Should the Nobel Prize In Economic Sciences Be Put on Hold?

The field of economics seems to have entered a crisis moment. True, in some areas of the micro economy, analysts are still making important contributions. But in the so-called "science" of fully understanding and predicting the outcome of the broader economy, the field seems less a science and more a blind walk through a wasteland of uncertainty.

Witness the once-certain relationship between the unemployment rate and inflation--the so-called Phillips Curve--which has become dubious at best. The link between long-term inflationary expectations and real inflation is hardly reliable. The so-called "neutral" interest rate has too often become an impenetrable mystery. Fact: most of the profession blew the call in predicting the 2008 financial crisis. And the Federal Reserve's macroeconomic models are described by many FOMC board members themselves as deeply flawed.

Perhaps the Peterson Institute's Adam Posen put it best when he told the New York Times: "Macroeconomics behaves like we're doing physics after the quantum revolution ... We're really at the level of Galileo and Copernicus."

When he received the Nobel Prize in 1974, Friedrich Hayek said that had he been consulted when the prize itself was conceived in 1968, he would have "decidedly advised against it." The reason: the world is simply too complex. His insight was echoed by John Kenneth Galbraith, who said that there are two classes of forecasters: those who don't know, and those who don't know they don't know. Since Hayek and Galbraith were in their heyday, the economy has become far more complex and global--at times a paradox wrapped in a riddle.

Posen argues that economists need more "humility." Should that include putting the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel on hold until the profession establishes a more credible track record? As Time magazine once noted, economics is the only field in which people can share a Nobel Prize for arriving at the complete opposite conclusion--something that arguably actually happened.

Fourteen prominent thinkers offer their views.

JAMES K. GALBRAITH

Lloyd M. Bentsen, Jr., Chair in Government/Business Relations, LBJ School of Public Affairs, University of Texas at Austin

Hayek was right. The prize should never have been started. In its early days, one could argue for the distinction of some recipients--Wassily Leontief, Simon Kuznets, and Gunnar Myrdal come to mind. Nor can one complain about Paul Samuelson, Robert Solow, James Tobin, or Milton Friedman, major figures in their time, even though their various theories have not endured.

More recently, the prize mainly converts otherwise obscure academics into a caste of media celebrities, whose names are forever prefixed, whose egos are inflated and marriages damaged by the attention, who yield too often to the urge to be quoted on topics of which they know little. A few have mastered that art, a few have shunned it--but this is a common case.

Should the Nobel Prize in Economics therefore be "paused"? Emphatically not, for two reasons.

First, there is no Nobel Prize in Economics. What there is, is the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, an impostor, pretentiously linking economics to science and captiously trading on the prestige of the real thing.

Second, to pause that prize would leave in place the previous winners. It would foreclose any chance of diluting their influence, whether by moving further down the ladder of diminishing returns in "mainstream" economics, or by tapping the richer veins of heterodoxy. Either way, as an elementary principle of supply and demand, to cut the flow of new awards would raise the value of those already given out.

So, no. The Riksbank prize should not be paused. It should be repealed, abolished, revoked, erased from memory, and the ruins should be sown with salt. Carthago delenda est. Let the sands close over it, as though it had never been.

JAGDISH BHAGWATI

University Professor, Economics, Law, and International Relations) Columbia University

One can only speculate, in the absence of archival investigation, on what the officials at the Bank of Sweden thought about the rationale for an "as if Nobel Prize in Economics which they started in 1968 with monies pledged by Sveriges Riksbank during its tercentenary celebrations.

Sweden has recently had hugely distinguished economists in the generations after the remarkable Wicksell, among them Erik Lundberg, Ingvar Svennilson (who first introduced me to the Stockholm School of Economics by inviting me to join the defense of Bo Sodersten's dissertation on trade and growth), Staffan Linder, Assar Lindbeck, Gunnar Myrdal, and Bertil Ohlin, all of whom I knew well. I can only guess that they were all consulted in the matter of launching this prize, though we have only the testimony of Lindbeck that he, Lundberg, and Myrdal were consulted and concurred.

Apparently, the only condition imposed by the Riksbank was that the "conditions and rules" applied to the original Nobel Prizes be extended to the new "Nobel" as well.

But in retrospect, the critical decision on the Economics "Nobel" came rather from the linking of the new award to all the traditional and legitimate Nobels (in physics, chemistry, medicine, literature, and peace) through the simple but effective device of its simultaneous announcement with the traditional Nobels so that the fact of its not being a real Nobel Prize would soon be obliterated and forgotten, as indeed happened. The consequences, whether intended or unforeseen, have defined the serious problematics of the new "Nobel," which are not generally understood as critics focus on trivialities instead.

Principally, the consequence of the strong linking of the economics prize to all historical Nobels has been that, while there has always been a benign plurality of awards for outstanding accomplishments in economics, including honorary degrees from prestigious universities, the economics Nobel enjoys unique prestige and lends to the awarding committee in Sweden what can only be called extraordinary power in the game. This matters and defines the serious adverse consequences that have followed from the economics Nobel.

First, it often corrupts the recipients. Economics Nobelists divide into the few, like Robert Solow and the late Paul Samuelson, Milton Friedman, James Tobin, Kenneth Arrow, William Vickrey, and Franco Modigliani, who lend great distinction to the prize and rarely advertise their receipt of it, and the many whose websites and op-eds are used to proclaim to the world the year of their award. The latter group use the Nobel as a shield behind which they hide their inadequacies and often growing Nobel-induced incompetence. Thus, I have remarked jokingly about a colleague who has post-Nobel become a patron saint of the radical left, that he was a savant when he received the Nobel, then became an idiot savant, and is now just an idiot.

Second, while the Nobel laureates in the hard sciences rarely push for anything from their universities except funds to finance their laboratories and research projects, the record of the economics Nobel recipients often offers a shoddy contrast. Typically, we have seen them using their new status to flout the conventional restrictions on nepotism, for example, by getting their spouses and children appointed to well-paying university jobs, and even appointing their spouses as their public relations officers who then proceed to intimidate department heads and deans into compliance with their demands.

Third, one cannot help noting the arrogance with which the economics Nobelists (unlike the Nobelists in the hard sciences) disregard elementary standards of academic integrity and inquiry.

I recall how one such laureate was giving a lecture at the law school, drawing on case law from the U.S.-Canada cases to illustrate his thesis. Unfortunately for him, a lawyer in the audience intervened to say that he had been involved in all these cases and the Nobel laureate had gotten all of them wrong. A normal scholar would have sunk through the floor; but the Nobelist said: "It makes no difference to my thesis!" Arrogance combined with ignorance and indifference to the normal canons of scholarship is the kind of corruption that the economics Nobel fosters but has no place in scholarly discourse.

Fourth, the economics Nobelists typically corrupt the public policy discourse because, unlike the major scholars in the hard sciences who rarely enter the public policy arena (nuclear disarmament and climate change being two exceptions), most economists are typically operating with...