MacroScope

Macroeconomics deserves a prize?

Europe on the brink. United States risks double-dip recession. Financial turmoil threatens world economy. Not the sort of headlines you would associate with a Nobel-prize-winning contribution to the progress of humanity. To their credit, recipients Christopher Sims of Princeton and Thomas Sargent of New York University did develop methods and models that are wisely used by economists around the world, including central banks. But it’s unclear what practical applications their findings have for the world’s current economic predicament.

Alfred Nobel himself was not shy about hiding his disdain for the dismal science, which was not part of the original set of awards given in his name. The Nobel prize in economics came into existence in 1968, when Sweden’s central bank decided to create it in the dynamite tycoon’s honor. As German journalist Karen Ilse Horn writes (Thanks to @RecklessMonkeys for bringing the quote to our attention):

Economics was nothing Alfred Nobel appreciated as such, even though he was himself a pretty successful businessman. Rather to the contrary: ‘I have no training in economics myself and also hate it from the bottom of my heart,’ he wrote.

The question appears worth asking: what exactly was the concrete contribution of Sims and Sargent? That answer, it seems, is a little harder to come by. Take Paul Krugman, who makes a living explaining the intricacies of economics to lay persons. This is what he had to say about the winners:

This is a statistical techniques prize — both men worked on methods for extracting insight from the data history provides us, which generally don’t offer anything like a controlled experiment.

Economic Ties?

Ties

As rare as it is to get any two economists to agree, the chances are even slimmer of hearing three Nobel economics laureates concur.

And so it was that each of the award winning economists — Eric Maskin (2007), Michael Spence (2001) and Robert Merton(1997) — all had their own take on the legacy of three years of financial and economic crises when they spoke to a conference organised by Pioneer Investments  in London last week.

 To be fair, they broadly coagulated around the inevitability of greater regulation of banking and finance and also on the enormity of China’s now imposing position in world economic affairs.

The Nobel prize for governance

The people who hand out Nobel Prizes are obviously keen this year to trumpet a new world order in economics as well as politics. Hot on the heels of giving Barack Obama the peace prize, they have awarded  this year’s economics prize for research into governance.

American economists Elinor Ostrom and Oliver Williamson won — the former for showing how common property can be managed by user associations, the latter for a theory on corporate conflict resolution.

You can read some background on  their research here and here.