The Economics Nobel: Predictions, Missed Opportunities, and Questionable Winners

Summary

The Marginal Revolution Podcast

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

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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.

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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).

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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)

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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

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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.

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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.

Transcript

[A]

Afternoon, Tyler.

[B]

Good afternoon, Alex.

[A]

So today we're going to be talking about the Nobel Prize in economics. Who will win, who should win, who.

[B]

Didn'T win, who should have won and all the more.

[A]

Yeah.

[B]

Which of those questions do you want to start with? How about who's going to win this year or soon?

[A]

Looking forward.

[B]

Yes.

[A]

Let's talk about the gossip. Who do you think will win? I think it will be next week, right?

[B]

I believe so. I don't have a clear pick. Most years I do, but the picks are harder each time. So one option is Michael Woodford for monetary theory. Since many nations have beat back inflation, it's not a terrible year for Woodford to be the winner. Another pick probably won't happen this year, but Susan Athey for introducing machine learning to economics in addition to other contributions.

[A]

That would be two in the Athe family.

[B]

That's correct too. Almost, you know, in close connection but I do think she will get it for that. Those would be two of my picks but again I'm really not sure on the timing.

[A]

Yeah, I think AD is too early, but definitely a possibility. She is married to Guido Imbens. If you don't know who won the Nobel Prize very recently, that was two.

[B]

Years ago, is that right?

[A]

Something like that.

[B]

Two or three. Yeah.

[A]

Yeah. My guess is a IO prize. Industrial Organization. Maybe Paiks.

[B]

Maybe with Paik's is a good prediction. Maybe that's the most likely single winner.

[A]

Yeah, yeah. So Paige has this model with Barry and Levinson, the BLP model.

[B]

Right.

[A]

It's not my favorite thing.

[B]

It's not intuitive, it's hard to teach. I don't understand it myself.

[A]

Yeah.

[B]

Can I vote for Susan?

[A]

Exactly.

[B]

But he probably deserves it. He probably deserves a field in some way, right?

[A]

Exactly. I mean the essence of the model is that we have very good models. If you want to understand pricing in a monopoly and we know pricing in perfect competition, oligopolistic markets, especially when you have differentiated products like you think about the auto market. Right. And you've got gas, electric, hybrid, two seater, four seater, luxury, economy. And what they do is they created a model which is based upon deep characteristics, deep structural parameters and they're able to show how to estimate that model. Apparently it's pretty useful.

[B]

It's an interesting question which awards will become pretty obsolete because of AI within five or 10 years. That's yet another category we could talk about but at some point it might affect the committee's thinking.

[A]

That's true. Yeah, that's true. So technical contributions actually might become Less valuable to the extent that AI can produce those fairly easily.

[B]

But there are fewer conceptual contributions to award. I think also over time.

[A]

Yeah, yeah, yeah.

[B]

Someone like Lynn Ostrom, she has her prize passed away, but there are fewer linostrums out there to give the prize to. Yeah, Armin Alshian passed away.

[A]

Yeah. It makes our job less interesting because those are the ones I would like to see. Let's see, who else? Acemoglu. Possibility.

[B]

Bhagwadi, I think is not likely. But I have sympathies in his direction and I think Richard Posner is not likely.

[A]

I agree with you and I have.

[B]

Sympathies in his direction. Yeah, yeah, I would give it to Robert Barrow.

[A]

Okay, okay. Tell me why you would give it to Robert Barrow.

[B]

Our government bonds, Net wealth as a fundamental way of thinking about fiscal policy remains central. Also, he did early work on political business cycle theory. The status of cross country growth regressions has fallen greatly. People once thought he might get it for that. That may now even be hurting his chances. But I think overall what he's created and done is enough for a Nobel Prize.

[A]

Yeah, I agree.

[B]

He said five or six key articles in major macro fields.

[A]

Yeah, I agree with you and I think you're right about the cross country aggressions have fallen in favor over time, but still hugely important and really pushed the profession in that direction for a long time. So just because it's not fashionable today doesn't mean that it wasn't as a major contribution.

[B]

But it does mean fewer people will nominate him for fear of looking a bit low status. Like, oh, you still think cross country growth regressions are the thing? I think it matters how many people nominate you in the early rounds.

[A]

Yeah, I think it's Barrow's birthday this week. Like he's 80, I think. Okay, yeah, he's getting on. I agree with you about Richard Posner. He is fact long overdue.

[B]

He has serious health problems now. So whether that's a factor in the selections, I don't know, but I suspect it is. They want someone who can come to the ceremony.

[A]

Yeah, yeah, no, I agree. I think it's too late for him, but that will be a tragedy. I mean, he is a giant. He is the most cited legal scholar of all time. I've often said he's the only person who deserves a Nobel Prize and a seat on the Supreme Court.

[B]

Are you sure he's the only one? I put Susan Athey on the Supreme Court.

[A]

Well, who is plausibly a candidate from the Supreme Court. I mean, he Was an incredibly prolific author as well. Right.

[B]

I mean, he's prolific, can hurt you for Nobel Prize. His single central contribution is a little unclear. I don't think that many economists or former winners will nominate him. And the fact that he built out the whole field is a little amorphous. Like he didn't do the Coase Theorem. Right, Right. He didn't do what Calabrese did with liability rules. He filled in the boxes, got everyone interested, wrote the textbook. I'm not sure he ever was going to win.

[A]

I hear what you're saying. Still, as the giant of law and economics and as law and economics being the really the only kind of major, major revolution in legal thinking which has gained a foothold in the law schools and. And held onto it. You know, all this other stuff, critical legal theory, it comes and goes. But law and economics has really gained a foothold.

[B]

But having to switch twice back to law and law schools is complicated for his chances or what would have been his chances. You know who I think should win? I really can't believe I had never thought of this all these years, but Arnold Harberger is 100 years old, still alive. He has the corporate tax model, which is essential and used for things other than just tax incidents. Harberger triangle. How you think about deadweight loss, distributional weights and cost benefit analysis. Some major contributions which I use mentally all the time. He's still going. I met him, I think six, seven years ago. He was then very sharp. I don't know how he's doing, but I would love to see Harberger get the prize. And I feel guilty that I haven't. On marginal revolution. Been saying it all these years.

[A]

Right. So I think Vickry got the prize and died three days later.

[B]

Yes.

[A]

I guess those are pretty nice. Three days.

[B]

I'm not sure they are, actually.

[A]

Does Chile hurt Harburger? People always said it was, you know, the Chicago boys. Yeah.

[B]

Yeah. So from what I've read, Harberger was not very ideological. In Chile, he was insisting on very scientific approaches. People probably don't know that either.

[A]

Yeah.

[B]

Just somehow he's overlooked and people have a sense while all the Nobels to Chicago have been given. That is wrong. And. Yeah, it'd be great.

[A]

Yeah. Yeah, I agree with you. Speaking of, you know, Harburger and the Harburger triangle and people who are not likely to get it but. Or can't get it now actually. But brings up, of course, the tolic rectangle, of course.

[B]

For rent seeking.

[A]

For rent seeking.

[B]

But also, Tullock wrote the best and most important parts of Calculus of Consent, which was cited for Buchanan, and the two themselves, say, in the. The preface.

[A]

Yes.

[B]

Who wrote which part?

[A]

Yeah, yeah.

[B]

That's a tough one to Elide.

[A]

Yeah, yeah. I. I think Talik should have gotten it along with Buchanan. Calculus of Consent clearly is Buchanan's best work. Not the only great work that he wrote, but clearly his best work written with Tullock, and I think Tullock should have gotten as well. This raises an interesting issue about. It's not just your scientific contributions which matter. Right.

[B]

That's right. It's your public presence.

[A]

It's your public presence. Yeah. And your students.

[B]

Yes. And Tullock didn't have many students. And his public presence was viewed as ornery. Yes. And he did some things, like he gave that address at the Southern Economic association, where he compared, I think, U.S. immigration treatment of Mexicans to South African apartheid, which will get you in trouble even back then.

[A]

Yes. Yeah, yeah.

[B]

And I think that factors like that matter.

[A]

Yeah, yeah. He didn't have many students.

[B]

Bill Woolsey was a Tullock student.

[A]

Okay.

[B]

Shigeiro Naka. But again, it. I feel I would know almost all of them. There's very few.

[A]

Buchanan had far more.

[B]

That's right. Dick Wagner would be one of the better known ones.

[A]

Absolutely. Yeah. Yeah. I mean, Tullock was. Yeah. As you said, he was ornery. I think when I got to know him, which was much later in his life, the ornery came off as curmudgeonly.

[B]

Yes.

[A]

And I loved him. I loved him for that. You know, I remember one time he asked me for some comments on a paper which he had written. This is a short, short paper. And I gave him some minor comments, even just some grammatical errors. And he took a look and he said, surely this will be your greatest contribution to economics. As I said, I loved it. He was talking with me. I thought that was great. He was fun. But I could imagine for someone who was young, earlier on in their career, that could have been a devastating quip.

[B]

I recall recruiting Tullock back to George Mason, and I had a conversation with him, and he said 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.

[A]

Right.

[B]

And proceeded to make all plans.

[A]

Yeah. Yeah.

[B]

Along those lines.

[A]

Yeah. So who else? Who else? Should win.

[B]

Should win. Looking forward.

[A]

Yeah.

[B]

Well, I have an unusual pick. I suspect you'll agree with me, but I would give it to Vitalik Buterin, who actually did something in monetary economics.

[A]

Yes, yes.

[B]

It's amazing to me how much none of the economists that I can think of at all have made any contributions to the theory of crypto.

[A]

Yeah, right.

[B]

Is there anyone?

[A]

Not so far. I mean they're taking a greater interest in it as it has become a bigger share of the economy. But the fundamentals were all from computer scientists.

[B]

Vitalik built a platform, created a currency, you could say refuted Mises regression theorem in the process. Obviously following in the footsteps of Satoshi.

[A]

Yeah.

[B]

But my goodness, what does someone have to do to get a Nobel Prize?

[A]

Absolutely.

[B]

What's the asset value? Ether. What's the current market cap of ether? Do you know?

[A]

It's hundreds of billions. Yeah.

[B]

So it's a lot.

[A]

Yeah, yeah. And I mean this is applied mechanism design. This is mechanism design in the world. And it's both Bitcoin and Ethereum are incredible examples of mechanism design which I think you would have looked, you would have thought that they were impossible, you know, if you had thought about it in advance. And yet they're actually working in the real world. And not only that, but Vitalik has continued to contribute towards the mechanism design of Ethereum by going to proof of stake changing Ethereum.

[B]

That's right, that worked. In fact, I was like, how are they going to do this? It's fine.

[A]

Yeah. I think you ever seen those videos of these guys in Saudi Arabia where they change the car tires while the car is moving. I mean, that's what Ethereum did. I mean, incredible. They changed from proof of work to proof of stake while the machine kept running.

[B]

And he writes on monetary economics and there's no economist who has anything better to say on the topics he writes on. And that to me is worth a lot in this consideration.

[A]

Yeah, yeah, that's. That, that's very true.

[B]

And he's super polite. You know, would, would bow to the king or whatever is required. He'd be wonderful at the ceremony, like there's no issues there at all. Yeah, he's given a lot to, you know, charity.

[A]

Yeah. I was just going to say he's gave hundreds of millions of dollars.

[B]

Not dollars, dollar value.

[A]

Well, yes, please. Eventually, I assume some. Fine. It turned into dollars.

[B]

Yes, I agree with that.

[A]

Yes. He has been very charitable and yeah. Also as someone in general who thinks deeply about economic issues and mechanisms in the world, you know. Yeah, I agree. Satoshi of course should have gotten it as well. But I said I'm sure he's dead.

[B]

You know, I'm not sure he's dead.

[A]

I'm pretty sure.

[B]

I don't think you can give it to someone you cannot identify. It's like Bob Dylan Cubed. At least you know Bob Dylan's Bob Dylan, right?

[A]

Yeah, yeah, yeah, that's very true. So let me give you a less speculative but so more plausible award that I hope will come, and that is to the creators of data sets. You know, it's a very odd thing in economics. We should be more appreciative of people who create public goods, right?

[B]

That's right. And we're not.

[A]

And we're not. Yes. Even an econom free ride. So I would point to John Houtwinger, Steven Davis, maybe joined by somebody like Catherine Abraham or Ron Jarman for Jolts and the longitudinal business database, the lbd. So let me say a little bit about Jolts and why that's important. The job opening labor turnover survey. And you know, you hear right, every month, you know, the economy has created 400,000 jobs, let's say, right, you have heard that. Of course, it's not actually true.

[B]

Right. We know these too.

[A]

It's not actually true when you hear that the economy has created 400,000 jobs, it's actually created 5 million jobs. And at the same time, in the same month, 400,600,000 jobs have been destroyed. So that 400,000 figure, which you hear it's a net figure, but it really is just the tip of the iceberg and it hides all of the dynamism which is going on underneath. Like every single month, millions and millions of jobs are created and millions of jobs are destroyed as people are fired, they quit, they die, they retire. Young people entering the workforce. So the US Economy, you know, is incredibly dynamic. And that's what we really began to understand with the creation of the JALTS database.

[B]

Another data set that clearly deserves consideration and deserved a prize was the PEN World Tables with Robert Summers and Alan Heston. So you have real income comparisons across nations and adjusted for purchasing power parity, that's a big deal. We still use all that material. Incredibly important.

[A]

Hundreds of papers written based upon that data set.

[B]

That's right.

[A]

And it's the thing that you go to first when you want to look up, you know, how to really compare countries on purchasing power parity basis. So it's like used every single day.

[B]

And this is the Robert Summers, as you know, who's father of Larry Summers, who's great.

[A]

Robert Summers, father of Larry Summers and brother too, Paul Samuelson. Paul Samuelson.

[B]

And related to Kenneth Arrow and the economist Anita Summers, who is noteworthy in her own right.

[A]

Absolutely.

[B]

So, yeah, yeah.

[A]

If I understand correctly, I think Robert Summers sort of changed his name to Summers because he didn't want to be compared with Paul Samuelson, his brother, so much. But if he'd also won a Nobel.

[B]

Prize, you know, out of the frying pan into the fire.

[A]

Right. So maybe there could have been two Samuelson. It could have been Larry Samuelson. Anyway. Yeah, I definitely agree there should be more attention given to people who create public goods like the Penworld database, along the same lines, the Madison database, which tries to measure GDP going back hundreds of years. The Pen World database is more for the last post World War II. But yeah, both of those databases have been incredibly important and it seems like we ought to be thanking people who create public goods for other people.

[B]

That's right, yeah. And they can use the money. They're typically not that well paid.

[A]

That's right, yeah. Yeah. They don't get the credit they deserve. Yeah. And the census, I think is important. So, you know, I mentioned, you know, Haldewanger and Stephen Davis and maybe joined, as I said, by somebody at the census like Catherine Abraham. She's a noted economist in her own right, has produced many papers, but she was also held many government positions, including serving as commissioner of the Bureau of Labor Statistics, I think, from 1993 through 2001. And she really pushed the creation of the JOLTS database, which I mentioned earlier. So I think there's an opportunity there to say this award is not just for economists publishing in journals, but for those who are contributing to these underlying tools which economists use all of the time.

[B]

Another possible set of awards. Is there more in Keynesian economics, Is Malinville still alive? Does Olivier Blanchard. There could be a packaged macro prize of some sort.

[A]

Right, right. There was.

[B]

That would not shock me.

[A]

Yeah. Yeah. I think Mankiw has sort of been discussion for some time, but he hasn't published a lot in recent years. You know, if Manukas.

[B]

I think Woodford is now more likely, but Woodford Mankiw, again, wouldn't be a shocking thing to do. Just sticky prices, money prize. Should people who write textbooks get prizes? Yeah, maybe. Talking about public service.

[A]

Yeah. I mean, when you look around the world and you think about how many bad economic policies there are, maybe textbooks are actually the biggest service which economists do to the rest, for the rest of the world.

[B]

I hope that's the way that people learn better economic policy ideas. I'm not sure it is.

[A]

Maybe not.

[B]

Sometimes it's my view. Events are what really persuade people and events may or may not break your way.

[A]

Yeah. So we have to go through the high inflation of the 70s to really learn about monetary policy.

[B]

And then you read Milton Friedman and it makes a lot of sense.

[A]

Yeah, yeah, yeah, yeah. That. That, that could be true. Another person that comes to mind who I think should have won or could have won, but didn't win was William Bommel.

[B]

Absolutely. So he has cost disease.

[A]

Yep.

[B]

Which is an idea people talk about all the time. All the time, all the more.

[A]

In fact, I wrote a book on.

[B]

It, given the way prices for some services have gone haywire. So that definitely in our mission. Contestable markets is something else. Revenue maximizing theories of the firm. Maybe not a big deal, but it shows. He had a creative, fertile mind, helped found economics of the arts and was just very active in the profession.

[A]

Yeah. Economies of scope. Yes. Yeah. Along with contestable markets. And especially towards the end of his life, he put a lot of attention on entrepreneurship.

[B]

That's right. Those are great pieces.

[A]

Yeah. Which I think is incredible to think, but I mean, when you think about economics and you think about economic growth and markets and all of these questions, entrepreneurship is one of the first things which any normal person. Person in the street thinks about.

[B]

That's right.

[A]

Don't economist. So you would think that economists must be studying entrepreneurship. Isn't that where innovation is coming from? And yet the economic study of entrepreneurship is almost nil.

[B]

And he revived interest in that topic. Another person who clearly should have won was Anthony Downs. So economic theory of democracy, I think that's 1959 median voter theorem, Incentives for voters to be poorly informed. Again, they're ideas we just use all the time, every day. He used these ideas and he did them. He also did some work on housing policy that was quite good. Not Nobel level worthy, but it shows. He had other arrows in his quiver, so to speak.

[A]

Yeah, yeah. So after economic theory of democracy, he didn't do much in political economy. Right. Sort of. Didn't build.

[B]

Not that I know of.

[A]

Yeah.

[B]

You know, he wrote the. Did he write. He wrote a book on bureaucracy. Yeah.

[A]

Okay.

[B]

And that was good.

[A]

Okay. Yeah, yeah.

[B]

So he has some other things. And his main contribution is one of the dozen most important ideas in economics.

[A]

It is. Yeah. Yeah. He was at Brookings for a very long time.

[B]

That's right. Maybe that hurt him.

[A]

Yeah.

[B]

As far as I know, he didn't have students that may have hurt him. Someone else who died early. I don't think it was an omission as much. But Manker Olson clearly deserved it.

[A]

Absolutely. Yeah, yeah, yeah.

[B]

And I think he would have won had he simply lived a bit longer. Same with Fisher Black.

[A]

Yes, yes. Clearly Fischer Black would have won with Scholes and Merton.

[B]

Right. And he was cited in that award. Now Olson was never cited, but to simply have had like an Olson Tolik Downs award for sure. There's so much intellectual firepower. Any combination of those is just clearly very deserving.

[A]

Yeah, yeah. Mansur Olson's Rise and Decline of nations still remains one of my favorite books. That was really critical for me becoming a political economist. I thought just the grand scope of ambition using know, microeconomic theory about public goods and the logic of collective action and then taking that theory and showing it had these huge macro implications for growth, for the rise and decline of nations, as the book title says. I thought that was an amazing achievement.

[B]

And the notion that certain kinds of catastrophes can have silver linings.

[A]

Right.

[B]

And also 1965, the idea of selective incentives comes from Olson.

[A]

Right, right.

[B]

Related to literature on public goods which you've built upon.

[A]

Yeah.

[B]

And if you want to analyze norms in small groups, how they differ in large groups, things Eleanor Ostrom did. I mean, you need to build from Olson.

[A]

Yeah, yeah, yeah. I mean, I guess the lesson there don't. Don't die early.

[B]

That's right. It's a good lesson. Did you mention Alcion already?

[A]

No. Let's talk about Alchian Armin, Alchemian.

[B]

I think he's deserving, but it's a bit trickier than some of the others. I don't know if there's a single major contribution that puts him over the line. So the evolutionary work is not that well fleshed out. I'm not even sure how correct it is, but it's very interesting. The general developing price theory approach I value highly, but it was in the form of a text and his oral presence on Money and Search. Very good articles. To me they aggregate well above the Nobel Prize level. But again, it's harder than with some people.

[A]

But you know, the government destroyed his most important work. Right. And they confiscated it and they destroyed his most important work, which might have got him the Nobel. You know this story. I'm sure you do, but I forget the details.

[B]

During the war. Right?

[A]

That's correct. So in 1954 you had these atom bomb tests. Right. And there was a lot of discussion about what are the critical components which went into making the atom bomb. Okay. And Alchen went into the basement at Rand and he looked up the Stock prices of a bunch of different firms, some of which produced, you know, hydrogen, some of them produce lithium, some of which produce other things. And what he noted was that. Right. Following. And even a little bit before the atom bomb test, the stock price of the major firm, which was Castle Bravo, had gone up 48% before the bomb goes up. And for the year, it was up by a factor of four or five. So this firm was producing lithium. So Alcian concluded from his stock market analysis that lithium was the key ingredient in the atom bomb. And he started to show this paper around, and people freaked out. The FBI comes in and they take his paper and they burn it. Because he guessed correctly. So this shows a couple of things. So one, this was the first event study. So stock market event studies, in which you use the reaction of the stock market to announcements, to news. And you see, okay, this is a new antitrust investigation. What happens to the stock market of these firms or this kind of thing? This is one of the first event studies and didn't become popular again until 30 years later. Really. So he kind of lost out on that. And of course, it has. Pretty amazing that information. Right. Was being leaked into the stock price. So somebody had to know, hey, we.

[B]

Have to let the Soviets know.

[A]

Yeah, we gotta buy shares in this firm. This is gonna be a good. This is going to be a good pick.

[B]

Right.

[A]

So somebody was buying up the shares to try and make a killing on the stock market.

[B]

So I'd say a prize for Alshean and Demsets. Even though the Alshi and Demsets piece, I tend not to think is not so correct.

[A]

Right.

[B]

Is the firm about delegated monitoring? It seems to me not. That's just part of contracting the firm's some. Whatever else it may be, it's something else.

[A]

You prefer the Hart Grossman model of the firm?

[B]

I prefer Julio Roton. You know, he's another premature death. The Julio Rotenberg model, which is. Firms grow bigger when you can buy things cheaply. And it's not necessarily efficient, but you'll take the opportunity to do so. So it's more costly to transact within the firm than not. It's like the opposite of Oliver Williamson.

[A]

Okay.

[B]

And I think that's a pretty neat idea that never got enough recognition.

[A]

Yeah, yeah.

[B]

And Rodenberg had a lot of great papers, but just somehow none of them really quite stuck.

[A]

Was he one of your teachers?

[B]

No. He was at MIT then, I think.

[A]

Okay. Yeah.

[B]

Yeah. Not Harvard.

[A]

Yeah.

[B]

Never met him. Super creative as a mind. Is this person still alive? But Joseph Newhouse. So he did the Rand healthcare study. Now, they've already given their RCT prizes to Kramer, Duffalo and Banerjee, but the Rand study is very important. Robin Hansen loves the result. Incredible amount of work went behind. It held up in the sense that for the health care of that time, it probably was true.

[A]

Yeah.

[B]

And he has a. Has had a good claim.

[A]

Yeah. Health economics in general.

[B]

Martin Feldstein should have won a prize.

[A]

Martin Feldstone should have won.

[B]

Yes. So for multiple reasons. Public finance, tax incidents, empirical public finance, really building up the Nber economics of the arts. He was actually a figure, and he was a big pusher of healthcare economics. He said, this is the future. At the time, people thought he was crazy. He knew it was headed to basically 20% of GDP.

[A]

Right, right. Yeah. That Feld sign is a. Is a surprise that he didn't win because he was also so connected, you know?

[B]

But that one error in the Social Security piece hurt him. And I think being in Reagan's advisor hurt him. Reagan has aged into a. Even Noah Smith can love him kind of figure.

[A]

Right, right.

[B]

But for a long time, it's like Reagan was like the evil fascist to you.

[A]

The Trump of the time.

[B]

Yeah, that's right.

[A]

Yeah.

[B]

And someone who definitely should have won and could have won not two prizes, but he's like, well above the one prize line.

[A]

Yeah. I remember there was Reagan derangement syndrome.

[B]

I was there for it.

[A]

Let's see, who else? Mises. What about Mises?

[B]

Well, I think he's deserving, but he dies early enough. They didn't have that much time to give it to him.

[A]

Right.

[B]

So there's an optimal sequencing question. This stunned me when I saw it. I was looking through the list. They gave it to Buchanan before Robert Solo.

[A]

Yeah.

[B]

Which I don't mind as a good gmu, but doesn't that surprise you in retrospect?

[A]

Yeah. Yeah.

[B]

So they would have had to give it to Mises very early, like before Hayek and some others. And while I think he deserved it, it's not the same kind of omission.

[A]

Yeah. Yeah. He was already quite old. I think he died 73. Hayek wanted in 74.

[B]

And you have what, Frisch and Tinbergen winning the first and then Samuelson and Arrow. So that seems fine to me.

[A]

Okay. Let me ask a tough question, Tyler.

[B]

Yes.

[A]

Who won the prize and shouldn't have won it?

[B]

Okay. I have some selections here. First, Gunnar Myrdal. It was to counterbalance Hayek. None of the work has held up. No, One talks about him, it was bad socialism, second rate sociology. It's impressive how much he wrote, how much work he did. He was Swedish. But no, Myrdal just should not have won a Nobel Prize. That to me is the clearest case.

[A]

Yeah, I agree. His wife also won a Nobel Prize. Yes, I know, different one, but yeah, I mean, in retrospect I agree. Just even imagining that you had to balance out Hayek with Bernal, I mean, that seems ridiculous now, right? I mean, Hayek was clearly deserving and the idea that you had to have some political balance was absurd. And yeah, Murdoch, I think, has certainly, even if you like his work, he has certainly not contributed to the mainstream of economic thinking. He's not cited, he's not created.

[B]

In his best book, 1930 Monetary Equilibrium is pretty good, but again, it's not what anyone has taken from my doll. It's in the Vixelian tradition and it's somewhat Hayekian. Right. In fact, someone else I wondered about, I'm not sure, I'm negative, but Lawrence Klein, big macro models, clearly it's been a major thing. In that sense, he deserves it. But did his model ever out predict random walk?

[A]

Right.

[B]

Like now we have some models that do out predict random walk by a bit. Did his. I don't know, mixed feelings there on the grounds of what he did. I clearly can see it. But if we're going to get, you know, persnickety, I'll at least bring up that name. Yeah, yeah, I have one or two others, but do you have any?

[A]

Well, maybe Stone, you know, I'm not sure on all the details. You know, he gets it, he won for helping to create GDP statistics, especially in Great Britain. And I guess maybe I'm contradicting myself because earlier I said people who produce public goods, they should get it, and people who produce databases and things like that. So maybe on those grounds he deserved it.

[B]

I'm just not sure I have another pick. Tell me what you think. Again, I'm genuinely unsure. But Kentarovich, he wins very early also. So I understand the mathematical techniques have been used a lot, but it's bad economics. There's a lot of pure math people you could give it to, like Nash deserves it. It's economic content. Kantarevich, I don't know, I feel if I sat down and chatted economics with him, I'd come away shaking my head, yeah, sure.

[A]

I mean, yeah, so it was an interesting direction, which they could have gone towards more math. And I think they corrected themselves and thought about it. More as a social science later on. But yeah, if you were going to give it for math, I mean, operations research, things of that nature, there are other people you could have given it to. Yeah, yeah, yeah. No, I think that's. That, that. That's fair though. He deserves it. He deserves something for math.

[B]

Of course, yeah. Give him some medals.

[A]

Yeah. But maybe what he really showed was that Mises was right, correct. After all, he was the key Russian economist, Soviet economist, and the Soviet economy did not do very well. So yeah, there's a great book on this. Did you know the book on.

[B]

You mean Red Plenty?

[A]

Yeah, Red Plenty. Yeah, yeah, yeah, Red Plenty. Everyone should. It's a fun book. All right, let's. I don't know, maybe we should conclude by satisfying the pedants a little bit. And note that we've been talking about the Nobel Prize in Economics, but the official name, Sverjes Riksbank Prize in Economic Science in memory of Alfred Nobel. Right. So why do we talk frequently?

[B]

Repeated blog comment of all time.

[A]

Yes, exactly. So why do we call the Nobel Prize in Economics? Because you hate it, that's why. So this raises the question, should there be a Nobel Prize in Economics? Was it a good idea? Has it been good for the economics profession? Hayek thought that there actually shouldn't. Right. Even after he won it.

[B]

Overall, I've been quite impressed just how good the selections have been. So I'd say it's gone very well and done the world some good. But with growing specialization, I would gladly see the prize wrapped up say in five years time. Whoever you think is still out there and deserving, give them their happy day, send them on their way.

[A]

Right.

[B]

And clear out the bank account. And I think that makes sense because you'll end up with so many winners and as longevity rises, so many living winners, you'll inflate away some of the value of what you had. It's like an optimal seniorage problem in a way. And I think the committees over time will get more and more small C Conservative. It doesn't have to be bad, but it also makes the prize less valuable. You give it to a lot of super technical people who are definitely defensible picks, but don't change anything. The world hears about them. Nothing happens. I already see this with some cases. Not complaining about the pick. I was very happy. But like Mortensen and Pisserides and Peter Diamond. Yep, neglected stuff, very good pick. But no one actually took up those ideas and how they talked about unemployment. In fact, they moved further away from search Economics and everything became just the crude, sticky nominal wages model for many years of popular discourse. So that prize was ignored, I would say, by the rest of the world. And I just think that's the future we're looking at right now.

[A]

That has also got to be true for any of the prizes. Right. Physics, chemistry and so forth. You think economics is special or different in this regard?

[B]

Well, I know much less about those fields, but that Caudle and Carico could deserve a Nobel Prize for something really big is quite easy for me to see. So I'm not sure the other fields are the same way. Economics to me is more of a closed system than at least some of those fields. When will the first non human Nobel Prize winner come?

[A]

Yeah, yeah.

[B]

Will they even consider it? Yeah, well, the winner would be polite at the ceremony. Right. Too polite. But I think in less than 10 years an AI will at least deserve a Nobel Prize in economics. I agree, but not in three years.

[A]

Yeah. So I think, if I recall correctly, they did not allow the monkey to get a copyright on its photo, right?

[B]

That's right, yes.

[A]

So that suggests that we're not quite ready to give a AI a prize. Maybe we would give it to, you know, Sam Altman, I don't know.

[B]

Not an economics prize, but someone. We're going to do the Buchanan tullock thing again. Like Buchanan deserved it. Tullock deserved it. So it'll be a human working with the AI and we'll give it to the human and. And who did how much of the work? Maybe we'll never know. Or maybe we will know. Yeah, that's what's going to happen, I think.

[A]

So somebody will get a Nobel Prize for the right prompt.

[B]

So all you listeners out there, your chance of winning is not as low as you think, right?

[A]

Yeah.

[B]

You don't have to know any economics.

[A]

Yeah. Nobel Prize for prompt engineering. I mean, it seems quite possible. I know my experience with working with the AIs is that there's so much more. You can ask it one question, but if you ask the question in a different way, there's so much more underneath which you can pull out. I mean, it is. The depths of the knowledge in there seems to be extremely, you know, unexplored.

[B]

That's right.

[A]

It's like the.

[B]

In the Jungian sense.

[A]

Yeah, yeah. Or the San Andreas Trench or something like that.

[B]

That's not what I think the prize will be for, though. So there's a number of people best known to me as Benjamin Manning at MIT who are working to build AIs that simulate economies at what scale we will first succeed, you can debate. But obviously simpler problems will come before tougher problems. And I think whoever really does that will deserve a prize and eventually get one.

[A]

Okay, well, I would. I think we've covered the gamut.

[B]

Alex, it's been great chatting with you, as usual. And when the prize comes, we'll see. Right?

[A]

Let's see. And let's hope they have a Nobel Prize for economic textbooks and blogs and podcasts. All right, Very good. Thanks, Tyler.

[B]

Hi, everyone.