this year’s Nobel prize for Economics is awarded to Oliver Hart and Bengt Holmström. This was announced by the Royal Swedish Academy of Sciences on Monday in Stockholm.
The Harvard University faculty, Briton, Hart and his Finnish colleague Holmström of the Massachusetts Institute of Technology (mit) in Cambridge, received the award for her contributions to the research field of contract theory.
The new theoretical instruments by Hart and Holmström be extremely valuable in order to understand the functioning of contracts and institutions, as well as their potential pitfalls, it was in the grounds of the Academy. The two scientists have developed a comprehensive framework.
Holmström was “very surprised” by the award. “I didn’t expect at all,” said the Economist on Monday during a press conference after the announcement in Stockholm, the he was via telephone. He was “very happy and grateful” about the award, said the native-born Finn. Hart said he was woken up at 4:40 a.m. and I wondered whether it was too late for this year, but then I rang the bell, luckily the phone.
analysis of the contract design awarded
Oliver Hart, born in 1948 in London, and a PhD in 1974 at the University of Princeton. Since 1993 he has been an Economics Professor at Harvard. Bengt Holmström, born a year later, in Helsinki, is actually a trained mathematician and theoretical physicist. In 1978, he received his doctorate at the University of Stanford. Since 1994, he has held the prestigious Massachusetts Institute of Technology with a chair.
Both were made in the field of contract theory a name. The Committee draws you in particular for your analysis of the contract design. For example, topics such as performance based payment for employees in management positions and the privatization of public sector organizations.
basic research on the principal-agent-theory
Bengt Holmström has already delivered in the 1970s, basic research in the field of contract theory and developed the principal-agent theory, which is now in every Textbook. In essence, it means that a principal with an agent concludes a contract. A principal can be, for example, a Shareholder, an Agent of the managing Director of the company.
In this Situation, the Agent will be always better than the principal. In addition, his actions can’t be overlooked entirely by the principal. In the Economics one speaks of “asymmetric information”. Because the two sometimes have different objectives, there may be conflicts.
Holmström has shown in the context of this theory, as an optimal contract between principal and Agent can look like and how this risks and incentives makes sense. In later years he generalized these results and applied them to situations in the everyday world of work are of importance:
Who gets to make what decisions?
What are the incentives for workers – in addition to the classic pay per content? And how can we deal with this, if the members of a team operate so-called “Freeriding”, so only by the efforts of their colleagues benefit?
Oliver Hart is also conducting research in the field of contract theory and awarded by the Committee, especially for his Work on incomplete contracts: No contract can settle to one hundred percent of all the situations that could theoretically arise. Therefore, the question arises: Who is allowed to make in which Situation the decisions? With incomplete contracts, not only the Economics, but also in adjacent disciplines such as political science and law deal today.
The eight million Swedish kronor (around € 830,000), the award goes back differently than the classic Nobel prizes, not on the will of the Swedish inventor Alfred Nobel. The Swedish Riksbank donated the award in 1968, subsequently, to pay tribute to eminent Economists.
Only a German under the price
carriers Officially, he is called “the price of the Bank of Sweden for economic Sciences in memory of Alfred Nobel”. The award is presented together with the other Nobel prizes on December 10. December, the anniversary of Nobel’s.
While the floor has considered the Stockholm Jury since the first award in 1969, mainly US Economists with the award, the prize-winner of the past two years from Europe. In 2014, the Frenchman Jean Tirole has received the prize for his research on market power and regulation. In the last year of the Scots, Angus Deaton received the award, the teaches but how many other prize-winners in America.
After Germany, the price went up in recent years. In 1994, the Nobel Committee honoured the Bonn game theorists Reinhard Selten. In addition, the honor has been given so far, only a woman: in 2009, the American environmental Economist Elinor Ostrom received the award.