What Is the Nobel Memorial Prize In Economic Sciences?

The Nobel Memorial Prize in Economic Sciences is a prestigious award acknowledging outstanding contributions to the science of economics. The Nobel Memorial Prize in Economic Sciences is commonly called the Nobel Prize in Economics. The official name for the award is the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.

Key Takeaways

  • The Nobel Memorial Prize in Economic Sciences is a prestigious award acknowledging outstanding contributions to the science of economics.
  • The award, named after Swedish entrepreneur Albert Nobel, was introduced in 1968 by Sweden's central bank.
  • Awards are presented at the annual Nobel Prize Award Ceremony in Stockholm, Sweden each year on Dec. 10, the anniversary of Nobel's death.

Understanding the Nobel Memorial Prize In Economic Sciences

The esteemed Nobel Memorial Prize in Economic Sciences is awarded yearly to individuals making exceptional contributions to the field of economics. In his will, Swedish scientist, inventor, entrepreneur, author, and pacifist Nobel, the man who the prize is named after, left much of his large estate to establish awards in physics, chemistry, physiology or medicine, literature, and peace.

Economics was added to that list 67 years later in 1968, courtesy of Sweden's central bank. The Sveriges Riksbank, as it is known locally, made a donation during its 300th anniversary to facilitate celebrating the brightest minds in economics. The award was named in memory of Nobel, one of the country's biggest heroes, and became recognized as the sixth Nobel Prize.

In 1995, the prize was expanded to include social sciences, meaning that fields such as sociology and political science could also be recognized.

An endowment from Sweden's central bank provides funding in perpetuity to pay the Nobel Foundation's administrative expenses pertaining to the award alongside the monetary prize, which has totaled eight million Swedish krona (SEK), the equivalent of approximately $1 million, since 2012.

History of the Nobel Memorial Prize In Economic Sciences

The first prize in economics was awarded in 1969 to Ragnar Frisch and Jan Tinbergen "for having developed and applied dynamic models for the analysis of economic processes."

Other prominent winners include: Milton Friedman "for his achievements in the fields of consumption analysis, monetary history and theory, and for his demonstration of the complexity of stabilization policy;" Harry Markowitz, Merton Miller, and William Sharpe "for their pioneering work in the theory of financial economics;" and John Nash and Reinhard Selten "for their pioneering analysis of equilibria in the theory of non-cooperative games."

In 2009, Elinor Ostrom became the first female recipient, winning the award alongside economist Oliver Williamson for their scholarly work showing how communities can successfully share common resources, such as waterways, livestock grazing land, and forests, through collective property rights

The Nobel Memorial Prize In Economic Sciences has been awarded 50 times to 81 laureates between 1969 and 2018.

Nobel Memorial Prize In Economic Sciences Awards Method

Each year, the prize committee sends out invitations to thousands of scientists, members of academies, and university professors in numerous countries, asking them to nominate candidates for the coming year. Members of the Royal Swedish Academy of Sciences and former laureates are also authorized to nominate candidates.

The proposals are reviewed by the prize committee and specially appointed experts. Before the end of September, the committee chooses potential laureates. If there is a tie, the chairman of the committee casts the deciding vote. Next, the potential laureates must be approved by the Royal Swedish Academy of Sciences, the independent, non-governmental organization responsible for awarding the Nobel Memorial Prize in Economic Sciences.

Awards are presented at the annual Nobel Prize award ceremony in Stockholm, Sweden each year on Dec. 10, the anniversary of Nobel's death. A maximum of three individuals can share a prize during the same year.

Special Considerations

In economics, it can take years for a theory to be proved effective. That means that the Nobel Memorial Prize in Economic Sciences tends to refrain from recognizing fresh, cutting-edge research, waiting for ideas to become validated before crowning them as outstanding.

For example, Robert Merton and Myron Scholes were awarded the prize in 1997 for a formula they first developed in 1973. The Black-Scholes model, as it is known, determines fair prices of options and is widely considered to be one of the most important concepts in modern financial theory.

Fischer Black was also credited as a pioneer of the Black-Scholes model, but was not a recipient of the Nobel Memorial Prize in Economic Sciences because he passed away in 1995. Rules against dishing out posthumous awards also explain why some of the world's most famous and influential economists, such as Adam Smith and John Maynard Keynes, have never won the most esteemed award in economics.