It is Nobel Prize season again. The Prizes for Physics, Chemistry and Medicine have been awarded and for Economics it will be announced on October 14.  The original prizes date back to 1901 along with Literature and Peace. The latter two awards are not relevant to this article.  This article compares a neglected aspect of the science awards with the Prize started in 1968 by Sweden’s central bank for ‘Economic Sciences’ (their phrase).

The best article that I have read critical of the prize is “Cancel this Nobel, please” by Robert J Samuelson in the New Republic, December 1990. His main point is the non-scientific triviality of most economics Nobels. His article specifically discusses the 1990 award to Markowitz, Sharpe and Miller for their portfolio theory of risk diversification.   As he points out, this is just the old adage “do not put all your eggs in one basket”. One can still ask what is the harm with giving a Nobel Prize for rendering common sense into clever calculus?

In my opinion, a more compelling justification for scrapping the economics Nobel than their non-scientific triviality is the potential or actual damage the award does by bestowing credibility on the recommended policies and/or professional activities of the awardees.  Two cases on different ends of the ideological spectrum provide justification for this conclusion.

The 1997 award went to Myron Scholes, whose coauthor Black had passed away, for their ‘rocket science’ option pricing formula and also to Robert Merton for similar work.  The instruments they created facilitated “efficient risk management” in the Committee’s words.

As it turned out, the very next year Long Term Capital Management (which had on its board Scholes and Merton) collapsed due to Russia’s debt default in October 1998, which dangerously rocked the global financial system. LTCM was known as the Rolls Royce of hedge funds. Its spectacular rise was fostered by the Nobel Prize credentials of its founders, which also included David Mullins of Harvard/MIT pedigree.

Fast forward to 2021.  In California soaring apartment rentals have badly hurt the working poor and many have become homeless. A huge ‘living wage’ movement is calling for a $ 15 minimum wage. The 2021 award to David Card and others, partly for his finding (with the late Alan Krueger) that a higher minimum wage did not reduce employment has added legitimacy to this minimum wage demand.  Economists David Neumark and Bill Wascher had already unearthed serious problems with the survey data used by Card and Krueger, but the Nobel Committee either ignored their findings or was unaware of them.

Indeed, many awards since the global financial crisis of 2008 suggest that insofar as the Nobel Committee has an orientation or bias, it is now left wing and not right wing. During the Reagan and Thatcher deregulation period and beyond, it was the other way around.

Thus, due to the importance of the economics Nobel upon people’s livelihood and lives too, it is worth examining the awards for biases, other than ideological ones. This requires making a list of the top ten ‘Ivy’ League universities, not all of which are the original eight Ivies.  Hence the word ‘Ivy’ is within quotes. The ones chosen are Harvard, MIT, Princeton, University of Pennsylvania, Columbia, Yale, Stanford, Berkeley, Chicago and Oxford.

In making such a list, how does one deal with a university with just one or a few subjects -- specifically Caltech for Physics?  One can simply add them to the top ten for that specific subject.  How about universities with many subjects but that are top notch in one: Johns Hopkins for medicine, Carnegie Mellon for robotics and artificial intelligence? Since both of these are in the Next Ten, it is simplest to just keep them there.

The next ten I have chosen are New York University, Carnegie Mellon, Brown, Northwestern, UCLA, Cornell, Johns Hopkins, Duke, Cambridge, UK, Zurich ETH. These lists and cutoffs are arbitrary but that cannot be avoided.   Of the top four Canadian universities at least one should have been included.  Ditto for some European, Japanese and Chinese universities.  However, here we are assessing differences between Nobel prizes in economics versus the sciences. A globally more inclusive ranking will not make much difference for this purpose.

Those getting the awards have been classified into four groups.  Group A is the Top Ten ‘Ivy’ League, Group B is the Next Ten, Group C is all other universities, Group D is independent institutes, of which there are obviously far more in the sciences than in economics. If an Institute is affiliated to a university, such as Harvard Medical Center, it is entered accordingly.

Then there are joint affiliations that lead to a double counting problem. Some awardees are affiliated with more than one university or institute; in medicine often with many institutes. But one or many institutes makes no difference since the classification is either university or institute. Mostly, I have taken the university affiliation since the aim is to examine the range of universities.
Nobel Prize Winners2

 

Keeping in mind ranking and double counting issues, nevertheless the classifications chosen here indicate a huge ‘Ivy’ League bias in economics. Out of 12 awardees, 10 were from the Top Ten. And the single D classification, in year 2022, was to former Fed Chairman Ben Bernanke, with Brookings Institution at the time.  Since his PhD is from MIT and long affiliation was with Princeton, he should have come under A.  Hence the question mark, and certainly for other reasons too!

By comparison, in the sciences, there is a healthy diversity across all universities. More awards (14) went to Group C than to the Top Ten (11). Even more so for 2014 to 2019, the preceding five year period.  In the combined Sciences there were 21 in C and 5 in A, compared to 5  in A versus 2 in C for economics. Obscure university names crop up in the sciences: Drew, Sapienza, Alberta, Szeged. None at all in economics. In short, the bias in the economics Nobel Prize, to coin an expression, is not so much ideological but Iveological!