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The sixth and final Nobel Prize of this year wasjust awarded. They save the best for last, of course: economics.
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GORAN K. HANSSON: The Royal Swedish Academy of Sciences has decided to award the Sveriges Riksbank Prize in Economics Sciences in Memory of Alfred Nobel to Angus Deaton for his analysis of consumption, poverty, and welfare.
Let’s put aside for a moment that the Nobel in Economics is not a “real,” original Nobel Prize — we’ll get into that later. Let’s start by congratulatingAngus Deaton, a Scottish-born scholar who’s been at Princeton for many years. He’s best known for bringing an empirical zeal to the study of how individual people spend, save, invest, and so on; and how those choices are connected to poverty and wealth.
“By linking detailed individual choices and aggregate outcomes,” the Nobel committee declared, “his research has helpedtransform the fieldsof microeconomics, macroeconomics, and development economics.”
Within the economics profession, Deaton is widely revered; the award surprised few and delighted many. So, that’s great news for Angus Deaton. But what about the rest of us, who haven’t yet won our Nobel? How are we supposed to get hold of one? I’m glad you asked that question. Because today’s episode is called “How to Win a Nobel Prize.”
Alfred Nobel, born in Stockholm in 1833, was a chemist, an engineer, an inventor, and an entrepreneur. He held more than 350 patents, many of them concerning weaponry and explosives — which, in a world often at war, were always in demand. That’s how Nobel made much of his fortune.
One popular story, perhaps apocryphal, says that in 1888, when his brother Ludwig died, in France, the newspapers theremistakenly reportedthatAlfredNobel had died. As the story goes, one obituary was headlined “Le Marchand de la Mort est Mort” — “The merchant of death is dead.” Having been able to read his own obituary, some historians have speculated, Nobel was inspired to establish an award that might lead to his being remembered differently.
Whatever his motivation, when Alfred Nobel died, in 1896, childless, he left awilldemanding that his estate beused to fund annual prizesto people who have “conferred the greatest benefit on mankind.” There would be prizes in five categories — literature, peace, physics, chemistry, and in medicine or physiology.”
The Nobel Prize has of course become one of the most famous and well-regarded prizes in the world, with winners to match. Among thePeace Prize winnersareTheodore Roosevelt, Martin Luther King, Jr., andMother Teresa. Inliterature:Hemingway,Shaw,Camus. Inthesciences:Albert Einstein,Sir Alexander Fleming,Pierre and Marie Curie. And in Economics – wait a minute. Who said anything about a Nobel Prize in Economics?
Per STROMBERG: The Economics Prize in the Memory of Alfred Nobel is not one of the original Nobel Prizes that, you know, Alfred Nobel put in his will.
We have a very special guest today on the program. His name isPer Stromberg.
STROMBERG: I’m a professor of finance at the Stockholm School of Economics and I’m also one of the members on the Prize Committee for the prize in economics in memory of Alfred Nobel.
STROMBERG: So I’m actually not allowed to talk so much about what happens.
Well, we’ll see about that, Per. Let’s start with the basics. The economics prize was established by the Swedish Central Bank in 1968, nearly seven decades after the original prizes.
STROMBERG: When they created it, they wanted it to be a prize in the Nobel family, if you will, and should basically follow the same principles, the same procedures, the same amount of rigor as the other Nobel Prizes in chemistry and physics and so forth.
DUBNER: Because it is not one of the original Nobel Prizes and was created many years later, there are always those people who consider it therefore not an “official” Nobel Prize. It’s technically called The Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel. So whenever anybody writes, “So-and-so won the Nobel Prize in Economics,” there’s always one or two people out there who say, “Well, it’s not really a Nobel Prize.” Can you just address that head-on for a moment? Should we care that it’s not one of the official, original prizes?
STROMBERG: You know, I think pretty much everyone would agree that this is the most prestigious prize there is worldwide in economics and probably the most prestigious prize we have in social sciences, more broadly, in the world. And, you know, part of the respect that this prize carries with it has to do with the fact that we are part of the Nobel family. So, the reason why the Nobel — if we call it the Nobel in Economics — is the most prestigious prize is not because we pay the most money, because there are other prizes around the world that are richer in dollar terms, but I think it’s because of the rigor in the selection process that we apply.
Alfred Nobel’s will designated which institutions would be responsible for conferring which prizes. The prize in medicine or physiology would be chosen by theKarolinska Institute, a prestigious medical university near Stockholm. The literature prize would come from theSwedish Academy. TheNobel Peace Prizeis awarded by a five-person committee that is elected by theNorwegian Parliament; it’s the only Nobel prize that does not originate in Sweden. Now why is that? Even the Nobel Prize Committeedoesn’t know for certain whyAlfred Nobel wanted it that way. One reason may have been that Sweden had a deeper militaristic tradition than Norway, which made Norway the more natural place to deploy a peace prize. The Nobel Prizes in chemistry and physics were to be conferred by theRoyal Swedish Academy of Sciences– which would also become the decider of the economics prize.
STROMBERG: We are closest to the prizes that are in physics and chemistry, which are the two other prizes that are given out by the Royal Swedish Academy of Sciences. It was modeled on those prizes and we follow the same type of procedures.
DUBNER: Now, talk for just a minute a little bit about the creation of the Prize in Economics. Who was behind it? What was the impetus for the origin of that prize in 1969?
STROMBERG: Basically it was a joint initiative by the Central Bank at the time and the governor of the Central Bank. But there were obviously a group of economists at the time that felt that economics was becoming an important and rigorous topic and was sort of worthy of this type of prize.
DUBNER: Now it doesn’t surprise me that economists and the economics fraternity would want to have a prize that was part of the Nobel family and institution. Was there reluctance by the Nobel family or institution to accept economics and perhaps it was proposed years before 1969? Was there resistance that took a while to overcome?
STROMBERG: So I don’t know whether it was proposed earlier and there was resistance, but I think it’s fair to say that there are still some scientists and researchers in other professions that maybe kind of looked down on economics in general and maybe social sciences, even — not feeling that that’s a real science. But by this time, I think the vast majority of people involved in the Royal Academy of Sciences are proud and in favor of this prize.
DUBNER: I could imagine that if I’m a serious academic psychology researcher or sociology researcher or anthropologist or whatnot, even though you do occasionally cross over borders, I could imagine feeling very left out. You know, physics I understand, chemistry I understand, we’re dealing hard sciences. But once we get into the social sciences, either why don’t we have more — like for psychology — or why don’t you have a prize for social sciences instead of just economics?
STROMBERG: I think it’s a good point you’re making. I mean, I want to make clear though that the prizes in what we call “economic sciences,” so maybe I’m playing with words but economic sciences formally, the way our interpretation encompasses basically all social sciences to the extent that they are dealing with economic issues. So in principal, that means that we could give prizes and have given prizes more in political science, sociology, psychology, history and so on. You know, as far as the subject matter pertains to economics. But that said, I guess economics is sort of a somewhat imperialistic discipline. And we have become the strongest of the social sciences so I guess it was natural that the prize started there.
It may be true, as Stromberg says, that the prize started in economics because it has become the strongest of the social sciences but it’s worth asking: how much did the Nobel Prizehelpeconomics become the so-called strongest of the social sciences? Just imagine if sociology or political science had been granted a Nobel Prize way back in 1968; maybe they’d be the strongest. As for Stromberg’s point about how imperialistic economics has become, that’s harder to argue with. On this program alone, we’ve heard about economics being used to makemovies more suspenseful, tochange our eating habits, even how tomodernize organ transplantation.
We’ve heard fromJeff Ely on suspense;Richard Thaler on diet, andAl Rothon organ transplantation. Roth, in fact,won a Nobel Prizefor his work. Thaler may get one someday for his help creating behavioral economics but of course no one can say for sure. That will be decided by people like Per Stromberg. He is one of six primary members of theeconomics-prize committee. There are also four associate members, who are consulted for their expertise. Committee members are elected for a three-year term and can serve up to three terms.
STROMBERG: Now, the committee turns out to be only Swedish-speaking people, which may be a little bit bizarre for a prize of this importance, but you know, that’s sort of the way it’s been established. That’s the way the other prizes works and all the minutes and discussions and so on are in Swedish, so I guess that’s sort of tough luck. But currently we have one Norwegian who works in Sweden, who speaks Swedish in the committee,Tore Ellingsen, who happens to be the chair actually of the committee .
DUBNER: How’d you get on the committee, Per?
STROMBERG: I was asked. There’s — what do you call it — a nominating committee that is appointed by the Royal Academy of Sciences and they come up with proposals and if the academy thinks it’s a good idea, they ask that person. So I don’t know how heated the debate was before I was asked.
[MUSIC: Phil Symonds, “Compromised” (fromSpy)]
Nobel Prize committee members don’t do a lot of media interviews and the particulars of the selection process are intended to be kept secret; it’s all sealed for 50 years. Stromberg made it clear, repeatedly, that in our conversation certain lines could not be crossed.
STROMBERG: Yeah, so I’m getting now close to things that are bordering the confidentiality I’m under, unfortunately…
STROMBERG: I don’t want to delve into — I’m bordering dangerous territory here …
STROMBERG: So maybe I’m gonna disappoint you here all the deliberations that take place and the voting and the discussions and so on, are also confidential. So I’m actually not a lot to talk so much about what happens.
Because the economics prize is relatively young, we haven’t passed the 50-year secrecy limit on even its earliest winners, but we can share some details about other prizes. A few years ago, it was revealed thatJ.R.R. Tolkienwas nominated for the literature prize by his friendC.S. Lewis, but one Nobel jury member thought Tolkien’s writing had not “measured up to storytelling of the highest quality.” We’ve learned thatJohn Steinbeck, who did win the Literature prize, in 1962, wasnominated eleven timesbefore winning, going all the way back to 1943.
When it comes to the Nobel Peace Prize, things tend to get really political.Mahatma Gandhinever won the prize but, as we learned after the 50-year limit passed, he wasnominated twelve times. Some have speculated that the Norwegian juries of that era were loyal to Great Britain, and apparently ruled against Gandhi because he implicitly represented a critique of British colonialism. Others have said the Nobel committee didn’t want to increase Hindu-Muslim friction.
Just this year, the former Secretary of the Norwegian Nobel Committee,Geir Lundestad, published a book calledThe Peace Secretary. The current committee says that Lundestad has broken Nobel confidentiality rules on several recent Prizes. In the book, Lundestad accused a former Peace Prize committee member — who also happened to be the former Norwegian prime minister — of being “disorganized,” having “surprising holes in his knowledge” and for letting journalists know ahead of time who would win. Lundestad also gave some insight into selection politics. One committee member, he said, was dead-set againstAl Gorereceiving the prize for his environmental campaigning. One potential winner, the weapons inspectorHans Blix, was passed over on the grounds that it might upset the American government, according to Lundestad.
As for the Nobel Prize in Economics — well, despite the obvious limitations, we will give it our best shot to learn how the selection process works. The job of Per Stromberg’s committee is to propose winners to the Royal Swedish Academy of Sciences, which has the ultimate vote. The Academy has 615 members; a majority vote is needed to declare a winner. For the Prize that is awarded each October,the processbegins the previous September. Nomination forms are sent out to around 3,000 people, including Academy members as well as eminent university professors and former Nobel Laureates.
STROMBERG: So there’s a secret list of people, but prominent researchers in economics and other social sciences around the world are asked to nominate candidates and those nominations are due some time in January.
Some of these nominators also send Stromberg’s committee brief reports in support of certain candidates. The committee also solicits its own reports. Stromberg says this is one of the most important parts of their work.
STROMBERG: Our goal is to keep on scanning the field of economic sciences broadly speaking, so we have our secret book, basically, where we kind of follow up on this is what people currently view industrial organization and this is the current state of labor economics and so on. And to keep this up to date, we continuously send out this report basically scanning the field. So these are super-helpful and they’re sent to really top people in these fields put a lot of work into these reports. So these are probably our most important input.
DUBNER: I see. And those reports remain confidential for 50 years as well, correct?
STROMBERG: Exactly. Exactly.
DUBNER: I did want to ask about one particular — so Richard Thaler tells me that he was asked many years ago to write a report, he was commissioned to write a report on the work ofDaniel KahnemanandAmos Tversky,who —
STROMBERG: I’m not sure he was allowed to say that but fine.
DUBNER: Okay now, that’s his problem, not mine.
STROMBERG: Dick’s a friend of mine, that’s fine.
DUBNER: Okay, so let’s pretend that it was okay for him to have told me that.
DUBNER: Now, what’s interesting is that Thaler at the time was much younger than those guys, so the committee was going to people who had been influenced by the people, not people who were the mentors. But what was interesting to me is this was a report that was commissioned in, I believe, the mid-1990s. And then, as it turns out, Amos Tversky tragically died very young, but Danny Kahneman didgo on to win the Nobel, even though he’s a psychologist by training and a groundbreaking one. So, I’m curious, how typical would that recommending report be? A) Written by someone who was influenced by the people — as opposed to a mentor of, and B) That far in advance of what turned out to be a winning prize?
STROMBERG: So, if I start with the first question, in most of our reports I would say we ask for a view on the field from someone who is an expert in the field. But occasionally — and especially when a name is converging in a particular field, like Daniel Kahneman came up, must have come up, I mean it was before my time, but I presume he came up a lot as a proposed prize winner in a lot of these reports — then we can solicit personal reports on individuals, as we sort of hone in on the names. Now, to be honest, we would typically try to get both cheerleaders as well as critics to get the balanced picture. So it doesn’t surprise me that — if Dick wrote the report, but it probably was not the only one.
DUBNER: And I guess that kind of report might have been a little unusual in that this was a field or a subfield that was new, right? Behavioral economics. I’m guessing. It’s not like you guys don’t know what finance is or econometrics is, right? And it’s so interesting to me that you would commission these reports kind of prospectively to learn, to educate yourselves about what are the fields that are developing. Can you give us a hint about what sort of fields or subfields within economics — or maybe they’re within psychology and sociology and so on — that your committee is particularly interested in these days?
STROMBERG: I wouldn’t be — I can’t tell you that. It’s not so much whatwe’reinterested in as what the profession tells us they’re interested in. So in terms of the reports in these fields, we basically try to throw a pretty wide net across economic sciences and neighboring fields. But as we come back to these nominations, nominations are indeed very informative about what the profession thinks. And nominations are also important because we cannot give a prize to someone who has not been nominated, so that’s actually a rule. But the way I view our job is basically as aggregating the voice of the profession. You know, it’s not reallyourviews on what we think is hot and what’s not, but we really try to get a sense of okay, of the top researchers in these fields, this is what they believe.
[MUSIC: Human Factor, “The Axis Mundi”)]
So the committee can’t give the prize to someone who hasn’t been nominated. They also can’t give the prize to someone who’s dead. The Nobel Prize is not awarded posthumously. That’s why Amos Tversky, who almost certainly would have shared the prize with his collaborator Danny Kahneman, didn’t win the Prize. And maybe Gandhi, who was assassinated in 1948, would have won a Nobel if he had outlived the various frictions surrounding his nomination.
It was June when Per Stromberg and I spoke, which meant the awarding of the Nobel Prize to Angus Deaton was still four months away. Over the preceding six months, Stromberg and the rest of the committee had been culling the nominations and research reports they received from around the world. Early in this process, they created a long list of potential prize ideas.
STROMBERG: And that list typically involves, let’s say a dozen or so potential prizes. And then we divide these 12 prize ideas — let’s call them that — among ourselves in the committee and start writing, basically, the scientific materials and the proposal to see whether it sort of holds up.
Keep in mind that although the prize is awarded to individuals — often more than one individual per year — it’s usually the work itself, the breakthrough idea, that’s actually being rewarded. That’s what Stromberg means by “prize ideas.”
STROMERG: And then we meet probably every four weeks throughout the spring, and then we vote on which of these 12 proposals should remain in the game until the next meeting and which ones are out — a little bit like a reality show.
DUBNER: You know now that you mention it Per, this would make such a good reality TV show, but I’m guessing you’re not willing to share, to let the cameras in these rooms are you?
STROMBERG: Maybe we could tape it and then release it in 50 years if reality shows are still hot. But no. Kidding aside, that’s sort of how it works and I think by now we have, I think, what we believe is the best prize for this year. But we obviously, since we’ve been working on twelve prizes throughout the spring, we obviously have Plan B if this is not popular.
The committee’s idea needs to be “popular” with the Academy, which, if you examine previous Nobel Prizes in economics, seems to mean being at least a bit in sync with a Scandinavian view of the world: measured, a bit technocratic, maybe; also somewhat humanistic.
Last year, the French economistJean Tirolewon for his “analysis of market power and regulation.”In 2009, the American political scientistElinor Ostrom— the first and thus faronly female economics laureate— shared the prize withOliver Williamson; Ostrom was cited for her “analysis of economic governance, especially the commons.”
And, while the committee insists that the prize is given for a body of work, and not necessarily for work that intersects with world events, several of the recent prizes — in addition to Tirole’s and Ostrom’s — seem to speak to the causes and consequences of the Great Recession. The2013 prizetoEugene Fama,Lars Peter Hansen, andRobert Shiller“for their empirical analysis of asset prices.” The2011 prizetoThomas SargentandChristopher Simsfor “their empirical research on cause and effect in the macroeconomy.” As Per Stromberg noted, while his committee steers the choice, it’s the Royal Swedish Academy of Sciences that ultimately has the power to give the prize.
STROMBERG: The day we announce the economics prize in the memory of Nobel, that is the day when the Academy votes. So it’s basically, we present the proposal and they vote. And if they vote for our proposal, that’s going to be the thing that’s announced that day. Now obviously we don’t take them by surprise at that point. So there’s a whole process before that — and actually one of the important steps is that there’s a chapter of the Royal Academy of Sciences, which is the chapter for social sciences — so we first present our proposal to the chapter for social sciences. They vote on whether they want to support this proposal or not. That happens in September.
DUBNER: I see.
STROMBERG: If things go badly, if there’s resistance to a prize or something like that, we should know that and so have some leeway or some time before the October vote.
DUBNER: Has there been such a case in recent memory or even long memory where the nominating committee put forward a proposal and the Academy of Sciences committee said, “You know, we don’t really like the options you’ve given us. Go back to the drawing board”?
STROMBERG: Yeah, so I’m getting now close to things that are bordering the confidentiality I’m under, unfortunately.
DUBNER: That’s the border we wish to cross. So go ahead and lead us across —
STROMBERG: Well, if you do another show in 50 years, we can make it. Let me put it this way: there is usually, you know, interesting and constructive discussion when we propose these prizes.
The Nobel Prize in Economics — technically the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel — was just awarded to Angus Deaton. Not everyone loves this prize; it wasn’t one of the original prizes designated in Alfred Nobel’s will. Just the other day, one member of the Royal Swedish Academy of Sciences, which votes for the winner,argued it should be done away with, as the study of economics leads to corruption. But at least among economists, the prize is pretty popular — and it comes with a cash award of roughly $1 million. So how do you get one of those babies for yourself? The first step is to become an economist, although occasionally a political scientist or psychologist will win the prize. You then have to compile a body of research that a handful of Swedish gatekeepers consider world-class. You also better be patient. This is not a prize for young people.
STROMBERG: We, by necessity will have to see more evidence of the long-lasting impact before we can give the prize.
That’s Per Stromberg, a member of the committee that awards the prize. He makes the point that, although the prize is often given for research done while a winnerwasyoung, the prize comes only after the research has stood the test of time. Accordingly, theaverage age of an economics Nobel laureateis 67. But as noted earlier, you can’t be so old as to be dead, since the prize is not awarded posthumously.Steve Levitt, my Freakonomics friend and co-author, is an economist at the University of Chicago. He’s seen quite a few of his colleagues win a Nobel.
STEVEN LEVITT:Roger MyersonandJim HeckmanandLars Hansenwould be a couple of the people who have won the Nobel Prize since I’ve known them.
DUBNER: And what kind of ideas do you believe are considered most valuable within the economics realm for winning the Nobel? How important — or virtuous, let’s say — do they need to be?
LEVITT: So, in general, I’d say most of the people who have won the Nobel Prize have had ideas that have radically changed the way future economists were going to think about problems. Now what’s often funny though, when they have to characterize what the idea is for, it’s tricky for the news media to try to make sense of it. And often the one-line blurb of why someone wins a Nobel Prize will be something completely absurd, like, “He made it clear to other economists that when you don’t have complete information, you sometimes make bad judgments.” And, so it’s interesting, because ideas are hard to come by, and ideas are often so obvious ex-post that when you summarize them in one sentence for the public, you wonder how in the world this guy could have gotten a Nobel Prize for it. But the details are often the hard part.
DUBNER: And how substantially, or let me just ask how have you observed that winning the Nobel will change the economist’s life and maybe the lives of those around him?
LEVITT: I really haven’t seen the Nobel Prize change people’s lives much at all. I think the best example would be my good friend Gene Fama. And Gene and I play golf almost every weekend in the morning and when Gene won the Nobel Prize, he was there for our 7 a.m. golf tee time the next Saturday. And I said, “Gene, I didn’t expect to see you.” And he said, “If winning the Nobel Prize keeps me from playing golf in the morning, I’ll consider it the worst thing that ever happened to me.” And so for Gene, his goal was to change as little as possible. I think for most of the people who win the Nobel Prize, by the time they win the Nobel Prize they are so prominent and so well-equipped to do what they want to do, that they more or less just keep on doing exactly that. They just do it with a little swagger in their step, and a little more excitement, and a lot more bowing by the people who they’re talking to.
DUBNER: And what do you know about the selection process? Do you as an economist choose to try to find out how it works? Do you remain wildly oblivious?
LEVITT: I think almost no one on the planet knows less about the selection process for the Nobel Prize than I do. The only way that I have any idea that it’s Nobel season is that there is a whole set of people in the profession of economics — a really large set of people — who think a lot about winning the Nobel Prize and who plan their calendars around winning the Nobel Prize. And the way I know it’s Nobel season is that around Chicago, a lot of people tend to get haircuts in the few days leading up to the announcement of the prize. And so if I see all my colleagues with really short and well-maintained hair, I know that the prize must be somewhere right about the corner.
[MUSIC: Jetty Rae,“Nice Ones”(fromDrowning in Grain – Instrumentals)]
So does the average would-be recipient have a sense that he or she will win the prize?
ALVIN ROTH: You know, it’s hard to answer that humbly.
ROTH: I knew that I was on the big list of people who, if I won a Nobel Prize, it wouldn’t cause the Nobel committee to be embarrassed. The newspapers the next day would not say “Craziness in Stockholm.” But there are many, many people in that category. So indeed, we were asleep. We were not waiting for a call. And it’s an interesting call because one of the things they’re concerned about — they have a lot of experience with this — is convincing you that it’s not a prank. So the person who first spoke to me said, “Congratulations. You’ve won the Nobel Prize.” And then he said, “And I’m here with six of my colleagues and two of them know you and they’re going to talk to you now.”
DUBNER: To persuade you that this was for real.
DUBNER: Either that, or a very elaborate prank.
Angus Deaton, this year’s winner, had a similar experience. Here he is at a press conference on the day he won:
ANGUS DEATON: So, Anne, my colleague and wife here, picked up the phone and I think that I picked it up almost at the same time. And there was a very Swedish voice — which was almost enough, you know — and who said, “I would like to speak to Professor Angus Deaton. There is a very important telephone call for him from Stockholm.” So then I had a pretty good idea of what it was. And then they said some very nice things about me, which was very nice. And then they were very keen to make sure that I did not think it was a prank. I don’t know whether this is common. I’ve never had a prank phone call telling me that. And, of course, as soon as they said that, I thought, “Oh, my god, maybe it is a prank.”
Per Stromberg was one of the people on the other side of the line this year with Deaton and also a few years ago, with Al Roth. As Stromberg recalled, once the Royal Swedish Academy of Sciences voted to give Roth the prize, the committee members got into a room and had some lunch.
STROMBERG: And we sit down, the whole committee, plus the secretary of the Royal Academy, around the big table with a speakerphone and start calling. So there’s a bit of a process in trying to find, once we decide on these prizes or the proposals at least, to dig up phone numbers, which might not always be so easy. And for sure if you’re on the West Coast, it’s a nine-hour time difference. We do this at noon sometime and that could be the middle of the night in California, obviously.
DUBNER: Now, Al told us that to convince him that it wasn’t a prank, you told him right off the bat — the committee told him — that there were some people he knew in the room whose voices he could hear.
STROMBERG: Oh, yeah. Exactly. So, typically the committee is reasonably well-connected. So someone in the committee will have met the laureate and know the laureate a little bit beforehand. But if we don’t, then we actually usually invite another economist that knows the laureate to be in there and chat a bit and to make sure it’s not a prank call.
DUBNER: Now, when he told me that, I had to think that would be one of the cruelest pranks you could ever play on anyone.
STROMBERG: Yeah, exactly.
DUBNER: Do you think it’s ever happened?
STROMBERG: I haven’t heard about it, but now you’re giving people ideas I guess.
DUBNER: Uh-oh, okay. And describe what it’s like. It must be a wonderful thing to be able to make that call.
STROMBERG: It’s one of the most gratifying moments of this whole process, to make this call and hear the reaction of the laureate and so on. It’s quite amazing actually.
DUBNER: And what’s it feel like to have so much — I don’t want to say power over someone’s life, but winning a Nobel really changes the trajectory of your life. Can you just talk for a moment about what it feels like to have that kind of ability?
STROMBERG: It carries a huge amount of responsibility, obviously. After having been on the committee for a few years, the thing that has impressed me the most is actually the process. I keep on repeating it, but with the nominations, the reports with the work we do, it really makes the process very solid — which also, at the end of the day, I think everyone feels kind of comfortable with these prizes that we propose. It doesn’t feel like — I don’t know if this makes any sense to you, but — it doesn’t feel like you have so much power at the end of the day because the process is so thorough.
DUBNER: Because the process is really the power.
DUBNER: So, I’ve talked to some economists who detect — or at least believe that they detect — a sort of pattern. You know, there’s a finance prize every decade or so. The same for econometrics. You throw in a game-theory prize once in a while. Even behavioral economics has now entered the mix. So how much emphasis does the committee put on not only rewarding fields that are newer, or have coalesced by now, but in also rotating it to keep things interesting, maybe for something as simple as making a splash in the wider world?
STROMBERG: I think, at least in part, this happens kind of automatically due to the process we follow. Because when we start out with the prize, we have a topic. Let’s take the finance prize as an example. We had been investigating asset pricing and empirical work in asset pricing for quite some time, because that had emerged as — you know, when people were doing reports in finance, that had come up as — the most prize-worthy thing. So that basically means once we’ve given the prize to Fama, Shiller, Hansen, there are not a lot of candidates — natural prizes — waiting right behind them, right? Because this was what people believe was the most important contribution in this field, right? So then it’s very natural that you move on for the next year to a different field. So, I think part of it is that. But then I think that probably — I don’t know deliberate it is — but the way that things turn out is, if you’ve been working very hard on a particular area for a year, you feel a little bit exhausted for that particular area, which means that that’s also kind of gives rise to a natural cycle. But it’s not that we follow any explicit rules.
DUBNER: When a subfield or an area of economics gets more popular — so, behavioral economics, which I’ve been fascinated by for a lot of years, and thereforewas thrilled to see Danny Kahneman winthe Nobel in Economics for it — it’s really gained momentum in the public sphere and in the governmental sphere. And there are books — Thaler has published a book,Misbehaving, on it, Kahneman’s bookThinking, Fast and Slow really opened a lot of eyes around the world. And I’m curious, does popularization tend to work in favor of a field that the Nobel committee may be considering, or against it?
STROMBERG: I think it’s irrelevant if you think about popularization outside of academic circles. Because it is very much about academic contributions and the view of the academic community. Ao in some sense, it really is not a decision variable that we take much note on.
DUBNER: TheJohn Bates Clark Medal, which is a very prestigious American academic economics award — used to be every two years awarded, now it’s every one year — but still it’s considered sort of a junior Nobel. Have you ever looked at the correlation between Clark Medal winners and future Nobel winners? Is it as strong as we think?
STROMBERG: Well actually, you don’t have to ask me, you can just calculate the correlation.
DUBNER: Well, that is true.
STROMBERG: And you would find that it’s significant.
DUBNER: Well, the only thing we don’t know is whether recent winners, especially as it’s expanded to annually, stand as good a chance as winning a Nobel as the past winners who won the Clark, right?
STROMBERG: Let me answer a slightly different question, which is, I think economics and social sciences in general are maybe — they’re a little bit more complex than, say, some of the natural sciences because it takes some time before you know how fundamental a contribution is. There’s like a longer lag between that particular research study is done until you actually know whether this was an important finding with long-lasting impact. And arguably, I think, the John Bates Clark Medal will naturally have a shorter lag because you give it to good, prominent economists below the age of 40, right?
DUBNER: Alright, Levitt. Now, if I were to ask the average high-quality economist — someone perhaps who has already won the John Bates Clark Medal, someone like you perhaps — what he thinks of his prospects or her prospects to win the Nobel Prize in economics. What does that person, you for instance, say?
LEVITT: So, almost any economist you talk to will say they think their own likelihood of winning the Nobel Prize is really low. But I think that’s not what most people really think about their chances. I remember one person who won the Nobel Prize and he, like all the other winners, acted so surprised and couldn’t believe he had won the Nobel Prize. And at the press conference, his daughter was invited up onto the stage after he has just said what an amazing honor this had been and he couldn’t believe it happened to him, and they asked the daughter, “Well, what do you think of your father winning the Nobel Prize?” And she said, “Thank God he finally won the Nobel Prize. He complains bitterly every year he doesn’t win it and finally we won’t have to have that conversation at the dinner table.”
The Nobel is among the highest-profile prizes in the world. The Academy Awards – the Oscars — are also a pretty big deal. In that case, movie studios and producers often lobby openly for the prize. I was curious if the same thing happens with the Nobel. Per Stromberg again:
STROMBERG: So, I must say, and maybe this was little bit surprising to me, but there’s surprisingly little explicit lobbying to us in the committee. Maybe because we’re just kind of nobodies and no one knows us, maybe that helps.
DUBNER: Alright, last question for you Per. Let’s say that I want to win your prize. Okay? So I’m not, personally, I’m not an economist, but I do collaborate with one, Steve Levitt, who won the Clark Medal, at the University of Chicago. And we’ve written a bunch of books about economics and look, we’re making this weekly — we’re bringing economics to the whole world via this podcast. So what do I have to do to get your prize? Can you help me out with that?
STROMBERG: Keep on your good work, at doing your good work, and then we’ll see if you have enough long-lasting impact on the field and the outside world to merit the prize.
DUBNER: Okay I’d better hang up now and get back to my work.
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On next week’s Freakonomics Radio: let’s say a pharmacist has a headache. What do you think she or he will choose: the name-brand Bayer aspirin, or the much cheaper store brand? About 92 percent of the headache remedies pharmacists buy are store brand. The rest of us spend up to $2 billion extra each year just on brand-name headache medicine. Is this just a triumph of marketing, or something more? When is the time to go generic? A college education maybe? That’s next time, on Freakonomics Radio.