Question: This year’s Nobel Prize in economic sciences has been awarded to Oliver Hart and Bengt Holmström for their contribution to….?
a) Contract theory
b) Social justice
c) Distributive justice
d) none of the above.
Ans: (a)
Related fact:
- The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2016 was awarded jointly to Oliver Hart and Bengt Holmström “for their contributions to contract theory”.
- The Prize amount: 8 million Swedish krona will be shared equally between the two laureates.
- New theoretical tools created by Hart and Holmström are important to the understanding of real-life contracts and institutions as well as potential pitfalls in contract design.
- This year’s laureates have developed contract theory which provides a comprehensive framework for analysing many diverse issues in contractual design, like performance-based pay for top executives, deductibles and co-pays in insurance, and the privatisation of public-sector activities.
- In the late 1970s, Bengt Holmström’s informativeness principle stated precisely how this contract should link the agent’s pay to performance-relevant information.
- In the mid-1980s, Oliver Hart made basic contributions to a new stream of contract theory that deals with the important case of incomplete contracts. Hart’s findings on incomplete contracts have shed new light on the ownership and control of businesses and have had a vast impact on several fields of economics, as well as political science and law. His research provides us with new theoretical tools for studying questions such as which kinds of companies should merge the proper mix of debt and equity.
- It is to be noted that the Prize in Economic Sciences is not a Nobel Prize. In 1968, Sveriges Riksbank (Sweden’s central bank) instituted “The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel”, and it has since been awarded by the Royal Swedish Academy of Sciences according to the same principles as for the Nobel Prizes that have been awarded since 1901. The first Prize in Economic Sciences was awarded to Ragnar Frisch and Jan Tinbergen in 1969.
- The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel has been awarded 48 times to 78 Laureates between 1969 and 2016.
Reference:
http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/2016/press.html
https://www.theguardian.com/business/economics-blog/live/2016/oct/10/nobel-prize-in-economics-2016-awarded-live