Handicapping the dismal scientists on a not-so-dismal day.
- By Daniel AltmanDaniel Altman is the owner of North Yard Analytics LLC, a sports data consulting firm, and an adjunct associate professor of economics at New York University’s Stern School of Business.
Who will win the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, scheduled to be announced this Monday? Economists aren’t usually big gamblers, but we love a punt on the annual apotheosis of one of our own. We can try to predict the winners using things like academic citations or, like me, just go with our gut. This year the field is pretty wide open, and my own picks make it clear why. Here’s my shortlist:
Ben Bernanke. Now that he has left the U.S. Federal Reserve, the man who may have done more than anyone else to prevent another Great Depression would surely be a worthy winner. The late Masaru Hayami pioneered the use of quantitative easing at the Bank of Japan more than a decade ago, but Bernanke took it much further — and he has always been careful to distinguish his “credit easing” from earlier incarnations. With the mandate of the world’s most important central bank, Bernanke gave monetary policymakers everywhere a new set of tools to fight economic stagnation, at least in the short term. He didn’t do it as an academic, but his career in the ivory tower prepared him for the greatest challenge any economist may ever have faced. There’s just one problem: The fact that Sweden’s central bank, which sponsors the award, has itself been using quantitative easing this year may create something of a conflict of interest.
Anthony Atkinson. Inequality in income and wealth has been a hot topic for the past couple of years, but Atkinson was at the vanguard of its study long before Thomas Piketty made it a best-seller. Back in the 1970s, he was already using data to examine how inheritances affected the distribution of wealth and how far the United Kingdom was from a hypothetically egalitarian society. The Nobel committee likes innovations in formal and mathematical economics, though, and Atkinson’s best-known contribution is actually in the field of optimal taxation: the Atkinson-Stiglitz theorem on the use of indirect taxes such as value-added taxes. His prospects may also be dampened by his somewhat radical proposals to reduce inequality, such as guaranteed employment.
Martin Weitzman, William Nordhaus, and Nicholas Stern. Climate change and the environment have received plenty of attention from economists, though it wasn’t always that way. In the past decade and even earlier, these three economists have been among the leading thinkers on the topic. Weitzman is one of the fathers of environmental economics, taking on topics ranging from the optimal level of biodiversity to ways of accounting for the value of environmental goods. He also had to settle a court case once for allegedly stealing a truckload of manure from a private farm, though that news may not have made it to Stockholm. Nordhaus has used mathematical models to gauge, among other things, the accumulation of carbon dioxide and the feasibility of strategies to control it. Stern hasn’t necessarily changed how economists think about climate change, but he did offer a big step forward in empirics with his mammoth review of the economics of the British Treasury; even the executive summary is 27 pages long. Of course, the work of all three men has been politicized and controversial, so there’s a question of whether the Nobel committee would want to involve itself in the issue at all.
Paul Romer. My colleague at New York University has the significance of history on his side. His landmark model of economic growth, in which investment decisions affect the rate of technological change, turns 25 this year (at least counting from its official publication date). His way of explaining how living standards rise was revolutionary for its time, since technological change was viewed as a separate and rather unaccountable phenomenon in earlier models. But the model still has some unexplained issues, as noted in a commemoration this month. In any case, Romer has lately been more concerned with getting his Charter Cities initiative off the ground, and the Nobel committee might shy away from a prize that could be considered an endorsement.
There are plenty of more names to choose from, of course, especially since many recent favorites haven’t yet won. Hardly any of them are women, though, and economists can be a bit embarrassed to admit that the first female laureate, Elinor Ostrom, came from political science. But there’s some hope — albeit faint — that this will change. Three women have won the John Bates Clark Medal, often a harbinger of the Nobel, from the American Economic Association since 2007, and in September a MacArthur “genius” grant went to Heidi Williams of the Massachusetts Institute of Technology.
Putting gender aside, the preferences of the Nobel committee have been fairly clear in the past several years. The committee likes traditional areas of research and theory in finance, econometrics, and the structure of markets, and it has acquired a taste for behavioral economics as well. The committee is not so keen on labor economics, health economics, economics of the family, global development, and other allegedly squishier topics. Yet this apparent avoidance of entire swaths of academic achievement may have a simple cause. The best economists in these areas tend to amass a mountain of papers on narrow topics rather than author a few seminal — and especially theoretical — tracts. Rarely has the Nobel been tantamount to a lifetime achievement award, so the odds on these otherwise outstanding researchers are typically long.
Regardless of who wins, this year’s prize will be a poignant one for me. About 18 years ago, I took temporary charge of a Nobel betting pool for economists started by David Romer — no relation to Paul Romer — of the University of California, Berkeley. (I had placed a winning bet the previous year on William Vickrey, who died tragically before he could accept the prize.) The pool caught the attention of Sylvia Nasar, then of the New York Times, and eventually led to my first job writing about economics at the Economist in London. As I’ll be taking a hiatus from this column soon [Ed.: a brief one, we hope], the award of the prize will close a cycle — actually a few economic cycles — for me. Later this month, I’ll discuss what I’ve learned in that time, even if it wasn’t enough to predict Monday’s winner.
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