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Rename the Nobel Prize for Economics



Recent protests by economics students on both sides of the Atlantic against their curriculum have once more shed light on the nature of economics. In November Harvard students wrote to Prof. N. Gregory Mankiw, author of a major economics textbook: ‘Today we are walking out of your class, Economics 10, in order to express our discontent with the bias inherent in this introductory economics class.’ The course ‘espouses a specific—and limited—view of economics that we believe perpetuates problematic and inefficient systems of economic inequality in our society today.’

Many students around the world are opposed to the dominance of standard (neoclassical) theory and its focus on mathematical modelling that is quite divorced from the real world. However, the aim of dislodging orthodoxy from its entrenched position in academia will be difficult to achieve: as in any field of activity, those in powerful, privileged positions will strive to preserve the status quo.

True, the neoclassical theorists failed to predict the 2008 economic and financial crisis but this has caused little self-reflection and self-doubt, not least in the ivory towers. Lest one forgets, economics is — along with other social sciences — a highly ideological, normative discipline so its claim to the status of a ‘science’ needs to be treated with caution. Indeed as Joseph Stiglitz, a recipient of the Nobel Prize for economics (in 2001), has asserted, ‘That such models prevailed, especially in America’s graduate schools, despite evidence to the contrary, bears testimony to a triumph of ideology over science. Unfortunately, students of these graduate programs now act as policymakers in many countries, and are trying to implement programs based on the ideas that have come to be called market fundamentalism.’ It needs pointing out that the recipients of Nobel awards have overwhelmingly been US citizens who, despite notable exceptions such as Stiglitz, use the toolkit of ‘market fundamentalist’ neoclassical theory.

But of all the social sciences, economics has been singled out for special treatment by the conferral of an annual Nobel Prize for Economics. However one may dislike the accolade given to the Nobels, there is little debate over its prestige: many think ‘Nobel Laureate’ is the highest mark of distinction. A current example is Al Gore’s new book The Future, with its cover emblazoned ’Winner of the Nobel Prize’ (it fails to mention ’for Peace’). That the Nobel prizes emanate from Scandinavia rather than a superpower or one of the old colonial powers has no doubt been a factor in their universal acclaim.

It follows that the Nobel Prize for Economics confers great legitimacy and excellence on the type of economics practiced and theorised by the winners — and implicitly on the ideological underpinnings of their works. This cannot be right, and would not be tolerated in any other social science discipline. The two other Nobel Prizes that have attracted sustained criticisms are those that also have ideological (and indeed political) elements: the Peace and Literature Prizes.

What is rarely acknowledged is that the prize for economics is not one of Alfred Nobel’s original prizes created in his will which were to be conferred to those who had contributed to the ‘greatest benefit on mankind’ in physics, chemistry, physiology or medicine, peace and literature. The true name for what is mistakenly termed the Nobel Prize for Economics is the Sveriges Riksbank (Swedish Central Bank) Prize in Economics Sciences in Memory of Alfred Nobel. It was inaugurated in 1969 and is awarded at the same ceremony in Stockholm as the others (excepting the Peace prize). So to all intents and purposes it is a bona fide Nobel.

Given its ideological nature, not surprisingly, the Economics prize has been bedevilled with controversy since its inception. Even Alfred Nobel’s descendants have argued against the award, saying a prize for the discipline was never envisaged, and it ought to be renamed ‘The Riksbank Prize’. The Austrian, Friedrich Hayek, who aroused much controversy when he was awarded the prize in 1974, made clear his views in his acceptance speech: ‘I must confess that if I had been consulted whether to establish a Nobel Prize in economics, I should have decidedly advised against it ... It is that the Nobel Prize confers on an individual an authority which in economics no man ought to possess. This does not matter in the natural sciences. Here the influence exercised by an individual is chiefly an influence on his fellow experts; and they will soon cut him down to size if he exceeds his competence. But the influence of the economist that mainly matters is an influence over laymen: politicians, journalists, civil servants and the public generally.’

In 2005 a petition by over 1,000 academics was organised against the prize winners — the Israeli Robert Aumann and the American Thomas Schelling — on the grounds that the former used game theory to justify occupation of Palestinian land, and the latter was accused of support for the Vietnam war and US foreign policy. Using Nobel’s criterion, the petition stated: ‘Neither of these individuals has contributed anything that improves the human condition; rather, they have contributed to the misery of millions.’

It is therefore appropriate that the Nobel Prize for Economics be renamed as the Riksbank Prize for Economics and not included in the annual Nobel prize-winning ceremony in Stockholm. This would doubtless downgrade the present prestige accorded to the discipline and its recipients, helping to place economics in its rightful place as a social science with inherent ideological bias. Moreover, it would also reduce the dangers of the argumentum ad verecundiam (appeals to authority) fallacy, which detracts from objectivity and sound empirical evidence. By so doing, it would facilitate the teaching of a more rounded approach to the discipline, including its history, together with the various approaches used to help understand the real world in the endeavour to better tackle so many of its problems.

Published in Le Monde Diplomatique 10th March 2014