What the Nobel Economists Missed

Wall St Journal ^ | October 12, 2001 | David R. Henderson

[SJackson]

On Wednesday, the Nobel Prize committee announced this year's winners for economics: Berkeley's George Akerlof, Stanford's Michael Spence, and Columbia's Joseph Stiglitz. Americans all, they won the award for their path-breaking contributions to the economics of "asymmetric" information.

The awards may well be justified, especially for Messrs. Stiglitz and Akerlof. But unfortunately the Nobel committee, and economists in general, are missing the big picture on information economics. Let me explain, first by highlighting the three economists' contributions.

[Critter]

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[Lev]

Good points.

[1234]

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[SJackson]

Hayek pointed out that almost all information that matters is decentralized, that it exists in the minds of the millions of participants in an economy. Hayek first made this point in a 1935 article explaining why socialism couldn't work.

This is at the core of the success of free market systems, a very difficult concept for many people.

[Eugene Tackleberry]

"The awards may well be justified, especially for Messrs. Stiglitz and Akerlof"

Why is he snubbing Spence? I noticed that both are at Stanford -- some kind of personal rivalry???

[untenured]

Why is he snubbing Spence? I noticed that both are at Stanford -- some kind of personal rivalry???

Prof. Spence really only had one significant contribution, the one described in the article. Profs. Stiglitz and Akerlof have amassed a much more substantial body of work.

[timm22]

Thanks for the post. Last night we were discussing the recent Nobel prize in my economics class, and it caused a big ruckus between a free-market leaning student and the Keynesian instructor. I'll have to bring a copy of this to class next time in case the issue reemerges.

[Moonman62]

Hayek pointed out that almost all information that matters is decentralized, that it exists in the minds of the millions of participants in an economy. Hayek first made this point in a 1935 article explaining why socialism couldn't work.

This is at the core of the success of free market systems, a very difficult concept for many people.

Sure, but people want to be protected from asset bubbles, wealth-effects, and economic overheating. Even a good deal of conservatives and Republican's have become anti-capitalists in order to avoid those things. Heaven forbid that investment in technological growth should ever lead our economy again. It's far better to lose trillions of dollars in wealth than to ever allow another internet IPO.