Marginal Revolution: Economist wins Nobel Peace Prize

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Economist wins Nobel Peace Prize

The winner is Muhammad Yunus, economist (!) and founder of the micro-credit movement, along with his Grameen Bank. Here is the story. Here is his Wikipedia entry. Here is my New York Times column on micro-credit. Here is the best piece on what we know about micro-credit. Here is Yunus's book on micro-credit, which also serves as a memoir and autobiography. It is a captivating and well-written story.

This is a wonderful choice. The funny thing is, they never would have considered this guy for the Economics prize.

I would write more, but a) read my column, and b) the Topalov-Kramnik sudden death speed chess tiebreakers are being played this morning, watch them live here. Susan Polgar offers running commentary here.

Posted by Tyler Cowen on October 13, 2006 at 08:09 AM in Current Affairs | Permalink

Comments

It is great to see that the Nobel Prize for Peace will now also be associated with prosperity, trade and entrepreneurship! I am not sure if some of the past Economics winners have symbolised free trade, entrepreurship or prosperity.

Even more heartening that he won when Susilo Bambang Yudhoyono, the president of Indonesia, Bono, Rudolph Giuliani, Colin Powell and Oprah Winfrey were in the running apparenetly!

Posted by: Shruti Rajagopalan at Oct 13, 2006 8:40:21 AM

From the little I know it does seem to be a wonderful choice. The Grameen Bank is one of those things that (I suspect) all sides of the political spectrum would like to claim for their own. Those of us on the left see it as a way towards social justice that the free market cannot deliver on its own. Those on the right would, I guess, see it as a way that private initiative can deliver social justice in a way that the state cannot.

So just for today I'll try to put aside my left/right thing and accept that (1) there really are new and hopeful ideas in the world and (2) it doesn't really matter a damn whether you label them left or right.

Posted by: tom s. at Oct 13, 2006 8:59:34 AM

It's a wonderful choice and Yunus' book really is amazing. As soon as I finished I went to his website and applied for any jobs I could find.

Tyler, what is your opinion on the fact that he would never be considered for the economics Nobel?

Posted by: eriks at Oct 13, 2006 10:55:39 AM

I'm guessing that it's because this guy is unlikely to have anyone pushing his case in Stockholm. Also, he hasn't published any papers of note - he's just had an idea and turned it into successful reality.

You could argue it's a weakness of the economics prize, but I think it's appropriate that he got the prize for peace instead of for economics.

Posted by: JW Tan at Oct 13, 2006 12:17:03 PM

The main thing to remember about microcredit is that IT WOULDN'T BE NEEDED IF GOVERNMENTS HAD REASONABLE ECONOMIC POLICIES, including overly regulated and restricted financial sectors and lack of good title and other private property laws.

I am perplexed how this ended up a peace prize. I do agree that moving cultures away from zero-sum economy mentalities to non-zero-sum economy mentalities probably does reduce conflict, but there are zero-sum cultures in the U.S. who are technically rich by global standards, but remain with high levels of conflict because they are in a zero-sum mentality. People in these cultures get credit card offers in the mail, but it doesn't change their zero-sum outlook.

Posted by: Mr. Econotarian at Oct 13, 2006 12:37:17 PM

Certainly as someone who's on the right, I applaud this choice. The Grameen Bank is a wonderfully effective institution that has done tremendous work to reduce poverty and increase the status of women.

Posted by: John Thacker at Oct 13, 2006 1:02:43 PM

Tyler, that "what we know about microcredit" isn't much more than a Grameen Bank press release. There are a lot of papers on Jonathan Morduch's website which give a more balanced view (in particular, while boradly supportive of microcredit, they're much more sceptical about its ability to reach the very poorest, or to work on a financially self-supporting basis).

Posted by: dsquared at Oct 13, 2006 1:14:52 PM

I'm with Econotarian on this one. Given Yunus's win, I wonder if Hernando de Soto was in the running for this year's Nobel Peace Prize? It seems to me that de Soto's emphasis on establishing private property claims to land and other tangible capital is a necessary precondition to the success of micro-credit programs. After all, what good are the results of the micro-lending investments if they can be expropriated by corrupt governments?

Posted by: dr fies at Oct 13, 2006 1:27:29 PM

I am just glad the got recognized for all that he has done. It takes a lot for an academic to break out of academia and start something that has had such a widespread effect. But I agree with Econotarian on the role of governments... especially if you consider a the bureaucracy of governments in countries like India... everyone wants a piece of the pie and they don't care if its going to a farmer in a village who is taking a loan to buy a new part for his combine.

Posted by: Sharran Srivatsaa at Oct 13, 2006 2:00:03 PM

FYI, the Mises Economics Blog has published a critique of Yunus and Grameen Bank. The bottom line: "if microcredit is so wonderful, why aren't big Western banks getting involved?"

Posted by: guest at Oct 13, 2006 2:47:03 PM

They are trying. But I don't think the return justifies them deploying that capital. There are far more lucrative activities to pursue.

Posted by: JW Tan at Oct 13, 2006 2:52:39 PM

Doesnt look like The Economist is too happy with the decision either...

http://www.economist.com/agenda/displaystory.cfm?story_id=8045069

Posted by: Alex Chisholm at Oct 13, 2006 3:31:04 PM

Pawn-broking helps the poor more, but is not PC.

Posted by: stomalian at Oct 13, 2006 9:24:38 PM

"if microcredit is so wonderful, why aren't big Western banks getting involved?"
Two share traders were walking down the street one day when they spy a 20 dollar note lying on the ground in front of them, one of them starts to reach down to pick it up, but the other stops him and says:
"What are you doing, it's obviously not really a 20 dollar note, if it was someone would have picked it up by now."
And so they continue their journey.

I love that joke.

Posted by: Factory at Oct 14, 2006 12:30:19 AM

The 1995 Jeff Tucker piece at Mises hardly boils down to "why aren't Western banks doing it?"

Posted by: Jason Briggeman at Oct 14, 2006 2:55:34 AM

The "why aren't western banks doing it?" is a weak argument. Western banks weren't doing arbitrage either; didn't mean arbitrage didn't work. Just meant they couldn't be bothered to use the political capital to create the infrastructure to do it. Banks don't like change. (no pun intended.)

The question isn't: "does microcredit actually work? " It's "what does microcredit accomplish"?

Posted by: anonymous at Oct 14, 2006 10:24:49 AM

After reading the Jeff Tucker piece, and assuming it's accurate, I think it's fair to say that what Grameen Bank accomplishes is well in line with the outcomes of typical Peace Prize winners.

Posted by: anonymous at Oct 14, 2006 10:33:39 AM

I have read from enough sources* and talked to enough people to believe that this statement by Jeff Tucker is FALSE: "Contrary to legend, Yunus wasn't an independent entrepreneur when he started his bank. He used his personal wealth and high-level connections to arrange special privileges and millions in subsidies. Before the Grameen Bank lent one Taka, he had government backing for fully 60% of its operations."
So blatantly false that I don't trust Tucker on anything else he says.

*Perhaps a hundred mostly internet but by no means all on the internet.

Posted by: ShakespearesFool at Oct 14, 2006 3:18:06 PM

Recall Norman Borlaug won the Nobel Peace Prize, but not the Nobel Prize for medicine, even though undoubtedly his worked saved more lives than any winner of the medicine prize.

Posted by: howardl at Oct 15, 2006 8:03:12 AM

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