Freakonomics Radio
Hosted by Stephen J. Dubner
The process is famously secretive (and conducted in Swedish!) but we pry the lid off at least a little bit.
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Hey, guess who just won a Nobel Prize?
We'll talk about that in a minute, but presumably, the answer is not you. But that's OK, because you can still win something and, at the same time, give back a little to your favorite podcast. As you may know, Freakonomics Radio is produced by WNYC, a public radio station in New York. As you also may know, public radio stations are funded by listener donations. So please make a donation to WNYC, and you'll be automatically entered to win our prize, a trip to New York to spend the day here at our studios and have lunch with me and the Freakonomics Radio crew. You don't even have to donate to be entered in the contest, but of course, we hope you will. Just go to Freakonomics.com, hit the Donate button.
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The sixth and final Nobel Prize of this year was just awarded. They saved the best for last, of course. Economics.
The Royal Swedish Academy of Sciences has decided to award the Sveriges Riksbank Prize in Economic Sciences in memory of Alfred Nobel to Angus Deaton for his analysis of consumption, poverty, and welfare.
Let's put aside for a moment that the Nobel in economics is not a real, original Nobel Prize. We'll get into that later. Let's start by congratulating Angus Deaton, a Scottish-born scholar who's been at Princeton for many years. He's best known for bringing an empirical zeal to the study of how individual people spend, save, invest, and so on, and how those choices are connected to poverty and wealth. "By linking detailed individual choices and aggregate outcomes," the Nobel Committee declared, "his research has helped transform the fields of microeconomics, macroeconomics, and development economics." Within the economics profession, Deaton is widely revered.
The award surprised few and delighted many.
So, that's great news for Angus Deaton. But what about the rest of us, who haven't yet won our Nobel? How are we supposed to get hold of one? I'm glad you asked that question, because today's episode is called "How to Win a Nobel Prize."
From WNYC, this is Freakonomics Radio, the podcast that explores the hidden side of everything. Here's your host, Stephen Dubner.
Alfred Nobel, born in Stockholm in 1833, was a chemist, an engineer, an inventor, and an entrepreneur. He held more than 350 patents, many of them concerning weaponry and explosives, which, in a world often at war, were always in demand. And that's how Nobel made much of his fortune. One popular story, perhaps apocryphal, says that in 1888, when his brother Ludwig died in France, the newspapers there mistakenly reported that Alfred Nobel had died. As the story goes, one obituary was headlined "Le merchant de la mort est mort." "The Merchant of Death Is Dead."
Having been able to read his own obituary, some historians have speculated, Nobel was inspired to establish an award that might lead to his being remembered differently. Whatever his motivation, when Alfred Nobel died in 1896, childless, he left a will demanding that his estate be used to fund annual prizes to people who have, quote, "conferred the greatest benefit on mankind." There would be prizes in five categories: literature, peace, physics, chemistry, and in medicine or physiology. The Nobel Prize has, of course, become one of the most famous and well-regarded prizes in the world, with winners to match. Among the Peace Prize winners are Theodore Roosevelt, Martin Luther King Jr., and Mother
Teresa. In literature, Hemingway, Shaw, Camus. In the sciences, Albert Einstein, Sir Alexander Fleming, Pierre and Marie Curie. And in economics... Wait a minute. Who said anything about a Nobel Prize in economics?
The economics prize in the memory of Alfred Nobel is not one of the original Nobel Prizes that Alfred Nobel put in his will.
We have a very special guest today on the program. His name is Per Stromberg.
I'm a professor of finance at the Stockholm School of Economics, and I'm also one of the members in the prize committee for the Prize in Economics in the memory of Alfred Nobel.
Which means that he can tell us everything there is to know about how to win a Nobel Prize in economics, right?
So I'm actually not allowed to talk so much about what happens.
Well, we'll see about that, Per. Let's start with the basics. The economics prize was established by the Swedish Central Bank in 1968, nearly seven decades after the original prizes.
When they created it, they wanted it to be a prize in the Nobel family, if you will, and should basically follow the same principles, the same procedures, the same amount of rigor as the other Nobel prizes in chemistry and physics and so forth.
Because it is not one of the original Nobel prizes and was created many years later, there are always those people who consider it therefore not a, quote, "official Nobel prize." It's technically called the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel. So whenever anybody writes so-and-so won the Nobel Prize in Economics, there's always one or two people out there who say, "Wow, it's not really a Nobel Prize." Can you just address that head-on for a moment? Should we care that it's not one of the official original prizes?
You know, I think pretty much everyone would agree that this is the most prestigious prize there is worldwide in economics and probably the most prestigious prize we have in social sciences more broadly in the world. And, you know, part of the respect that this prize carries with it has to do with the fact that we are part of the Nobel family. So, you know, I think that the reason why the Nobel, if we call it the Nobel in Economics, is the most prestigious prize is not because we pay the most money, because there are other prizes around the world that are richer in dollar terms, but I think it's because of the rigor in the selection process that we apply.
Alfred Nobel's will designated which institutions would be responsible for conferring which prizes. The prize in medicine or physiology would be chosen by the Karolinska Institutet, a prestigious medical university near Stockholm. The literature prize would come from the Swedish Academy. The Nobel Peace Prize is awarded by a five-person committee that is elected by the Norwegian Parliament. It's the only Nobel Prize that does not originate in Sweden. Now, why is that? Even the Nobel Prize Committee doesn't know for certain why Alfred Nobel wanted it that way. One reason may have been that Sweden had a deeper militaristic tradition than Norway, which made Norway the more natural place to deploy a Peace Prize. The Nobel Prizes
in Chemistry and Physics were to be conferred by the Royal Swedish Academy of Sciences, which would also become the decider of the Economics Prize.
We are closest to the prizes that are in Physics and Chemistry, which are the two other prizes that are given out by the Royal Swedish Academy of Sciences. It was modeled on those prizes and we follow the same type of procedures.
And talk for just a minute, a little bit more about the creation of the Prize in Economics. Who was behind it? What was the impetus for the origin of that prize in 1969?
Basically, it was a joint initiative by the Central Bank at the time and the governor of the Central Bank. But there were obviously a group of economists at the time that felt that economics was becoming an important and rigorous topic and was sort of worthy of this type of prize.
Now, it doesn't surprise me that economists and the economics fraternity would want to have a prize that was part of the Nobel family and institution. Was there reluctance by the Nobel family or institution to accept economics? And perhaps it was proposed years before 1969. Was there resistance that took a while to overcome?
So I don't know whether it was proposed earlier and there was resistance, but I think it's fair to say that there are still some scientists and researchers and other professions that maybe kind of looked down on economics in general and maybe social sciences even, not feeling that that's a real science. But by this time, I think the vast majority of people involved in the Royal Academy of Sciences are proud and in favor of this prize.
I could imagine that if I'm a serious academic, psychology researcher, or sociology researcher, or anthropologist or whatnot, even though you do occasionally cross over borders, I could imagine- And feeling very left out, you know. Physics, I understand. Chemistry, I understand. We're dealing hard sciences. But once we get into the social sciences, either why don't we have, why don't you have more, like for psychology? Or why don't you have a prize for social sciences instead of just economics?
I think it's a good point you're making. I mean, I want to make clear, though, that the prize isn't what we call economic sciences. So maybe I'm playing with words here, but economic sciences formally, you know, the way we, at least in our interpretation, encompasses basically all social sciences to the extent that they are dealing with economic issues. So in principle, that means that we could give prizes and have given prizes more in political science, sociology, psychology, history, and so on, you know, as far as the subject matter sort of pertains to to economics. But that said, I guess economics is sort of a somewhat imperialistic discipline. And we have, we have become the strongest of the social sciences.
So I guess it was natural that the prize started there.
It may be true, as Stromberg says, that the prize started in economics because it has become the strongest of the social sciences. But it's worth asking, how much did the Nobel Prize help economics become the so-called strongest of the social sciences? Just imagine if sociology or political science had been granted a Nobel Prize way back in 1968, maybe they'd be the strongest. As for Stromberg's point about how imperialistic economics has become, that's harder to argue with. On this program alone, we've heard about economics being used to make movies more suspenseful. We view the construction of suspense and surprise as basically optimally economizing
on a scarce resource. To change our eating habits.
If he says he's gonna go on a diet next week, he goes on a diet next week.
Even how to modernize organ transplantation.
So, Grandpa, tell me again, you used to cut the organ out of a dead person and sew it into a sick person, and that was modern medicine?
Those voices belong to Jeff Ely on suspense, Richard Thaler on diet, and Al Roth on organ transplantation. Al Roth, in fact, won a Nobel Prize for his work. Richard Thaler may get one someday for his help creating behavioral economics. But of course, no one can say for sure. That will be decided by people like Per Stromberg. He is one of six primary members of the Economics Prize Committee. There are also four associate members who are consulted for their expertise. Committee members are elected for a three-year term and can serve up to three terms.
Now, the committee turns out to be only Swedish-speaking people, which may be a little bit bizarre for a prize of this importance. But that's sort of the way it's been established. That's the way the other prizes work. And all the minutes and discussions and so on are in Swedish. So I guess that's sort of tough luck. But currently, we have one Norwegian who works in Sweden and speaks Swedish in the committee, Tor Elingsen, who happens to be the chair, actually, of the committee.
How did you get on the committee, Per?
I was asked. So there's a, what do you call it? Nominating committee that is appointed by the Royal Academy of Sciences. And they come up with proposals. And if the academy thinks it's a good idea, they ask that person. So I don't know how heated the debate was before I was asked.
Nobel Prize committee members don't do a lot of media interviews. And the particulars of the selection process are intended to be kept secret. It's all sealed for 50 years. Stromberg made it clear repeatedly that in our conversations, certain lines could not be crossed.
Yeah, so I'm getting now close to things that are bordering the confidentiality I'm under, unfortunately. I don't want to delve into, I'm bordering dangerous territory here. So maybe I'm going to disappoint you here. But all the deliberations that take place in the voting and the discussions and so on are also confidential. So I'm actually not allowed to talk so much about what happens.
Because the economics prize is relatively young, we haven't passed the 50-year secrecy limit on even its earliest winners. But we can share some details about other prizes. A few years ago, it was revealed that J. R. R. Tolkien was nominated for the Literature Prize by his friend C. S. Lewis, but one Nobel jury member thought Tolkien's writing had not, quote, "measured up to storytelling of the highest quality." We've learned that John Steinbeck, who did win the Literature Prize in 1962, was nominated 11 times before winning, going all the way back to 1943. When it comes to the Nobel Peace Prize, things tend to get really political. Mahatma Gandhi never won the prize, but as we learned after the 50-year limit passed, he was nominated 12 times.
Some have speculated that the Norwegian juries of that era were loyal to Great Britain and apparently ruled against Gandhi because he implicitly represented a critique of British colonialism. Others have said the Nobel Committee didn't want to increase Hindu-Muslim friction. Just this year, the former secretary of the Norwegian Nobel Committee, Gere Lundestad, published a book called The Peace Secretary. The current committee says that Lundestad has broken Nobel confidentiality rules on several recent prizes. In the book, Lundestad accused a former Peace Prize committee member, who also happened to be the former Norwegian prime minister, of being, quote, "disorganized," having, quote, "surprising holes in his knowledge," and for letting journalists know ahead of time
who would win. Lundestad also gave some insight into selection politics. One committee member, he said, was dead set against Al Gore receiving the prize for his environmental campaigning. One potential winner, the weapons inspector Hans Blix, was passed over on the grounds that it might upset the American government, according to Lundestad.
As for the Nobel Prize in Economics, well, despite the obvious limitations, we will give it our best shot to learn how the selection process works. The job of Per Stromberg's committee is to propose winners to the Royal Swedish Academy of Sciences, which has the ultimate vote. The academy has 615 members. A majority vote is needed to declare a winner. For the prize that is awarded each October, the process begins the previous September. Nomination forms are sent out to around 3,000 people, including academy members, as well as eminent university professors and former Nobel laureates.
So there's a list of, a secret list of people. But prominent researchers in economics and other social sciences around the world are asked to nominate candidates. And those nominations are due sometime in January.
Some of these nominators also send Stromberg's committee brief reports in support of certain candidates. The committee also solicits its own reports. Stromberg says this is one of the most important parts of their work.
Our goal is to keep on scanning the field of economic sciences, broadly speaking. So we have our secret book, basically, where we kind of follow up. Okay, this is what people currently view industrial organization, and this is the current state of labor economics and so on. And to keep this up to date, and we continuously send out these reports, basically scanning the field. So these are super helpful, and they're sent to really top people in these fields who put a lot of work into these reports. So this is probably our most important input.
I see. And those reports remain confidential for 50 years as well, correct?
Exactly, exactly.
So I did want to ask you about one particular. So Richard Thaler tells me that he was asked many years ago to write a report. He was commissioned to write a report on the work of Daniel Kahneman and Amos Tversky.
I'm not sure he was allowed to say that, but fine.
Oh, okay. Well, that's his problem, not mine.
It's a friend of mine. That's fine.
So, okay, let's pretend that it was okay for him to have told me that. Now, what's interesting is that Thaler at the time was much younger than those guys. So, the committee was going to people who'd been influenced by the people, not people who were the mentors. But what was interesting to me is this was a report that was commissioned in, I believe, the mid 1990s. And then, as it turns out, Amos Tversky tragically died very young. But Danny Kahneman did go on to win the Nobel, even though he's a psychologist by training and a groundbreaking one. So, I'm curious, how typical would that recommending report be?
A, written by someone who is influenced by the people as opposed to a mentor of? And B, that far in advance of what turned out to be a winning prize?
So, if I start with the first question, most of our reports, I would say, we ask for a view on the field from someone who's an expert in the field. But occasionally, and especially when your, you know, a name is converging in a particular field, like Daniel Kahneman, you know, came up, must have come. I mean, it was before my time, but, you know, I presume he came up a lot as a proposed prize winner in a lot of these reports. Then we can solicit, you know, personal reports on individuals as we sort of hone in on the names. Now, to be honest, we would typically try to get both, you know, cheerleaders as well as critics to get the balanced picture. So, it doesn't surprise me that if Dick wrote the report.
But, you know, it probably was not the only one.
And I guess that kind of report might have been a little unusual in that this was a field or a subfield that was new, right? Behavioral economics.
Yeah, exactly.
It's not like you guys don't know what finance is or econometrics is. Right. And it's so interesting to me that you would commission these reports kind of prospectively to learn, to educate yourselves about what are the fields that are developing. Can you give us a hint about what sort of fields or subfields within economics? Or maybe they're within psychology and sociology and so on that your committee is particularly interested in these days?
I wouldn't be, I can't tell you that. I basically view it, it's not so much what we're interested in as what the profession tells us they're interested in. So in terms of the reports, you know, on these fields, we basically try to just have a, throw a pretty wide net, okay, across economic sciences and neighboring fields. But the, as I come back to the nominations, nominations are indeed very informative about, you know, what the profession thinks. And nominations are also important because we cannot give a prize to someone who has not been nominated. So that's actually a hard rule.
But the way I view our job is basically as aggregating the voice of the profession. You know, it's not really our views on what we think is hot and what's not, but we really try to kind of get a sense of, okay, this is, you know, the top researchers in these fields, this is what they believe.
So the committee can't give the prize to someone who hasn't been nominated. They also can't give the prize to someone who's dead. The Nobel Prize is not awarded posthumously. That's why Amos Tversky, who almost certainly would have shared the prize with his longtime collaborator Danny Kahneman, didn't win the prize. And maybe Gandhi, who was assassinated in 1948, would have won a Nobel if he had outlived the various frictions surrounding his nomination. It was June when Per Stromberg and I spoke, which meant the awarding of the Nobel Prize to Angus Deaton was still four months away. Over the preceding six months, Stromberg and the rest of the committee had been culling the nominations and research reports they received from around the world.
Early in this process, they created a long list of potential prize ideas.
And that list typically involves, let's say, a dozen or so potential prizes. And then we divide these 12 prize ideas, let's call them that, among ourselves in the committee and start writing basically the scientific materials and the proposal to see whether it sort of holds up.
Mind that although the prize is awarded to individuals, often more than one individual per year, it's usually the work itself, the breakthrough idea that's actually being rewarded. That's what Stromberg means by prize ideas.
And then we have meet probably every four weeks throughout the spring. And then we vote on which of these 12 proposals should remain in the game until the next meeting and which ones are out, a little bit like a reality show.
You know, now that you mention it, Per, this would make such a good reality TV show. But I'm guessing you're not willing to share, to let the cameras in these rooms, are you?
Well, maybe we can tape it and then release it in 50 years if reality shows are still hot. But no, kidding aside, so that's sort of how it works. And I think by now we have what we think is the best prize for this year. But we obviously, since we've been working on 12 prizes throughout the spring, we obviously have, you know, Plan B if this is not popular.
The committee's idea needs to be popular with the Academy, which, if you examine previous Nobel Prizes in economics, seems to mean being at least a bit in sync with a Scandinavian view of the world. Measured, a bit technocratic maybe, also somewhat humanistic. Last year, the French economist Jean Turel won for his, quote, "analysis of market power and regulation." In 2009, the American political scientist Eleanor Ostrom, the first and thus far only female economics laureate, shared the prize with Oliver Williamson. Ostrom was cited for her, quote, "analysis of economic governance, especially the commons." And while the committee insists that the prize is given for a body
of work and not necessarily for work that intersects with world events, several of the recent prizes, in addition to Turel's and Ostrom's, seem to speak to the causes and consequences of the Great Recession. The 2013 prize to Eugene Fama, Lars Peter Hansen, and Robert Shiller for their, quote, "empirical analysis of asset prices." The 2011 prize to Thomas Sargent and Christopher Sims for their, quote, "empirical research on cause and effect in the macroeconomy." As Per Stromberg noted, while his committee steers the choice, it's the Royal Swedish Academy of Sciences that ultimately has the power to give the prize.
The day we announce the economics prize in the Memory of Nobel, that is the day when the Academy votes. So it's basically, we present the proposal and they vote. And if they vote for our proposal, that's going to be the thing that's announced that day. Now, obviously, we don't take them by surprise at that point. So there's a whole process before that. And actually, one of the important steps is that there's a chapter of the Royal Academy of Sciences, which is the chapter for social sciences. So we first present our proposal to the chapter for social sciences. They vote on whether they want to support this proposal or not. That happens in September.
I see.
And if things go badly, if there's resistance to a prize or something like that, we should know that and have some leeway or some time before the October vote.
Has there been such a case in recent memory, even long memory, where the nominating committee put forward a proposal and the Academy of Sciences committee said, you know, we don't really like the options you've given us. Go back to the drawing board.
Yeah, so I'm getting now close to things that are bordering the confidentiality I'm under, unfortunately.
That's the border we wish to cross, so go ahead and leave us across.
Exactly. Well, if you do another show in 50 years, we can make it. But, you know, let me put it this way, that there's usually interesting and constructive discussion when we propose these prizes.
Coming up on Freakonomics Radio, an interesting and constructive discussion with Steve Levitt, who knows more than a few Nobel laureates.
He said, if winning the Nobel Prize keeps me from playing golf in the morning, I'll consider it the worst thing that ever happened to me.
And if you want to hear from some past and perhaps future winners, check out the full archives of Freakonomics Radio. You can hear the aforementioned Danny Kahneman in the episodes called 100 Ways to Fight Obesity and How Biased Is Your Media? You can hear from Al Roth in Make Me a Match. Every one of our episodes is available for free in the iTunes Podcast Store, where you can also subscribe, or on Freakonomics.com.
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The Nobel Prize in Economics, technically the Bank of Sweden Prize in Economic Sciences in memory of Alfred Nobel, was just awarded to Angus Deaton. Not everyone loves this prize. It wasn't one of the original prizes designated in Alfred Nobel's will. Just the other day, one member of the Royal Swedish Academy of Sciences, which votes for the winner, argued it should be done away with as the study of economics leads to corruption. But at least among economists, the prize is pretty popular and comes with a cash award of roughly $1 million. So how do you get one of those babies for yourself? The first step is to become an economist, although occasionally a political scientist or psychologist will win the prize.
You then have to compile a body of research that a handful of Swedish gatekeepers consider world-class. You also better be patient. This is not a prize for young people.
We, by necessity, will have to see more evidence of the long-lasting impact before we can give the prize.
That's Per Stromberg, a member of the committee that awards the prize. He makes the point that although the prize is often given for research done while a winner was young, the prize comes only after the research has stood the test of time. Accordingly, the average age of an economics Nobel laureate is 67. But as noted earlier, you can't be so old as to be dead since the prize is not awarded posthumously. Steve Levitt, my Freakonomics friend and co-author, is an economist at the University of Chicago. He's seen quite a few of his colleagues win a Nobel.
Roger Meyerson and Jim Heckman and Lars Hansen would be a couple of the people who've won the Nobel Prize since I've known them.
And what kind of ideas do you believe are considered most valuable within the economics realm for winning the Nobel? How important or virtuous, let's say, do they need to be?
So in general, I'd say most of the people who've won the Nobel Prize have had ideas that have radically changed the way future economists were going to think about problems. Now, what's often funny, though, when they have to characterize what the idea is for, it's tricky for the news media to try to make sense of it. Often, the one-line blurb of why-- Someone wins a Nobel Prize will be something completely absurd. Like, he made it clear to other economists that when you don't have complete information, you sometimes make bad judgments. And so it's interesting, because ideas are hard to come by. And ideas are often so obvious, ex post, that when you summarize them in one sentence for the public, you wonder, how in the world could this guy have gotten a Nobel Prize for it?
But the details are often the hard part.
And how substantially, or let me just ask, how have you observed that winning the Nobel will change the economist's life and maybe the lives of those around him?
I really haven't seen the Nobel Prize change people's lives much at all. I think the best example would be my good friend Jean Fama. And Jean and I play golf almost every weekend in the morning. And when Jean won the Nobel Prize, he was there for our 7:00 AM golf tee time the next Saturday. And I said, Jean, I didn't expect to see you. And he said, if winning the Nobel Prize keeps me from playing golf in the morning, I'll consider it the worst thing that ever happened to me. And so for Jean, his goal was to change as little as possible.
I think for most of the people who win the Nobel Prize, by the time they win the Nobel Prize, they are so prominent and so well-equipped to do what they want to do, that they more or less just keep on doing exactly that. They just do it with a little swagger in their step and a little more excitement and a lot more bowing by the people who they're talking to.
And what do you know about the selection process? Do you, as an economist, choose to try to find out how it works? Do you remain wildly oblivious?
So I think almost no one on the planet knows less about the selection process for the Nobel Prize than I do. The only way that I have any idea that it's Nobel season is that there's a whole set of people in the profession of economics, a really large set of people, who think a lot about winning the Nobel Prize and who plan their calendars around winning the Nobel Prize. And the way I know it's Nobel season is that around Chicago, a lot of people tend to get haircuts in the few days leading up to the announcement of the prize. And so if I see all my colleagues with really short, well-maintained hair, I know that the prize must be somewhere right around the corner.
So, does the average would-be recipient have a sense that he or she will win the prize?
You know, it's hard to answer that humbly.
That's Stanford's Al Roth, who, along with Lloyd Shapley, won a Nobel in 2012 for the, quote, "theory of stable allocations and the practice of market design."
So, I knew that I was on the big list of people who, if I won a Nobel Prize, it wouldn't cause the Nobel Committee to be embarrassed. You know, the newspapers the next day would not say craziness in Stockholm. But, but there are many, many people in that category. So, indeed, we had, we were asleep. We were not waiting for a call. And it's an interesting call because one of the things they're concerned about, they have a lot of experience with this, is convincing you that it's not a prank. So, the person who first spoke to me said, you know, "Congratulations, you've won the Nobel Prize." And then he said, "And I'm here with six of my colleagues, and two of them know you, and they're going to talk to you now."
To persuade you that this is for real.
Right.
Either that or a very elaborate prank.
Exactly.
Angus Deaton, this year's winner, had a similar experience. Here he is at a press conference on the day he won.
So, Anne, my colleague and wife here, picked up the phone, and I think I picked it up almost at the same time, and there was a very Swedish voice from...
Which is almost enough, you know. Anne, who said, "I would like to speak to Professor Angus Deaton, who, there is a very important telephone call from him, for him, from Stockholm." So then I had a pretty good idea of what it was. And then they said some very nice things about me, which was very nice.
And then, they were very keen to make sure that I did not think it was a prank.
And I don't know whether this is common. I've never had a prank phone call telling me anything. And of course, as soon as they said that, I thought, oh, my God, maybe it is a prank.
Per Stromberg was one of the people on the other side of the line this year with Deaton and also a few years ago with Al Roth. As Stromberg recalled, once the Royal Swedish Academy of Sciences voted to give Roth the prize, the committee members got into a room and had some lunch.
And we sit down, the whole committee, plus the secretary of the Royal Academy, around the big table with a speakerphone and start calling. So there's a bit of a process in trying to find, you know, once we decide on these prizes, or the proposals at least, to dig up phone numbers, which might not always be so easy. And, you know, for sure, if you're on the West Coast, it's a nine-hour time difference. So we do this at noon sometime, and that could be in the middle of the night in California, obviously.
Now, Al told us that to convince him that it wasn't a prank, that you told him right off the bat, the committee told him that there were some people he knew in the room whose voices he could hear.
Oh, yeah, exactly, exactly. So typically, the committee is reasonably well-connected, so someone in the committee will have met the laureate and know the laureate a little bit beforehand. But if we don't, then we actually usually invite another economist that knows the laureate to be in there and make sure, you know, chat a bit and to make sure it's not a prank call.
Now, when he told me that, I had to think, that would be one of the cruelest pranks you could ever play on anyone.
Yeah, one of the, yeah, exactly.
Do you think it's ever happened?
I haven't heard about it, but now you're giving people ideas.
Uh-oh, yeah, okay. And then, and describe what it's like. It must be a wonderful thing to be able to make that call.
It's one of the most gratifying moments of this whole process is to to really make this call and hear the reaction of the laureates and so on. It's quite amazing, actually.
And what's it feel like to have so much, I don't want to say power over someone's life, but winning a Nobel, it really changes the trajectory of your life. So can you just talk for a moment about what it feels like to have that kind of ability?
It carries a huge amount of responsibility, obviously. After having been in the committee for a few years, the thing that has impressed me the most is actually the process. You know, the, as I keep on repeating, but with the nominations, with the reports, with the work we do, it really makes the process very solid, which also, at the end of the day, I think everyone feels kind of comfortable with these prizes that we propose. So it doesn't feel like, I don't know if this makes any sense to you, but it doesn't feel like you have so much power at the end of the day because the process is so thorough.
Because the process is really, the process is really the power.
So I've talked to some economists to detect, or at least believe that they detect a sort of pattern. You know, there's a finance prize every decade or so, the same for econometrics. You throw in a game theory prize once in a while. Even behavioral economics has now entered the mix. So how much emphasis does the committee put on not only rewarding fields that are newer or have coalesced by now, but in also rotating it to keep things interesting and maybe, you know, for something as simple as making a splash in the wider world?
I think, at least in part, this happens kind of automatically due to the process we follow. Because, you know, when we start out with a prize, it's typically, you know, we have a topic. Let's take the finance prize as an example. Okay, so we had been investigating asset pricing and empirical work in asset pricing for quite some time, because that had emerged as, you know, when people doing reports in finance that had come up as, you know, the most prize-worthy thing. So that basically means that once we've given the prize in, you know, to Farma Schiller Hansen, there are not a lot of candidates, you know, natural prizes waiting right behind them, right? Because we've kind of, okay. So this was the important, you know, what people believed was the most important contribution in this field, right?
So then it's very natural that you move on for the next year to a different field. So I think it's, part of it is that. Uh, but then, you know, I, I think that probably, I don't know how, how kind of deliberate it is, but I think also the way things just turn out is that if you've been working very hard on a particular area uh for a year, you feel a little bit exhausted with that particular area, uh, which means that, that, that's also kind of a, uh, I, I think gives rise to a natural cycle. But it's not that we follow any explicit rules.
When a subfield or an area of economics gets more popular, so behavioral economics, which I've been fascinated by for, for a lot of years and therefore was thrilled to see Danny Kahneman win the Nobel in economics for it. Uh, it's really gained momentum in the public sphere and in, in the governmental sphere. And there are books, you know, Thaler has published a book, Misbehaving on it. Um, Kahneman's book, Thinking Fast and Slow, really opened a lot of eyes around the world. And I'm curious, does popularization tend to work in favor of a field that the Nobel Committee may be considering or against it?
I think it's irrelevant if you think about popularization, you know, outside of academic circles, because it is very much about academic contributions and the view of the academic community. So in some sense, it, it really is not a decision variable that we, we take much, much note on.
The John Bates Clark Medal, which is the, a very prestigious American academic economics award, uh, used to be every two years awarded, now it's every one year, uh, but still it's considered a sort of a junior Nobel. Uh, have you ever looked at the, the correlation between Clark Medal winners and future Nobel winners? Is it as strong as we think?
Well, actually, you don't have to ask me. You can just calculate the correlation.
But it is, and you would find that it's significant.
Well, the only thing we don't know is whether recent winners, especially as it's expanded to annually, stand as good a chance of winning a Nobel as the past winners who won the Clark, right?
Let me answer a slightly different question, which is, you know, I think economics and social sciences in general are maybe, they're a little bit more complex than, say, some of the natural sciences. Because it takes some time before you know how fundamental a contribution is. There's like a longer lag between that a particular research study is done until you actually know whether this was an important finding with long-lasting impact. And arguably, I think the John Bates Clark Medal will naturally have a shorter lag because you give it to good, you know, prominent economists below the age of 40, right?
In 2003, Steve Levitt was awarded the John Bates Clark Medal, which is conferred by the American Economics Association. He was cited for his, quote, "pioneering empirical research" and for confronting important questions in the economics of crime and political economy. All right, Levitt, now if I were to ask the average, high-quality economist, someone perhaps who's already won the John Bates Clark Medal, someone like you perhaps, what he thinks of his prospects or her prospects to win the Nobel Prize in Economics? What does that person, you for instance, say?
So almost any economist you talk to will say they think their own likelihood of winning the Nobel Prize is really low. But I think that's not what most people really think about their chances. And I remember one person who won the Nobel Prize, and he, like all the other winners, acted so surprised and couldn't believe he had won the Nobel Prize. And at the press conference, his daughter was invited up onto the stage after he had just said, well, you know, what an amazing honor this was, and he couldn't believe it happened to him. He had never expected it. And they asked the daughter, "Well, what do you think of your father winning the Nobel Prize?" And she said, "Well, thank God he finally won the Nobel Prize. He complains bitterly every single year that he doesn't win it, and finally we won't have to have that conversation at the dinner table."
The Nobel is among the highest-profile prizes in the world. The Academy Awards, the Oscars, are also a pretty big deal. In that case, movie studios and producers often lobby openly for the prize. I was curious if the same thing happens with the Nobel. Per Stromberg again.
So I must say, and maybe this was maybe a little bit surprising to me, but there's surprisingly little explicit lobbying to us in the committee. Maybe it's because we are kind of nobodies and no one knows. Maybe that helps.
All right. So, last question for you, Per. Let's say that I want to win your prize. Okay? So I'm not, personally, I'm not an economist, but I do collaborate with one, Steve Levitt, who won the Clark Medal at University of Chicago. And we've written a bunch of books about economics and we make, you know, look, we're making this weekly, we're bringing economics to the whole world via this podcast. So what do I have to do to get your prize? Can you help me out with that?
Well, keep on your good work. Doing your good work. And then we'll see if you have enough long-lasting impact on the field and the outside world to merit the prize.
Okay. Better hang up now and get back to my work.
On next week's Freakonomics Radio, let's say a pharmacist has a headache. What do you think she or he will choose? The name-brand Bayer aspirin or the much-cheaper store brand?
They, by and large, take the store brand. So in the context of headache remedies, about 92% of the headache remedies pharmacists buy are store brand.
The rest of us spend up to $2 billion extra each year just on brand-name headache medicine. Is this a triumph of marketing or something more? When is the time to go generic? College education, maybe? That's next time on Freakonomics Radio.
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Hey, it's Kelly Ripa, and if you don't know, I have a podcast where I get to say whatever I want. Hold on, let me get a shovel and a body bag. I envision doing a podcast with the conversations that happen in my dressing room, off camera, where people feel free to talk. No hair, no makeup. This is my kind of job. Only Kelly Ripa can ask me these questions. I'm flipping the script and saying what's really on my mind.
We're seeing a different side of you. It's a little bit more honest.
When the cameras go off, the real fun begins. Get my hair down over here. Hey! This is an off-camera podcast, so it doesn't even matter. It's unfiltered conversations and unexpected confessions.
My mom, it says. Woody, I knew your dad.
Stop the press. I would like to volunteer to administer any and all DNA tests.
Maybe that should be part of the show?
Let's talk off-camera with me, Kelly Ripa. You just put that in the universe. Listen and follow wherever you get your podcasts.
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