Tuesday, October 5, 2010

Nobel Prize Prediction - 2010

Last year, I tried [and failed] to predict the winner for the Nobel Prize in Economics. I predicted John Taylor, who is most famous for his rule for approximating the short-term Fed funds rate, and Martin Weitzman, who is a luminary in environmental economics but his earlier work included studies of price vs. quantity controls and profit-sharing firms.
For reference, the Thomson-Reuters annual picks are out. I don't like them, because they are a particularly focused bet - the two halves of the Kiyotaki-Moore model represent two of the four picks. I bet that is unlikely that the University of Chicago's Freakonomics clan will receive another Nobel for Kevin Murphy's work. For reference, Gary Becker was the original Freakonomist, who pioneered the introduction of econometric techniques to other fields like sociology. He used them to study drug addiction, racial discrimination, and crime as well as more familiar economic topics like utility maximization.
OK, so my pick for this year is Robert Shiller from Yale University. Last year's pick kept a considerably safe distance from the financial crisis. I consider it a reasonably good bet that the Nobel committee won't strive so hard to keep away from macroeconomists who were right throughout the crisis. Besides the development of the famous Case-Shiller real estate indices and the dire warnings of the housing price bubble, his "pioneering research in the field of financial economics, relating to the dynamics of asset prices, such as fixed income, equities, and real estate, and their metrics. His contributions on risk sharing, financial market volatility, bubbles and crises, have received widespread attention among academics, practitioners and policy makers alike." (Wikipedia) His well-rounded and widely-received body of work is on par with past winners like Robert Lucas.
And if you haven't read his opus-extraordinaire, Irrational Exuberance, you should because it is fantastic. Also, his other book, Animal Spirits, is also quite good.
Considerable hat tip to Marginal Revolution for the inspiration and information that contributed to this post.

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