What’s the Point of the Economics Nobel?
(Bloomberg Opinion) -- Next week marks the 50th anniversary of the Nobel Prize in Economics, as it has come to be known. It was first awarded in 1969 by the Swedish central bank as an addendum to the other, much older, Nobel prizes (and is correctly known as the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel). This upstart status subtracts nothing from the esteem, or cash, accorded to the laureates. The latest winner, or winners, will be announced Monday.
What have we learned from half a century of these awards — and is there any point to them?
Sweden and the rest of Scandinavia certainly see a point. The celebratory banquet — each December, at the Stockholm City Hall — is broadcast on live television across the region. Where else would reality television mean listening to a commentary on the dress (white tie and tails for those identifying as male) and careers of academic superstars, not to mention the menu?
Initially there was controversy over the new prize — a member of the Nobel family said it glorified profits over people. In some ways it remains an awkward fit. “Discoveries” are harder to identify in a subject that contributes most when it’s framing problems rather than stating answers. It hasn’t helped that some economists have become identified with strong political positions. For instance, there was criticism from the left of Milton Friedman’s Nobel, even though he was being recognized for his work on monetary history and macroeconomic theory rather than for his subsequent declarations on the role of the state.
It would be difficult to imagine a parallel in the physical sciences for the 2013 prize. That year, the award went jointly to Eugene Fama, who developed the efficient market hypothesis, which states that market prices reflect all publicly available information, and Robert Shiller, who has worked to refute that very idea. It’s telling that the insights of both men have proved invaluable. It confirms that economics at its best gives us insights not solutions.
Has the prize altered the type of research on which economists engage? Should it try to? The answer to both questions is no. Many if not most fundamental breakthroughs have a large element of luck or serendipity about them. They often spring from ideas that originate in unrelated problems, not a head-on attack. The Nobel Committee is wise not to try to influence future research but to recognize past contributions. Too many national research councils, with far larger budgets, ignore this lesson.
The real value of the prize is simply that once a year public attention is drawn to an important set of ideas. The issues explored by the discipline’s most creative thinkers — Paul Samuelson and Robert Solow, James Meade and Robert Lucas, Arthur Lewis and Amartya Sen, to name just some — gained wider currency as a result.
On several occasions the prize has been shared, and in all there have been 81 winners. So far, reflecting a woeful imbalance in the discipline, only one has been awarded to a woman. Elinor Ostrom was honored in 2009 for her work on how the “commons” (common property such as natural resources) can be managed efficiently by agreement among users. The profession has belatedly come to recognize the underrepresentation of women in its highest reaches and (as efforts by the American Economic Association, for instance, attest) is trying to do something about it.
Last year the prize was awarded to Bill Nordhaus and Paul Romer for their work on environmental economics and growth. Recognition of their contributions had long been expected, but many were surprised that another contributor to the economics of the environment, Marty Weitzman, had been overlooked. This summer Weitzman took his own life, amid speculation that he’d grown despondent after being passed over.
Suffice it to say that competition among academic economists is intense, and the longing for recognition is almost universal.
James Meade, I should mention, was a notable exception. Oblivious to the impending announcement in 1977, this gentlest and most generous of economists took a bus from Cambridge to Buckingham to give a seminar. On arrival, he was met at the bus stop by a large group led by the excited vice-chancellor of the University of Buckingham. They told him he’d just been awarded the Nobel Prize. They celebrated over cups of tea.
The highest accolade hadn’t made much difference to Meade one way or the other: His pioneering work on trade and capital flows had been carried out long before the prize was a gleam in the Riksbank’s eye. Later, he was one of the first economists to propose adopting “money income” (nominal gross domestic product) as a target for monetary policy, and he used his Nobel memorial lecture to advocate it. More than 40 years after that address, the idea remains topical — and the Nobel Prize remains the discipline’s most cherished honor.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Mervyn King is a Bloomberg Opinion columnist. He is a member of the U.K. House of Lords, and a professor of economics and law at New York University. He was governor of the Bank of England from 2003 to 2013.
©2019 Bloomberg L.P.