Encyclopedia

Of
Nobel Laureates

ECONOMIC SCIENCES
 ENCYCLOPEDIA
OF
NOBEL LAUREATES
IN ECONOMIC SCIENCES

Published by :

Panther
Publishers
 ENCYCLOPEDIA
OF
NOBEL LAUREATES
IN ECONOMIC SCIENCES

P.T. RAJASEKHARAN
SOPHIE VARMA

Panther Publishers Private Limited

Bangalore, India.
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 INTRODUCTION

It is now more than hundred years since Alfred Nobel’s multifaceted

life came to an end. He died in San Remo on 10th December
1986, at the age of sixty-three.
The announcement of his testament and last will in early January
1897 surprised Sweden and the other parts of the thinking world.
In his will he had left bulk of his estate to form a fund, with the
interest to be distributed annually ‘as a reward to those who during
the past year have done humanity the greatest service’. It took
four years of investigation and often bitter argument before
objections of every kind from sceptics were finally overcome and
the will could be given a definite form and the Nobel Foundation
was constituted.
Since the inception of the Nobel Award in 1901, Alfred Nobel’s
instruction in his Will has been carried out almost every year.
Barring unavoidable interferences like the world wars, this prize
for scientific and literary excellence and world peace has brought
into limelight eminent humanists, thinkers and researchers who
have pioneered in shaping the world throughout the current
century. Roentgen, C. V. Raman, Einstein, Madam Curie, Herman
J. Muller, Watson, Crick, Rabindranath Tagore, Solzhenitsyn,
Mother Teresa, Gorbachev, Nelson Mandela, Amartya Sen,... the
honoured list of laureates is a veritable who-is-who amongst
homosapiens in the past one hundred years of human history and
accomplishments.
The members of the jury selecting the prize winners have
repeatedly distinguished themselves by their professional and
impartial judgement. Should we wish today, after all these years,
once again, to nominate the most important figures from the
various scientific fields, the greater part of the list could hardly
be any different - with just a few names deleted or a few more
added.
The unbiased attitude of the Committee which selects the
laureates in different fields and their commitment to enforce
strictly Nobel’s last wishes that “ the award of the prize shall
be made without regard to nationality, so that he who has the
greatest merit, shall receive it, be he a Scandinavian or not”,
if ever, been seriously contested.

The Nobel Prize

The Will of Alfred Nobel was as confusing and mysterious as the
man. Nobel had bequeathed his entire fortune to be invested in
‘safe papers’ and the annual interest to be divided into five parts
and given as awards to individuals who had made the most
important discoveries or inventions in physics, chemistry,
physiology or medicine, and in literature to the best author of an
ideological work, and in peace to whoever had worked the most
towards achieving the furtherance of international brotherhood,
the abolition or reduction of armies, and the organization or
propagation of peace congress. The cosmopolitan Nobel had also
desired that no consideration whatsoever was to be given to
nationality in choosing the prize winners. He had nominated the
prize givers also in his Will.
The Will of Alfred Nobel
The Nobel Foundation was established under the terms of the
Will of Alfred Bernhard Nobel, Ph.D.h.c., dated Paris, November
27, 1895, which in its relevant parts runs as follows:
“The whole of my remaining realizable estate shall be dealt
with in the following way: the capital, invested in safe securities
by my executors, shall constitute a fund, the interest on which
shall be annually distributed in the form of prizes to those
who, during the preceding year, shall have conferred the
greatest benefit on mankind. The said interest shall be divided
into five equal parts, which shall be apportioned as follows:
one part to the person who shall have made the most important
discovery or invention within the field of physics; one part to
the person who shall have made the most important chemical
discovery or improvement; one part to the person who shall
have made the most important discovery within the domain of
physiology or medicine; one part to the person who shall have
produced in the field of literature the most outstanding work
of an idealistic tendency; and one part to the person who shall
have done the most or the best work for fraternity between
nations, for the abolition or reduction of standing armies and
for the holding and promotion of peace congresses. The prizes
for physics and chemistry shall be awarded by the Swedish
Academy of Sciences; that for physiological or medical works
by the Caroline Institute of Stockholm; that for literature by
the Academy in Stockholm, and that for champions of peace
by a committee offive persons to be elected by the Norwegian
Storting. It is my express wish that in awarding the prizes no
consideration whatever shall be given to the nationality of
the candidates, but that the most worthy shall receive the prize,
whether he be a Scandinavian or not.”
Nobel had nominated an unusual man, 26 year old Ragnar
Sohlman, as the executor and trustee of the Will. A chemical
engineer and an employee of Nobel since 1893, it was the sheer
determination, loyalty and skill of Sohlman that saw the dream
of Nobel materialize into reality. Sohlman had to content with
Nobel’s disgruntled relatives, persuade the nominated prize givers
to accept the undertaking and convert Nobel’s assets and place
them in a fund and above all interpret a will that was extremely
plastic and challenging. Together with Rudolf Liljeqvist, who was
appointed his associate executor, and the lawyer, Carl Lindhagen,
Sohlman performed his duties of the “soul’s messenger”
remarkably. Emanuel Nobel, Nobel’s wealthy and loyal nephew
was by Sohlman’s side throughout the difficult task reminding
the young engineer that in Russian the executor of a will was
known as the “soul’s messenger”.

Nobel Foundation
The main objective of the foundation, since the beginning, has
been to administer the Nobel inheritance and to ensure that the
prize winners, according to the wishes of its patron, should receive
substantial prizes. One of the major reasons for the continual
high regard for the prize is the Foundations’ strong economic
base and hence the absolute independence and freedom from
external influence and interest.

The Five Nobel Prizes

Subject: Prize-awarders:
Physics The Royal Swedish Academy of Sciences
(Kungliga Vetenskapsakademien), Stockholm.
Chemistry Idem
Physiology or The Nobel Assembly at the Karolinska
Medicine Institute (Nobelfdrsamlingen vid Karolinska
Institute), Stockholm.
Literature The Swedish Academy (Svenska Akademien),
Stockholm.
Peace The Norwegian Nobel Committee (Den
Norske Nobelkomite), Oslo.

Prize In Economic Sciences In Memory of Alfred Nobel

Sveriges Riksbank (Bank of Sweden) at their tercentenary, in
1968, instituted an Alfred Nobel Memorial Prize in Economic
Sciences and placed an annual amount at the disposal of the Nobel
Foundation as basis for a prize to be awarded by the Royal Swedish
Academy of Sciences. Nobel Prize rules will, mutatis mutandis,
be followed regarding nomination of candidates, prize
adjudication, prize award and prize presentation. The latter takes
place on Nobel Day, December 10, each year. The prize amount
will equal that of a Nobel Prize for the same year. Special Statutes
and Regulations (valid from January 1, 1969) have been issued
lor this Alfred Nobel Memorial Prize in Economic Sciences.

Statutes And Regulations

Statutes for the Nobel Foundation were given by the King in
Council on June 29, 1900 (S.F.63/1900). Revised statutes were
given on October 4. 1974 (valid from December 1. 1974) with
later amendments on November 24, 1977 (valid from January 1,
1978), and on September 16, 1982 (valid from January I. 1983).
Special regulations for the Swedish prize awarding institutions
were given by the King in Council on June 29, 1900 (S.F.63/
1900), with later amendments, and in the case of the Norwegian
prize awarder by the Nobel Committee of the Norwegian
Parliament (Det Norske Stortings Nobelkomite) on April 10,
1905, with later amendments.
Regulations for the Board of Nobel Foundation were issued by
the King in Council on February 15, 1901, (S.F. 11/1901), with
later amendments.
The bodies governed by these Statutes and Regulations are:
1. The Nobel Foundation with its Trustees, Board of Directors
and Auditors;
2. Four Prize-Awarding Institutions, viz.
the Royal Swedish Academy of Sciences,
the Nobel Assembly at the Karolinska Institute,
the Swedish Academy, and
the Norwegian Nobel Committee;
3. Five Nobel Committees (including the above mentioned
Norwegian Committee, which is in itself a prize awarding
institution ) - one for each prize section;
4. Five Nobel Institutes - two for the Royal Swedish Academy
of Sciences and one for each of the three other prize­
awarding bodies.
Important dates

Jan. 31 Final date for acceptance of proposal for

current year’s prize awards.

Feb 28 Final date for presentation of the Annual

Reports to the Auditors.

Mar 31 Final date for submission of the Annual Report

and the Auditor’s Report to the Trustees.

Apr 30 Final date for Trustees’ meeting to consider

the Annual Report and the Auditors’ Report,
and to elect new Board Members.

May 1 The newly elected Members of the Board begin

their term of office.

Sept. Invitations issued for proposals of prize

candidates for next year.

Oct. Decisions on Prize Awards.

Oct. 21 Date of Alfred Nobel’s birth (1833).

Dec. 10 Date of Alfred Nobel’s death (1896) and

Commemoration Day of the Nobel Foundation
(Nobel Day), when the Nobel Awards are
formally presented, the Peace Prize in Oslo and
the other prizes in Stockholm.
In Economic Sciences

1. Swedish and foreign members of the Royal Swedish

Academy of Sciences;
2. Members of the prize committee for the Alfred Nobel
Memorial Prize in Economic Sciences;
3. Recipients of the prize in Economic Sciences;
4. Permanent professors in relevant subjects at the universities
and colleges in Sweden. Denmark, Finland, Iceland and
Norway;
5. Holders of corresponding chairs in at least six universities
or colleges, selected for the relevant year by the Academy
of Sciences with a view to ensuring an appropriate distribution
between different countries and their seats of learning; and
6. Other scientists from whom the Academy may see fit to invite
proposals.
Decisions as to the selection of the teachers and scientists
referred to in sections 5 and 6 shall be taken each year before
the end of the month of September.
Eligible for a Nobel Prize are only individuals except for the Peace
Prize, which also may be awarded to institutions and associations.
The Nobel Committees and the Prize Committee start their
preparatory work on February 1 and submit the ensuing
recommendations in the early autumn of the same year to the
respective prize-awarding bodies which have the sole right to
decide. Even a unanimous committee recommendation can be
overruled by the adjudicating prize- awarding institutions. The
prize awards must be made not later than November 15; the
decisions are final and without appeal. The deliberations as well
as the votes are kept secret. Only the results are made public.

The Nobel Trust

The initial capital of 31.3 million kronor, have, over the years
grown substantially. Its market value, for example, as on 1985
was 711 million kronor. The Foundation’s income for 1985
amounted to 36 million kronor, including 21.5 million in interest,
6 million on share dividends and nearly 8 million for estate assets.
With a total expense of 5.6 million a year, the profit of the
Foundation was 30.5 million that year compared to the 28.5
million, the previous year. The appreciation, in fact, would have
been double the amount, had the Foundation not been so highly
taxed during the first five decades. Since 1946, however, it is
exempt from state income tax, although there are other local
levies and government taxes it has to bear. The Foundation also
has been relieved of its old restrictions of investing only in
government bonds since 1953. By judiciously using this
opportunity, to invest freely, the initial capital of the trust has
substantially recovered and the value of the prize has appreciated
since then.
Prize Amounts Through Years
Year in Swedish Year in Swedish
Kronor Kronor
1901 150,800 1978 725,000
1910 140,700 1979 800,000
1920 134,100 1980 880,000
1923 (lowest amount) 115,000 1981 1,000,000
1930 172,900 1982 1,150,000
1940 138,600 1983 1,500,000
1946 121,000 1984 1,650,000
1950 164,300 1985 1,800,000
1953 175,300 1987 2,340,000
1960 226,000 1989 3,000,000
1969 (including Prize in 375,000 1990 4,000,000
Economic Sciences)
1970 400,000 1991 6,000,000
1971 450,000 1992 6,500,000
1972 480,000 1993 6,700,000
1973 510,000 1994 7,000,000
1974 550,000 1995 7,200,000
1975 630,000 1996 7,400,000
1976 681,000 1997 7,500,000
1977 700,000 1998 7,600,000
The prize money is taxed in accordance with the laws of the
country of the recipient.

The Prize
The Nobel prize consists of a medal, a diploma and a cash award.
The Nobel medals, first minted in 1902 (1901 winners received
their medals late), are of 23 carat gold, about two and a half inches
across, and weigh nearly half a pound. Swedish sculptor Erik
Lindberg, whose bas-relief of Nobel in profile is considered to
be one of the finest likenesses ever made of the founder, designed
these medals.
The obverse side of each medal has a bust of Alfred Nobel. The
Chemistry and Physics medals have identical reverse sides. The
reverse side of each of the other medals is different.
The Nobel diploma is individually designed and hand-painted for
each winner in a style resembling that of medieval illuminated
manuscripts. The designs have never been repeated excepting
once in the case of the father and son team of Braggs who shared
the 1915 Physics prize.
ALFRED NOBEL
PHYSICS AND CHEMISTRY
PEACE
LITERATURE
PHYSIOLOGY OR MEDICINE
ECONOMIC SCIENCES
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ALFRED NOBELS M’NINE
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HERBERT A.SIMON
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THE NOBEL DIPLOMA

xxii
The Nobel Phenomenon
Since the first award was given in 1901, Nobel prize has always
been regarded by laymen, scholars and scientists alike as the
ultimate symbol of excellence in achievements. The Nobelists,
undoubtedly, occupy the topmost hierarchy in their area of work
and are considered as peers. In the late 19lh century when Nobel
contemplated the awards, there was no substantial support for
scholars or researchers. As an inventor and scientist with over
350 patents under his belt, Nobel was aware that the costs of
most research, though modest, were beyond an independent
scientist’s means. For example, even as late as 1920, the research
grant for the entire Cavendish Laboratory was only about ten
thousand dollars or two thousand pounds for a year. One of the
major prizes available at that time, the Royal Society’s Rumford
medal, by comparison, carried an honorarium of approximately
$ 150. The first year Nobel awards in 1901 was $ 42,000 each.
For the general public and the laureates themselves, Nobel’s
princely sum constituted a symbolic message asserting, in a way,
that these people really mattered.
The value of the prize has varied between $ 30,000 to $ 100,0000
over the years. The division of Nobel prizes into two or three
portions further diminishes its monetary value. The prize money
of 1998 is $ 978,000 compared to the $ 42,000 of 1901.
Although the purchase value (adjusted after inflation) still lags
behind the original sum given in 1901 and no longer provides
anything like the liberating endowment that Nobel envisaged, for
independent research, the prestige of the award has increased
incomparably in ninety years of its evolution. The extraordinarily
deserving roster of recipients is the most distinctive aspect of
this prize.
The exclusion of certain branches of science, and more especially
that of mathematics, from the award list has caused a great deal
of heart-burns. One story, apocryphal though, traces this to the
rivalry between Nobel and the Swedish mathematician, Gosta
Mittag-Leffler, for the hand of an unidentified lady. Nobel, the
story goes, being the unsuccessful suitor had his revenge by
making sure that Mittage-Liffler would never get one of his prizes.
The general attitude of the Nobel Foundation, however, as its
member Stig Romel concludes, is that Nobel wanted to benefit
mankind in a concrete, rather than an abstract way, and thus
excluded mathematics from his purview.
There are other prizes as rich as the Nobel prize. The John and
Alice Taylor Ecology Award, for example, had an honorarium of
$ 175,000 in 1975. The Robert A. Welch award in Chemistry
carried with it $ 100,000 and Prix Balyan $ 52,000. But, the
Nobel prize is, in effect, the most prestigious international award,
and the fact that persons of over 40 nations have received the
prize attests to its international character and greatly extends its
viability. The international media attention it receives and the
feverish competition that preludes the awards ensure that the
Nobel prize is an ecumenical symbol of literary and scientific
accomplishments.
Historically, the Nobel awards in literature and peace have been
controversial. By virtue of the very scope of these specialised areas,
the prize is normally given at the fag end of the laureate’s career.
The average age of a Nobelist in this area is far higher than that of
his colleagues from sciences and the evaluation in these subjects
is almost based on one’s life work. The personality of the laureate,
invariably, is an aspect of consideration in these two areas. In
sciences, on the other hand, it is the work and only the work that
matters. In terms of criticism, it is in fact necessary to remember
that the Nobel prize in sciences is given as a recognition to a
particular discovery or achievement and not to the individual
per se or his life-time's work.
Nationalities do not count in the exploration and understanding
of nature and its beings, but certain institutions do have a profound
influence on the standard of work and the opportunities they offer.
The Universities of Harvard and Washington, for example, have
dominated awards in life sciences, whereas Columbia has led in
physics and Berkeley in chemistry. Similarly, certain specialist
areas, as for example, biochemistry have dominated the prizes.
As a consequence, scientists who work in a special area stand a
better chance of being noticed and recognised. Nobel Committee
has also favoured discoveries in fundamental sciences than in
technological innovations. This, despite the explicit will of Nobel,
that inventions and improvements should be included within the
purview of the prizes.
One significant point to note, while understanding the Nobel
phenomenon, is the tremendous influence the atmosphere provides
to a scholar in science. Association with laureates and
apprenticeship under them involves not merely education and
training as is ordinarily understood, but also the acquisition of
the norms and standards, the values and attitudes as well as the
knowledge, skills and behavioural patterns associated with
particular statures and roles. As a laureate himself put it: “ I knew
the technique of research. I knew a lot of physics. I had the words,
the libretto, but not quite the music. In other words, I had not
been in contact with men who were deeply embedded in the
tradition of physics: men of high quality. This was my first real
contact with first rate minds at the high point of their power”.
Hans Krebs, the 1953 Nobel laureate in Physiology or Medicine
and a student of the 1931 laureate Otto Warburg explains thus:
“If I ask myself how it came about that one day I found myself in
Stockholm, I have not the slightest doubt that I owe this good
fortune to the circumstance, that I had an outstanding teacher at
the critical stage in my scientific career... Otto Warburgh set an
example in the methods and quality of first rate research. Without
him, I am sure I would never have reached the standards which
are prerequisites for being considered by the Nobel Committees”.
The standard of excellence demanded by some of the masters
even when they were independent were so exacting that Gunther
Stent, a former Junior Colleague of‘phage group’ leader and 1969
laureate Max Delbriick, said: “Max Delbriick managed to become
a kind of Gandhi of biology, who, without possessing any temporal
power at all, was an ever-present and sometimes irksome spiritual
force. ‘What will Max think of it?’ became the central question
of the molecular biological psyche”.
As science advanced, the narrow lines that bordered specialized
areas seem to have become thinner. The interrelationship between
different branches became so dependent that a greatmaster’s
school often produced laureates from different areas.
The Nobel dream, however, could often be elusive or the wait
agonising. Polish born Andrew Schally and French emigre Rogre
Guillemin, each clearly dreamt of a Nobel as they made their
major breakthrough in 1969, after a 21 year battle to be the first
to discover how the brain’s hormones regulate the body’s growth
and other functions. Schally later confessed: “I was tense every
October”. But not until 1977 did the long awaited phone call came
from the Swedish capital to both of them. For the venerable old
virologist, Francis Peyton Rous, it was a different kind of wait.
He had to wait 50 years, until he was 87, to be honoured with the
prize in 1966. Von Frisch, the ethologist was 86 when he won the
award, but then his subject itself had taken decades to come under
the purview of the Nobel list. Over 30 scientists have won the
prize after their seventies, in spite of the official reluctance to
award the prize as ‘pensions’. In fact the trend has been an increase
in the average age of the winners as the years go by. This is
attributable to the increase in the time gap between the actual
work and award. The backlog of scientific giants partly contributes
to this trend, and the application and through that reemergence
of an earlier work after a time gap, accounts for the remaining.
An award of this magnitude cannot also be completely error-free.
There have been occasions, very rare though, of an awardee not
being actually deserving of the honour. Johannes Fibiger, the 1926
winner, for example, is regarded as one of the least meritorious
of laureates because his work on the propagation of malignant
tumours was altogether mistaken. The Nobel Committee for
medicine was so embarrassed over the error that it declined to
give a prize for cancer research for almost forty years. The
selection of J. J. R. Macleod (1923) was another error. When
Banting and Best isolated insulin and studied its therapeutic use
in human diabetes, Macleod was not even present at the laboratory.
The Committee honoured Macleod along with Banting; still worst,
Best was ignored. Macleod’s only role was, as a Director of the
laboratory, to facilitate the work. Another unfortunate oversight
involving the same award was that the Committee had failed to
note the Rumanian scientist N. Paulesco who had also come to
similar conclusion as that of Banting and Best, six months before
the actual awardees.
There are also obvious kinds of anomalies. Einstein, for example,
won the award in 1921 for discovery of the photoelectric effect.
His phenomenal and monumental work on the special theory of
relativity and the theory of Brownian motion done in 1905 or the
work on the general theory of relativity done in 1916 were not
mentioned in the prize citation. Edward C. Kendall, whose
research on thyroxine (between 1914 and 1926) was proposed
and judged prizeworthy, however did not win his prize for the
thyroxine investigations for unknown reasons. His studies on the
biochemistry of Cortisones and its use in treating chronic
rheumatoid arthritis finally brought him the award. The case study
of Frederic Soddy is even more fascinating. He was not nominated
to share the 1904 chemistry prize with William Ramsey even
though he was a close, indispensable collaborator with Ramsey
in his work.'Soddy again missed out 4 years later when the prize
went to Ernest Rutherford. This was despite the emphatic
statement of Rutherford that Soddy has been a full collaborator
on the research cited for the award. In 1921, Soddy finally
received his own prize for his investigations of isotopes, thus
demonstrating his persistence and scientific acumen and putting
to rest the questions that had been raised about the wisdom of
the Chemistry Committee’s earlier decisions.
In the past 98 years, 694 individuals and institutions have won
the Nobel prize, 157 in physics, 130 in chemistry, 168 in
physiology or medicine, 95 in literature, 101 in peace including
11 institutions, and 43 in economic sciences. The study of the
Nobelists, their work, and the tremendous commitment they
have to society at large and their area of work is revealing.
Economics, the baby of the Nobel Prizes since it was incepted
only in 1968, has travelled far from the days of the ‘study of how
goods and services get produced and how they are distributed’ to
a study of a behavioural science in seeking to understand the
responses which individuals, a group of people or countries
make in a given set of circumstances. Economists today
investigate and explain the patterns of behaviour they observe
and are concerned with what is and not what ought to be. The
scientific approach to economics, in fact, had started in the late
1800s and early 1900s. As early as the 1600s, the English
economist Sir William Petty stressed the use of mathematics
and statistics in economics. In France, Leon Walras prepared a
mathematical statement to show how each part of an economy
is related to all the other parts and thus laid the foundation for
econometrics with his mathematical description of the market
economy. The American, Wesley Clain Mitchell, who also
studied booms and depressions, was a pioneer in stressing the
need for using statistics in testing theories.
The great depression of the 1930s brought the applicability of
economics into proper perspective. John Maynard Keynes, the
British economist led the way by attacking free market and
propagating that the government could help end depression by
increasing its own spending. Ragnar Frisch, Simon Kuznets,
Gunnar Myrdal, Haavelmo, Allais among others, developed
methods of measuring gross national product, national income
and other economic factors. The 1960s and 1970s saw the
emergence of the monetarists, led by the American Milton
Friedman, who urged that governments increase the money
supply at a constant rate to stabilise prices and economic growth.
Econometrics, with its emphasis on mathematics and statistics,
by the 1960s, was as much a science affecting human welfare as
any and it is a tribute to the subject that the ‘closed doors’ of the
Nobel Foundation were opened in its seven decades of history
only once to sneak in the infant science of all.
1990s have seen the Nobelists in Economics being socially
active pioneers and influential opinion makers who have dared
to delve into transaction costs for the institutional structure
(Coase 1990) through transforming macroeconomic analysis
and deepening our understanding of economic policy (Lucas,
1995) to the phenomenal works of Amartya Sen on welfare
economics (1998).
Nobel Foundation has been rejecting proposals, often supported
by promises of large donations, to offer new prizes. These
include mathematics, astronomy, music, environmental
conservation and architecture, to name a few. The Nobel
Foundation has been of the view that addition of more categories
would result in inflation of the Nobel Prize values. The
Economics Prize is hence the exception that confirms the rules
- no new Nobel Prizes beyond the five prizes stipulated by Nobel
himself in his will, directly reflective of his own interests and
activities.
The Economic Prize, called “the Alfred Nobel Memorial Prize
in Economic Sciences”, initiated in 1968 is endorsed by the
Bank of Sweden, and is awarded by the Academy of Sciences.
The donation was made as a gesture to celebrate the bank’s 300lh
anniversary. The history of Nobel Prizes and its prestige and
durability suggest that it is a prudent association and investment
by the Bank of Sweden.
1969

FRISCH TINBERGEN
FRISCH, RAGNAR KITTIL ANTON
Nationality: Norwegian
b.-March 5,1895, Oslo, Norway; d.- January 31,1973,
Oslo.

For having developed and applied dynamic models

for the analysis of economic processes

Frisch studied at the University of Oslo and obtained

his Ph.D. from there in 1926. He served as a professor
in social economy and statistics at the same university
from 1931 until his retirement in 1971.
Frisch’s pioneering work in early thirties involved a
dynamic formulation of the theory of cycle and had
led a number of theoretical investigations concerning
production, economic planning and national
accounting. His contributions were significant in
establishing basic concepts on models of whole
economics, production, consumer behaviour, index
numbers and planning. He was before his time in the
building of mathematical models and his statistical and
mathematical methodologies have applications in areas
other than economics also. He was instrumental in
establishing the Econometric society in 1930 and was
the chief editor of its journal, Econometrica, until 1955.
He also served as advisor to various developing
countries, including Egypt and India.
Fischer’s publications include Maxima and Minima -
Theory and Economic Application (1966), Economic
Planning Studies (1976) and New Methods of
Measuring Marginal Utility (1978).

TINBERGEN, JAN
Nationality: Dutch
b.- April 12, 1903, The Hague, Netherlands; d.- June
9, 1994, Netherlands.

For having developed and applied dynamic models

for the analysis of economic processes
Tinbergen was born in The Hague and graduated from
the University of Leiden and obtained his Ph.D. in 1929.
He worked with the Central Bureau of Statistics,
Netherlands, between 1929 and 1945, with a brief two
year stint (1936-1938) at the League of Nations
Secretariat. He was the Director, Central Planning
Bureau between 1945 and 1955 and taught for a very
long period at the Universities of Leiden (1933-1973)
and Netherlands (1973-1975). In addition to serving
as advisor to many governments, he was Chairman of
the United Nations Committee for Development
Planning in 1965.
Tinbergen, along with Frisch, worked to lend economic
theory a mathematical stringency, and to render it in a
form that permits empirical quantification for
investment and consumption expenditure, produced a
wave movement with wavelength of 4 to 8 years and
he could demonstrate how these wave movements
became permanent and uneven rather realistic manner.
Both of them, with the support of macroeconomic
analysis, constructed theories for stabilization policy
and long term economic planning, with a view
particularly to the problems of the developing countries
and made fundamental analysis of the theoretical basis
of rational decision-making in the field of economic
policy.
During his impressive career, he worked with statistical
models of economics, the mathematical analysis of
economic cycles, and several other theories on income
distribution, economic growth, economic planning and
economic development.
Tinbergen’s publications include An Economic
Approach to Business Cycle Theories (1937),
Statistical Testing of Business Cycle Theories (1939),
On The Theory of Economic Policy (1952) and
Economic Principles and Design (1956). He is the
brother of Nikolaas Tinbergen, the 1973 Nobel Laureate
in Physiology or Medicine and one of the founders of
Behavioural Sciences.

1970

SAMUELSON, PAUL ANTHONY

Nationality: American
b.-May 15, 1915, Gary, Indiana.

For the scientific work through which he has

developed static and dynamic economic theory’ and
actively contributed to raising the level of analysis in
economic science

Samuelson was educated at the universities of Chicago

and Harvard and obtained his Ph.D. from the latter in
1941. Since 1941 he is at the faculty of Massachusetts
Institute of Technology.
Samuelson’s thesis, written in 1937 at the age of 22,
presented a general framework for economic analysis
which revealed fundamental common elements in
aspects of economic behaviour which had until that time
been investigated separately. Since then, he has made
major contributions to every area of economic research.
Samuelson’s introductory textbook has dominated the
market since 1948. Many of his early contributions
(including Foundations of Economic Analysis'}
involved a formal description of the activities of
economic agents as the consequences of optimization
processes.
These optimizing models of individual consumption and
firm production (and investment) decisions can be
combined to yield a framework within which the
consequences of economic growth can be explored.
Samuelson’s contributions in this area have been made
individually and.in collaboration with Robert Solow
and others.
In the macroeconomic area, Samuelson has made basic
contributions to the analysis of government monetary
and fiscal policy.
Samuelson, in cooperation with Robert Solow, showed
that it is possible to develop a logical capital theory
and he further elaborated the conditions for economic
efficiency over time. Through his famous “turnpike
theorem”, he defined conditions for maximum growth
and showed that it might pay for a country to choose
an economic growth path characterised by maximal
growth rate, what he called a ‘turnpike’. He has
developed formal versions of the “world views”
inherent in the writings of several classical economists,
including Adam Smith, David Ricardo, and Karl Marx.
Although his own work has furthered the use of
mathematics as a framework for the exposition of
economic theory, he has always had the purpose of the
analysis in view. His works include Foundations of
Economic Analysis (1947) and The Collected Scientific
Papers of Paul A. Samuelson, 3 volumes (1966-1972).
1971

KUZNETS, SIMON SMITH

Nationality: American
b.-April 30,1901, Kharkov, Russia; d.-July 10, 1985,
Cambridge.

For his empirically founded interpretation of

economic growth which has led to new and deepened
insight into the economic and social structure and
process of development

Kuznets studied at Columbia University and obtained

his Ph.D. in 1926. He taught at the faculties of
Pennsylvania (1930-1954), John Hopkins (1954—
1960) and Harvard (1960-1971).
His work represented the culmination of certain
distinctive lifelong efforts; his approach to economic
research, the development of national income
accounting, the study of economic fluctuations, and the
analysis of economic growth.
Kuznets has a deserved reputation as a cautious
investigator concerned about spurious mathematical
and quantitative precision (although he is a prominent
user of quantitative data), the historical relativity of
economic theory (although he seeks patterns of
relationships and continuity), the limits of determinate
deductive reasoning, and the narrow scope of technical
economic theory. He was an advocate of the cautious
blending of careful definition, theory, and empirical
analysis in the use of wide ranging - but to him relevant-
material. He is willing to consider alternative
hypothesis, unwilling to manipulate data to reinforce
preconceived theories and ideas, and willing to reach
only tentative conclusions - even speculations - in the
absence of materia! enabling him to dispose of an issue
conclusively.
Kuznets has earned a distinguished reputation for his
work as a (perhaps the) principal developer of the US
national income accounting system, the results of
which have been the statistical basis of much subsequent
empirical work in economics. His works include
Commodity Flow and Capital Formation (1938),
Capital in the Americah Economy (1961) and
Economic Growth of Nations (1971).

1972

ARROW HICKS
ARROW, KENNETH JOSEPH
Nationality: American
b.- August 23, 1921, New York City.

HICKS, SIR JOHN RICHARD

Nationality: British
b.-April 8, 1904, Leemington Spa, England; d.- 1989.

For their pioneering contributions to general

economic equilibrium theory and welfare theory
Arrow obtained his Ph.D. from the University of
Columbia (1941) and had taught at the faculties of
Chicago (1947-1949), Stanford (1949-1968) and
Harvard (1968-). His doctoral research was on social
choice and individual values and he continued the
interest applying economic theory to all types of social
problems - medical care, education, water resources,
etc.
Arrow is most widely known for his General
Impossibility Theorem, the result of inquiring whether
it is possible to discover a collective choice rule to
transform individual preferences into a social ordering
that satisfies certain axioms.
Arrow was also a pioneer in developing and applying
the concepts of uncertainty and risk to economic
analysis. His subsequent research concerned the role
of information in the behaviour of business people and
consumers. He was also actively involved with students
of different levels.
His works include Social Choice and Individual Values
(1951), Studies in the Mathematical Theory of
Inventory and Production (1958), Essays in the
Theories of Risk-Bearing (1971), Studies in Resource
Allocation (1977), and Social choice and Justice:
Collected Papers of Kenneth J. Arrow (1984).
Hicks was educated at Oxford and taught at the London
School of Economics (1926-1935), Cambridge (1938—
1946) and Oxford (1946-1965). John Hicks’s Nobel
Prize was in recognition of his work in general
equilibrium and welfare analysis. However, few
economists can claim as strong a contribution to
economics, in originality, in synthesising the works of
others, and in assisting the teaching of the subject in so
many and varied fields. In Value and Capital (1939),
he set forth his general economic equilibrium theory,
an economic classic. His other works include The
Theory of Wages (1932),A Contribution to the Theory
of the Trade Cycle (1950), Capital and Growth (1965)
and The Crisis in Keynesian Economics (1974).

1973

LEONTIEF, WASSILY W,
Nationality: American
b.- August 5, 1906, St. Petersburg, now Leningrad,
Russia.

For the development of the input-output method

and for its application to important economic
problems

Leontief was educated at the Universities of Leningrad

and Berlin and obtained his Ph.D. from the latter in
1928. He worked in the University of Kiel (1927-
1930), National Bureau of Economic Research, New
York (1931) and the faculties of Harvard (1931-1975)
and New York (1971—) Universities.
Leontief’s first significant attempt to model an economy
empirically in a genuine, general equilibrium manner
has certainly been a major contribution to the discipline,
and is Leontief’s outstanding accomplishment.
Solving practical problems with the use of analytical
tools has been more important to Leontief than
involvement with theoretical controversy. He is the sole
and unchallenged creator of the input-output technique,
which gave the economic science an useful method to
highlight the general interdependence in the production
system of a society. The widespread use of input-output
techniques by governments, business, and other
academics involved in empirical research in several
disciplines besides economics is the reward for this
commitment to a problem-solving view of the role of
economics. This system also found extensive use
especially in forecasting and planning, both in the short
and long run, in quite different types of economic
systems - decentralized market economies, mainly
private enterprizes and centrally planned economies.
His works include The Structure of the American
Economy, 1919-1929 (1941) and The Distribution of
Work and Income (1966).

1974

VON HAYEK MYRDAL

VON HAYEK, FRIEDRICH AUGUST
Nationality: British
b.- May 8, 1899, Vienna; d.- 1992.

MYRDAL, KARL GUNNAR

Nationality: Swedish
b.- December 6, 1898, Gustaf, Parish, Sweden;
d.- May 17, 1987, Stockholm.

For their pioneering work in the theory of money

and economic fluctuations and for their penetrating
analysis of the interdependence of economic, social
and institutional phenomena

Hayek studied at the University of Vienna and obtained

his doctorate in 1923. He was for some time with the
Austrian Institute of Economic Research (1927-1931)
and then j oined the University of London (1931-1950).
He was at the faculties of the Universities of Chicago
(1950-1962) and Frieburg, Germany (1962-1970).
Hayek shared the Nobel Prize with Gunnar Myrdal for
“his pioneering work in the theory of money and
economic fluctuations” and for “penetrating analysis
of the interdependence of economic, social and
institutional phenomena”. As in all areas where he has
carried out research, he gave a profound historical
expose of the history of doctrines and opinions in this
field. He presented new ideas with regard to basic
difficulties in ‘socialistic calculating’ and investigated
the possibilities of achieving effective results by
decentralized ‘market socialism’ in various forms. He
began his work on theoretical economic thought and
later combined these writings with analysis of the
viability of different economic systems. His works
include Monetary Theory and the Trade Cycle (1933),
Prices and Production (1933), The Pure Theory of
Capital (1941), The Road to Serfdom (1944),
Individualism and Economic Order (1949), The
Constitution of Liberty (1960) and Denationalization
of Money (VHT).
Gunnar Myrdal obtained his Ph.D. from the University
of Stockholm, Sweden (1927) after a degree in law
(1923). He practiced as an Attorney (1923-1927) and
took up teaching at the University of Stockholm after
that (1927-1938). He was with the Carnegie
Corporation for 4 years (1938-1942) and after that took
up writing and political activities on a full time basis.
His work had considerably influenced economic and
social activities in Sweden and extended to the United
States. His analytical and extensive treatment of
economic policy of both these countries as also his
research on the population question in Sweden and race
issue in America are considered classics. He has
sought to relate economic analysis to social,
demographic and institutional conditions. Myrdal and
Hayek extended their field of study to elements such as
the legal framework of economic system and issues
concerning the way individuals, organisations, and
various social systems functions. An active campaigner
for peace, he was also an active U.N. worker in Asia.

1975

KANTOROVICH KOOPMANS
KANTOROVICH, LEONID VITAL EVICH
Nationality: Russian
b.- January 19, 1912, St. Petersburg, Russia; d.- April
9, 1986, Moscow.

KOOPMANS, TJALLING CHARLES

Nationality: American
b.- August 28, 1910, Graveland, Netherlands;
d.- February 26,1985, New Haven, Connecticut.

For their contributions to the theory of optimum

allocation of resources

Kantorovich obtained his Ph.D. from the Leningrad

State University in 1935 and was a Professor at the
faculty there for a long time (1934—1960). He was with
the Academy of Sciences, USSR, as an Administrator
between 1960 and 1971 and worked with the Institute
of National Economy Control, Moscow, for few years
(1971-1976). He returned to the Academy of Sciences
in 1971 and served there until his retirement in 1976.
His treatise, Mathematical Methods of Organizing and
Planning Production (1939) introduced linear
programming as a solution to the problems of resource
allocation. His work was received unfavourably by the
Soviet Union and they were not recognized until the
publication of his works such as The Best Use of
Economic Resources, started appearing in the 1950s.
His other works include Optimal Solution in
Economics (1972) and Functional Analysis (1977).
Koopmans studied at the University of Utrecht and
obtained his Ph.D. from the University of Leiden in
1936. He worked with the Netherlands School of
Economics (1936-1938), League of Nations (1938—
1940) before immigrating to America. He worked at
the University of Chicago for eleven years (1944— 1955)
before settling in the University of Yale for a long career
(1955-85).
His initial work was on the efficient use of shipping
facilities. He applied brilliant mathematical techniques
to develop the complicated equations of this field. His
contributions to econometrics and mathematical
programming has expanded the scope of economic
studies and developed new areas of research. His
publications include Three Essays on the State of
Economic Science (1957) and Scientific Papers of
Tjalling C. Koopmans (1970).

1976

FRIEDMAN, MILTON
Nationality: American
b.- July 31, 1912, Brooklyn, New York.

For his achievements in the fields of consumption

analysis, monetary history and theory and for his
demonstration ofthe complexity ofstabilization policy

Friedman was educated at the University of Chicago

and Columbia and obtained his Ph.D. from the latter
in 1946. After working briefly with the Government,
he joined the University of Minnesota (1937-1945)
and later the University of Chicago (1946—).
Milton Friedman was the first and most famous disciple
of the “Chicago School” of economic thought to be
honoured with the Nobel Prize in Economics. His
remarkable advocacy and influence has resulted not only
from intellectual prowess, but also from a uniform and
robust analytical approach which is applied with
seemingly equal effect to social and political problems
as well as those which are purely economic.
Friedman’s achievements include the formulation of the
theory of demand of money or liquid resources, re­
fashioning of the theory of consumption and the studies
of ‘lags’. His major work, A Monetary of the United
States; 1867-1960 is considered as his most profound
achievement. The Nobel citation notes his work,
Capitalism and Freedom (1962) and adds that it is
“very rare for an economist to wield such influence,
directly or indirectly, on scientific research and actual
practice”.

1977

MEADE OHLIN
MEADE, JAMES EDWARD
Nationality: British
b.- June 23, 1907, Swanage, Dorset, England;
d.-December 22, 1995.

OHLIN, BERTIL GOTTHARD

Nationality: Swedish

20
b.- April 23, 1899, Klippan, Sweden; d.- August 3,
1979, Northern Sweden.

For their pathbreaking contribution to the theory

of international trade and international capital
movements

Meade was educated at Oxford and had a successful

career there as a professor (1930-1937), before he
joined the League of Nations as an economist (1938—
1947). Between 1947-1957, he was at the London
School of Economics and taught at Cambridge between
1957-1968.
Meade was a pioneer in the area of macro economics,
the study of the economic behaviour of large systems.
His influence was felt through his prolific writings and
his work on important British Committee studying the
economy. He studied the effect of domestic economic
policies on foreign trade. Tax cuts, he demonstrated,
affect the balance of payments adversely. Similarly
monetary policy and exchange rates also affect economic
stability.
His books that dealt with foreign trade in an ‘open’
world economy, with the uncertainties and benefits of
employer’s associations and trade unions, were
representative of his influence. His works include; The
Theory of International Economic Policy, 2 volumes,
in which he demonstrated the effects of economic policy
on foreign trade and penetrated the problems of
stabilization policies in ‘open’ economies and The
Principles of Political Economy, 4 volumes.
Ohlin a child prodigy studied at Lund University,
Sweden and Harvard before obtaining his Ph.D. from
the University of Sweden in 1924. He was a Professor
at Copenhagen between 1925-1930 and at the
Stockholm School of Economics, Sweden between
1930 and 1965. A member of the Swedish Parliament
from 1938 to 1962, he was the leader of the Swedish
Liberal Party for 23 years (1944-1967). He also served
his country as its Minister of Trade at the close of World
War II. Ohlin produced the majority, of the economic
work, for which he was awarded the Nobel Prize, prior
to the start of his political work, but throughout his life,
he regularly contributed material on economic policy
to the Swedish daily newspapers. He greatly enlarged
the theory of international trade that was originally
proposed by his teacher Heckscher. His works include:
The Theory of Trade (1924), Interregional and
International Trade (1933) and The Problem of
Economic Stabilization.
1978

SIMON, HERBERT ALEXANDER

Nationality: American
b.-June 15, 1916, Milwaukee, Wisconsin.

For his pioneering research into the decision

making process within economic organizations

Simon was educated at the University of Chicago and

obtained his Ph.D. from there in 1943. After a brief
stint as a researcher at the University (1936-1938), he
worked as an administrator in the University of
California, Berkley (1939-1942) and as a professor at
Illinois Institute of Technology (1942-1949). Since
1949, he is associated with Carnegie Mellon University,
Pennsylvania.
Thirty years after the publication of his classic work
Administrative Behaviour, Simon received the Nobel
Prize for his ‘pioneering research into the decision
making process in economic organization’. He
acknowledged the human factor in problem solving
in his concept of ‘bonded rationality’ and demonstrated
that decision-makers often do not choose the optimum
solution but rather the first alternative to meet the
predefined needs. His subsequent works on artificial
intelligence with computer aids made him a pioneer in
this area along with Allen Newll. His enormous
contribution to the theory of science, statistics, applied
mathematics, business administration and artificial
intelligence makes him a true Renaissance man,
because of his diversity and depth.
His works include Administrative Behaviour (1947),
Models of Man (1957), Organizations (1958), New
Science of Management Decision (1960), Human
Problem Solving (1972) and Reasons in Human
Affairs (1983).

1979
LEWIS, SIR WILLIAM ARTHUR
Nationality: British
b.- January 23, 1915, St. Lucia, British West Indies;
d.- June 15, 1991, Barbados, Princeton, New Jersey.
 LEWIS SCHULTZ

SCHULTZ, THEODORE WILLIAM

Nationality: American
b.- April 30, 1902, Arlington, South Dakota.

For their pioneering research into economic

development with particular consideration of the
problems of developing countries

The first black to receive a Nobel Prize in a category

other than Peace, Lewis was educated at St. Mary’s
College, British West Indies, and obtained his Ph.D.
from the London School of Economics in 1937. He
taught at the London School of Economics (1938-1947),
University of Manchester (1948-1958), University of
West Indies (1959-1963) and Princeton University,
New Jersey (1963-1990). He also served as the
Economic Advisor to the Prime Minister of Ghana,
Deputy Managing Director to the UN Special Fund and
Vice Chancellor to the University of West Indies.
His works with the developing nations in Africa and
the Caribbean helped him to produce his famous
models for developing of economics of third world
nations. His ‘lifelong concern with poverty and growth,
agricultural and human development in developing
countries’ merited the Nobel Committee’s attention
although in other years, the award was strictly given
for theoretical breakthroughs in economics. His works
include Economic Survey, 1919-39 (1950), Theory of
Economic Growth (1955), Development Planning
(1966), The Evolution of the International Economic
Order (1978), Growth and Fluctuation; 1870—1913
(1978) and Selected Economic Writings ofW. Arthur
Lewis (1983).
The American economist Schultz, studied at South
Dakota State College and University of Wisconsin and
obtained his masters (1928) and Ph.D. (1930) from the
latter. During 1930-1943, he taught at Iowa State
University and subsequently shifted to the University
of Chicago (1943-1972). The revival of Germany after
World War II and the human resource mobilization for
its recovery fascinated him. He defined human resource
utilization, especially in agriculture and played a major
role in pointing out that there “has been a considerably
higher yield on human capital than on physical capital
in the American economy”. A believer in human
endeavour, he was confident that farmers of developing
countries could efficiently use available resources and
would adopt modern techniques and methods of
production given a chance. He systematised and
promoted investments in education and showed that
this can affect agricultural productivity as also the entire
economy of the country.
His works include The Economic Value of Education
(1963), Transforming Traditional Agriculture (1964)
and Investments in Human Capital (1971).

1980
KLEIN, LAWRENCE ROBERT
Nationality: American
b.- September 14, 1920, Omaha, Nebraska.

For the creation of econometric models and their

application to the analysis of economic fluctuations
and economic policies
KLEIN
Klein obtained his Ph.D. form Massachusetts Institute
of Technology in 1944. He worked at the University
of Chicago (1944-1947) and shifted to the National
Bureau of Economic Research (1948-1950). After
spending time at Michigan (1949-1954), and Oxford
(1954-1958) Universities, he joined the faculty of
Pennsylvania University in 1958 where he remained.
Klein has made numerous contributions to economics.
Three of these contributions stand out for they helped
to shape the development of modem day economics.
First, he popularized the construction and practical use
of mathematical/statistical (econometric) models of the
economy for which he received the Nobel Prize in
Economics in 1980. Second, the success of his work
on econometric models helped educate the economic
profession to the potential benefits of quantitative
economic methods and thereby served as a catalyst for
the development of the quantitatively oriented sub­
discipline of economics known as econometrics. Third,
his work in the 1940’s on Keynes’ General Theory
helped clarify the real revolutionary contribution of
Keynes’ seminal work. Economics today is what it is
in no insignificant part because of the work of Lawrence
Klein. His works include The Keynesian Revolution
(1947), Economic Fluctuations in the United States,
1921-41 (1950) and An Introduction to Econometrics
(1962).

1981

TOBIN
TOBIN, JAMES
Nationality: American
b.- March 5, 1918, Champaign, Illinois.

For his analysis of financial markets and their

relations to expenditure decisions, employment,
production and prices

The American economist Tobin studied at Harvard and

after obtaining his masters in 1940, served the U.S.
Navy as an economist for a year (1941-1942) and then
as a Lieutenant (1942-1946). Returning to Harvard, he
took his Ph.D. in 1947 and after being in the faculty for
a period (1946-1950), shifted to Yale University.
Tobin’s work was in the areas of economic theory,
econometrics, monetary theory, and policy and
consumer behaviour. His major interest, however, was
to update and integrate the original Keynesian theory
that the federal government should pursue an
aggressive fiscal and monetary policy to attain rapid
growth and complete employment. His famous
portfolio selection model of liquidity preference
postulates that an individual has a portfolio of money
and bonds, whereas money brings security and no
income, bonds though with the in-built risk that goes
with it, brings income. A judicial mix of these portfolios
of money and bonds, he proposed, would be healthy.
His works include National Economic Policy (1966),
Essays in Economics, Volume 1 (1972), Volume 2
(1975), Volume 3 (1982), Consumption and Economics
(1975) and Asset Accumulation and Economic Activity
(1980).

1982

STIGLER, GEORGE JOSEPH

Nationality: American
b.- January 17,1911, Renton, Washington; d.-1991.

For his seminal studies of industrial structures,

functioning ofmarkets and causes and effects ofpublic
regulation

Stigler graduated from Washington and during the hard

days of depression had to switch many jobs before
finally opting for a career in academics and finally
obtaining a Ph.D. from the University of Chicago in
1938. He taught at Iowa State University (1936-1938),
University of Minnesota (1938-1946), Brown
University (1946-1947), Columbia University (1947-
1957), Centre for Advanced Studies in Behavioural
Sciences (1957-1958) and finally back at University
of Chicago (1958-1991).
Stigler’s first major work, Production and Distribution
Theories, published in 1941 was a survey of late 19th
and early 20th century scholarship in the field. The
Theory of Price, published in 1942 became a standard
text book the world over. Roofs or Ceilings,
Foundation for Economic Education, published in
1946, after initial controversies from the liberals
became standard reference work in the field.
Stigler’s studies of the forces, which gave rise to
regulating legislation, had opened up a completely new
area of economic research. His work in the explanation
of price fluctuations and his understanding of the effect
in the market place of households and companies made
similar economic decisions with different amounts of
information in praiseworthy. His other works include
The Citizen and the State (1975), The Organization
of Industry (1983) and The Intellectual and the
Marketplace (1984).
1983

DEBREU, GERARD
Nationality: American
b.- July 4, 1921,Calais, France.

For having incorporated new analytical methods

into economic theory and for his rigorous
reformulation of the theory of general equilibrium

Debreu, the American economist of French origin

studied in France and obtained his D.Sc. from the
University of Paris. After a year in the French army
(1944-1945), he moved to America as a Rockefeller
research fellow (1946-1948). He was with Chicago
University between 1950 and 1955 and was a professor
at Yale University between 1955 and 1961. From 1962
he is at the University of California.
A mathematician and an economist par excellence, he
has worked for over four decades on one of the most
basic of economic problems, the equilibrium between
prices in a free-market economy and what producers
supplied and consumers demanded. While awarding
the prize, the Nobel Committee specially mentioned
his book, The Theory of Value (1959) as “a classic
both for its universality and for its elegant analytical
approach”. His work has been the basis on which many
other economists have built their own works on
microeconomics. His theoretical contributions, the
Nobel committee said ‘lent themselves to far reaching
interpretations and applications’.
His works include Professor Debreu’s "Market
Equilibrium”: An Expository Note (1973) and
Mathematical Economics: Twenty papers of Gerard
Debreu (1983).

1984
STONE, SIR JOHN RICHARD NICHOLAS
Nationality: British
b.-August 30, 1913, London; d.-1991.
STONE
, For having made fundamental contributions to the
development ofsystems ofnational accounts and hence
greatly improved the basis of empirical economic
analysis

The British economist, Stone was educated in

Cambridge University and obtained his D.Sc. from
there in 1957. As assistant to John Maynard Keynes,
he and the 1977 Nobel laureate James Edward Meade
helped prepare a wartime study that organised
voluminous data into a profile of the British economy
during World War II that helped Britain and its leaders
to assess the country’s resources accurately. Gross
national product and the consumer price index that are
bylaws and compulsory yardsticks to today’s
economists were unheard of in the 1940s. Few experts
have been more crucial in developing complex
economic models, particularly those which led to
accounting systems and could be used to chart the
economic activity of nations. Early in his career, he
had developed statistical techniques for economics and
studied consumer reaction to change in income and
prices.
After the war, Stone headed the United Nations project
that developed a standard accounting model for over
100 countries, a monumental work setting guidelines
and making international economic studies and
comparisons possible. Although there are criticisms
about the applicability of the sophisticated system of
Stone as ill-suiting for underdeveloped countries, it is
widely followed the world over. His passionately
enthusiastic involvement with economic statistics has
contributed tremendously to getting the disorderly
world of accounts of income and health systematized.

1985
MODIGLIANI, FRANCO
Nationality: American
b.- June 18, 1918, Rome, Italy.

For his pioneering analysis of saving andfinancial

markets
MODIGLIANI
The Italian born American economist Modigliani was
educated in Rome and obtained his doctorate in law
from the University of Rome in 1938. He migrated to
America in 1938 and obtained his Ph.D. in Social
Sciences from the New School of Social Research in
New York in 1944. Since 1962 he is in the faculty at
the Massachusetts Institute of Technology.
The Crux of Modigliani’s work is that people tend to
save when they are young to create a nest egg for their
old age. His ‘life-cycle’ savings theory developed in
1950s along with Richard Brumberg is accepted by
economists the world over as the key to the
understanding of thrift. The work offers a yardstick for
gauging the impact of different pension systems. The
theory of personal finance also stated that persons save
when their income is highest to allow for financial
security throughout life.
Modigliani’s record theory on corporate finance states
that a company’s market value "was not altered by the
distribution of shares or bonds in its balance sheet.
Proposed in 1958 with Merton Miller (Nobel Laureate,
1990) of the University of Chicago, the theory states
that investors look mainly at a firm’s prospect for future
profits while deciding its share value.
These findings are crucial in securities analysis and
are well-accepted in economic circles.

1986

BUCHANAN, JAMES McGILL

Nationality: American
b.- October 3, 1919, Tennesse, USA.

For his development of the contractual and

constitutional basis for the theory of economic and
political decision making

Buchanan is one of the leading spokesmen of the

‘public-choice’ school, which applies the discipline of
economics to the study of political decision making.
Governments reflect the actions and choices of
politicians, Buchanan argues, just as markets operate
through the decisions of consumers who buy and sell
goods. His theories help to explain the growth of budget
deficits. Members of Congress are primarily motivated
by a desire to get reelected, he assumes. “ Their natural
proclivity is to spend more and not tax”, he says. The
result: a “regime of permanent budget deficits”. The
cure, he contends, is to change the rules of the game.
Says he: “We must impose a constraint on politicians
when it comes to spending”.
Buchanan admits that his ideas are ‘not standard’ but
points out that many of his theories are “simple
applications of common sense that the academics all
forget about”.
1987

SOLOW, ROBERT
Nationality: American
b.- August 23, 1924, Brooklyn, New York.

For his contributions to the theory of economic

growth

Solow is a leading advocate of government intervention

to correct the natural imbalance of the market place.
He won his prize for a pioneering 1956 study
demonstrating that the rate of technological progress
does more to determine an industrialized country’s
growth than the size of its labour force or its
investments in new factories or equipment. Solow’s
“theoretical model had an enormous impact on
economic analysis”, said the academy’s statement. The
revolution in jet aviation and the computers of Silicon
Valley can be directly linked to government policies
that steered money into technological research and
development.
A staunch critic of Reaganomics, his popular essay
and book reviews livens economic analysis with a dry,
cutting wit.

1988

ALLAIS, MAURICE
Nationality: French
b.- May 31, 1911, Paris.
 For his pioneering contributions to the theory of
markets and efficient utilization of resources

The son of a Parisian diary-store owner, Allais studied

and earned a degree in engineering and then switched
to economics after witnessing the great depression in
America in 1931. He enrolled in the Ecole Nationale
Superieure des Mines in Paris and after distinguishing
himself in economics, worked for seven years in French
mine administration before becoming a professor in
his alma mater (1944).
An influential voice in the making of France’s industrial
policy, he denounced nationalization as against majority
of the nation’s economists and argued that even state­
run monopolies are most efficient when they set prices
and allocate resources according to market forces. He
developed theories on many economic relationships
including the relationship between investment, interest
rates and growth. His best work were his formulas that
demonstrated how a monopoly could set prices for such
products as coal or electricity at a level that would be
best for society. Relatively unknown until the Nobel
recognition, outside France, his ideas have spread far
and wide through his students. The best recognition
Allais received from his country was when France
changed its economic direction during the mid-1980s
and turned many of its nationalized industries back to
private hands.
Allais’s major work, In Search of an Economic
Discipline (1943) is a massive 900 page volume. Assar
Lindbeck, chairman, Awarding Committee for the
Royal Swedish Academy of Sciences, summed up his
many theories substantiated by complex mathematical
formulas when he said that “it took a long time to
investigate him because of the great volume and
complexity of his works”.

1989

HAAVELMO, TRYGVE
Nationality: Norwegian
b.- December 13, 1911, Skedsmo, Norway.

For his pathbreaking work that laid the foundation

for econometrics

Haavelmo, the modest and shy professor emeritus of

University of Oslo and the winner of the 1989 prize
for economics is one of the most highly respected
economists in the world. His path-breaking work in
the 1940s laid the foundation for econometrics, which
uses mathematical models to study the behaviour of
economy. His major contribution was the demonstration
that the relationship between such factors as income
and spending was far more complex than has been
originally envisaged, since those factors affect one
another and rest of the economy. He showed, for
example, that an economist could not gauge the impact
of a change in tax rates on consumer spending without
using sophisticated statistical methods.
Haavelmo has influenced economists the world over
and according to 1987 Nobel laureate, Solow of the
Massachusetts Institute of Technology, is the ‘Thomas
Edison of Economics’. While economists everywhere
were jubilant at the recognition, Haavelmo was critical
since he ‘does not like the idea of such prizes’.
1990

MARKOWITZ SHARPE

MILLER
MARKOWITZ, HARRY
Nationality: American
b.- 1927, Chicago.

MILLER, MERTON
Nationality: American
b.- May 16,1923, Massachusetts, Boston.

SHARPE, WILLIAM
Nationality: American
b.- June 16,1934, Massachusetts, Boston.

For their proposal that investors should diversify

for better returns

Markowitz proposed the self-evident notion that

investors should diversify their portfolio 35 years ago
to a financial community that scoffed and ridiculed
him for his proposal. Markowitz, a professor at the
Baruch College of the City University of New York
and two of his colleagues, Sharpe, of Stanford
University and Miller, of the University of Chicago
shared the 1990 prize for economics for the very same
idea and its substantiation.
Markowitz showed that investors fared best when they
purchased a wide range of stocks, bonds and other
assets, because the risks in a diversified portfolio tended
to offset one another. This insight makes Markowitz -
the father of mutual-fund industry.
Sharpe showed that the rewards and risks of holding
an asset like stock are linked to its volatility in relation
to the rest of the market. Highly volatile stocks are the
biggest winners in bull markets but suffer the heaviest
losses in downturns.
Sharpe’s investments have clients who include the
pension funds for the State of California.
Miller’s forte was corporate finance. With Franco
Modigliani, the 1985 Nobel laureate, he has
demonstrated that companies with poor cash flow tent
to lead to bankruptcy. The overall value of the firm,
they showed, was dependent on the cash flow that it
generated.

1991
COASE, RONALD. H
Nationality: British
b.- December 29,1910, Willesden, London.

For his discovery and clarification of the

significance of transaction costs and property rights
for the institutional structure and functioning of the
economy
COASE

Coase joined the London School of Economics in 1929

for a Bachelor of Commerce degree. He came under
the influence of professor Arnold Plant, his professor
of Commerce who kindled his interest in the working
of the economic system. He was awarded Sir Ernest
Cassel Travelling Scholarship. On this he spent his
academic year (1931-1932) in the United States
studying the structure of American industries with the
aim of discovering why industries were organized in
different ways. He was engaged in teaching and research
in Dundee School of Economics and Commerce (1932—
1934), University of Liverpool (1934-1935) and
London School of Economics (1935-1940). He joined
government service during Second World War and
returned to London School of Economics after a gap of
five years, in 1946. His book, British Broadcasting -
A Study in Monopoly, was published in 1950. He
migrated to the United States in 1951 and joined the
economics department of the University of Virginia.
There he contributed to the theory of public utilities,
particularly in broadcasting and had made a study of
‘Federal Communications Commission’. He was editor
of the Journal of Law and Economics (1964-1982)
which was instrumental in creating the subject ‘Law
and Economics’.
The Problem of Social Cost and The Nature of the
Firm were the two articles cited by the Royal Swedish
Academy of Sciences as justification for awarding him
the Alfred Nobel Memorial Prize. The first major study
of Ronald Coase, The Nature of the Firm exposes the
fact that a large portion of total use of resources was
deliberately withheld from the price mechanism in order
to be co-ordinated administratively within firms. This
is the point at which he introduced transaction costs
and illustrated their crucial importance in the traditional
microeconomic theory, which included only production
and transport costs. All allocation would take place
through simple contracts between individuals. His
model and formulation proved to be exceedingly
practical and has given rise to intensive examination of
the contract relations, which characterise firms. It has
become the basis for rapidly expanding research on
principal-agent relations with its exploitation of the
pattern of financial intermediaries.
Coase’s second major contribution is The Problem of
Social Cost, in which he introduced the set up in terms
of rights or property rights. Parties would “agree
themselves around” every given distribution of rights
if it is to their mutual advantage. Thus, according to
him, a large amount of legislation would serve no
material purpose if transaction costs are zero. He
concludes that transaction costs are never zero which
indeed explains the institutional structure of the economy
including variations in contract forms and many kinds
of legislation. This hypothesis is of immense importance
in developing the new discipline of law and economics
and for renewal of many aspects of legal science.

1992
BECKER, GARY. S
Nationality: American
b.- December 2, 1930, Pottsville, Pennsylvania.

For having extended the domain of microeconomic

analysis to a wide range of human behaviour and
interaction, including non-market behaviour
BECKER

Gary S. Becker had his elementary and high school

education in Brooklyn and, although his parents had
not studied beyond the 8lh grade, grew up in an
environment of lively discussions about politics and
justice. He studied in Princeton and University of
Chicago for his graduation in Economics. Here, he came
in contact with Milton Friedman who influenced him
in perceiving the influence of microeconomics in a wide
range of human behaviour and interaction. His
excellence in Mathematics in his high school also
proved to be useful in his study of economics. He
obtained his Ph.D. in 1957 from University of Chicago
for analysing the effects of prejudice on the earnings,
employment and occupations of minorities, thus applying
economics to social issues which he continued in his
further research.
Becker was Assistant Professor at Chicago for three years
before shifting to Columbia while simultaneously doing
research work at the National Bureau of Economic
Research for 12 years. His book, Human Capital (1964)
was a product of his first research project here. He
returned to Chicago in 1970 and continued research on
economic theories in the understanding of birthrates,
family size, divorce and effects of changes in family
composition. His interdisciplinary emphasis on
theoretical paradigms was instrumental for an offer of
a joint appointment to the Sociology Department at
Chicago in 1983. He published mainly technical books
and technical articles in professional journals until
1985. An offer to write in a monthly column for the
Business Week magazine paved the way to write
articles in economics for the layman. This has
enormously improved his capacity to discuss important
subjects briefly and in simple language.
Becker has applied the principle of rational, optimising
behaviour to areas where researchers formerly assumed
that behaviour is habitual and often downright irrational.
Becker’s applications of basic model to different types of
human behaviour can be accounted for by distinguishing
among four research areas: (i) investments in human capital,
(ii) behaviour of the family (or household), including
distribution of work and allocation of time in the family,
(iii) crime and punishment, and (iv) discrimination on the
markets for labour and goods. The first significant research
contribution of his unconventional theory on economic
discrimination on the basis of race, sex etc., were published
in his book, The Economics ofDiscrimination in 1957.
His book, Human Capital is one of the most noteworthy
contributions in the area of human competence and the
consequences of investments in human competence.
Today, the human capital approach is one of the most
empirically applied theories in economics. A Treatise
on the family written in 1981 analyses relations among
individuals outside the market system. Here the
household is regarded as a ‘small factory’ that produces
basic goods such as meals, a residence, entertainment
etc., using time and input of ordinary market goods.
His model provides a general theory for the household’s
allocation of time. He further formulated a general
theory for behaviour of the family - including not only
the distribution of work and the allocation of time in
the family, but also decisions regarding marriage,
divorce and children. The third area where Gary Becker
has applied the theory of rational behaviour and human
capital is crime and punishment. These ideas expressed in
his essays Crime and Punishment: An Economic
Approach (1968) and Essays in the Economics of
Crime and Punishment (1974) have been empirically
tested.
Sociologists and political scientists often work with
models based on theories of rational choice and
Becker’s unconventional and often controversial ideas
have gained increasing influence on these areas.

1993

FOGEL NORTH
FOGEL, ROBERT. W
Nationality: American
b.- 1926, New York City.
NORTH, DOUGLASS. C
Nationality: American
b.- Novembers, 1920,Cambridge,Massachusetts.

For having renewed research in economic history

by applying economic theory and quantitative methods
in order to explain economic and institutional change

Fogel’s parents were immigrants from Russia and he

went to the public schools in New York City between 1932
and 1944. He was inspired by his excellent teachers in
school as also by the intellectual brilliance of his older
brother who held intense discussions with his college
classmates about the social and economic issues of the
Great Depression. He had his professional training at
Cornell University (B.A. 1948), Columbia University
(M.A.1960) and at Johns Hopkins University (Ph.D.
1963). He was influenced by two teachers at Columbia,
George J. Stigler and Carter Goodrich who taught
microeconomic sequence and the sequence in American
economic history. It was Simon Kuznets at Johns Hopkins
who guided Fogel in future training. He was also inspired
by senior investigators who were exceptional teachers with
enthusiasm for work in their areas of research involving
the inter-disciplinary relations between economics,
demography and the biomedical sciences. He
understood the importance of greater use of quantitative
evidence and mastered some of the most advanced
analytical and statistical methods to solve economic
problems. Fogel succeeded in mastering the
mathematical models of demography and the art of
applying them to incomplete data. He also had a good
insight into anxology, epidemiology, nutrition,
physiology and clinical medicine.
Robert Fogel’s foremost work concerns the role of the
railways in the economic development of the United
States (1964). He rejected the concept of Schumpeter
and Rostow that important discoveries played a vital
role in development. The sum of many specific technical
changes, rather than a few great innovations determined
the economic development. His use of counter factual
arguments and cost-benefit analysis made him an
innovator of economic historical methodology.
Fogel’s work on the importance of slavery as an institution
(1974) and its economic role in the USA, was controversial
and gained great attention. Fogel showed the established
opinion that slavery was an ineffective, unprofitable and
pro-capitalist organisation was incorrect. The institution
did not fall to pieces because of economic weakness but
collapsed due to its political decisions. He showed that
the system, inspite of its inhumanity, had been economically
efficient.
His third area of research is less controversial but is
of interdisciplinary and international importance. It
involves studies in historical demography and economic
demography. According to Fogel, a systematic analysis
demands an integrated study of mortality rates,
morbidity rates, food intake and individual body
weights and statures. A combination of bio-medical and
economic techniques is required to achieve this. In
different ways, Fogel had renewed research in
economic history, by making it more stringent and more
theoretically conscious.
As a student of University of California, Douglass North
was an ardent Marxist, engaging in several student
liberal activities. He was mediocre as an undergraduate.
He was opposed to the war and joined the Merchant
Marine, to avoid killing, during the Second World War.
It was his reading during the war and the persuasion of
Paul Taylor at the University of California that
convinced him to become an economist. Among the
people who influenced him most were M. M. Knight at
Berkeley, who guided him for his Ph.D., Don Gordon
at the University of Washington and Solomon Fabricant
at the National Bureau of Economic Research.

The Economic Growth of the United States from 1790

to 1860 was his first book. It was a straightforward analysis
of how markets worked and how one sector (cotton
plantation) stimulated development in other branches.
He switched from American to European economic history
in 1966-1967 and wrote two books, one with Lance
Davis, Institutional Change and American Economic
Growth and the other with Robert Thomas, The Rise of
the Western World: A New Economic History. In his
book - Structure and Change in Economic History
(1981), he abandoned the notion that institutions were
efficient and attempted to explain why “inefficient” rules
would tend to exist and be perpetuated. He was interested
in developing political-economic models, which led him to
leave the University of Washington in 1983 after being there
for 33 years. He moved to Washington University in St.
Louis and there created the center in Political Economy,
which continues to be a creative research centre.
In his book Institutions, Institutional Change and
Economic Performance (1990), he developed a
political-economic framework to explore long run
institutional change. He raised some fundamental
questions to further progress in social sciences such as an
understanding of how people make choices; under what
conditions the rationality postulate is a useful tool and how
individuals make choices under conditions of uncertainty
and ambiguity.
One of the pioneers in ‘new institutional economics’, North
analysed some fundamental question of why some countries
are rich and others poor. Institutions provide the basic
structure by which human beings throughout history have
created order and attempted to reduce uncertainty in
exchange. The greater the institutional uncertainty, the
greater the transaction costs - lack of opportunity to enter
binding contracts and other institutional arrangements
causes economic stagnation. This is true of developing
countries as also of former socialistic states. He has also
raised fundamental questions concerning the connection
between economic change, technical development and
institutional conditions.
North is an inspirer and a producer of ideas who inspires
a number of research workers to solve the old problems
more effectively by stressing on the importance of stringent
theory.

1994
HARSANYI, JOHN. C
Nationality: American
b.- May 29, 1920, Budapest, Hungary.

NASH, JOHN. F
Nationality: American
b.- June 13, 1928, Bluefield, West Virginia.
HARSANYI NASH

SELTEN
SELTEN, REINHARD
Nationality: German
b.- October 10, 1930, Breslau, Germany.

For their pioneering analysis of equilibria in the

theory of non-cooperative games

John Harsanyi chose to study pharmacy in order to

obtain military deferment during the German occupation
of his native Hungary but was obliged to serve in the
forced labour unit for six months. While being deported
to a concentration camp in Austria, he managed to escape
from the Railway station and found refuge with the help
of a Jesuit priest. He re-enrolled at the University of
Budapest and obtained his Ph.D. in Philosophy in 1947.
He worked briefly as a junior faculty member at the
University Institute of Sociology before he was obliged
to resign due to his outspoken anti-Marxist views. He
escaped from Hungary along with his fiancee in the
April of 1950 and reached Australia late that year. He
worked in a factory during the day for three years and
took economic courses at the University of Sydney to
receive his M.A. in 1953.
Harsanyi was appointed lecturer in Economics at the
University of Queensland in Brisbane in 1954. Awarded a
Rockefeller Fellowship in 1956, he took his Ph.D. in
Economics from Stanford University under the
supervision of Ken Arrow. He returned to Australia to
a very attractive research position at the Australian
National University in Canberra in 1958 and later was
a professor of Economics at Wayne State University in
Detroit but returned to the Business School at the
University of California in Berkeley to pursue his
interest in game theory. Enthused by John Nash’s papers
on cooperative and non-cooperative games between
1950 and 1953, he has provided some brilliant analyses
of games with incomplete information since then.
He is presently associated with a number of
organizations such as National Academy of Sciences,
American Academy of Arts and Sciences and the
Economic Time Society and is a Distinguished Fellow
of the American Economic Association.
Nash excelled in Mathematics in school and joined the
Carnegie Technical Institute in Pittsburgh to major in
Chemical engineering but shifted to Chemistry and later to
Mathematics. His progress in the subject was so good
that he was awarded the M.S. in addition to the B.S.
when he graduated. He took up graduate fellowship at
Princeton after that but his early interest in economics was
kindled when he took an elective course in ‘International
Economics’ at Carnegie. It was this exposure and later his
paper The Bargaining Problem that led to his interest in
game theory. These ideas were presented for the thesis
for his Ph.D. in mathematics. Nash introduced the
distinction between cooperative and non-cooperative
games. His most important contribution to the theory of
non-cooperative games was to formulate a universal
solution concept with an arbitrary number of players and
arbitrary preferences. This solution concept later came to
be called as Nash Equilibrium.
Nash took his Ph.D. in 1950 with the dissertation entitled
Non-Cooperative Games. He joined the Massachusetts
Institute of Technology (M.I.T.) as an instructor in 1951
and was on the faculty until he resigned in 1959. He went
to the Institute for Advanced Study in Princeton on a ‘Sloan
Sabbatical’ in 1956- 1957 when he mainly researched
on mathematics. Nash had an extensive nervous
breakdown, which forced him to resign from M.I.T. He
mainly kept to himself after that until around 1994 when
he resumed meeting fellow mathematicians in Princeton at
meals and teas. He accomplished many other things
including introducing into economics a formal theory of
bargaining.
Selten Reinhard, being a half Jew, had to leave high
school when he was fourteen during the Hitler regime.
He escaped along with his family and lived as a refugee
in Saxonia, Austria and Hessia where he worked as a
farm boy until he could return to school. Selten
developed a strong interest in mathematics and used
his long hike to and from school to brood over problems
in mathematics - a habit he continues to enjoy.
Selten studied mathematics at the University of Frankfurt
from 1951 to 1957 and completed his master’s degree
in mathematics (1957) with mathematical economics
as a minor. He was greatly influenced by Ewald Burger,
which resulted in his thesis on cooperative game theory.
For 10 years after his master’s degree he worked for
professor Heinz Sauermann, the first man to propagate
Keynesianism in Germany, in various assistant
positions. In 1961, he received his Ph.D. in mathematics
from the University of Frankfurt am Main.
Influenced by Oskar Morgenstern, he participated in
the game theory conference in Princeton, which led to
his paper Ein Oligopolmodell mit Nachfragetragheit
(An Oligopoly Model with Demand Inertia) which
define ‘subgame perfectness’. Later in a paper in 1975
he defined a refined notion of perfectness called
‘trembling hand perfectness’. He worked in the Free
University of Berlin (1969-1972) as a professor of
Economics and at the University of Bielefeld (1972 -
1984). He moved to the University of Bonn in 1984
and has been a professor of Economics there since then.
He has researched in such diverse areas as general
theory of equilibrium in selection of games, applications
of game theory to biology, game theory in behavioural
sciences etc.
Game theory is used for understanding and analysing
complex economic issues and emanates from the study
of games such as chess or cards. The foundations for
this theory were introduced by John Von Neumann and
Oskar Morgenstern in their book Theory of Games and
Economic Behaviour in 1944. Game theory is a
mathematical method for analysing ‘strategic interaction’.
While classical analyses assumes that a large number
of agents can disregard others’ reaction to their own
decision, in reality each agent tries to maximise his
gain in an outcome which is most disadvantageous to
him and hence is aware of the strategic interaction. That
is, he uses a ‘minimax solution’ or a consistent solution
of mixed strategies. By awarding the Nobel Prize to
the three laureates, The Swedish Academy recognized
this work on Game theory for the first time in 50 years.
Game theory found all kinds of application in the early
1950s - from airplane dogfights to doctrines of massive
retaliation. Much of the early work was done in the
Institute for Advanced Study at Princeton and Rand
Corporation in Santa Monica, California. The book -
Prisoner’s Dilemma by William Poundstone records
this progress very effectively.
As a young doctoral student in mathematics, John Nash
introduced the concepts of ‘Cooperative’ and
‘Non-Cooperative’ games in his dissertation. He
formulated a ‘universal solution concept’ for an
arbitrary number of players and arbitrary preferences.
Non-cooperative games meant those in which no
outside agent assures that players adhere to
predetermined rules. This solution concept came to be
known as the ‘Nash equilibrium’. He proposed two
interpretations of the equilibrium concept - one based
on rationality in which the players are rational and have
complete information about the structure of the game,
individual player’s preferences and possible outcome;
and the other in terms of statistical populations, thus
providing the foundation for the analysis. His
interpretation in terms of statistical populations is useful
in so-called evolutionary games. This type of game has
also been developed in biology in order to understand
how the principle of natural selection operates in
strategic interaction within and among species. This
concept has been used in competition between firms in
industry, macroeconomic theory for economic policy,
environmental and resource economics, foreign trade
theory, the economics of information, etc. Nash
equilibrium has become a standard tool in almost all
areas of economic theory.
Despite its usefulness, if a game has several Nash
equilibria, the equilibrium criterion cannot be used to
predict the outcome of the game. This led to refinement
of the Nash equilibrium concept. Another problem faced
while interpreting in terms of rationality is that the
equilibrium concept presupposes that each player has
complete information about the other players’ situation.
Reinhard Selten and John Harsanyi undertook to solve
these two problems. Selten developed the concepts with
respect to the dynamics and introduced the concept of
subgame perfection by eliminating ‘uninteresting’ Nash
equilibria and using stronger conditions to reduce the
number of possible equilibrium, which are
unreasonable in economic terms. However, there are
situations where even the ‘subgame perfection’ is
insufficient. Selten introduced a further refinement
known as the ‘trembling hand equilibrium’ whereby
the analysis assumes that each player presupposes a
small probability that a mistake will occur. Nash
equilibrium is said to be ‘trembling-hand’ perfect if
the game is full of small probabilities of such mistakes.
These concepts have found wide application in the
theory of industrial organization and macroeconomic
theory of economic policy.
The rationalistic interpretation of Nash equilibrium is
based on the assumption that the players know each
others’ preferences, whereas they either completely or
partially lack this knowledge. Games with incomplete
information represent many strategic interactions in the
real world. Harsanyi published three articles entitled
Games with Incomplete Information Played by
Bayesion Players in 1967-1968 where, his approach
to games with incomplete information lays the
foundation for all economic analysis involving
information. He showed how to convert a game with
incomplete information into one with complete yet
imperfect information, making it accessible to game
theoretical analysis. Harsanyi showed how games on
incomplete information can be analysed, thereby
providing a theoretical foundation for a living field of
research - the economics of information - which focuses
on strategic situations when different agents do not know
each others objectives. His approach to games with
incomplete information may be viewed as the foundation
for nearly all economic analysis involving information,
regardless of whether it is asymmetric, completely
private or public.

1995
LUCAS, ROBERT JR. E
Nationality: American
b.- September 15,1937, Yakima, Washington.
LUCAS
For having developed and applied the hypothesis
of rational expectations, and thereby having
transformed macro economic analysis and deepened
our understanding of economic policy

Robert Lucas excelled in mathematics and science in

school and had his first taste of applied mathematics
when as a schoolboy he helped his father in his
refrigeration design problem. It was expected that he
would become an engineer but joined the University of
California for a graduate course in History after he lost
interest in the mathematics course at the University of
Chicago. At Berkeley, he took courses in economics,
history and found that economics was to his liking. He
obtained Ph.D. in Economics in 1964 from the
University of Chicago.
Lucas was successful in getting numerous fellowships
and honours from 1955. He served in the Department
of Economics at the Carnegie Institute of Technology
from 1963 to 1973 and returned to Chicago in 1974 as
a faculty member and became John Dewey
Distinguished Service Professor in 1980 - a position
he continues to hold.
Robert Lucas is an economist who has had some of the
greatest influence on macroeconomic research since
1970. His work has brought about rapid and
revolutionary development in such varied fields as -
application of the rational expectations hypothesis,
emergence of an equilibrium theory of business cycles,
insights into the difficulties of using economic policy
to control the economy, and possibilities of reliably
evaluating economic policy with statistical methods and
in many other fields.
Expectations about the future are highly important to
economic decisions made by household, firms and
organizations. Economic variables are to a large extent
governed by expectations about future conditions. The
rational expectation hypothesis means that agents
exploit available information without making the
systematic mistakes implied by earlier theories.
Expectations are formed by constantly updating and
reinterpreting this information. Lucas has demonstrated
the far-reaching consequences of rational expectations
formation, particularly concerning the effects of
economic policy and the evaluation of these effects
using econometric methods. He demonstrated how
people’s fear and expectations can frustrate policy
makers’ efforts to fine-tune the economy.
Lucas had a critical view of the Phillips curve. The
Phillips curve displays a positive relation between
inflation and employment - that is, these time-series
conclude that employment could be increased by
implementing an expansionary economic policy. Lucas
proved that an endeavour to rely on the Phillip curve to
increase employment permanently would be futile and
would only lead to higher inflation. Lucas provided
the first theoretically satisfactory explanation for why
the Phillips curve could be sloping in the short-run but
vertical in the long-run, thus illustrating the pitfalls of
uncritically relying on statistically estimated so-called
macro econometric models to draw conclusions about
the effects of changes in economic policy. The Lucas
critique has had a profound influence on economic-
policy recommendations. He formulated powerful and
operational methods for drawing conclusions from
models with rational expectations, which have now
been accepted as the natural basis for further studies.
He has also established new areas of research such as
equilibrium theory of business cycles. In addition to
this, he has made outstanding contributions to investment
theory, financial economics, monetary theory, dynamic
public economics, international finance and more
recently, the theory of economic growth. His
methodological approach has found acceptance by a
large majority of macro economists.
As an interesting aside, Lucas had to share half his prize
money with his ex-wife Rita Cohen since the couple’s
property settlement stipulated ‘wife shall receive 50
percent of Nobel Prize’ if he won the prize before
October 31, 1995. He was awarded the prize on
October 10, and Lucas was glad to share the $ 1 million
with her.

1996
MIRRLEES, JAMES. A
Nationality: British
b.- July 5, 1936, Minnigaff, Scotland.

VICKREY, WILLIAM
Nationality: American
b.- 1914, Victoria, British Columbia, Canada;
d.- October 11,1996, Columbia.
 MIRRLEES VICKREY

For their fundamental contributions to the

economic theory of incentives under asymmetric
information

James Mirrlees received his M.S. in Mathematics in

1957 from Edinburgh and left for Cambridge to pursue
his studies in mathematics. He took his Ph.D. in
Economics for his thesis Optimum Accumulators
Under Uncertainty, from the Cambridge University in
1963. Beginning his academic life as an Advisor with
the MET Centre for International studies in 1963 on their
‘India Project’ at New Delhi, he has been teaching
economics in University of Cambridge (1963-1968),
University of Oxford (1968-1995) and now continues
to teach at the University of Cambridge. He has also
served as visiting professor to MIT, University of
California, Berkeley and Yale University. He was
Fellow of Nuffield College, University of Oxford (1968
-1995) and Fellow of Trinity College, University of
Cambridge (1963-1968) where he is presently holds a
professorship in Economics.
Vickrey received his B.S. in Mathematics from Yale
University in 1935 and did his post graduate studies at
Columbia University, New York, from where he
received his master’s degree in 1937. Opposed to the
World War, he spent part of his alternate service
designing a new inheritance tax for Puerto Rico for
which he was awarded Ph.D. in Economics at Columbia
University in 1948. His thesis Agenda for Progressive
Taxation was reprinted as an economic classic in 1972.
His teaching career began in 1946 as a lecturer at
Columbia University. He went on to become full
professor in 1958 and was named McVickar Professor
of Political Economy in 1971. He was Chairman of the
Department of Economics from 1964 to 1967 and
retired as McVickar Professor Emeritus in 1982.
Vickrey lectured widely and served as a consultant in
the United States and overseas and to the United
Nations. He cared about urgent issues like budget
deficits and did not hesitate to contradict prevailing
policy dogmas. He was founding member of Taxation,
Resources and Economic Development and was a
member of many professional and civic organisations.
He was an active supporter of organisations promoting
peace. He died 3 days after the Nobel announcement,
en route to an economics conference.
Incomplete and asymmetrically distributed information
occur in many contexts - a bank has incomplete information
about borrowers’ future income, an insurance company
cannot fully observe policy holders’ responsibility for
the property insured and the external factors that could
affect the risk of damage etc. Research on the economics
of information has therefore focussed on the question
of how contracts and institutions can be changed to
handle different incentive and control problems. The
two laureates have laid the foundation for such work
where informational asymmetries are a key component
thereby generating a better understanding of insurance
markets, credit markets, auctions, the internal
organization of firms, wage forms, tax systems, social
insurance, competitive conditions, political institutions,
etc.
William Vickrey researched on the properties of different
types of auctions, as well as designing a model on income
taxation to attain a balance between efficiency and equity.
Vickrey analysed in his two papers of 1961 and 1962, the
properties of different kinds of auctions where in,
asymmetric information is an essential component and
where potential buyers have limited knowledge about
the value of the asset or rights up for sale. In the Vickrey
auction, or the second-price auction, an object is
auctioned where the highest bidder gets to buy the item,
but only pays the next highest price offered. Here it is
in the individual’s best interest to state a truthful bid.
The object goes to the person with the highest willingness
to pay, and the person in question pays the social
opportunity cost which is the second highest bid.
Researchers have developed analogous principles, for
example, in order to elicit the true willingness to pay
for public projects and Vickrey’s analysis has also
conveyed fundamental insights into the design of
resource allocation mechanisms aimed at providing
socially desirable incentives.
Classical structure of taxation based on Francis Y.
Edgeworth (1897) adopted a utilitarian perspective
recommending strongly progressive tax rates which would
neutralize all differences in income. Vickrey’s analysis in
the mid 1940s however, showed that a progressive tax
schedule would affect individuals’ incentives to
perform. His reformulation of the problem stipulating
that each individual take the tax schedule into account
while choosing his work effort and that governments,
in practice, do not know the productivity of individuals
was solved 25 years later by James Mirrlees. Mirrlees’s
approach is particularly valuable in ‘moral hazards’ -
i.e., situations where it is impossible to observe another
agents’ actions. He identified a critical condition
(known as single crossing) which drastically simplifies
the problem and at the same time enables a solution.
Mirrlees helped in establishing a paradigm for analysing
abroad spectrum of economic issues where asymmetric
information is a prime component. The revelation
principle, which induces all individuals to reveal their
private information truthfully without conflicting their
self-interest, has a large bearing on the treatment of
many issues of economic theory and has been greatly
benefited through his efforts. The issues involving
insurance and auctions are solved by this principle.
In the income tax problem, Mirrlees showed that an
agent’s actions indirectly imply a choice of the
probabilities that different outcomes will occur. The
conditions for the optimal terms of compensation thus
provide “probability information” about the agent’s
choice and the extent to which insurance protection has
to be restricted in order to provide the agent with
suitable incentives. In designing an incentive scheme,
the principal has to take into account the costs of giving
the agent incentives to act in accordance with the
principal’s interests. Thus the higher the agent’s
sensitivity to punishment and the larger the amount of
information about the agent’s choice contained in the
outcome, the lower these costs, which is stipulated in a
contract.
Mirrlees and Vickrey have made noteworthy
contributions in other areas of economics. Vickrey made
significant theoretical contributions as also practical
application. His study of the New York subway fare
system in the 1950s proposing an efficient pricing of
public services is an example. In collaboration with
the US economist Peter Diamond, Mirrlees studied the
structure of consumption taxes in a world where tax
wedges give rise to social inefficiency showing that
small open economies should not impose tariffs on
foreign trade and that taxes on factors of production
such as labour and capital should not be levied on the
production side, but at the consumption stage. This has
had important consequences for project appraisal and
economic policy in developing countries.

1997
MERTON, ROBERT. C
Nationality: American
b.- July 31,1944, New York City, USA.
 MERTON SCHOLES
SCHOLES, MYRON. S
Nationality: American
b.- July 1, 1941, Ontario, Canada.

For a new method to determine the value of

derivatives

Robert Merton received a B.S. in Engineering

Mathematics from Columbia University in 1966, a M.S.
in Applied Mathematics from California Institute of
Technology in 1967, a M.A. (honorary) from Harvard
University in 1989, and his Ph.D. in Economics in 1970
from the Massachusetts Institute of Technology. He was
assistant professor (1970-1973), associate professor
(1973-1974), professor (1974-1980), and Penney
Professor of Management (1980-1988) in Finance at
MIT’s Sloan School of Management. He joined the
faculty of the Harvard Business School in 1988 and
currently holds the George Fisher Baker Professorship
in Business Administration at the Harvard Business
School. Dr. Merton is one of the founders of Long-Term
Capital Management, L.P., a financial technology and
proprietary firm. He is a Research Associate of
Scientific Advisers of the Tinbergen Institute and serves
on the advisory board of the Centre for Global
Management and Research at George Washington
University.
Myron Scholes earned his Ph.D. from the University of
Chicago in 1969 and taught there and at MIT’s Sloan
School of Management before serving the Stanford
Graduate School of Business as Frank E. Buck Professor
of Finance from 1983 to 1996. While at Stanford, he
was also a professor of law at Stanford Law School
and Senior Research Fellow at the Hoover Institution.
He retired from Stanford in 1996 after co-founding Long-
Term Capital Management, L.P, a firm that specializes
in the development and application of sophisticated
financial technology to investment management.
Professor Merton and Scholes have, in collaboration
with the late Fischer Black, developed a pioneering
formula for the valuation of stock options. Their
methodology has paved the way for economic
valuations in many areas. It has also generated new
types of financial instruments and facilitated more
efficient risk management in society. Their method has
become indispensable in the analysis of many economic
problems. They made vital contribution by showing that
it is in fact not necessary to use any risk premium when
valuing an option.
In a modern market economy, it is essential that firms
and households are able to select an appropriate level of
risk in their transactions. This takes place on financial
markets, which redistribute risk towards those agents
who are willing and able to assume them. A prerequisite
for efficient management of risk, however, is that such
instruments are correctly valued, or priced. A guarantee
gives the right but not the obligation to exploit it under
certain circumstances. French mathematician Louis
Bachelier attempted to value derivatives in 1900. His
formula was flawed in many ways and although
subsequent researchers were more successful, their
results had the fundamental shortcoming that risk premia
were not dealt with in a correct way. In 1973, Myron
Scholes in collaboration with Fischer Black published
a formula now known as the ‘Black-Scholes formula’
for option valuation.
According to this formula, the value of the call option
is the difference between the expected share value and
the expected cost, if the option right is exercised at
maturity. The optimal value would be higher if existing
share price is high, high volatility of the share, high
risk-free interest rate, length of the time to maturity, a
low 'strike price’ and a high probability that the option
will be exercised.
Robert Merton devised another method to derive the
formula that has wide applicability besides generalising
the existing formula.
The new method to determine the value of derivatives
developed by Professor Merton and Profesor Scholes
in close collaboration with Fischer Black stands out
among the foremost contributions to economic sciences
in the last three decades. They showed that it is not
necessary to use any risk premium when valuing an
option. While the risk premium does not disappear, it
is included in the stock price. The ‘Black-Scholes
formula’ is now used by thousands of traders every
day to value stock options in markets throughout the
world. Merton has also developed a new powerful
method for analysing consumption and investment
decisions over time.
Their method has also vital applications in the analysis
of many economic problems. Banks and investment
banks regularly use their methodology to value new
financial instruments and to offer instruments tailored
to their customers’ specific risks. At the same time such
institutions can reduce their own risk exposure in
financial methods. Scholes has clarified the impact of
dividends on stock market values and made empirical
contributions.

1998

SEN, AMARTYA
Nationality: Indian
b.- November 3, 1933, Shantiniketan, Bengal, India.
 For his contributions to welfare economics

As a schoolboy in Shantiniketan, Sen dreamt of

becoming either a Sanskrit scholar or a
physicist.However, he graduated in Economics from
Presidency College, Calcutta in 1953 where he
displayed unusual talent. He served as professor of
economics at Jadavpur University, Calcutta from 1956
to 1958 and as a Fellow of Trinity College, Cambridge
from 1957 to 1963, from where he had received his
Ph.D. in Economics in 1959. Sen was professor at the
Delhi School of Economics (1963-1971), professor at
the London School of Economics (1971-1977), served
at the Nuffield College, Oxford (1977-1980),
Drummond Professor of Political Economy, Oxford
(1980-1987) and Lamont Professor of Economics and
Philosophy, Harvard (1987-1998). He joined the Trinity
College at Cambridge as Master in January 1998.
As a boy of 10, Sen was witness to the Bengal famine
of 1943 a man-made catastrophe in which five million
died. The grim childhood experience had left a lasting
impression on his mind, which is reflected in the several
subjects he has researched on.
Sen clarified the conditions, which permit rules for
collective decision making that are consistent with a
sphere of rights for the individual. Majority voting is
the most commonly known rule for making collective
decisions but the decision rule cannot always select an
alternative that is unambiguously best for any majority.
In the early 1950s Kenneth Arrow (Nobel Laureate,
1972) examined the possible rules for aggregating
individual preferences and arrived at the conclusion
that no aggregate rule exists that fulfills the five axioms
or conditions. Arrow argued that it is impossible to
devise a voting system that is both rational and
egalitarian - if it was rational with full harmonisation
of individual preferences, it could well be dictatorial
and, therefore, not egalitarian.
In his seminal work, Collective Care and Social Welfare
(1970), Sen offered an answer to this ‘Impossibility
Theorem’ of Arrow. He showed that there are grey areas
in individual and group choices. One prerequisite for a
collective decision making rule is that it should be ‘non-
dictatorial’ i.e., it should not reflect the values of any
single individual. In further support of democracy as a
choice, he argued that individuals transact better among
themselves when they are better informed about each
other and that there can be no democracy without a free
press. If lack of democracy and a free system of news
distribution were responsible for 30 million dying of
starvation in China, it was stockpiling as a result of
war hysteria inspite of a bountiful harvest that led to
the Bengal famine. In Poverty and Famines: An Essay
on Entitlement and Deprivation (1981), he maintains
that maldistribution rather than food shortage leads to
famine. He has studied actual famines, in a way quite
in line with his theoretical approach to welfare
measurement.
By analysing the available information about different
individual’s welfare when collective decisions are
made, he has improved the theoretical foundation for
comparing different distributions of society’s welfare
and defined new and more satisfactory indexes of
poverty. Distributions of welfare in different countries
or within a country is measured by an index. Inequality
indexes are linked to welfare functions representing
values of society. Serge Kolm and Anthony Atkinson
clarified the relation between the Lorentz curve of
income distribution and Gini-Coefficient of income
inequality in the 1970s. Sen made valuable contribution
by defining poverty index and other welfare indicators.
In his On Economic Inequality, he provided a yardstick
for measuring poverty line. While this common measure
shows the population that is below a tolerable standard of
living, Sen claimed it ignores the levels of deprivation among
the poor. He devised a new formula for poverty indexation
based on the income inequality of the population below
the poverty line.
Almost all of Sen’s works deal with development
economics, as they are often devoted to the welfare of
the poorest people in the society. Sen's more recent
work concerns social opportunity. He argues that even
well functioning economies cannot take care of
problems caused by inadequacies such as poor
education, poor health service, gender inequalities and
skewed social stratification. In his book, India:
Economic Development and Social Opportunity co­
authored with Belgian Economist Jean Dreze, he
suggests that more political protest and opposition can
reduce variations in social opportunities. For the first
time in several years, the Nobel award to Sen has given
it a human face. By combining tools from economics
and philosophy, he has restored an ethical dimension
to the discussion of vital economic problems.
 Name Index

Allais, Maurice (1988) 41

Arrow, Kenneth Joseph (1972) 9
Becker, Gary. S (1992) 50
Buchanan, James Mcgill (1986) 38
Coase, Ronald. H (1991) 47
Debreu, Gerard (1983) 33
Fogel, Robert. W (1993) 54
Friedman, Milton (1976) 18
Frisch, Ragnar Kittil Anton (1969) 1
Haavelmo, Trygve (1989) 43
Harsanyi, John. C (1994) 59
Hicks, Sir John Richard (1972) 9
Kantorovich, Leonid Vital Evich (1975) 16
Klein, Lawrence Robert (1980) 27
Koopmans, Tjalling Charles (1975) 16
Kuznets, Simon Smith (1971) 7
Leontief, Wassily W. (1973) 11
Lewis, Sir William Arthur (1979) 24
Lucas, Robert Jr. E (1995) 68
Markowitz, Harry (1990) 46
Meade, James Edward (1977) 20
Merton, Robert. C (1997) 78
Miller, Merton (1990) 46
Mirrlees, James. A (1996) 72
Modigliani, Franco (1985) 36
Myrdal, Karl Gunnar (1974) 14
Nash, John. F (1994) 59
North, Douglass. C (1993) 55
Ohlin, Bertil Gotthard (1977) 20
Samuelson, Paul Anthony (1970) 4
Scholes, Myron. S (1997) 79
Schultz, Theodore William (1979) 25
Selten, Reinhard (1994) 61
Sen, Amartya (1998) 83
Sharpe, William (1990) 46
Simon, Herbert Alexander (1978) 23
Solow, Robert (1987) 40
Stigler, George Joseph (1982) 31
Stone, Sir John Richard Nicholas (1984) 34
Tinbergen, Jan (1969) 2
Tobin, James (1981) 30
Vickrey, William (1996) 72
Von Hayek, Friedrich August (1974) 13
 ECONOM IC SCIENCES
Encyclopedia of Nobel Laureates Vol. VI-Economic
Sciences is the last of a six volume series on all Nobel
Prize winners since the inception of the aw ard in
1900. The prize in Economic Sciences was instituted
in the year 1968. The interdisciplinary approach,
the authoritative study and the lucidity of style
make this work a must for all those seeking
definitive information on the Nobel Laureates and

ENCYCLOPEDIA OF NOBEL LAUREATES

the Nobel phenomenon.

ISBN 81-87350-21-0