It’s that time of the year again! Sure, the leaves start falling and we bring out the winter clothes, but what we really care about is the annual Nobel Prize award. Winning the Nobel Prize is like leveling up to Chuck Norris status; only the best in the field win. Very few achieve this status and as seen from our weekly Bygone Econ Icon, the contributions from the winners of the prize in economics are huge. Though there are a number of qualified economists in the field today, here are our picks of who will likely receive the prize on October 9th.
My pick for the 2017 Nobel laureate is Paul Romer. Remember the Solow growth model? Here’s my super speedy refresher (in order to get a better explanation, look here). Solow saw the key to economic growth as a combination of capital, savings rate, population, and a mysterious variable known as “total factor productivity.” He also thought that these variables should lead to a convergence of all countries to the same level of wealth.
However, a huge hole was poked in Solow’s convergence theory. All the nations of the world aren’t moving towards the same level of wealth. They are actually becoming more unequal! The inequality of the world is growing. The rich countries continue to grow while the bottom poor countries remaining stagnate.
Maybe. It could be argued, for a few, that some of the variables in Solow’s model were different between these diverging countries. However, this became less likely when growth miracles such as South Korea outpaced growth disasters such as Argentina. The Solow model was in crisis. Never fear, Romer is here. He pointed out a missing variable that’s crucial for economic growth: ideas. What do you think of when you think of South Korea?
Ridiculously Overthought Movies?
South Korea is exploding with innovation, constantly creating new ideas. With the country on the bleeding edge of technology, they are growing at an incredible rate. This innovation is a result of institutions, allowing people to innovate without high costs, and a high amount of human capital.
“But wait Alex,” says the one guy who’s read through all my posts. “When you wrote about Solow, you included all of this in his model.” Nowadays, talking about Solow naturally leads to Romer’s contributions, and that’s why I think he’s deserving of the Nobel Prize in Economics this year.
My co-writers below will talk smack about each other’s picks, but I’ll let Romer do the talking for me in his speech come November.
My pick for the 2017 Nobel Prize in economics is Robert Barro. His influence on the world of macroeconomics has been relatively unmatched. Alex’s pick, Romer, has had some influence on Barro’s work, but Barro has arguably applied it in a much more useful way. He is one of the first economists to measure human capital to assess growth rates among countries in the world. He took the “growth regression” initiated by previous laureates and applied it to his own endogenous growth models, which includes human capital’s effect on fertility and investments across countries.
Like the great Paul Samuelson, Barro’s textbook, “Macroeconomics: A Modern Approach,” has become the standard for teaching and furthering the economics profession. If the 120+ top-tiered journal articles, several books, and their subsequent translations don’t sell you, perhaps the fact that he was projected as the fifth most influential economist as of August 2017. This not only beats out both Alex and James’ picks for the Nobel prize, but it also beats out most economists in the world.
Though critics of Barro will say that he hasn’t contributed new ideas to the field, Barro has spent his career applying important contributions like Lucas’ rational expectations, to the real world.
He is one of the most sought-after economists by top-tiered academic institutions, one of the most productive economists in the field, and his ideas have been implemented in areas such as taxes and economic growth.
If we look at all the Nobel laureates in economics, one common theme is that they were all highly productive. Amongst the three picks in this post, Barro wins hands down. Loewenstein has arguably been just as productive, but he’s cast a wide net by publishing in different journals, many outside the scope of economics.
Barro’s application of economics, vast inventory of papers, and revolution of macroeconomics makes him the next Nobel laureate. Plus, his swank nature will make for a great Nobel lecture.
While Alex and Kevin have picked truly good, influential economists, they are peons to my pick for the 2017 Nobel Prize in Economics, George Loewenstein. George Loewenstein is a professor at Carnegie Mellon whose primary research is in Behavioral Economics. His research dug into the choices people make under different emotional situations. It is common sense to think that you may choose differently when you are upset versus when you are happy, but no one prior to Loewenstein has discussed this important factor. His work reshaped how people in the field analyzed individual decisions.
His research also dives into the question of what factors actually matter when we are applying for jobs (known as the theory of evaluability). This theory states that attributes of a well known option, such as GPA, are given greater weight than attributes one knows little about, such as the number of programs written in an obscure language, when evaluating each candidate individually. However, when looking at two candidates side by side, the less evaluable option starts to have increased weight because it is possible to make a simple comparison between the two options on that attribute (i.e., more or fewer programs written in an obscure language).
While I’d like to say Loewenstein is the only pick worthy of the Nobel, all these brilliant economists have made lasting contributions to the field. They have specialized and fundamentally transformed their respective fields, furthering economics as a whole.