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| Economists win Nobel for contract theory | Economists win Nobel for contract theory |
| (35 minutes later) | |
| UK-born Oliver Hart and Bengt Holmstrom of Finland have won the Nobel Economics Prize for work on contract theory. | UK-born Oliver Hart and Bengt Holmstrom of Finland have won the Nobel Economics Prize for work on contract theory. |
| Judges said their work laid "an intellectual foundation" for policies in areas such as bankruptcy legislation and political constitutions. | Judges said their work laid "an intellectual foundation" for policies in areas such as bankruptcy legislation and political constitutions. |
| The pair will receive 8 million Swedish krona (£744,652) from the committee. | |
| Mr Hart, who was woken with the news at 4.40am, said his first reaction had been to hug his wife and wake his younger son. | |
| Mr Holmstrom said he felt "very lucky" and "grateful". | |
| The Royal Swedish Academy of Sciences said that Mr Hart and Mr Holmstrom's work was "valuable to the understanding of real-life contracts and institutions". | The Royal Swedish Academy of Sciences said that Mr Hart and Mr Holmstrom's work was "valuable to the understanding of real-life contracts and institutions". |
| It also said it could identify "potential pitfalls in contract design." | It also said it could identify "potential pitfalls in contract design." |
| For example, contract theory can be used to assess performance-based pay for top executives, the academy said. It can also be used to find the best design for employee benefits. | |
| Competitive field | |
| Mr Hart, born in 1948, is an economics professor at Harvard University in the US, while Mr Holmstrom is a professor of economics and management at Massachusetts Institute of Technology. | Mr Hart, born in 1948, is an economics professor at Harvard University in the US, while Mr Holmstrom is a professor of economics and management at Massachusetts Institute of Technology. |
| The pair saw off competition from the World Bank's new chief economist Paul Romer, who was widely tipped to win. | |
| New York University's Stern Business School, where Prof Romer teaches, sparked controversy last Thursday when it accidently published a press release naming him as the winner. | |
| It quickly took down the release, saying it was only preparing for a possible win. | |
| Others believed to be the running included Olivier Blanchard, a former chief economist at the International Monetary Fund, and Edward Lazear, a fellow at the Hoover Institution, Stanford University. | |
| American's dominate | |
| The economics prize is the only Nobel not created by Alfred Nobel, and was instead launched in 1968, long after the philanthropist's death. | |
| To date Americans have dominated the award, with 55 of the 76 laureates holding US citizenship, including those with dual nationalities. | |
| Last year Scottish-born economist Angus Deaton won the prize for his use of data to investigate income inequality and inform economic policy. | |
| It is the fifth Nobel to be announced this year, after prizes for physiology or medicine, physics, chemistry and peace were awarded last week. | |
| The Nobel prize for literature will be awarded on Thursday. |