Nobel Prizes: Being Right and Wrong

"Nobel prizes are sometimes awarded to scholars who are wrong for the right reasons, but almost never to those who are right for the wrong reasons". Robert H. Frank in The Return of the Economic Naturalist. p. 90

Belated Tribute to Elinor Ostrom

Source: http://www.nobelprize.org/nobel_prizes/economics/laureates/2009/ostrom-photo.html

I was speaking to an undergraduate student of economics who was surprised at my mentioning that Elinor Ostrom was the first female Nobel laureate on in Economic sciences. The purpose of this blog post is not to express my surprise that this student was unaware of this important first in economics, but that this fact has not been sufficiently covered in popular press.

As a professional with a a distinguished career and who is classified as a political scientist, Elinor Ostrom was deservedly awarded the prize in 2009 in conjunction with Oliver Williamson.

To my embarrassment, I realized that I had not announced the award on this blog in 2009 as I have often done for other Nobel prize winners in that category. This left me with the delicate issue of blowing Elinor's trumpet rather late especially since she sadly passed away about a month ago. In short, she received the prize, " ..for her analysis of economic governance, especially the commons". Here is the link to her Nobel Prize Lecture delivered on December 8, 2009. In short, her work responds to the economic aphorism, "tTragedy of the Commons", and shows presents real examples in parts of the world where societies adopted sophisticated systems to ensure coordinated utilization of such resources. Here's social scientist who tests theories through empirical means and provided a serious counterfactual to one of the most common responses to handling common resources. 


Addition: Here's the article from the NYT announcing her passing on. 

Steinman's Nobel Comes Three Days Late

There are all kinds of sensible reasons one can consider for why the Nobel Prizes are not awarded posthumously. Among them is to ensure that the prestige of the award is provided to the individual who carried out often important and difficult work. It is therefore a sad coincidence that the committee for the Nobel Prize on Physiological Sciences sent the happy message of the award to Ralph Steinman and learned that he passed on a few days prior to the announcement.  

Certainly a well-deserved prize and his name goes to the record of winners except that the repository of the award will not have his lecture for the prize. Congratulations are due to Ralph Steinman as this statement confirms that in spite of his demise, he reamins a winner. 

The Intellectual And The Market Place

George Stigler is not only a first class economist but also a formidable polemicist who is not too deeply beholden to any philosophy. I have just read his collection essays in this rare book shows that the incentives faced by professors in the academy are not always conducive for maximum output in terms of teaching, research or promoting free thinking. An important and enduring issue tackled with a sense of humour that is uncharacteristic of an economist is on ensuring better economic literacy among common people. His views about why that elevated quest may be futile is by and itself worthy of a thesis in philosophy. The choice of the title comes from the final essay in the collection that contrasts the academy to the market place and wonders why these two are not natural allies.

Without doubt a superior book for introducing a lay and professional audience to the thinking on economics and the place of academies in the nation. Definitely deserving of five stars because of the due regard for Adam Smith, whose ideas are still profoundly correct in spite of the fact that he did not employ spreadsheet and high order mathematics.  

He makes the following profund statement in the title essay that is still demonstrably true almost half a century later: "I consider it shocking that more Americans have read The Affluent Society than The Wealth of Nations". Needless to mention, it is not only true of the US where a larger proportion of citizens have heard of Adam Smith than many other nations.

Ethics and Economic Progress

I make no resolutions upon the turn of a calendar year partly because time change is a very arbitrary factor but I resolve every now and again to read some more of a type of literature or improve on a set of skills that I consider important. Among the resolutions that I made is to read at least one book per month written by a scholar who won the Nobel Prize in Economic Sciences. 

In the last week, I started and read an extremely perceptive book that provides the title for this blog post. Its author is James Buchanan, to whom the Nobel prize in Economic Sciences was deservedly awarded in 1986, "..for his development of the contractual and constitutional bases for the theory of economic and political decision-making."

Needless to state, the book is very well written and reads well notwithstanding the fact that its author avoided complicated notations in the text. Without spoiling it for readers of this blog, he provides a justification based on Adam Smith's thinking for the reason to encourage saving and work. He correlates these easily by starting with the observed truth that division of labour and exchange are significant factors for raising productivity. Growth in division of labour in turn affects the extent of the markets with the result that more labour and saving affect this increase.  Taking these two together, it is clear that the value to society is increased by the choice of an individual to work some more or save some more. On the other hand, idleness exerts a cost on the rest of society because it constrains its growth. 

Essays in the second portion of the book connect these three thoughts by addressing the effects of these ethical considerations on tax responses, idleness and "unproductive" labour. In all, the essays clarify many issues and are written in a very lucid and engaging manner. This is indeed a five start book written by a colossus of the discipline and leader in the Public Choice School of economics.

A Portrait of Paul Krugman

Of the many brilliant economists that emerge from the singularly enviable training of the American academies for economics, I am most in awe of Paul Krugman. And my admiration preceded his elevation to Nobel laureate status so I have some justification in claiming that I could see the inevitability of that prize. In reading the common blogs by ideologues and other party apologists who appropriate libertarianism as necessary, one would think that Paul Krugman never went through a first principles course in economics. It is possibly because ideology and political biases often trump rational thought and makes people more interested in attacking the man and not bad ideas.

Writing in the New Yorker Magazine, Larissa MacFarquhar has painted a sharp and immensely entertaining portrait of Paul Krugman based on a visit to the professor's home in St. Croix. While the title suggests that it is about the formation of some of Prof. Krugman's strong political ideas in the United States, I think that it presents a clear picture of the household of two scholars with solid ideas and who are accomplished in every respect. Consider that they both have graduate degrees from distinguished schools of economics, have taught in such schools, been consultants to corporations, published a text book in their subject and one bears the rare distinction of a Nobel prize in Economic Sciences.

This portrait reveals that paul's political ideas and his articles in the NYT arose from a reflection of the circumstances of the country and the denial of some facts that were evident to him. This created the need to understand and comment on how the politically dominant ideas influence society and the economy.

Paul's strident attacks of the Republican Party and its dominant paradigm makes him a loathsome target for party operators and their intellectual foot soldiers. What often gets lost in the debate is the fact that Prof. Krugman has a set of very solid intellectual credentials and an unrivalled portfolio of ideas that changed the field. The article summarizes some of these contributions in diverse areas starting with his understanding of financial crises, international trade and geography and trade. Some of these findings are now so embedded in the subject that they are taken as having been a part of the theory all along.

As would be expected of an elaborate article like this, the author would eventually ask his subject whether there are other contributions of consequence that are expected to emerge from him. Paul Krugman goes back to the history of humanity where poverty has been almost a fixed feature. His question though is why with such stability in poverty among humans do some states suddenly begin a relentless growth path toward prosperity. My hope is that Paul Krugman rediscovers the obsession that is required to fully answer this profound question.

Tribute to Paul Samuelson

I have just read the news that prof. Paul Samuelson died at his home in his home in Belmont yesterday. Which student of economics, or college student who interacts with the students of economics never got to see and perhaps go through a few paragraphs of textbooks written by prof. Samuelson. Awarded the Nobel prize in economic Sciences in 1970, he heralded the rise of US dominance in research and thinking for the discipline. His award reads that he receives the honor "for the scientific work through which he has developed static and dynamic economic theory and actively contributed to raising the level of analysis in economic science."

Paul Krugman Wins the Nobel

I have always expected Paul Krugman to eventually win the Bank of Sweden's Prize in Economic Sciences in memorial of Albert Nobel. What I may have missed totally was that this would happen this year and that the citation reads in part: "for his analysis of trade patterns and location of economic activity".

There's no doubt that merit has been rightly rewarded here and by a professional economist who takes the time to explain the elements of the discipline to lay audiences through lucid and popular publications. This is proof to me that the science of economics is indeed useful. Prof. Krugman is unlikely to pass by this blog but congratulations nevertheless.

A less mathematically-laden publication that would highlight the contributions mentioned in this prize are found in this book featuring the Gaston Eyskens lectures. As the citation states, Krugman provided the connection between cities and global trade through the argument of increasing returns. The study answers the question about why production and industrial activity occurs where it does.