Wednesday, October 16, 2019

Is The Nobel Prize in Economics Really a Nobel Prize?

F. A. Hayek's Nobel Prize medal
By Robert Wenzel

Often when I post about a recipient of The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, I will see a comment that goes something along the lines of this:
There is no such thing as a Nobel Prize in Economics. It is fake. It was created by the Sveriges Riksbank to promote  central banking and government economic interventions in the economy.
So let us look into the Nobel award in economic sciences and see how it compares with the other Nobel awards.

The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel was established in 1968 by a donation from Sweden's central bank Sveriges Riksbank to the Nobel Foundation to commemorate the bank's 300th anniversary. The first prize was awarded in 1969.

The other Nobel Prizes were endowed by the industrialist, philanthropist and inventor of dynamite, Alfred Nobel, in his will. Those prizes were first awarded in 1901.

However, that is where the differences stop.

Laureates in the Memorial Prize in Economics are selected by the Royal Swedish Academy of Sciences just like most other Nobel laureates. The Swedish Academy grants the Nobel Prize in Literature and the Norwegian Nobel Committee awards the Nobel Peace Prize.

Further, like the Nobel laureates in physics, chemistry, medicine, and literature, each laureate in economics receives a diploma, gold medal, and monetary grant award document from the King of Sweden at the annual Nobel Prize Award Ceremony in Stockholm, on the anniversary of Nobel's death (December 10). The Peace Prize ceremony is held in Oslo, Norway

Thus, other than funding, most of the other Prizes are determined and awarded in the same manner as the Prize in economics.

But here is the thing. The claim that the Nobel Prize in Economic Sciences is not a Nobel Prize suggests that the other Prize winners have some kind of magical marking of value and importance that the Economics Prize does not.

The fact that both Al Gore and war criminal Henry Kissinger have won Nobel Peace Prizes should put that notion to death.

In fact, the key to the Nobel Prize, in economics and others, is that it brings notoriety to the individuals who receive the award.

Indeed, the notoriety brought to the recipient of the Economics Prize is in line with that of the awards in Peace and Literature. The other awards in physics, chemistry, and medicine do not garner anywhere close to the same general public attention.

The Nobel laureate in economics, F. A. Hayek understood this.

During his Nobel speech he said that had he been consulted on the establishment of a Nobel Prize in economics, he would "have decidedly advised against it" primarily because "The Nobel Prize confers on an individual an authority which in economics no man ought to possess.... This does not matter in the natural sciences. Here the influence exercised by an individual is chiefly an influence on his fellow experts; and they will soon cut him down to size if he exceeds his competence. But the influence of the economist that mainly matters is an influence over laymen: politicians, journalists, civil servants and the public generally."

In other words, who funds the Prizes is not the key point. It is that the Nobel in economics provides an important stage by which public officials and the general public can be reached. Something that does not generally occur with the Nobel prizes in the natural sciences.

The economics award is, in fact, in the general scheme of the development of policy and society more powerful than a room packed with Alfred Nobel dynamite.

Dissing the funding of the Nobel economics prize ignores its power and influence. The strengths and weaknesses of Nobel laureates are thus very important to flush out, far beyond a wave of the hand with the generally inaccurate claim that the Nobel Prize in Economics is not a legitimate Nobel award.

As for the claim that the Award was created to justify government interference in the economy that flies in the face of reality. While the Academy tends to make its awards in line with current popular thought, there is no indication that they have ruled out critics of central banking. In fact, Hayek was specifically awarded for his thinking about business cycles, where he fingered central banks as the cause.

Further, with the award handed out to Hayek and Ronald Coase, it is difficult to make the claim that the Academy ignores economists who favor much less government intervention.

Robert Wenzel is Editor & Publisher of EconomicPolicyJournal.comand Target Liberty. He also writes EPJ Daily Alert and is author of The Fed Flunks: My Speech at the New York Federal Reserve Bankand most recently Foundations of Private Property Society Theory: Anarchism for the Civilized Person Follow him on twitter:@wenzeleconomics and on LinkedIn. His youtube series is here: Robert Wenzel Talks Economics. More about Wenzel here.

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