Hey There,
Alfred Nobel's will is responsible for the creation of the prizes named after him, they ranged from Physics to Peace. Economics was not one of the areas he chose to leave an award for, but in 1968 when the Swedish Central Bank was celebrating its 300 years they decided to honour Nobel by adding a prize in his name in economics.
It also helped that right round the time the bank was trying to persuade the government to be more free market friendly, and the prize was to be used as a political tool for persuasion. As you read this the winner of this year would have been announced, but let us see who wins these prizes.
The prize in Economics has been awarded to a number of economists whose work has been highly influential, including Kenneth Arrow, Milton Friedman, James Buchanan, Friedrich Hayek and John Maynard Keynes. They have made substantial contributions to our understanding of a wide range of economic issues and have provided guidance to policymakers in the areas of taxation, inflation, monetary stability, the regulation of financial markets and international trade.
From Jan Tinbergen to Joshua Angrist, 50 years ago, economists were dominated by Keynesian ideas, but in the 21st century there has been a revival of interest in the Austrian school of economics. By the 1970s the emphasis in economics had shifted from quantity to quality, a shift that was supported by several prominent economists including George Stigler and Gary Becker. In the 20th century, economists became enamoured of macroeconomics and technique over microeconomics, but in the last three decades there has been a resurgence of interest in the latter. There is little doubt that this award has contributed to this trend.
A new generation of economists emerged in the 1990s with a tendency to emphasise the role of market failure in explaining economic outcomes. This market-failure emphasis extended to both micro- and macro-levels of analysis.
Scholars working at either of these levels showed no reluctance in proffering advice to governments on detailed market interventions designed to correct market failures. Most of these recommendations focused on the reduction of externalities in the form of pollution or inequality. This approach led to greater willingness to consider government intervention in the economy as a means of addressing social problems than had been the case in the previous decades.
The Prizes in Economics by Categories: The Quant Revolution is becoming Sharper (Behavioural Visualisation)
This willingness to consider government intervention has been criticised by economists such as George Stigler, who argued that market failure is only one of many causes of economic inefficiency and therefore should not be the only focus of government economic policy. His views received strong support from Milton Friedman who viewed government intervention as a means of redistributing income rather than increasing social welfare. Friedman argued that government intervention was often counterproductive, as it increased inefficiency and distorted incentives.
The implication of this view was that markets should be left free to operate unhindered by the state in order to maximise social welfare. As concerns about environmental damage caused by industrialisation increased during the second half of the 20th century, many economists began to take the view that the government should intervene in the market in order to reduce the negative effects of economic growth.
The Nobel Prize in Economic Sciences has been awarded to people, 87 men and 2 women, since it was first given in. All of these awards have been made to Western European and American scholars, with the exception of Lester C. Thurow who received the award for research in non-Western economies. During the history of the prize, there have been several controversies surrounding its award to western economists.
Is the Nobel Prize in Economic Sciences beneficial for the discipline?
The Nobel Prize in Economics has arguably been the most prestigious award in economics, but has also caused controversy. Some argue that the award puts too much emphasis on individual achievements and ignores other important contributions in the field. Others argue that it is too closely linked to politics and that the prize is often awarded to people based on political rather than scientific considerations. Despite these criticisms, there is no doubt that the award has helped to raise the profile of economics as a field.
In the book Nobel factor, Avner and Gabriel examines how the Nobel Prize in Economics has affected the field in the past and how it might be affecting the field in the future. They argue that the prize has encouraged a "winner-take-all" mentality within the field and that the competition for the award has diminished the ability of other economists to collaborate and exchange ideas. This has resulted in a narrowing of the range of topics and methods that are considered important in the discipline and may have a negative impact on the long-term future of the field.
Some of the greatest controversies surrounding the Nobel prize have to do with the political leanings of the winners.
For example, several winners have been members of the Austrian School of economics, or Chicago School, which is generally regarded as a right-wing economic ideology. Critics have argued that this undermines the credibility of the prize as an objective measure of merit because it may encourage like-minded economists to exclude those from diverse backgrounds who hold different views about the causes of social problems and the best solutions for addressing those problems.
One particularly interesting example of this came in when Eugene Fama was awarded the prize for his work on asset pricing, despite the fact that he had previously expressed support for some extremely right-wing economic views. This led many to criticise the award as being politically motivated and expressed concern about the influence of conservative thinking on the economics profession. Milton friedman's work represents one of the central pillars of modern economic theory and has been hugely influential in shaping the thinking and policies of governments and businesses around the world. However, his conservative political views have prompted criticism that he may not always be as objective as he would like others to believe and that he may be influenced in his work by his own personal beliefs and assumptions.
But by offering this award every year, the academy is allowing the public to weigh in on these issues and helping to raise awareness of the importance of economic research. Ultimately, the purpose of the Nobel committee is not to award the best science, but rather to reward significant contributions to the advancement of society.
The prestige and weight of this award is substantial, and it can also have a significant impact on the careers of the winners. The laureates generally become celebrities in their fields and are often invited to speak at prestigious conferences and events all over the world. Their views (and their implied opinions) are often widely cited in the media, and their opinions often influence government policies.
The main arguments against this prize include that it focuses almost exclusively on Western Europe and North America, and that it promotes an excessively narrow view of the social sciences that fails to recognise the contributions made by scholars in other parts of the world. There is also considerable disagreement among economists about whether the prize should be given to an individual or to a group, and some believe that it should not be awarded at all on the grounds that it is essentially a political prize.
In 2019, Milanovic,a leading scholar on global inequality, criticised the prize, stating that it had not rewarded a single scholar for groundbreaking research that benefits the whole world but rather an economist who belongs to a particular school of thought. He also argued that inflation and other economic issues were not included in the criteria for the award and called for the creation of a prize that better reflected the concerns of ordinary people in the developing countries of Africa and Latin America.
Theoretical and empirical limitations of economics as a science:
When economics is viewed as a science, it relies heavily on assumptions of rationality and utility maximisation. Scholars argued that this assumption is undermined by the existence of cognitive dissonance. Cognitive dissonance refers to the psychological discomfort that occurs when people are forced to acknowledge that their beliefs are at odds with their actions. The existence of such dissonance leads to support for ideologies that favour self-interest at the expense of others.
The existence of cognitive dissonance in modern society leads to widespread support for political ideologies that favour self-interest at the expense of others. Examples of such ideologies include neoliberalism and conservatism. Milanovic argues that neoliberal policies have contributed to the widening gap between rich and poor by making the rich richer and the poor poorer. Similarly, conservative policies are designed to promote the interests of wealthy individuals and business interests at the expense of everybody else.
The inability of neoclassical economics to provide a coherent theoretical explanation of how the economy actually works. Indeed, there is no consensus among economists regarding the actual causes of economic phenomena such as unemployment, inflation, growth, and so on. At best, we have a collection of disparate theories that are unable to provide an integrated and coherent approach to understanding economic phenomena. Moreover, these theories have proven inadequate at explaining and predicting economic developments during the last few decades. In particular, the majority of economists did not foresee the heightened risk of economic crisis and financial turmoil that has been experienced in the last decade.
As a hard science, economics tries to build economic models on a foundation of axioms and theorems. These axioms-and-theorems-based economic models are useful in the sense that they provide a systematic way of analysing economic activity and making predictions about the future performance of the economy and markets. However, the objectivity of these axiomatic-theorem-based models is sometimes called into question because of the circular logic involved and the limitations imposed by the fact that these models are unable to capture the human factor involved in economic activities and interactions.
Economics, as a hard science, often ignores distributional effects arising from the dependence of willingness to pay(WTP) on income. Thus, the assumption that individuals maximise their utility function at their point on the marginal curve is premised on the idea that both factors have constant marginal utilities. In reality, however, this assumption ignores the important link between income and utility that can give rise to various inequality-inducing effects such as income effect and substitution effect. The distribution of prizes by the different schools are testament to the fact.
There is a great deal of confusion about the nature of economic science and the nature of the discipline itself. Economists sometimes seem to believe that economic science is, in fact, a science, when in reality it is a social science that deals mainly with the study of human behaviour.
Economics is storytelling at its most basic level – it relies on narratives to provide explanations about how an economy works.
"Why do economists miss the stories behind many of our economic fluctuations? Because they think in abstractions, not narratives. But the human psyche responds much more to narrative than to abstraction."
Economic theory is built around metaphors and equations that express logical relationships between different concepts. This is why one has to be very cautious when interpreting what the underlying meaning of a given model or equation might be.
