Maurice Allais, the only one from France to win a Nobel Prize in Economics in 1988, died the day the 2010 Nobel Prize was announced. Peter Diamond, Dale Mortensen and Christopher Pissarides have won the 2010 Prize for their work on efficient functioning of labour markets. That?s topical and none of the three are controversial. The Nobel in Economics isn?t one of the original five proposed by Alfred Nobel. Consequently, since its institution in 1969, the Prize itself has had different names, ranging from a Prize in Economic Science in Memory of Alfred Nobel to the Sveriges Riksbank (Bank of Sweden) Prize. Economics isn?t like the physical sciences, where there is one momentous invention or discovery. It is more a matter of chipping away at incremental knowledge, knowing perfectly well there is nothing like the ?truth?. Paul Samuelson, John Hicks, Kenneth Arrow, Friedrich Hayek and Milton Friedman don?t surface every day. Given that, there will be inevitable dilution and questions will be asked whether one particular Laureate deserved the recognition. Gunnar Myrdal, Robert Merton and Myron Scholes spring to mind. Conversely, there are those who should have received the Prize but never did?Joan Robinson and Jagdish Bhagwati are two obvious names.
There is a broader question about whether these Prizes are biased, both because Prize Committee members have a geographical bias (selections aren?t globally peer-reviewed) and because there is a discernible leftward slant. Notwithstanding the University of Chicago?s stranglehold and the odd exception, it is rare for a Prize to be awarded to one whose work hasn?t been seen to further ?development?. Allegations of lobbying are also not unknown. Unlike the physical sciences, and in common with Literature and Peace, there is scope for subjectivity and this becomes accentuated because economists usually advocate certain public policy options. Consequently, irrespective of the value of their work, Milton Friedman, John Nash and Robert Aumann have been controversial because of political positions they have adopted. While research is often inter-disciplinary, awardees haven?t always been economists. Herbert Simon, Daniel Kahneman and Elinor Ostrom are instances. Should the Prize then become one awarded to social sciences, as Sylvia Nasar suggests in her biography of John Nash (A Beautiful Mind)? Or should one abolish the Prize entirely?
Certainly, Peter Nobel, a human rights lawyer and Alfred Nobel?s great-grand-nephew argues against such a prize in Economics. Even more significant is the case of the two 1974 awardees?Gunnar Myrdal and Friedrich Hayek. Myrdal thought such a Prize was a bad idea because it was given to a reactionary like Hayek, a view reinforced by a later award to Friedman. Hayek?s reservation was more profound and deserves to be quoted. ?The Nobel Prize confers on an individual an authority which in economics no man ought to possess … This does not matter in the natural sciences. Here the influence exercised by an individual is chiefly an influence on his fellow experts; and they will soon cut him down to size if he exceeds his competence. But the influence of the economist that mainly matters is an influence over laymen: politicians, journalists, civil servants and the public generally.?
Splice that with the Keynes? observation that practical men are usually slaves of some defunct economist. Economics isn?t an exact science. It is more like a bag of tools or an approach. While economists are aware of this, they don?t usually project themselves to the rest of the world in that fashion. The run-of-the-mill economist may compete with lawyers as the butt of several jokes. But once invested with the nobility of the Nobel Prize, they become founts of all wisdom and venture into terrain where they don?t necessarily possess expertise. That doesn?t occur in physical sciences, or even in Literature. A Nobel Prize to Peace isn?t that dangerous either.
Alfred Nobel contemplated awards to those who were young, so that prize money could be used to pursue research. It hasn?t worked that way. Thus, benefits of such a Prize are questionable. However, costs can be significant. Think of the now-forgotten hedge fund known as Long-Term Capital Management. Now that giants have been recognised, it is a good idea to abolish the Prize in Economics.
The author is a noted economist