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Wednesday, October 13, 2021

Nobel Prize in Economics 2021

Long ago, people lived in villages – they were self-sufficient, their wants were limited – slowly Trade progressed – humans started consuming more – boundaries opened up ! people started travelling from place to place and sometimes shifted their pastures.  When people cross national borders during their migration, they are called migrants or immigrants (from Latin: migrare, 'wanderer') from the perspective of the destination country. In contrast, from the perspective of the country from which they leave, they are called emigrants or outmigrants. 

Immigration is the international movement of people to a destination country of which they are not natives or where they do not possess citizenship in order to settle as permanent residents or naturalized citizens.  Commuters, tourists, and other short-term stays in a destination country do not fall under the definition of immigration or migration; seasonal labour immigration is sometimes included, however. 

As for economic effects, research suggests that migration is beneficial both to the receiving and sending countries.  Research, with few exceptions, finds that immigration on average has positive economic effects on the native population, but is mixed as to whether low-skilled immigration adversely affects low-skilled natives.  .. ..  How does immigration affect pay and employment levels? How does a longer education affect someone’s future income? These questions are difficult to answer because we have nothing to use as a comparison. We do not know what would have happened if there had been less immigration or if that person had not continued studying. 

As it was with most subjects at College, Economics bemused and always tested our understanding ! ~ there was Micro Economics and Macro Economics. To put 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. 

On the Qs on immigration and its effects - this year’s Laureates have shown that it is possible to answer these and similar questions using natural experiments. The key is to use situations in which chance events or policy changes result in groups of people being treated differently, in a way that resembles clinical trials in medicine. 

Using natural experiments, David Card has analysed the labour market effects of minimum wages, immigration and education. His studies from the early 1990s challenged conventional wisdom, leading to new analyses and additional insights. The results showed, among other things, that increasing the minimum wage does not necessarily lead to fewer jobs. We now know that the incomes of people who were born in a country can benefit from new immigration, while people who immigrated at an earlier time risk being negatively affected. We have also realised that resources in schools are far more important for students’ future labour market success than was previously thought. 

Data from a natural experiment are difficult to interpret, however. For example, extending compulsory education by a year for one group of students (but not another) will not affect everyone in that group in the same way. Some students would have kept studying anyway and, for them, the value of education is often not representative of the entire group. So, is it even possible to draw any conclusions about the effect of an extra year in school? In the mid-1990s, Joshua Angrist and Guido Imbens solved this methodological problem, demonstrating how precise conclusions about cause and effect can be drawn from natural experiments.


The Royal Swedish Academy of Sciences has decided to award the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2021 

with one half to: David Card

University of California, Berkeley, USA - “for his empirical contributions to labour economics” 

and the other half jointly to Joshua D. Angrist

Massachusetts Institute of Technology, Cambridge, USA 

Guido W. Imbens; Stanford University, USA 

“for their methodological contributions to the analysis of causal relationships” 

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). The physical conduct of  prize award Ceremony at present is affected by present Covid scenario.

With regards – S. Sampathkumar
13th Oct 2o21. 

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