Who Will Win the 2005 Economics Nobel?

Time to stick my foot in my mouth again. The 2005 Nobel Prize in Economic Science will be awarded this Saturday; last year I just about guaranteed that Prescott would not win.

Caveat: I have no morbid fascination - if any of these people passed away this year I apologize (you have to be living to get a prize).

My money is still on Jagdish Bhagwati. Last year, Brad DeLong agreed, and I just don't think these rankings change that quickly (Matthew Kahn of Environmental and Urban Economics has got him ranked highly this year too).

There is also the question of Bhagwati and who else? These prizes just aren't awarded solo very often. There's a big list of other possibilities: Dixit, Helpman, Grossman, and even Krugman. Having said that, I tend to think that Bhagwati might get one solo, with one or more to follow for these other fellows.

The big weakness of Bhagwati is that the Nobel Committee is leaning increasingly towards people who did seminal work in sub-sub-fields rather than broader work in sub-fields. Bhagwati has done a ton of stuff in the trade sub-field, but I'm hard pressed to name a sub-sub-field which he started (this is Krugman's great strength in this sort of voting). For example. Kydland and Prescott won last year for work in rules vs. discretion and real business cycle theory - but there are very good macroeconomists who cover up the fact that they can't master everything and have only a passing understanding of either of those tracks within the sub-field of macroeconomics.

Last year there was a betting market to help us out. It isn't up and running this year, but you can see who ranked highly and who got votes at all.

Here's my speculation on other picks.

• People in that area think Thomas Schelling is due. Maybe so, I'm not sure.
• Baumol comes up on a lot of lists. He doesn't do it for me, but he's certainly influential. And he has a brand name.
• Phelps is also probably due, but they won't do macro 2 years in a row (for the same reason, I would say Barro and/or Sargent are out for this year).
• If I had to pick one sub-sub-field it would probably be contracts - someone like Oliver Williamson.
• Lately, they've been leaning towards people who developed econometric techniques for the toolkit. I think the big fish here is Dale Jorgenson for his work on cost functions. Another possibilty is Chris Sims for VARs.
• Maybe it's just me, but I have a soft spot for Arnold Harberger - Arnold Kling and Michael Stastny, can you say "Harberger Triangle"?
• It's mostly used in macro, but the overlapping generations theory developed in the 60s is all micro, so Diamond, Cass, and Shell might be up this year. This might be a good dark horse bet given Assar Lindbeck's influence on moving the Nobel Committee towards people from different fields who layed the foundation of contemporary macroeconomics.
• Finance is probably due again, and Fama is at the top of the list here (although I tend to think that given enough time just about anyone could've done his work - he's Henry Aaron not Willy Mays).
• John Quiggin has said Robert Shiller in the past, but I don't see this happening for a long time, if at all. He's done a lot of good work, but if you claim that the sky is falling it seems to me that you go off the short list until it actually does fall.
• Certainly Paul Romer looks likely to be the youngest prize winner ever. I think it's too early, but you never know.
• Lastly, I had to review last year's posts to find this one from Division of Labor who suggest that Anne Krueger and Gordon Tullock for rent seeking might be a possibility too.

UPDATE: Here's the other interesting choices posted around the blogosphere this week. William J. Polley agrees with me about Bhagwati. There are many new comments on Marginal Revoluton since I looked at that post earlier this week, but there really don't seem to be any new suggestions. De Gustibus Non Est Disputandum has an October 7 post noting that James Hamilton of Econbrowser would like to see Chris Sims get the nod. I've always liked the idea of Sims getting the nod - I think his development of VARs has made so many other things possible. And ... as long as I'm on the subject, I think Hamilton himself should be on everyone's medium (length) list. Mahanlonbis chimes in with what I view as a blast from the past - 1988 John Bates Clark Medal winner Sandy Grossman. I've wondered about that myself, but I haven't been inclined to read his stuff since graduate school, so I can's say for sure. A commenter there added Eric Maskin, but I think he is a long shot for many years to come. Lastly, there is this post from Freakonomics giving 40 names in alphabetical order who should eventually win the prize. I think almost all of these are possibilties. I've repeated the list here, and struck through the names I think need to be off the short list and onto the medium list: Barro, Bernheim, Card, Doug Diamond, Peter Diamond, Dixit, Fama, Feldstein, French, Goldin, Gene Grossman, Sandy Grossman, Hall, Lars Hansen, Hart, Helpman, Holmstrom, Jorgenson, Kreps, Krugman, Milgrom, Mortenson, Murphy, Myerson, Newey, Obsfeldt, Pakes, Phelps, Pissarides, Posner, Rabin, Rajan, Rogoff, Paul Romer, Sargent, Shleifer, Sutton, Thaler, Tirole, Williamson, and Wilson. On a list that broad, I am stunned that Sims is not included - I wonder if the anonymous author didn't really understand his Bayesian argument for why VARs perform so well even when unit roots are not explicitly modeled.

Comments

[Michael Stastny]

"Mincerian Wage Equation"

:-D

[USD]

What are the chances of Paul Krugman ?

[Dave Tufte]

After last year I think they might be quite good.

It was a big surprise (to me, at least) for them to jump over a bunch of deserving theorists from the early 70s into a second wave from the late 70s and early 80s. I was also surprised that they jumped over people who'd made fundamental contributions to a broader field to pick two people who made the initial conbtribution to a more focused field. That is precisely what Krugman did in trade, so if there is a voting philosophy moving in that direction, I'd say he's a lock in the next couple of years. Of course, he's a lock anyway, within 20 years.

Krugman's contribution is just immense. He's done a lot of work in a lot of areas, but what he is known for is (pretty much) single handedly inventing a new theory of why trade occurs. In short, that trade may give you access to a bigger market, thus allowing you to take more advantage of increasing returns to scale than you would otherwise. The only person that I know of who could make a similar claim is (the even younger) Paul Romer with new growth theory.