Introduction of Nobel Laureates

By Kane, Edward J. | Financial Management, Autumn 2000 | Go to article overview

Introduction of Nobel Laureates

Kane, Edward J., Financial Management

Edward J. Kane [*]

We are here to celebrate the work of Nobel Laureates in our field. Most of you probably know that the word "laureate" comes from the crowns of "laurel" which Romans used to honor their heroes. While it is said that no man is a hero to his valet, these men are truly heroes to us. I am honored and humbled to be introducing them to you today. I will first introduce them jointly and then introduce them individually.

Early in primary school, a future Nobel Laureate is bound to be labeled by fellow students as a "Big Brain." Although researchers examined Einstein's brain and found that it was of normal size, it did prove 15% wider in the physical areas responsible for mathematical thought.

But we know that the genius of men like Paul Samuelson and Robert Merton lies in things scientists can't measure: their capacity for vision and creativity and not primarily in their brains' obviously stunning capacity to do math. As a business school professor, I feel obliged to provide a visual aid (Exhibit I) to express this hypothesis.

In his 1970 Nobel lecture, Paul Samuelson humbly reminded us that the vision of modern scholars is enhanced by being able to stand "on the shoulders of our predecessors." An ancient Roman--who probably wasn't wearing a crown of laurel at the time--said that even a dwarf can see for miles if he can climb onto the shoulders of a giant. Without fear of contradiction, I can say that everyone in this room has enjoyed the huge boost that these two giants have given practitioners in our field.

And, we are lucky that they decided to work in our field. Interestingly, neither Paul nor Bob began college as an economics major and both seriously considered careers in other fields before settling into economics. Both give great credit to the economics professors and fellow students they encountered: Paul as an undergraduate at Chicago and as graduate student at Harvard in the 1930s; Bob at MIT in the late 1960s and early 1970s. Also, neither underwent any formal training in finance; rather, an inborn fascination with issues of our field--asset prices, portfolio choice, and financial trading -- acted as a magnet that attracted their research activity inexorably into the province of financial economics.

Turning now specifically to Paul, I am convinced that history will rate Paul Samuelson as the greatest and most-versatile economist of our century. He has written pioneering papers in virtually every area of economics and for years penned an influential column for lay persons in Newsweek. His Foundations of Economic Analysis reoriented the field of economics, while his principles textbook reoriented departmental curricula around the world.

Bob and I both count ourselves as lucky to have studied for our doctorates under Paul and both of us acknowledge his Foundations as the book from which we truly "learned" economics. Bob goes to the extreme of proclaiming this on his webpage.

Across our profession, Paul is renowned for his wit and for not suffering fools. However, only his students know how extravagantly generous Paul can be with his time and how sympathetically he is willing to entertain poorly formulated student questions. I still remember a wonderful lecture on bilateral monopoly that Paul gave in 1958 during my second semester at MIT. In those days classrooms were not equipped with projectors, so Paul had to carefully draw the edges of the Edgeworth-Bowley Box and the two parties' indifference curves in differently colored chalk. He put the origin of a "yellow individual's" indifference map in the NE corner of the board and a "white individual's" origin in the SW. He went on to trace the [[blank].sup.1]c tangencies that generated the contract curve, to explain the indeterminancy of the trading equilibrium, and to walk the class through a series of brilliant applications of the framework. …

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