Financial crisis may shake Nobel Eco Prize

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The current financial crisis is raising questions about the legacy of the Nobel economics award, with prized liberal market theories being blamed for the mess and some experts saying the turmoil will in future push the prize in a new direction.

"I think the crisis is leading to a fundamental change in the philosophy. We've seen that unfettered markets can be a disaster," Joseph Stiglitz, a Columbia University professor who himself won the 2001 Nobel Economics Prize, said.

The prize committee has been criticised in the past for focusing heavily on the neoclassical approach to economics, which in political terms is often equated with the market liberalism dominating mainstream economics today.

The theories of such Nobel laureates as Milton Friedman, who won the prize in 1976 and whose ideas helped power a conservative policy revolution, have increasingly been accused of helping to pave the way for the current market mess.

With their unwavering belief in the efficiency of the private sector and the rationality of markets that are best left untouched by government intervention and regulations, such economic theories deserve a share of the blame for the financial sector meltdowns on view today, critics say.

"Recent events provide what you might call the meat, the causal empirical verification that markets don't work on their own very well," said Stiglitz, a former World Bank chief economist whose harsh criticism of the bank's policies led to his resignation in 2000.