The Marginal Revolution Podcast

Episode: The Economics Nobel: Predictions, Missed Opportunities, and Questionable Winners
Date: October 8, 2024
Hosts: Alex Tabarrok & Tyler Cowen

Episode Overview

In this episode, Alex Tabarrok and Tyler Cowen dive into the Nobel Prize in Economics: making predictions for upcoming winners, highlighting those they believe were snubbed, questioning past selections, and exploring the significance and future of the prize itself. They weave their personal anecdotes and keen analysis into a rich discussion on both the social and technical evolutions of the economics discipline, always with their signature irreverent tone.

Key Discussion Points & Insights

1. Predictions for Future Nobel Winners

Discussion begins at 00:18

• Michael Woodford: Cited as a strong candidate for monetary theory, aligned with current global focus on inflation (00:24).
• Susan Athey: Predicted as a future recipient for introducing machine learning to economics (00:41). Tied to the recent Nobel Prize won by her spouse, Guido Imbens (00:58).
• Steven Berry (BLP Model): Tabarrok predicts a potential Industrial Organization prize for Berry, Levinson, and Pakes (BLP). Both hosts admit the model is technically significant but hard to teach—Cowen: "It's not intuitive, it's hard to teach. I don't understand it myself." (01:30)
• Acemoglu: Flagged as a "possibility," but not discussed in depth (02:54).

2. "Should Have Won" and "Missed Opportunities"

Deep-dive discussion from 03:16–23:05

• Robert Barro: Cited for influential work in fiscal policy, political business cycle theory, and cross-country growth regressions, though declining consensus on the latter may hamper his chances (03:20).
• Richard Posner: Identified as a "giant" in law and economics but perhaps too late to be recognized—"Most cited legal scholar of all time... Only person who deserves a Nobel Prize and a seat on the Supreme Court" (04:40).
• Arnold Harberger: Praised for corporate tax incidence, the Harberger Triangle (deadweight loss), and overall foundational work (06:03).
• Gordon Tullock: Co-author of The Calculus of Consent with Buchanan—significant for public choice theory and the concept of rent-seeking, but limited by his "ornery" public persona and few students.
  • Tabarrok's anecdote: "He said, 'Surely this will be your greatest contribution to economics.' As I said, I loved it. ... Could have been a devastating quip." (09:28)
• Vitalik Buterin: Both hosts agree the Ethereum founder deserves recognition for applying monetary economics and mechanism design in crypto. Cowen: "What does someone have to do to get a Nobel Prize?" (11:09)
• Contributors to Major Economic Datasets: The creators of JOLTS, the PEN World Tables, and the Maddison database. Tabarrok emphasizes: "We should be more appreciative of people who create public goods, right?... And we're not." (13:48)
• William Baumol: Recognized for “cost disease” and contributions to entrepreneurship and economics of the arts (19:33).
• Anthony Downs: Noted for the median voter theorem and information theory of voting (20:41).
• Mancur Olson: The Rise and Decline of Nations and selective incentives highlighted (21:45–22:54).
• Armen Alchian: Contributions obscured by unrecognized works (24:04). His lost, confiscated research is said to have pioneered the event study methodology.

3. "Questionable Winners" and Nobel Controversies

Segment begins at 29:46

• Gunnar Myrdal: Cowen calls him the "clearest case" of an undeserving Nobel: "None of the work has held up. No one talks about him, it was bad socialism, second rate sociology." (29:51)
• Lawrence Klein: Mixed feelings—developed big macroeconomic models, but their predictive power remains questionable (31:18).
• Richard Stone: Debate over the value of public goods, such as national accounts statistics (31:36).
• Leonid Kantorovich: Early winner lauded for mathematical techniques but criticized for lack of real economic content (32:03).

4. The Social Side of Winning: Students and Public Persona

• The hosts discuss how public presence and mentorship networks impact Nobel chances, notably for Tullock and Downs (08:34–09:17).

5. Should the Nobel in Economics Exist?

Discussion from 33:28

• The official name, "Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel," is cited (34:01).
• Cowen is generally positive but theorizes the prize should be "wrapped up say in five years," highlighting the risk of excessive specialization and diminishing returns to its prestige (34:24).
• "You’ll inflate away some of the value of what you had. It’s like an optimal seigniorage problem in a way." (34:46)

6. Future of the Prize: AI and "Non-Human" Winners

• Both discuss the inevitability of AI that will merit Nobel-level recognition, possibly in less than ten years (36:23).
• Tabarrok jokes about the coming Nobel for "prompt engineering" and the unexplored depths of AI-generated insight (37:30–38:03).

Notable Quotes & Memorable Moments

• On the utility of economic models:
  "It's not intuitive, it's hard to teach. I don't understand it myself." – Tyler Cowen on the BLP model (01:30)
• On data and public goods:
  "We should be more appreciative of people who create public goods, right?... And we're not." – Alex Tabarrok (13:48)
• On missed Nobel chances due to persona:
  "Tullock didn't have many students. And his public presence was viewed as ornery." – Tyler Cowen (08:38)
• Wit & Anecdotes:
  "Surely this will be your greatest contribution to economics." – Gordon Tullock, as recounted by Alex Tabarrok (09:28) "He would consider going only if I served as his research assistant. And then he just hung up the phone without saying yes or no. Then I knew he was coming." – Tyler Cowen on recruiting Tullock (10:04)
• On the prize's future:
  "You’ll inflate away some of the value of what you had. It’s like an optimal seigniorage problem in a way." – Tyler Cowen (34:46)
• AI and the Nobel:
  "Nobel Prize for prompt engineering. I mean, it seems quite possible." – Alex Tabarrok (37:33)

Timestamps for Key Segments

• 00:18 — Predictions for Next Prize(s)
• 03:16 — Overdue Candidates: Barro, Posner
• 06:03 — Overlooked Giants: Harberger, Tullock
• 11:12 — Vitalik Buterin & Economics of Crypto
• 13:48 — Recognizing Dataset Creators
• 19:33 — William Baumol and Entrepreneurship
• 20:41 — Anthony Downs & Political Economy
• 21:45 — Mancur Olson & Historical Misses
• 24:04 — Armen Alchian’s Lost Contributions
• 29:46 — Winners Who Shouldn’t Have Won
• 34:01 — Should the Nobel in Economics Exist?
• 36:23 — The Coming of AI Laureates
• 37:30 — Prompt Engineering & The Next Frontier

Tone and Style

• The hosts oscillate between playful banter, scholarly rigor, and pointed critique.
• Personal anecdotes and sharp asides abound, particularly when discussing Tullock and the quirks of the prize system.
• Throughout, they champion the contributions of foundational, sometimes underappreciated, thinkers and public goods providers—always with a nod to the evolving discipline.

Takeaway

This episode is a comprehensive, lively sweep through the past, present, and possible future of the Nobel Prize in Economics. Tabarrok and Cowen blend sharp predictions, affectionate remembrances, and unsparing criticism—leaving listeners with a new appreciation both for the discipline's giants and the debates that animate economics today.