ECGI Nobel Laureates Collect Prizes

ECGI Fellows, Prof. Bengt Holmström and Prof. Oliver Hart attended the glittering Nobel Prize ceremony in Stockholm on 10 December 2016 and collected their awards for the Prize in Economic Sciences in Memory of Alfred Nobel. In presenting the award, Bengt Holmström's work was recognised for examining both the benefits and drawbacks of economic rewards. For example, “A variable salary can cause us to become more goal-oriented and to work harder. But it can also make us assume excessive risks, focus on the wrong things and become less enthusiastic about our work. Holmström has also shown how contracts should be adjusted when the parties will be working together over a long period of time, and how good agreements can encourage an individual even though only team performance can be observed. One common denominator is that contracts must be balanced and adapted to the specific situation”.

“Oliver Hart's research on incomplete contracts deals with how decision making rights should be allocated. Among other things, his works provide us with a rich theory of property rights. Perhaps it would have been better for the students in Teos if they had sold their property to the tenant and saved themselves the trouble to carving out fifty lines of ancient Greek text in marble. Hart's toolkit can be used to understand whether two companies should merge, how to design an effective bankruptcy law and whether to operate a particular welfare service in the private or public sector”.

Tribute was paid to both Laureates before they were called to accept their prizes from His Majesty, the King of Sweden:

“Dear Professors Hart and Holmström: The blossoming field of contract theory stands firmly on the shoulders of your contributions. With the tools of this theory, we can better understand many real-world contracts and contractual institutions. More importantly, your work helps us write better contracts to enhance cooperation and welfare. Your research is an outstanding example of practically useful theory, in the best sense of the term. It is an honour and a privilege to convey to you, on behalf of the Royal Swedish Academy of Sciences, our warmest congratulations”.

"The Prize in Economic Sciences 2016 - Presentation Speech". Nobelprize.org. Nobel Media AB 2014. Web. 10 Jan 2017.

About this:

ECGI Research Members Oliver Hart and Bengt Holmström were elected Fellows of the ECGI in 2002. "Contract theory identifies a variety of obstacles to cooperation and suggests which contracts are best suited to overcome them. The theory is both positive and normative: it offers coherent explanations for the contracts that are commonly written, as well as a method for fïnding appropriate contractual solutions to new problems. It generates precise hypotheses that can be confronted with empirical data and lays an intellectual foundation for the design of various policies and institutions, from bankruptcy legislation to political constitutions" (Scientic Background on the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2016).

See:

•  Press Release from the Royal Swedish Academy of Sciences

•  Popular Scientific Background (pdf)

•  Scientific Background (pdf)

•  Professor Per Strömberg explains the contribution (video)

•  Biography of Oliver Hart from the ECGI Website

•  Biography of Bengt Holmström from the ECGI Website

•  Bengt Holmström "Have Firms Become Too Transparent?" (ECGRF, 2016)

•  Oliver Hart "The Responsibility of Business is to Pursue Shareholder Value: True or False? (GCGC, 2016)

•  Prize lecture: Bengt Holmström, Laureate in Economic Sciences 2016

•  Prize lecture: Oliver Hart, Laureate in Economic Sciences 2016