On the Money Nobel Prizes Awarded to American, Briton for Radical Economics Theory of Incentives
Compiled From News Services, St Louis Post-Dispatch (MO)
An American economist with unorthodox ideas - among them that "it's insane to try to balance the budget" - shared the Nobel Memorial Prize in Economic Sciences on Tuesday with a British professor.
William Vickrey, 82, professor emeritus at Columbia University, and James Mirrlees, 60, of Cambridge University in England, were honored for explaining how governments as well as consumers use incomplete data to make decisions.
Vickrey and Mirrlees will split the $1.12 million prize for their "contribution to the economic theory of incentives under asymmetric information." The theory, used to explain human behavior, refers to the way in which everyone - from governments and giant corporations to small businesses and consumers - makes decisions based on varying kinds and amounts of data. Traditional economic theory held that all sides had the same information but different preferences, which influenced decision-making. "Asymmetric information" means one side knows something another side does not. A person seeking medical coverage may have health problems, but the insurer will not know it. A buyer will not know as much about a used car as the seller. And government does not know the earnings abilities of taxpayers. Although Vickrey and Mirrlees conducted separate studies decades apart, the Royal Swedish Academy of Sciences in Stockholm, Sweden, says their work has led to a better understanding of economic activity, including tax programs, auctions, insurance and credit markets. "It's very gratifying, . . . very warming," said Vickrey, a naturalized American citizen who is a native of Victoria, B.C. Mirrlees, a native of Scotland, said he was skeptical when he got the call from the academy. "I wanted to make sure I wasn't being teased." The annual prize is the third of the six Nobels to be awarded this year. The Nobel Memorial Prize in Economic Sciences is awarded by the Swedish Central Bank in honor of inventor Alfred Nobel. …