Nobel Prize in Economics 2018

As it was with most subjects at College, Economics bemused and always tested our understanding ! ~ there was Micro Economics and Macro Economics.  Simply, Micro is the study of   economic behavior of a particular individual, firm, or household, i.e. it studies a particular unit.  Macro  economics is the study of the economy as a whole i.e., not a single unit but the combination of all.   Microeconomics is the study of particular markets, and segments of the economy. It looks at issues such as consumer behaviour, individual labour markets, and the theory of firms. Macro economics is the study of the whole economy. It looks at ‘aggregate’ variables, such as aggregate demand, national output and inflation.

Then there were noted Economists like – Adam Smith, as a Scottish economist, philosopher, moral philosopher, a pioneer of political economy and a key figure during the Scottish Enlightenment. Smith is best known for two classic works, The Theory of Moral Sentiments (1759) and An Inquiry into the Nature and Causes of the Wealth of Nations (1776). The latter, usually abbreviated as The Wealth of Nations, is considered his magnum opus and the first modern work of economics. Smith laid the foundations of classical free market economic theory.

The Royal Swedish Academy of Sciences has decided to award the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2018 to William D. Nordhaus and Paul M. Romer “for integrating technological innovations into long-run acroeconomic analysis”.  The communiqué of Nobel reads - William D. Nordhaus and Paul M. Romer have designed methods for addressing some of our time’s most basic and pressing questions about how we create long-term sustained and sustainable economic growth.

William Dawbney Nordhaus (1941) is an American economist and Sterling Professor of Economics at Yale University, best known for his work in economic modelling and climate change. Paul Michael Romer (1955) is also an American economist, a pioneer of endogenous growth theory.  He was Chief Economist and Senior Vice President of the World Bank until he resigned in January 2018 following a controversy arising from his claim of possible political manipulation of Chile's "ease of doing business" ranking.

Nobel’s website states : At its heart, economics deals with the management of scarce resources. Nature dictates the main constraints on economic growth and our knowledge determines how well we deal with these constraints. This year’s Laureates William Nordhaus and Paul Romer have significantly broadened the scope of economic analysis by constructing models that explain how the market economy interacts with nature and knowledge.

Romer demonstrates how know- ledge can function as a driver of long-term economic growth. When annual economic growth of a few per cent accumulates over decades, it transforms people’s lives. Romer solved this problem by demonstrating how economic forces govern the willingness of firms to produce new ideas and innovations. Romer’s solution, which was published in 1990, laid the foundation of what is now called endogenous growth theory. The theory is both conceptual and practical, as it explains how ideas are different to other goods and require specific conditions to thrive in a market. Romer’s theory has generated vast amounts of new research into the regulations and policies that encourage new ideas and long-term prosperity.

Here is something more on the coveted award :  An endowment "in perpetuity" from Sveriges Riksbank pays the Nobel Foundation's administrative expenses associated with the prize and funds the monetary component of the award. Since 2012, the monetary portion of the Prize in Economics has totaled 8 million Swedish kronor. This is equivalent to the amount given for the original Nobel Prizes. The Prize in Economics is not one of the Nobel Prizes, which were endowed by Alfred Nobel in his will.  However, the nomination process, selection criteria, and awards presentation of the Prize in Economic Sciences are performed in a manner similar to that of the Nobel Prizes. The prize was established in 1968 by a donation from Sweden's central bank Sveriges Riksbank to the Nobel Foundation to commemorate the bank's 300th anniversary. Laureates are announced with the Nobel Prize laureates, and receive the award at the same ceremony. The Royal Swedish Academy of Sciences awards the prize "in accordance with the rules governing the award of the Nobel Prizes instituted through his [Alfred Nobel's] will.

Laureates in the Memorial Prize in Economics are selected by the Royal Swedish Academy of Sciences. It was first awarded in 1969 to the Dutch and Norwegian economists Jan Tinbergen and Ragnar Frisch, "for having developed and applied dynamic models for the analysis of economic processes". According to its official website, the Royal Swedish Academy of Sciences "administers a researcher exchange with academies in other countries and publishes six scientific journals. Each September the Academy's Economics Prize Committee, which consists of five elected members, "sends invitations to thousands of scientists, members of academies and university professors in numerous countries, asking them to nominate candidates for the Prize in Economics for the coming year. Members of the Academy and former laureates are also authorised to nominate candidates.  As with the Nobel Prizes, no more than three people can share the prize for a given year; they must still be living at the time of the Prize announcement in October; and information about Prize nominations cannot be disclosed publicly for 50 years.

Like the Nobel laureates in physics, chemistry, physiology or medicine, and literature, each laureate in Economics receives a diploma, gold medal, and monetary grant award document from the King of Sweden at the annual Nobel Prize Award Ceremony in Stockholm, on the anniversary of Nobel's death (December 10).

With regards – S. Sampathkumar

9^th Oct 2018.