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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. | 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 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". | 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." |
Working separately, the two created tools to help determine whether public sector workers should receive fixed salaries or performance-based pay, and whether providers of public services should be publicly or privately owned. | |
Mr Holmstrom in particular is known for his research into how contracts and incentives affect corporate behaviour. | |
The former Nokia board member declined to say whether he thought executive pay was too high these days, but commented: "My personal view is that [top executives' contracts] are too complicated today." | |
Competitive field | Competitive field |
Mr Holmstrom, aged 67, is a professor of economics and management at Massachusetts Institute of Technology, while Mr Hart, born in 1948, is an economics professor at Harvard University in the US. | |
The pair saw off competition from the World Bank's new chief economist Paul Romer, who was widely tipped to win. | 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. | 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. | 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. | 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 | 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. | 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. | 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. | 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. | 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. | The Nobel prize for literature will be awarded on Thursday. |