October 16, 2019

Last week, World Book looked at the Nobel Prize winners in physiology or medicine, physics, and chemistry. Today, we present the Nobel Prize winners in literature, peace, and economics. Every year in the first week of October, the Nobel Foundation in Sweden awards Nobel Prizes to artists, economists, scientists, and peace workers who—in keeping with the vision of the Swedish chemist and industrialist Alfred Nobel—have conferred the greatest benefit to humankind.

Nobel Prize medal (Credit: Nobel Foundation)

On October 10, the 2019 Nobel Prize for literature was awarded to the Austrian writer Peter Handke. Handke, an accomplished playwright, novelist, and screenwriter, was rewarded for his “influential work” and “linguistic ingenuity” in exploring human experience. On the same day, the 2018 literature prize (which was delayed over a scandal involving a foundation member) was given to the Polish author Olga Tokarczuk for her “narrative imagination” and “encyclopedic passion” representing all walks of life.

On Oct. 11, 2019, the Nobel Peace Prize was awarded to Ethiopian Prime Minister Abiy Ahmed for his successful efforts to create peace between his nation and neighboring Eritrea. In July 2018, Ahmed negotiated “a joint declaration of peace and friendship” with Eritrean President Isaias Afwerki, resolving a dispute that had festered since Eritrea broke away from Ethiopia and became an independent nation in 1993. Since coming to office in April 2018, Ahmed has also restored democratic freedoms within Ethiopia.

On Oct. 14, 2019, the Nobel Prize for economics was given to the United States-based economists Abhijit Banerjee, Esther Duflo, and Michael Kremer for creating an “experimental approach to alleviating global poverty.” Banerjee and Duflo (who are married and serve as professors at the Massachusetts Institute of Technology) worked with the Harvard University academic Kremer to find scientific solutions to improve education and children’s health around the world. They broke large issues into simple questions and then searched for practical answers to those questions that could be instituted on a grand scale.

October 10, 2018

On Friday, October 5, gynecologist Denis Mukwege and human rights activist Nadia Murad were jointly awarded the Nobel Peace Prize for their efforts “to end the use of sexual violence as a weapon of war and armed conflict.” On Monday, October 8, the Nobel Prize for economic sciences went to United States economists William Nordhaus and Paul Romer for integrating technological innovation and climate change with economic growth.

Nobel Prize medal (Credit: Nobel Foundation)

Denis Mukwege has spent much of his life helping the victims of sexual violence in the Democratic Republic of the Congo. Working from the Panzi Hospital in the far-eastern city of Bukavu, Mukwege and his staff have treated thousands of sexual assault victims. Most of the abuses were committed during a civil war that killed millions of people in the late 1990′s and 2000′s. Nadia Murad is a member of the Yazidi minority in northern Iraq. In 2014, Islamic State terrorists attacked Murad’s village, killed hundreds of people, and abducted Murad and other young Yazidi women and held them as sex slaves. Murad was repeatedly raped and abused before she managed to escape. Murad then began raising awareness of the horrors and traumas that she had experienced. Sexual violence in war and armed conflict is a grave violation of international law.

William Nordhaus is an economics professor at Yale University. He created an “integrated assessment model” that shows how economy and climate change together over time. Paul Romer teaches at the New York University Stern School of Business. He has demonstrated how economic forces govern the willingness of firms to produce new ideas and innovations.

October 10, 2017

Yesterday, on October 9, the Royal Swedish Academy of Sciences in Stockholm, Sweden, awarded the 2017 Nobel Prize in economics to American Richard H. Thaler of the University of Chicago. Thaler received the prize for his pioneering work in behavioral economics. This field demonstrates how human behavioral characteristics affect economic decision making.

Nobel Prize medal (Credit: Nobel Foundation)

Economists had long assumed that people act rationally and in their own best interests when making economic decisions. However, in his research, Thaler demonstrated how social preferences, limited knowledge, and a lack of self-control often lead people to make poor economic decisions. Such irrational decisions occur often enough that they can affect people’s lives and influence the economic market overall. He also demonstrated that people often simplify financial decisions by focusing on the narrow impact of each decision rather than on its overall effect. For example, people might choose not to withhold a small part of their paycheck to contribute to retirement savings. They may view it as an unnecessary pay cut rather than seeing it as an investment in their future.

Thaler also showed that people often make irrational economic decisions in consistent ways. Companies may exploit these predictable irrational behaviors to trick people into buying their products. But Thaler also demonstrated that people can be encouraged to make better decisions by means of a small incentive. Economists refer to this idea as nudge theory because it shows people can be nudged into making better economic choices. For example, employers may match a portion of a worker’s contribution to a retirement fund. This modest payment encourages responsible financial planning by employees and benefits society as a whole.

Thaler was born on Sept. 12, 1945, in East Orange, New Jersey. He studied at Case Western Reserve University in Cleveland, Ohio, where he graduated in 1967. He earned a master’s degree in 1970 at the University of Rochester in New York, where he also received his doctorate in economics in 1974. He taught at the University of Rochester and Cornell University in Ithaca, New York, before joining the faculty of the University of Chicago in 1995.

October 13, 2016

On October 10, the Royal Swedish Academy of Sciences in Stockholm, Sweden, awarded the 2016 Nobel Prize in economics to two United States-based economics professors. British-born Oliver Hart of Harvard University in Cambridge, Massachusetts, and Bengt Holmström of Finland, who works at the Massachusetts Institute of Technology (MIT), also in Cambridge, shared the prize for their research in contract theory. Contract theory is a comprehensive framework for analyzing a diverse range of issues involving contractual relationships. Such issues include performance-based pay for top executives, insurance deductibles and co-pays, and the privatization of such public-sector institutions as hospitals, schools, or prisons.

Nobel Prize medal (Credit: Nobel Foundation)

Noting that modern economies are held together by innumerable contracts, the academy said that “the new theoretical tools created by Hart and Holmström are valuable to the understanding of real-life contracts and institutions, as well as the potential pitfalls in contract design.” The work by the two economists is aimed at helping individuals, businesses, and others determine whether the agreements that bind them together are in their best interests.

Holmström, a longtime director on the board of the Finnish telecommunications giant Nokia, began his research on contract theory in the 1970’s. He demonstrated how a contract between a company’s shareholders and its top executives should be designed to link performance to pay incentives. He later generalized his research to link employee performance to pay and potential promotion incentives.

In the 1980’s, Hart’s work focused on incomplete contracts. His work explored how contracts do not always reflect reality because it is impossible for a contract to specify every eventuality when it is written. His work spells out control rights in contracts, specifying which party should be entitled to make decisions in which circumstances when problems arise. Hart’s findings have had a vast impact on several fields of economics, as well as in political science and law.

Hart was born in 1948 in London, England, and is now a U.S. citizen. He received a Ph.D. degree in 1974 from Princeton University in New Jersey. Hart is the Andrew E. Furer Professor of Economics at Harvard, where he has taught since 1993. Holmström was born in 1949 in Helsinki, Finland. He received a Ph.D. degree in 1978 from Stanford University in California. He is the Paul A. Samuelson Professor of Economics and Professor of Economics and Management at MIT.

October 12, 2015

Nobel prize medal (Credit: Nobel Foundation)

Today, October 12, Angus Deaton, an economics professor at Princeton University, won the 2015 Nobel Prize in economics. The Royal Swedish Academy of Sciences awarded the Memorial Prize in Economic Science to Deaton for “his analysis of consumption, poverty, and welfare.”  The Nobel academy said that Deaton has enhanced the understanding of choices on consumption made by individuals and that Deaton’s work has helped economists in designing “economic policy that promotes welfare and reduces poverty.”

Deaton is best known for his research in the areas of health, wellbeing, and economic development. The Nobel committee said that by linking detailed individual choices and aggregate (combined) outcomes, Deaton’s research has helped transform such modern fields of economics as microeconomics, macroeconomics, and development economics. According to the academy, Deaton “has consistently tried to bring theory and data closer together through his mastery of measurement and statistical methods.”

Deaton was born in Edinburgh, Scotland, on Oct. 19, 1945. He taught at Cambridge University and at the University of Bristol before moving to the United States. He holds dual British and American citizenship. Deaton is the Dwight D. Eisenhower professor of economics and international affairs at Princeton’s Woodrow Wilson School of Public and International Affairs.

His latest research focuses on the important factors of health in rich and poor countries, as well as on the measurement of poverty in India and around the world. His 2013 book, The Great Escape: Health, Wealth, and the Origins of Inequality, examines how it is that while most people in the world have gained in wellbeing as gross domestic product (GDP) has risen internationally, some groups have missed out entirely on these benefits.

October 14, 2014

French economist Jean Tirole yesterday was awarded the 2014 Nobel Prize in economics for his analyses of the best ways to regulate large, powerful industries. In making the award, the Royal Swedish Academy of Sciences characterized Tirole as “one of the most influential economists of our time” who had provided regulators with “a whole new set of tools.”

After earning a doctorate from the Massachusetts Institute of Technology in 1981, Tirole studied the regulation of industries dominated by a small number of firms, such as investment banking and communications. His work is based on the idea that policy rules have different effects, both good and bad, on different industries. He developed a framework for constructing regulatory policies suited to industries–such as cable television companies–where competition does not fulfill the textbook pattern of driving down prices while driving up quality. Tore Ellingsen, chairman of the prize committee, noted that Tirole had broken new ground on “what sort of regulations do we want to put in place so large and mighty firms will act in society’s interest.”

August 14, 2013

The longest recession to hit the eurozone has officially ended, economists at Eurostat, the statistical office for the European Union (EU), announced today. Economists generally define a recession as the contraction of a nation’s gross domestic product for two consecutive quarters. Eurostat officials said the eurozone’s recession, which began in the fourth quarter of 2011, ended during the second quarter of 2013, as the group’s collective economic output grew by a total of 0.3 percent. The recession was the longest in continental Europe in the past 40 years. The eurozone, which was founded in 1999, consists of 17 EU countries that use the euro as a common currency.

Economists cautioned, however, that economic growth across the eurozone remained uneven. The bloc emerged from the recession mainly because of growth in France and Germany, whose economic output increased by 0.5 and 0.7 percent, respectively. However, the economies of some eurozone countries, including Italy, the Netherlands, and Spain, continued to contract during the second quarter, though at a slower rate. In Greece, the rate of economic contraction slowed slightly. Portugal, one of the bloc’s weakest economies, grew by a surprising 1.1 percent.

The euro has replaced the individual currencies of 17 member nations of the European Union. (European Central Bank)

Officials noted that unemployment across the eurozone remains high, exceeding 25 percent in some countries. They also warned that despite the the good news, Europe’s economy remains deeply troubled. “I hope there will be no premature, self-congratulatory statements stating ‘the crisis is over,’” the EU’s top monetary official wrote in a blog.

Additional World Book articles:

• Crisis in the Eurozone (a Special Report)
• Economics, World 2010 (a Back in Time article)
• Economics, World 2011 (a Back in Time article)

Ocotber 16, 2012

Two American economists–Lloyd Stowell Shapley and Alvin E. Roth–yesterday were awarded the 2012 Sveriges Riksbank Prize in Economic Sciences, informally known as the Nobel Prize for economics.  The men received the award for their work in “matchmaking”–that is, matching up students with schools or donated organs with patients in need of a transplant. Their work allows matches to be the best possible for all the people in the pool.

The work of both economists involves game theory–a method of studying decision-making situations in which the choices of two or more individuals or groups influence one another. Shapley sought a way to match people in a group such that none of the individuals paired would prefer another partner to the one they were paired with. This problem in economics is known as the “Stable Marriage Problem.” When all of the people in the pool are paired with their best match, economists call this a “stable match.” Working with the late American economist David Gale, Shapley invented a mathematical formula–known as the Gale-Shapley algorithm–that allows economists to most efficiently match people in a group.

The mathematical formula can be used for practical applications, such as pairing a group of students as roommates or placing a group of medical students into hospital-residency programs. Building on Shapley’s work, Alvin E. Roth studied practical applications for these problems of matching. Perhaps the most interesting real-world use of Roth’s work has been in the field of organ transplantation.

Because humans have two kidneys, it is possible for someone to donate one to a relative or friend who needs a kidney transplant. However, the donor and the patient may not be compatible, which will cause the patient’s body to reject the donor kidney. This can lead to serious medical problems, even death. Roth founded the New England Program for Kidney Exchange in 2005. The program fosters paired exchanges of kidneys, meaning one incompatible donor gives a kidney to a stranger, while that patient’s donor donates a kidney to yet another patient. This has led to chains of donations with, for example, 10 donors and 10 patients all operated on at the same time. Each patient gets the kidney that is the best match in the chain.  More kidney transplants occur when these efficient systems of pairing are used.

Lloyd Stowell Shapley was born on June 2, 1923, in Cambridge, Massachusetts.  He completed his bachelor’s degree in 1948 at Harvard and received a Ph.D from Princeton in 1953.  He is currently a professor emeritus at the University of California, Los Angeles (UCLA).

Alvin Roth was born on Dec. 18, 1951, in New York City. He received his bachelor’s degree in a mathematical field known as operations research from Columbia University in 1971. He received his master’s and Ph.D. in the same field from Stanford University in 1973 and 1974, respectively. He is currently a visiting professor at Stanford University and the George Grund Professor of Economics and Business Administration at the Harvard Business School.

The Nobel Prize in economics was awarded on October 10 to American economists Thomas Sargent, of New York University, and Christopher Sims, of Princeton University. They are recognized for their studies on how such economic policies as raising interest rates or cutting income taxes affects such larger economic factors as inflation and gross domestic product (GDP). Inflation is a continual increase in prices throughout a nation’s economy. GDP is the market value of all final goods and services produced in a country during a given period.

Sargent’s and Sims’s research, which was carried out independently in the 1970′s and 1980′s, is considered particularly important today as governments and such central banks as the U.S. Federal Reserve, the Bank of England, and the European Central Bank attempt to guide their national economies away from another recession. The economics prize committee of the Royal Swedish Academy of Sciences cites Sargent and Sims for independently developing “complimentary methods that make it possible to evaluate [economic] policy and trace [economic] effects over time.”