Richard Thaler’s Nobel Prize

by Mario Rizzo

Richard Thaler has won the Nobel Prize for initiating the behavioral moment in economics.

My view of the Nobel Prize in economics is much like Time magazine’s view of its “Person of the Year.” It is awarded to the economist who “for better or for worse… has done the most to influence” the course of economic thinking – at least in certain respects. It also, like Time magazine, operates under the constraint that an award must be given every year. Continue reading


by Mario Rizzo

I have very little to say directly about this year’s Nobel Prize in Economics. I do not know whether the seemingly-technical contributions of Alvin E. Roth and Lloyd S. Shapley rise to the level of a Nobel Prize. However, I am mindful that the Nobel Committee has to give the award every year. They also have to show some diversity in the fields they recognize. But their issues are not mine. I have said to friends more than once that the prize in economics ought to be given every other year. I think there have been too many Nobel Prizes and too few really game-changing fundamental contributions.

My reactions here are different. Today’s New York Times has an interesting article on the prize. The first point that interests me:

Al [Roth] has spent the last 30 years trying to make economics more like an engineering discipline,” said Parag Pathak, an economics professor at M.I.T. who has worked on school-matching systems with Mr. Roth. “The idea is to try to diagnose why resource allocation systems are not working, and how they can be engineered to produce something better.”

I have no problem with better matching techniques for students applying to medical school or trying to get into certain popular courses and so forth. But I do object to the project of making economics more like engineering. Economics was born of the desire to elaborate and explain the spontaneous ordering of the market. It also tries to explain the conditions under which that ordering process may break down in markets. Markets generally coordinate but sometimes they may not. Let’s find out when, why, and how. It is very, very, important to understand – for both students and practitioners of economics alike – that markets are not like bridges. So I do not want an engineer teaching economics.

The second point has more to do with the impact of constructivist matching schemes on public policy. As a second best, where markets do not operate, they may improve things. However, this takes the spotlight off where it should be: permitting markets where they are forbidden. Or, perhaps, stated more “moderately” encouraging the discussion of a greater role for markets – as in human organs. Even Iran permits a market in kidneys, after all.

Nevertheless, I am amused by all the flurry of activity designed to show how wise and interesting the choice for this year’s economics Nobel is. Sometimes it is not.

Elinor Ostrom and the Relevance of Economics

by Mario Rizzo  

The work of Elinor Ostrom, the first woman to receive the Nobel Prize in economics, is not very well-known among economists. In fact, I would venture the guess than most economists had not heard of her before the prize was announced yesterday morning.  

Two reasons for this are that her degree is in political science and she has written for publications outside of the mainstream economics journals. Additionally, her work, by and large, lacks the high degree of mathematical formalism now so characteristic of economics.  

Yet the Nobel Prize Committee has done a great service to economics and the greater social-scientific community. Continue reading