The Economics award is usually the last
of the Nobel Prizes to be announced. Correctly so, for it was also the
last to be created - and strictly speaking is not even a real Nobel Prize.
The five original awards, first given out in 1901 for Literature, Peace,
Medicine/Physiology, Physics and Chemistry, were intended by Alfred Nobel
to recognise contributions that enhanced the quality of human life, through
scientific advance, literary creativity or efforts at bringing about peace.
The Economics Prize is not a prize of the Nobel Foundation; rather, it
was created in 1968 by the Central Bank of Sweden as a “Prize in Economic
Sciences in Memory of Alfred Nobel”. However, it now has the same procedure
of selection by the Swedish Academy and the same cash award presented
at a similar ceremony as the Nobel Prizes.
There have been recurrent doubts about whether it conforms to the basic
goals of the Prizes as envisaged by the founder. Is Economics a science,
on the same lines as Physics or Chemistry? Does it unambiguously contribute
to human well-being, like peace or literature? In any case, should Economics
be privileged over other branches of learning?
Peter Nobel, great-grandnephew of the founder and human rights activist,
famously argued that Alfred Nobel would not have approved of such a prize,
which he termed as “a PR coup by economists to improve their reputation...
most often awarded to stock market speculators”.
Certainly the reputation of economists has needed building up, not only
in the wake of the global financial crisis, but even before that. As much
of mainstream economics became obsessed with navel-gazing esoteric models
or theories designed to justify market liberalism, the general public
became relatively more alienated from the activities of economists. In
such a context, the Nobel Prize has definitely been a useful tool not
only to proclaim the conceptual advances supposedly made by “the dismal
science” but also to encourage certain types of economic analysis and
research. So its power extends beyond public recognition, altering the
very production of economic knowledge.
The early prizes generally honoured economists whose work was already
widely recognised. But even in the first decade, the list of exceptions
was probably more impressive than that of the recipients, as great economists
like Michal Kalecki, Joan Robinson, Richard Kahn, Nicholas Kaldor and
Piero Sraffa were overlooked in favour of lesser contributors. In the
subsequent period, while some recipients have been universally recognised,
the award has occasionally gone to economists of relatively minor and
sometimes absolutely questionable achievement, whom others in the profession
quickly had to look up when the announcement was made.
The political effect of the Prize in the profession has been undeniable.
There has been overwhelming domination of neo-classical economics, to
the exclusion of alternative streams of thought, with only a few nods
in the direction of broader and more socially embracing approaches. This
has encouraged more conservative approaches to the subject in research
and teaching.
Monetarist and free market approaches have been disproportionately rewarded,
often at crucial times. For example, the 1974 award to Friedrich von Hayek
led to a resurgence of interest in the Austrian School and made his book
“The Road to Serfdom” a bestseller. Two years later the Prize went to
Milton Friedman, making his extreme form of monetarism academically respectable
and even leading to a conservative policy revolution. Economic history
in the turgid and restricting form of retrospective econometrics was promoted
by the 1993 award to Robert Fogel and Douglass North, while rational expectations
theory was given a big boost by honouring Robert Lucas in 1995.
The geographical distribution of the award both creates and reflects power
hierarchies in the discipline. The Economics Prize has been awarded 40
times to 66 recipients, 42 of whom have been from the USA, while 50 were
working in the USA at the time of the award. The University of Chicago
has 11 laureates, leading to the joke about “the Stockholm-Chicago Express”.
This does not reflect the actual state of economic knowledge so much as
the biases and blindness of the jury. In the history of the prize, only
two persons from developing countries have received it (Arthur Lewis and
Amartya Sen) and both worked in the US and England. Only three economists
with an interest in the economics of developing countries – which is the
economic reality for around three quarters of the world’s population –
have received the award.
In recent years, the Prize has been focussed on financial market behaviour.
In 1997, the award went to two economists – Robert Merton and Myron Scholes
– who were supposed to have discovered a method of valuing derivatives
that could reduce or eliminate risk in financial investment. When the
hedge fund that they ran (Long Term Capital Management) went bust within
the year and had to be rescued by the US Fed, there was some embarrassment.
Perhaps to right this wrong, a few years later the prize was given to
economists George Akerlof and Joseph Stiglitz, who had pointed to the
imperfect functioning of financial markets. The award last year to Paul
Krugman may also have indicated some bowing to changing times.
So far, no woman has got the Economics Nobel. Apart from obvious exclusions
such as Joan Robinson, this also reflects power hierarchies within the
subject, because women economists even in the US and UK tend to be concentrated
in the lower reaches of the academics profession - as researchers and
lecturers rather than professors.
These imbalances will not be rectified easily. But the Nobel Prize in
economics may now be as much in need of wider legitimacy as the economics
profession itself. It will be interesting to see if this is reflected
in the current year’s award.