Princetonians receive economics Nobel Prize

Three professors affiliated with the greater Princeton community shared the 2001 Nobel Memorial Prize in Economic Science, which was announced last Thursday. Joseph E. Stiglitz, A. Michael Spence '66 and George A. Akerlof won the award "for their analyses of markets with asymmetric information," according to the Nobel Prize committee.

"The Nobel Prize in Economics is awarded annually to recognize outstanding research accomplishments in the field," economics department chair Ben Bernanke said.

"The three won the prize for their study of the effects of 'asymmetric information' in markets. Prior to their work, most analyses assumed that buyers and sellers in markets were equally well informed," Bernanke explained. "These economists showed that if information is 'asymmetric,' that is, one side of the market is better informed than the other, market outcomes can be very different — and in particular, markets may not work well or even fail to operate at all."

After graduating from Princeton in 1966, Spence earned a Ph.D. from Harvard University. He has held professorships at Harvard and Stanford business schools. He is currently a private venture capitalist.

While at the University, Spence played varsity hockey. As a graduate student at Harvard, he was a research assistant to former President Shapiro for two summers.

His son, Graham, graduated from Princeton in 2001.

Stiglitz briefly taught at the University. He earned his Ph.D. from Massachusetts Institute of Technology in 1967. He has also taught at Yale, Oxford and Stanford universities. He is currently a professor of economics at Columbia University.

At a press conference after receiving the prize, Stiglitz thanked Princeton among other research universities. He added, "academic freedom that is afforded by American universities is really an important part of why American universities have played such a dominant role in intellectual development around the world."

Though Akerlof is not connected to the University, he grew up in Princeton. He earned his Ph.D. from MIT in 1966, and is now an economics professor at the University of California at Berkeley.

"I am very pleased that a Princeton alumnus and a Princeton professor have received this great honor," President Tilghman said. "I would also note that Michael Rothschild, the Dean of the Wilson School, was a co-author with Stiglitz on one of the papers that was cited by the Nobel Committee. So Princeton is thrice honored."

Rothschild, however, did not share in the prize. In a letter to his ECO 102 class, Professor Uwe Reinhardt acknowledged this by writing, "Stiglitz co-authored the most important and by now truly classic piece of work of this genre — an article on adverse selection in health insurance markets and the consequent instability of these markets — with Michael Rothschild. It is not clear to me why our dean was not included in the prize, but you should think very highly of him just the same."

Rothschild, however, said he was not upset by the alleged oversight.

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"I am ecstatic both that my good friends should be honored and that my (joint) work should receive such recognition," he said in an e-mail.

Rothschild added that his work with Stiglitz was done while he was at the University in the mid 1970s, "most of it talking and scribbling on the blackboard in 216 Dickinson Hall."

The committee that chose the prize winners was chaired by Lars Svensson, who recently joined the University's faculty. "Svensson had to make several trips back and forth to Sweden for committee meetings and the announcement of the prize," Bernanke said.