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Nobel Prize predictions
The Economics prize will be announced October 9. Here are speculations from last year. Here are further plausible picks. Gordon Tullock deserves it. I predict Eugene Fama and Richard Thaler as deserving co-winners for their work in empirical finance. Fama will win it for first proving (1972) and then disproving (1992) CAPM, the Capital Asset Pricing Model. Thaler will win it for developing behavioral finance and a better account of how irrationalities manifest themselves in asset markets. Kenneth French, a co-author of Fama's, might be a third pick. My greatest fear is that they pick Lars Svensson (I believe he is Norwegian, but still that is not a bad name for winning a Swedish prize), and somebody asks me to explain his work.
I believe I have never once predicted this prize correctly. Last year I said Thomas Schelling, the co-winner with Bob Aumann, deserved the prize but might not ever get it. What do you all think?
Addendum: Chris Masse points me to bookie odds on the Peace Prize.
Posted by Tyler Cowen on September 28, 2006 at 07:54 AM in Economics | Permalink
Comments
If you have one, I would appreciate a link or reference to Fama's proof and disproof. By disproof, do you mean the 1992 journal of finance paper where he shows empirically that stock betas don't predict returns?
Posted by: DK at Sep 28, 2006 8:11:35 AM
DK - here's a recent paper by Fama on the empirical failings of the CAPM. He didn't devise the theory, which (in outline) is only common sense anyway.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=440920
If Fama and Thaler both win, wouldn't it be the best example of intellectual opponents sharing the prize since Myrdal and Hayek did so in 1974?
Posted by: chris at Sep 28, 2006 8:20:06 AM
Fama's paper of 1992 does not in fact falsify the CAPM. It can be interpreted the way that most betas are poorly computed. Saying that betas don't work does not yet mean that CAPM is wrong.
The best empirical support (albeit not proof) of CAPM is the relative performace of index funds vs. actively managed portfolios.
Posted by: Pavel at Sep 28, 2006 8:54:25 AM
Maybe this will help...
I found an article and Fama suggested these articles by Fama and French when looking for a discussion on the CAPM:
"Multifactor Explanations of Asset Pricing Anomalies" (Fama and French, Journal of Finance, 1996)
"Value vs. Growth: The International Evidence" (Fama and French, Journal of Finance, 1998)
"Characteristic, Covariances, and Average Returns" (Davis, Fama, and French, forthcoming)
The article I got the information for this post was dated 1999.
Posted by: CH at Sep 28, 2006 8:57:48 AM
My sister pointed me to the Science Citation Index people who have a prognosis at http://scientific.thomson.com/nobel/.
And while neither of us has a clue about the economics one, she is hoping for Alec Jeffreys to get the medical prize for DNA fingerprinting, as she did her PhD at his place.
Once upon a time I could have made a reasonable guess about the chemistry one. No longer, unfortunately.
Posted by: tom s. at Sep 28, 2006 9:15:22 AM
Oh yes. Click the links on the left of the page under "2006 Nominees" for information about each. For those who don't want to follow the links, their predictions are:
Bhagwati, Dixit and Krugman for trade.
Dale Jorgenson for investments in information technology and modelling techniques
Hart, Holmstrom and Williamson for transaction costs and contracts.
Posted by: tom s. at Sep 28, 2006 9:19:17 AM
Those are all good suggestions. I believe Tullock deserves it but I think he will never get it. His early work with Buchanan helped define public choice. But some of this other work, some with Buchanan and some independently, is truly wonderful. I think his Theory of Public Bads is Bastiatlike in its clarity and usefulness. But like Bastiat, Tullock gets dinged for not having the training in the field - although like Bastiat, a lot of his work helped define the field.
Posted by: drtaxsacto at Sep 28, 2006 9:33:05 AM
I vote for Alchian and Demsetz to share it. A look at the post on this site and reference to the link about citations of article since 1970 show that they had an article very near the top;
http://papers.nber.org/papers/w12526.pdf
This is a great contribution.
Not only that, both of these scholars have, of course, made other extremely excellent contributions, albeit not as frequently cited as their joint work. By excellent, I mean that their theories lead straightforwardly to operational propositions.
jim
Ps. I'd be just as happy if Tullock got it.
Posted by: jim at Sep 28, 2006 9:37:01 AM
Alchian has almost no chance to get it unless it ends up as a package deal. I could see Alchian and Williamson getting it. But more likely it will be Williamson and Hart.
Posted by: ghost at Sep 28, 2006 9:42:12 AM
IMO, no one alive deserves it more that Leo Hurwicz, but he'll never get it. Maybe along with Groves (and Ledyard?) for early work on mechanism design.
Milgrom and Myerson for auction theory would be a good bet, but they just gave a game theory related prize last year. Same problem with Milgrom, Myerson and Maskin for mechanism design.
Hart, Holmstrom and Williamson for contract/transaction costs is a decent bet, but it could as likely be Alchian-Demsetz (for the additional work on property rights).
Fama and (maybe) Thaler is probably the safest bet, since there hasn't been a prize directly related to finance in a long time. There's also a great public interest in work that relates to the stock market.
Posted by: Joe at Sep 28, 2006 11:03:18 AM
I spend a fair bit of time telling my students that you can't prove something, you can only either disprove it or fail to disprove it. Am I wrong?
Posted by: bartman at Sep 28, 2006 11:32:33 AM
im looking forward to luskin's column on krugman not getting it, this year or any other..
Posted by: daniel at Sep 28, 2006 12:43:43 PM
I think the list that Tyler linked to
can be viewed as the "A list." Any of
those could get it. In terms of probabilities,
I think the most likely competition to Fama or
Fama and Thaler or Fama, Thaler, and French (or
somebody else with Fama, etc.) would be one for
trade, with Bhagwati for sure on that one,
very likely with Dixit, less likely with
Krugman.
If Tullock gets it, and I think he deserves it,
it will be in conjunction with Anne Kreuger for
rent seeking. He invented the concept, and she
coined the term. This would also be politically
correct in that a woman has never gotten it.
Many think Joan Robinson should have gotten it,
but she never did and is now dead...
Posted by: Barkley Rosser at Sep 28, 2006 2:51:05 PM
Oh, and while we are at it I recently
learned that Oliver Williamson is the
most cited economist of all time, by a
long shot in fact. So, he better get it
sometime.
Posted by: Barkley Rosser at Sep 28, 2006 3:05:01 PM
Richard Musgrave deserves it. But another no chancer.
Posted by: mike at Sep 28, 2006 3:32:16 PM
mike,
While most think when Buchanan got it the
issue was why not Tullock at the same time,
credible rumors I have heard say that the
person the committee was thinking of pairing
with Buchanan was Musgrave. But they did not,
and now you are probably right that he is a
no-chancer, for better or worse.
Posted by: Barkley Rosser at Sep 28, 2006 3:58:38 PM
May be one of the bloggers should get it; for taking economics to the people.
Posted by: gaddeswarup at Sep 28, 2006 7:22:30 PM
I believe Svensson is Swedish, not Norwegian.
Posted by: James at Sep 28, 2006 10:12:42 PM
Will Brian Arthur (for his works on increasing returns) or Richard Nelson (for evolutionary economics) ever have any chance to win Nobel prize?
Posted by: Abdol at Sep 28, 2006 10:56:51 PM
Brian Arthur's work is generally considered to be on the fringes of economics and few would agree that he has had a significant role in economics. He just isn't part of the club.
Posted by: Jack at Sep 29, 2006 3:35:20 PM
Is Robert J. Barro not in contention this year?
Posted by: Tim at Sep 29, 2006 10:14:07 PM
Peter Diamond's name does not come up as often as I think it should. He has three very big papers to his name.
Posted by: Andrew John at Sep 30, 2006 6:12:52 AM
Barro is on the A list.
Having just gotten back from a
symposium honoring Thomas Schelling,
one of last year's recipients, I am
more inclined to think this might be
the year for a trade Nobel. There
has not been one for a long time, a
very long time, if ever. Furthermore,
the committee sometimes like to send
a political message, and the big global
economic event this year has been the
collapse of the Doha round of trade
negotiations, the first time in a long
time there has been such a definitive
collapse. The committee might well want
to send a message to the world about the
widely held consensus view on free trade
that is held by economists. No better
way to do it than to give to Bhagwati et al.
Posted by: Barkley Rosser at Sep 30, 2006 11:57:37 AM
By the way, my mention of Diamond wasn't really a prediction. I'd put my money on Bhagwati/Dixit as well. I'm just puzzled as to why Diamond doesn't seem to make the A list.
Conversely, I'm also a little puzzled as to why Barro's name figures so prominently. Don't get me wrong: he has a truly impressive body of work to his name, and I wish I were a tenth of the economist he is. But, in the end, I'm not sure that he has made the truly innovative, Nobel-worthy contribution. Unanticipated money? Didn't really go anywhere. Reputation? The most important point had already been made by Kydland-Prescott. Empirical growth? Useful and informative, but not pathbreaking. Ricardian Equivalence? Well, maybe, but it is named after Ricardo for a reason, and I don't think the interdependent utility wrinkle is that exciting, in the end.
Posted by: Andrew John at Oct 2, 2006 12:34:14 AM
For what it's worth, the Thomson predictions I cite above were all wrong for both the medicine and physics prizes.
Posted by: tom s. at Oct 3, 2006 8:56:05 AM
