Who wins the Nobel Prize? - How Fair Is the Nobel? - influence of government policy on choice of winners for the Nobel Price in economics

Challenge, March-April, 1999 by Johan van Gompel

The author reviews the work of the forty-three Nobel Prize winners and claims that many of them have influenced government policy.

Since the Nobel Prize in economics was first awarded in 1969, forty-three economists have received this distinction. The Nobel Prize winners have elucidated very different, often restricted, aspects of economics, frequently with a relationship to other disciplines (including mathematics, law, and history). Roughly two-thirds of the work has related to macroeconomics, one-third to microeconomics. The prizes awarded have reflected changing trends in economic thought. In this respect, the Swedish Academy of Sciences has shown a preference for the neo-Keynesian and, in recent years, the neoliberal schools of thought, with the Chicago school, in particular, setting the tone. Although many laureates made political commitments, few have known how to make their mark on postwar economic policy.

The Economics Prize: An Odd Man Out

Every year in October, the month in which Alfred Nobel was born in 1833, the Nobel Prize winners are announced. The prizes were presented for the first time in 1901 for peace and for the scientific disciplines of physics, chemistry; and medicine, and for literature. According to Nobel's will, laureates must have achieved "scientific discoveries which have made a significant contribution to human happiness" or have given evidence of "proven services to mankind."

Appreciation of the work of economists was, however, a long time in coming. In his decision at the end of the last century to reward social and scientific achievements every year, Nobel was not thinking of the social sciences in general or of economic sciences in particular. For that matter, at that time, this discipline barely had university status. Only in the 1930s did economics gradually receive recognition as a science and then, to start with, only among a small group of economists in the United States, the United Kingdom, Germany, and Sweden. In the postwar period, economic faculties developed at universities all over the world.

The Nobel Prize in economics, despite its official title of "Prize in Economic Sciences in Memory of Alfred Nobel," does not come from Nobel's legacy. It was created in 1968 by the Swedish Central Bank to commemorate its 300th anniversary and has been awarded annually since 1969. In spite of the late recognition, the economics prize follows the spirit of Nobel's will. Jan Tinbergen, who, together with Ragnar Frisch, received the first prize in 1969, explained the relationship as follows: "Human happiness can be influenced by economic policy, which makes use of economic sciences for its insight."'

The Choice of the Laureates

Every year, universities, research institutes, and professors from all over the world are asked to nominate a candidate for the prize. A committee of five Swedish economists, selected by the Royal Swedish Academy of Sciences, then asks economists of international repute for an in-depth study on twenty to thirty candidates. The winner is then elected by the 260 members of the academy by simple majority.

Table 1 provides an overview of the laureates and their fields of research. The United States, which has twenty-six laureates, easily dominates.(1) The United Kingdom is in second place with eight winners. Norway and Sweden have two each, while Russia, Canada, Germany, France, the Netherlands, and India each have one laureate to their credit (see Table 2). The University of Chicago, Cambridge, Harvard, and the Massachusetts Institute of Technology have carried off the prize more than twice. It is striking that the University of Chicago, which, as a school of economic thought, is sometimes stamped as distinctly neoliberal, has been able to make its mark on the Nobel awards.(2) In the 1970s and 1980s, the Nobel Prize winners Milton Friedman, Theodore Schultz, and George Stigler came from this institution. In the 1990s, the partiality for Chicago was even more pronounced, with five winners (Merton Miller, Ronald Coase, Gary Becker, Robert Fogel, and Robert Lucas). Paul Samuelson, Kenneth Arrow, Friedrich von Hayek, Tjalling Koopmans, Herbert Simon, Lawrence Klein, Gerard Debreu, James Buchanan, Trygve Haavelmo, and Myron Scholes also attended this university for a shorter or longer period of time, either as students or as researchers or professors. Possibly unjustly, the predilection of the Swedish Academy for the University of Chicago is sometimes attributed to the political change in Sweden from a welfare state to a more liberal country, with the government playing a more modest role in the economy.

It is striking that the Swedish Academy is not often tempted to give prizes for recent economic theories. More frequently than in the other disciplines, the Nobel Prize in economics is awarded to people who have long passed the peak of their careers and [TABULAR DATA FOR TABLE 1 OMITTED] for theories that have withstood the ravages of time. Recipients of the economics prize were on average sixty-seven years old when awarded the prize, compared to an average age of fifty-two for the laureates of the physics award, for example. Undoubtedly, this is related to the particular nature of economics as a social science, which means that the value of a theory can only be judged properly years later. It is also plausible that, since the prize has been in existence for only a short time, the Academy first wished to award it to older heavyweights who would have received the prize earlier if it had been available.(3) For all that, the Academy has passed over various prominent economists of the older generation, such as Joseph Stiglitz, George Akerlof, Edmund Phelps, Richard Abel Musgrave, and Frank Hahn. The choice of less recent theories must finally be seen in the light of the link, often close, between economic theory and politics. The Academy probably wishes to avoid having a prize interpreted as favoring a specific political or ideological movement.