Just sayin' -The Nobel Prize in Economics ain't like physics, chemistry, peace, literature, and medicine or physiology (the "classic 5") where it advances the art in a provable way. Okay, maybe "peace" is debatable and subjective. And literature for the same reasons.
Economics suffers from a major stigma - it works until it doesn't and is usually couched in "in an ideal market" or some such nonsense. In other words, "Your mileage may vary. A lot." They don't repeal the prize when the economic-BS falls flat on its face. At least when Einstein or Feynman got their prizes we don't find that their contributions were utter crap and don't amount to anything testable. Every time you use your GPS or study particles we can thank these chaps for some aspect of it. Same goes with medicine - heart transplants actually work. By God, Christian Barnard was right!
We also don't find that 20 years later the discoveries of Watson and Crick were utter non-sense and that microscopic weevils and leprechauns are the causative agents of heredity. However, we can thank the multiple crashes to incomplete understanding of the REAL markets (not the Onanistic fantasy in the heads of Nobel laureate). One was awarded for the pricing of options. Really? Why aren't these guys all bazillionaires?
Not just my opinion. LINK to Federal Reserve opinion piece.
TITLE: The Beauty (Pageant?) of Economics..
EXCERPT
Few realize, especially outside of economists, that the prize in economics is not an "official" Nobel. The five original Nobels—physics, chemistry, peace, literature, and medicine or physiology—were established in Alfred Nobel's will in 1895 to honor the most important discoveries in these respective areas. The first awards were made in 1901.
The award for economics came almost 70 years later—bootstrapped to the Nobel in 1968 as a bit of a marketing ploy to celebrate the Bank of Sweden's 300th anniversary. The Bank established a foundation to award the annual prize money, and the new award became known officially as "The Sveriges Riksbank (Bank of Sweden) Prize in Economic Sciences in Memory of Alfred Nobel."
Awarded by the Royal Swedish Academy of Science (which also awards the prizes for chemistry and physics), the selection process for economics laureates is similar to that of the original Nobels, and the financial award is also $1 million. In 30 years, 43 economists have received the award, which has been shared 11 different times.
Almost two of three laureates have been U.S. citizens (although Arthur Lewis had British citizenship as well, and several others were born elsewhere and eventually moved to the United States). This preference for American economists, according to several sources, stems from high-powered research at public and private institutions in the United States, which fosters scholarly competition and innovative thinking, particularly among young scholars looking to make their mark.
While based on research accomplishments, final selections for the Prize in Economics are inevitably subjective and easy targets for second-guessing. David Warsh, economics columnist for the Boston Globe for 20 years, said he was impressed by the Swedes' stewardship of the award, and particularly its emphasis on consensus. "What you want is consistency and clarity of criteria," he said.
David Romer, professor of economics at the University of California, Berkeley, acknowledged some grumbling about the apparent pro-Western leanings, mostly from economists at the ideological margins like neo-Marxists and neo-Keynesians. Romer said he thought the selection committee did a good job of "taking a stand," given the breadth of viewpoints among economists. "You have to decide what's good economics and what's not good economics," said Romer, adding the Academy "has made a judgment that most of the important work in economics has been done by mainstream academic economists."
Had the prize started in the first half of this century, the English would have dominated the award, according to Edward Prescott, Regents professor at the University of Minnesota and senior consultant with the Federal Reserve Bank of Minneapolis. The "best thinking" later moved to the United States, as economists from Harvard, MIT, Yale and Princeton took home awards during the early years, and continued its travel westward, Prescott said. Economists from the University of Chicago have grabbed five prizes this decade, eight overall, and an additional 10 laureates have spent time as students, researchers or professors at Chicago since the award's inception. 1
The United States will likely continue to dominate the prize awards in the near future, Prescott said, because "that's where the action is, and it's where you get paid a lot of money."
- The Economics Prize Selection Committee sends invitations to economists throughout the world and to all living economic laureates, asking for nominations for the coming year.
- Nominations received by the committee are then investigated with the help of specially appointed experts, who research and analyze the contributions of the top 20 or 30 candidates.
- These reports are then debated by the Prize Committee and by spring they send a recommendation to the Social Sciences Class, which endorses the recommendation by late summer or early fall and sends it to the full Academy.
- The winner is selected by a simple majority vote and announced immediately after the vote in mid-October each year.
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Selection process known for its secrecy If the award is anything, it is thorough in its selection process. Much of the legwork is handled by the Economics Prize Selection Committee, which consists of five eminent scholars. Every year in October, the committee sends invitations to economists throughout the world and to all living economics laureates, asking for nominations for the coming year.
The nominations received by the committee—usually around 250, covering roughly 100 individuals—are then investigated with the help of specially appointed experts, who research and analyze the contributions of the top 20 or 30 candidates. These reports are then debated by the Prize Committee, and by spring they send a recommendation to the Social Sciences Class, which endorses the recommendation by late summer or early fall and sends it to the full Academy. The winner is selected by a simple majority vote and announced immediately after the vote in mid-October each year.
One of the enamoring idiosyncrasies of the Economics Prize—particularly in light of the media's penchant for leak-filled, overhyped pseudo-events—is the degree of secrecy that surrounds the prize's selection and announcement.
Laureate Douglass North (1993 winner) said he was contacted by a German news magazine several days in advance of the announcement, claiming it had heard North was receiving the prize. North said he later inquired about the leak and was told by the Academy that "there was absolutely no way there could be a leak," he said.
Author Sylvia Nasar cobbled together one of the most in-depth looks at the selection process for the Prize in Economics in her recent book, A Beautiful Mind, a biography of 1994 laureate, John Nash, who was struck by mental disease after establishing himself as a mathematics genius in the 1950s.
But it wasn't easy, according to Nasar, who called the chapter on Nash's selection one of the book's biggest challenges.
"There is so, so little material that's out there," she said. "Just about everything connected to the prize is completely secret." Only a few token items are in the public domain, things like membership and process of the selection committee. Nobel Foundation statutes require that archives on committee and Academy decisions are closed to the public for 50 years.
Nash's mental health history made his selection one of the Academy's most controversial laureate votes, yet the heated internal debate almost went undetected. But Nasar's journalistic instincts were piqued when a business writer from a Swedish newspaper reported an hour-and-a-half delay in announcing the 1994 winner. A seemingly trivial detail, one which was largely overlooked by observers both far and near. But it was truly unusual for the Academy—a crack in its otherwise seamless public relations armor.
Nasar flew to Sweden for a week to take a closer look at the Academy and the prize selection process, "realizing that this would be a good story if could get it." Nasar's 16-page chapter on Nash's selection was the result of countless calls to members of the selection committee and the Academy, several of whom requested anonymity in the book.
But the "loose lips sink ships" aura that surrounds the selection has its upside as well. Laureate Robert Lucas (1995 winner) said that the secrecy, along with "the PR rush" that follows the announcement, adds a lot of excitement to the award. "Having everything leaked in advance, the way American Economic Association honors are, would take a lot of the fun out of it," Lucas said.
Once chosen, the recipient is thrown into a parallel world-an economist's Disney World—complete with all the pomp and circumstance befitting royalty. "It's a fabulous occasion," North said. "It's five days of living like a king." Now six years after receiving the Prize in Economics, North said his life has never been more chaotic, as he still receives 10 to 15 speaking invitations a week from around the world.
Lucas agreed that receiving the award comes with its own magical mystery tour. "The prize took over my life entirely for about six months."
Laureate Herbert Simon (1978 winner) said the prize did not dramatically impact his life, but "substantially increas[ed] the frequency of queries from reporters and writers about world events" who thought he became an expert on all things by virtue of his Nobel selection.
The beauty (pageant) of economics Most economists profess to have no concern over whether they win the Economics Prize. Simon said economists are more worried about leaving their mark on the world than filling the trophy case. "Of course scientists are competitive, but gold medals aren't the prizes they are competing for," Simon said. "At best, the prizes provide some mild reassurance that one is on track ... and a place in history is, for most scientists, the more important one."
Mere awards could hardly enhance the legendary status of John Keynes or Adam Smith, Simon pointed out. "The Nobel does not certify scientists to their scientific communities. It certifies them to the wider public."
But it is not uncommon for that detachment to erode once candidates make the selection committee's short-list. After the selection committee has narrowed the candidate pool, Prescott said, the award becomes a "complicated, political process" among candidates, some of whom become shameless self-promoters. "The committee has done a decent job [of selecting winners]. It's tough given the pressures that are put on it," said Prescott.
"For a lot of people, their whole life is geared around getting the award," North said, adding that he was "repulsed" by such actions.
But economists are human too. "It's no different than the Academy Awards, I suspect," Warsh pointed out.
To accompany the normal armchair conjecture about the annual winner, in 1982 Romer started an informal pool to guess the recipient of the economics award for "the same kind of reason people like doing the NCAA (basketball) pool."
Romer estimated that a total of 40 to 50 votes were cast the first year. The pool has remained small by virtue of its word-of-mouth marketing. While the eventual prize winner might not always receive the most votes, Romer said, he has almost always shown up in the voting. Most winners—such as Gary Becker and Lucas—usually make good showings in the pool for several years before being honored by the Academy.
A year ago Romer handed pool-running duties over to Dan Altman, a fourth-year economics graduate student at Harvard. Last September, a total of 79 votes were cast, with Amartya Sen receiving the most votes (15) for the second year in a row. Sen was also was the top vote-getter in the annual poll conducted by About.com, a topic-based Web resource.
Coincidence or not, Sen won the 1998 Economics Prize, which means a new "economists' choice" will be crowned for both polls this year. If tradition provides precedent in Romer's pool, this year's winner might be Zvi Griliches, Dale Jorgenson or George Akerlof, who were runners-up last year. Those interested in the About.com poll can cast a vote for this year's winner at economics.about.com.
A Nobel identity crisis The Prize in Economics also happens to be experiencing some of the same growing pains as the profession itself. Over the years, there has been less-than-polite discussion regarding economics' place among other Nobels in the natural sciences and the caliber of annual recipients for the Prize in Economics.
The award suffers under the impression of some that it is a second-class citizen among the Nobels. Part of the reason is the Royal Academy's involvement with the Nobels for physics and chemistry—the classic "hard" or natural sciences that hold such stature among some researchers. Meanwhile, economics is classified with other "soft" social sciences at the Academy, which have struggled within the larger scientific community to attain the reputation of their "harder" peers (also a matter of considerable debate among economists and scientists in other fields).
In 1969, the first year of the Economics Prize, Simon said he was a member of the President's Science Advisory Committee (PSAC), which was chaired by Lee DuBridge, longtime Caltech physics professor and science adviser to President Nixon. Also on that committee was Murray Gell-Mann, who won the Nobel Prize in physics that year for his work in elementary particles.
Upon returning from the award ceremonies, Simon said PSAC members were questioning Gell-Mann about the affair and the new Prize in Economics. "Lee DuBridge asked Murray, with real anguish in his voice, 'Did they [the economists] actually sit on the platform with the others?'"
Compounding the identity crisis within economics is the fact that most economists agree that the real giants of the field have already been honored. According to some, this has left the Academy with few obvious choices in the last decade and a half. One economist reportedly lamented in the early 1980s that "all the mighty firs have fallen. Now there are only bushes left." 2
"There is some question whether [the Academy] ought to be giving [the Prize] out every year," said North, agreeing that after the first 15 years the Academy had exhausted the backlog of candidates whose work clearly qualified them for the honor at some point. "I don't think there are any big, outstanding individuals left."
Warsh disagreed with that notion. "Some people think that, but I don't," he said. "Bob Lucas is not a 'less potent crowd.'" Warsh argued there are at most four or five legendary figures within any science in a given century—like Paul Samuelson and Kenneth Arrow in economics. "It's pretty absurd to think you could have an Einstein in physics every year," he said. "There is plenty of interesting work to award one of these every year."
Romer agreed, "It's easy to come up with several dozen people who could be very plausible winners." But he questioned the Academy's apparent preference for older economists, pointing out that most prizes have been awarded for research done some 30 years earlier. Adding fuel to Romer's point is that the average age of economics laureates is 67, compared with 52 years old for winners in physics.
Prescott argued this is partially out of necessity because economics has very established views that "fight like hell" against new ideas, so it takes time for new theories and models to become properly tested and accepted by the economics community. Assar Lindbeck, head of the Economics Prize Committee for years, wrote in a recent paper that "economic behavior, like human behavior in general, is complex ... [and] varies over time and place." As such, it often takes longer "to find out if a new [economics] contribution is solid or if it is just a fad." 3
"That's a fine argument for waiting 10 or 20 years" to reward a particular scientist for his or her contributions, Romer said. But there are very few examples of awards given even within this shorter timeframe. "It's appropriate that [the Economics Prize] not be like physics where it's hot off the presses, but I think they have carried it to excess," said Romer. "Maybe they want wrinkled fir trees."
It has also been suggested-though not widely among economists—that practitioners like Fed Chairman Alan Greenspan be considered for the award. North argued that the focus must remain on "new and original contributions," adding, "Greenspan's never done anything like that." While those involved in public policy have made many significant contributions, Prescott said someone like Greenspan cannot be a serious candidate for the award because he is "using the tool" developed through the research of others.
Lucas pointed out that the Nobel awards are given for intellectual achievement in a certain field, and measured by the quality and influence of one's research. "Obviously this limits the range of people who might win the prize," Lucas said, "Most people—even people of great eminence generally—don't have any intellectual achievements."
That fact alone is no reason to lower the standards for the Prize in Economics. "It seems perverse to criticize such a prize because it only goes to intellectuals," Lucas said. "Is it a criticism of the Heisman Trophy that it only goes to football players?"
The Nobel Prize Committee The Economics Prize Selection Committee consists of five members:
- Karl Gustav Joreskog, FD
Professor of Multivariate
Statistical Analysis
Uppsala University
- Bertil Naslund, Ph.D.
Professor of Finance
Stockholm School of Economics
- Torsten Persson, FD
Professor of Economics
Stockholm University
- Lars E. O. Svensson, FD
Professor of International Economics
Stockholm University
- Jorgen Weibull, TeknD
Professor of Economics
Stockholm School of Economics
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Notes 1 Johan Van Gomel, "Who Wins the Nobel Prize?" Challenge, March-April, 1999.
2 Sylvia Nasar, A Beautiful Mind, New York: Simon & Schuster, 1998, p. 368.
3 Assar Lindbeck, "The Sveriges Riksbank (Bank of Sweden) Prize in Economic Sciences in Memory of Alfred Nobel, 1969-1998," Institute for International Economic Studies, University of Stockholm, June 1999. Available on the Nobel Foundation Website.
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