NOBEL ECONOMICS PRIZE WINNERS-2016

Nobel Economics Prize 

winners-2016

Helsinki-born Bengt Holmström, of the Massachusetts Institute of Technology and London-born Oliver Hart of Harvard University were revealed as the winners of the 2016 Nobel Prize in Economics at the Royal Swedish Academy of Sciences in Stockholm on Monday.“I was very surprised and very happy,” said Holmström when interviewed by Swedish and international journalists over a phone link immediately after the prize announcement.

The duo will split eight million kronor ($924,000) in prize money.“This prize is about contracts. A fundamental phenomenon which impacts most of us,” Nobel Committee member Per Strömberg explained at the start of a breakdown of the prize-winning research.“In the late 1970s Holmström’s informativeness principle stated precisely how a contract should link an agent (a company’s CEO) to performance-relevant information,” the Royal Swedish Academy of Sciences said in a press summary.“He showed how the optimal contract carefully weighs risks against incentives,” it added.

Born in Finland, Holmström initially moved to Stanford, California as an exchange student. While there he started doing research on understanding problems in the business world. He eventually ended up staying in the US, and went on to become a world-famous researcher in his field.His fellow 2016 Nobel Economics Prize winner Hart came to the US in the 1970s to do his PhD at Princeton University. Initially focusing on more theoretical work, the Brit eventually started to specialize in ownership in business, turning him towards the field of contracting in which he would ultimately win a Nobel Prize.

“Hart made fundamental contributions to a new branch of contract theory that deals with the important case of incomplete contracts,” the Royal Swedish Academy of Sciences said.His findings on incomplete contracts “shed new light on the ownership and control of businesses and have had a vast impact on several fields of economics as well as political science and law,” they added.One of the big topics of the phone interview with Holmström following the prize announcement was whether huge bonuses should be paid to CEOs, and the newly-named Nobel Laureate said it was a tricky question.

Prof.John Kurakar