The ‘Nobel Prize’ in Economics: Further Considerations and This Year’s Award

Some further thoughts in the aftermath of publication of my brief review essay on the recent book on the Nobel Prize in Economics by Offer and Söderberg, and in response to reactions from colleagues:

1. The review should have made more explicit that the book focuses on the period before 2005.  It would have to be judged whether the authors’ narrative about the prize being aimed at undermining social democracy within Sweden would be as credible for the later period.

2. The review should have noted the authors’ neglect of heterodox and alternative traditions, as reflected for example in their premise that the body of opinion of the economics discipline as a whole (as reflected, for instance, in citations) is an indicator of worth. This is patently not the case because of the progressive marginalization within the discipline, first in the US but now everywhere, of very significant intellectual traditions, many of which have made fundamental contributions (ecological as opposed to environmental economics, various political economy traditions, such as feminist, institutionalist, Marxian, post-Keynesian, Sraffian etc.).  The biases of the Nobel Committee, both political and methodological, would have to be seen as having been even greater than the authors represent, in light of the presence of these neglected traditions, and by no means to have been subsequently corrected.  The susceptibility of the Prize to the biases of the discipline as a whole is not a subject addressed by the authors.

3.  Elinor Ostrom (2009 Prize) was not merely the only woman to win the Prize but one of the only non-economists (with e.g. Herbert Simon (1978 Prize) and Daniel Kahneman (2000 Prize)).  It might seem that such seemingly anomalous Prizes don’t really involve fundamental criticisms of or alternatives to the dominant ‘language game’ in economics but rather periodic and relatively hollow concessions, while for the most part maintaining a “technofetishist’ and a methodological and political approach that travels within narrow lines.

In these respects, this year’s Prize winners are indeed a case of “business as usual”:

Paul Romer is hardly the first economist (think Smith, Marx, Schumpeter, not to mention modern figures building on their ideas)  to recognize the importance of endogenizing technical change, and his approach to doing so merely codified within the mainstream’s favoured model aspects of common sense (e.g. the idea that research and development expenditures (Schumpeter) or the size of the market (Smith) could influence the rate of innovation).   The Prize looks primarily like a reward for adding an inevitable layer, and one that was more descriptive than explanatory, to the prior apparatus of mainstream growth theory. The committee appears at least to have had the good sense not to cite his more recent work, neocolonial in flavour, on Charter Cities.

William Nordhaus has been largely on the side of climate change quietism (long emphasizing the economic costs of efforts at climate change avoidance and cautioning against an excess of carbon emissions reductions) as a result of having applied a model substantially inappropriate to the real challenges of climate policy — a modified bog-standard model featuring a representative agent with perfect foresight, focusing only on narrowly-conceived economic gains and losses ( off consumption today and consumption tomorrow), showing no real recognition of the claims of future generations (since discounting implies their sharply diminishing weight) nor any real recognition of the uneven distributional consequences of climate change across and within countries. It is no small irony that the award to him was announced so soon after the launching of the latest landmark report of the IPCC (which itself won the 2007 Nobel Peace Prize), drew attention to the alarming consequences of our inaction to date, and the lack of time left for action before potentially catastrophic consequences arise.  The Nobel Prize in economics looks, juxtaposed in this way, like something between an embarrassment and a scandal.

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