The Nobel Prize Committee has announced the Prize in Economic Sciences in Memory of Alfred Nobel 2016.

The Royal Swedish Academy of Sciences has decided to award the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2016 to

Oliver Hart
Harvard University, Cambridge, MA, USA

and

Bengt Holmström
Massachusetts Institute of Technology, Cambridge, MA, USA

“for their contributions to contract theory”

I’ll excerpt just a little about their statement about one of the recipients, Bengt Holmström.

In the late 1970s, Bengt Holmström demonstrated how a principal (e.g., a company’s shareholders) should design an optimal contract for an agent (the company’s CEO), whose action is partly unobserved by the principal. Holmström’s informativeness principle stated precisely how this contract should link the agent’s pay to performance-relevant information.

Given the sorry state of affairs of the idea of pay for performance in the major robber corporations of this country, do you suppose that the Nobel Prize in Economics has gone to another pair of dud economists? There seems to be a pattern of awards for the committee.

What exaclty is The Riksbank for which the prize is named?

The Riksbank is Sweden’s central bank and an authority under the Riksdag, the Swedish parliament. The Riksbank is responsible for monetary policy with the objective to maintain price stability. The bank has also been given the task to promote a safe and efficient payment system.

Does this give you more, or does it give you less faith in the motives behind the reward?