The Questionable Value of the Nobel Laureate

BBC Business Presenter Peter Day, to whom I listen semi-regularly through my BBC World Service feed, has an interesting piece on the BBC New Web site.  It involves a convening of Nobel laureates in Lindau, an old Bavarian town, which is an island on Lake Constance.  Day provides the following context for this gathering:

In 1951, a distinguished local Count took up the bright idea of two local doctors for an international conference where Nobel Prize winners in various disciplines could lecture and interact with the best and the brightest under-30s in their fields from all over the world.

This year, as might be expected, economics was on everyone’s mind.  The funny thing is that in 1951 there was no Nobel Prize in economics.  Alfred Nobel had not included this in his areas worthy of his award.  The Nobel Prize in Economics was actually created by the Swedish Central Bank in 1968 in celebration of the Bank’s 300th anniversary.  Ever since then it has been controversial.

One of the most articulate sources of controversy was himself a Nobel Laureate in Economics, Friedrich Hayek.  He initiated the controversy in his acceptance speech, quoted in part by Day as follows:

The Nobel Prize confers on an individual an authority which in economics no man ought to possess.

This does not matter in the natural sciences. Here the influence exercised by an individual is chiefly an influence on his fellow experts; and they will soon cut him down to size if he exceeds his competence.

But the influence of the economist that mainly matters is an influence over laymen: politicians, journalists, civil servants and the public generally.

Hayek might have added (and may have done so) that the most important legacy of any natural scientist is the body of data (s)he collects.  Those data may be subject to different interpretations by later generations of scientists;  but the “hard value” of each datum will still stand.

As Hayek frequently observed, the complexity of economics is so great that even the reliable gathering of data can be called into question.  What does that say about the prospects for interpretation?  Look at Ben Bernanke.  He wrote one of the most authoritative analyses of the Great Depression, a model of scholarship involving both the collection and interpretation of evidence.  What does that get him in current conditions?  At the rate things are going, the sale of a used copy of his book might pay for a trip on the Metro in Washington.

The corollary of Hayek’s complexity claim is that even the best economists can rarely do more than hypothesize.  Before hypotheses are subjected to rigorous testing, they are good for nothing other than opinions.  Hayek’s point is that the authority conferred by the Nobel Prize provides a bully pulpit for opinions, regardless of whether they have been warranted (or, as is so often the case in complex systems, can be warranted).

The current gathering in Lindau reminds me of Colin Quinn’s joke about Davos.  Every year all the leading economists of the world gather to meet in Davos.  Between sessions they wander through the streets of Davos;  and, as they look around, they conclude that the world is in pretty good shape.  Isn’t is about time that all those economic authorities have one of their meetings in Haiti?