November Blog

Economics is not an exact science. This is the one thing that is clear during these times of economic upheaval. There are no rules and the so-called experts sound more and more like hollow weathermen in denial.

Indeed Christopher Sims and Thomas Sargent, who won this year’s Nobel Prize for Economics, have no easy answers on how Europe should solve its debt crisis, neither do they have a magic bullet for solving the U.S. economy’s woes.

The economics prize, officially called the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, was not part of the original group of awards set out in the dynamite tycoon's 1895 will.

The prize was established by the Bank of Sweden in 1968 in celebration of its 300th anniversary. The Nobel Foundation receives a fee from the Riksbank to administer the prize and include it on the Nobelprize.org site. The economics prize is the only non-Nobel prize to be awarded with the same pomp and circumstance as the regular Nobel prizes. And one can really ask why?

Alfred Nobel (page16) was an inventor, chemist, engineer and above all realist. He dabbled in philosophy and literature and held surprisingly radical political views. He hated lawyers and joked that "humbug" was the second biggest industry of his age.

I don’t think that Alfred Nobel would have been delighted to know that an economics prize is handed out in his name. As a scientist he wanted there to be prizes in physics, chemistry and medicine, while the prizes in literature and peace are a reflection of his philosophical and idealistic sides. Economics does not quite fit in.

Alfred Nobel’s great-grandnephew, the civil rights lawyer Peter Nobel, has, on behalf of his family, objected to the prize being associated with the Nobel Prizes.

In his speech at the 1974 Nobel Banquet, even the winner Friedrich Hayek stated that if he had been consulted on the establishment of a Nobel Prize in economics he would "have decidedly advised against it” primarily because "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."

After other controversies the economics prize was redefined in 1995 as a prize in social science, open also to political scientists, psychologists, and sociology researchers.

I feel that it is now time for the Nobel Foundation to cut the economics prize lose, before it damages the Nobel Prize itself.