Thursday, October 6, 2011

Predicting the 2011 Nobel Laureate in Economic Science

" "This is the Oscars for nerds," says Paul Bracher, a chemist at the California Institute of Technology"

(Daniel Strain, Science, 21 September, 2011)

I swore I wouldn't do it, but in the end I couldn't stop myself! Everyone else is having their say about next Monday's award of the Economics Nobel Prize, so I couldn't sit on the sidelines any longer.

I know it's proper name is "The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel", but I'm going to be lax here. The big announcement will come at around 1:00p.m. CST on Monday 10th October this year. That's around 4 a.m. that day if you're on the West coast, like me, or 7a.m. in New York. If you're not the lucky one to get the wake-up call, then you can watch the announcement, live, here. I'll be joining you!

So, who will the recipient(s) be this year?

Everyone's been having their two cents' worth, of course. Steven Levitt of the Freakonomics blog was first off the grid, as far as I can tell, with a nice retrospective piece, way back in May. The crowd at Thomson Reuters have gone all pseudo-scientific on us, and used citation data to come up with the following short-list:

"Douglas W. Diamond
Merton H. Miller Distinguished Service Professor of Finance, Booth School of Business, University of Chicago, Chicago, IL USA

For his analysis of financial intermediation and monitoring

Anne O. Krueger
Professor of International Economics, Paul H. Nitze School of Advanced International Studies, Johns Hopkins University, Washington, DC USA
Gordon Tullock
Professor Emeritus of Law and Economics, George Mason University School of Law, Arlington, VA USA

For their description of rent-seeking behavior and its implications

Jerry A. Hausman
John and Jennie S. MacDonald Professor, Department of Economics, Massachusetts Institute of Technology, Cambridge, MA USA
Halbert L. White, Jr.Chancellor’s Associates Distinguished Professor of Economics, Department of Economics, University of California San Diego, La Jolla, CA USA
For their contributions to econometrics, specifically the Hausman specification test and the White standard errors test  "

The Harvard economists are back again with their Nobel Pool. The Wall Street Journal had its say this morning. Even the National Public Radio has come up with some amusing input from Dennis O'Toole that will at least please Greg Mankiew!

What could I possibly add to all of this?

Well, for one thing, I've been making forecasts of various sorts for long enough to know that it's a mug's game! In any case, there's more to the Nobel process than counting citations, and chewing on impact factors. We all know that it's highly political and the model probably has as much noise as signal.

I could note that over the years econometricians have fared reasonably well. We certainly got off to a great start when two of our founding fathers, Ragnar Frisch and Jan Tinbergen were the recipients of the first Economics Nobel Prize in 1969. The citation read: "for having developed and applied dynamic models for the analysis of economic processes".

Recent highlights include the recognition of Rob Engle and Clive Granger in 2003, of course. In Engle's case it was "for methods of analyzing economic time series with time-varying volatility (ARCH)"; and in Granger's it was "for methods of analyzing economic time series with common trends (cointegration)".

So, when we look at the names that are being thrown around, my econometric eyes pick up Jerry Hausman and Hal White, of course. In my mind there's no doubt that they'd be extremely worthy recipients. Without making predictions, and with the knowledge that my list will be unfairly short, let me just  put two other econometricians' names on the table. Just for the heck of it.

On one side of the Atlantic, you'd be hard-pressed not to single out Oxford's David Hendry. My citation would read something like: "For his outstanding contributions to our understanding of econometric methodology, our understanding of dynamic economic systems, and forecasting methods."

On the other side of the pond I can't go past fellow New Zealander, Peter Phillips (Yale). In this case, I'd say: "For his seminal contributions to the modelling of continuous-time economic systems, the analysis of simultaneous equations estimators, and the use of non-stationary economic time-series data."

This is way more fun than the Oscars!

© 2011, David E. Giles

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