialisation and scale.
1999 Robert Mundell - Monetary & Fiscal Policy at different exchange rates.
1998 Amartya Sen – Welfare Economics.
An ethical dimension to self interest. Is 'right' something that must be
provided or something that simply cannot be taken away? Can individual
values be aggregated into collective decisions? Can we allow a majority to
suppress a minority? Arrow's 'impossibility theorem' seemed to be an
insurmountable obstacle to progress in the normative branch of economics for
a long time. Universal principles proposed by moral philosophy can evaluate
different alternatives for society. £100 for the poor man is 'worth' more
than £100 for the poor man.
Equal opportunity varies across individuals so capabilities of individuals constitute the principal dimension in which we should strive for equality but individuals make decisions which determine their capabilities at a later stage.
Education in a progressive culture.
Valuations are logical and there are opportunities to profit from information asymmetries and arbitrage. Long Term Capital Management exploited 'convergence trades' where Government Bond valuations tend to converge. But these trades are dependent on orderly markets and availability of buyers and sellers. In 1998 (and before) Governments defaulted! Flights to liquidity can destroy all 'schemes', even sophisticated computer schemes, Keynes was succinct, 'the markets can stay irrational longer than you can stay solvent'!
1995 Robert Lucas – Rational Expectations.
1992 Gary Becker - Economic Human Behaviour. Micro economic explanations of human interactions.
1991 Ronald Coase – from Socialism to Classical Liberalism. Regulation generally makes things worse.
Social Costs - Theories of transaction costs and property rights.
1989 Trygve Haavelmo - Econometrics and Probabilitity heory.
1988 Maurice Allais - The Golden Rule - 'do unto future generations as you would hope previous generation did unto us'.
1987 Robert Solow – Growth Accounting. Technological change & 'total factor productivity'.
1986 James Buchanan - Public Choice. Economic and political decision making.
1985 Franco Modigliani - Capital Structure Irrelevance Principle. A higher debt/equity ratio leads to a higher required return on equity, because of the higher risk involved for equity holders in a company with debt.
1984 Richard Stone - National Accounts.
1983 Gerard Debreu - New analysis of General Equilibrium.
1982 George Stigler - Regulation & 'capture'.
1981 James Tobin – 'Know how' and Share Valuations ... expenditure, employment, production & prices.
James Tobin defined q as the ratio of share value to net worth, q values are historically high. Is this because shares overvalued or because returns are dependent on 'know how' not on tangible assets? 'Know how' = technological & institutional innovation = understanding and useful practice.
1980 Lawrence Klein - Econometric fluctuations and models.
1978 Herbert Simon – Decision Making and 'Satisficing'.
1976 Milton Friedman – Monetarism. Monetary history and the complexity of stabilisation policy.
1974 Friedrich Hayek – evolutionary descriptions of diverse & dispersed knowledge.
Fatal Conceit - Complexity cannot be managed. The calculation problem.
Gunnar Myrdal - interdependence of economic, social & political and inherent cycles.
1973 Wassily Leontief - empirical input/output analysis.
1972 Kenneth Arrow – from 'socialism to pragmatism' and general equilibrium maths.
Impossibility Theorem - Mathematical proof that there is no method, majority voting or otherwise, for constructing social preferences from arbitrary individual preferences. No system can be both rational and egalitarian.
John Hicks - IS (savings & investment)/LM (liquidity preferences) model of Keynes general equilibrium & welfare theory.
1971 Simon Kuznets - empirical interpretations of GNP growth & population growth.
Later the Kuznets Curve suggested inequality increased then decreased as industrialisation progressed.
1970 Paul Samuelson - theoretical analysis. He wrote the text books.
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