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BLOG: Sweden's Nobel Prize in Economics 2016

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BLOG: Sweden's Nobel Prize in Economics 2016
Royal Swedish Academy of Sciences secretary Göran K. Hansson announcing the winner of the 2016 Economics Prize. Photo: Stina Stjernkvist/TT
10:30 CEST+02:00
The Local reported live from Stockholm as Oliver Hart and Bengt Holmström won the 2016 Nobel Prize in Economics.

13:40 That's a wrap!

That concludes our live Nobel Prize coverage for today, but more background on winners Hart and Holmström, as well as detailed analysis of their work can be found here. Our editor Emma Löfgren and reporter Lee Roden will be back on Thursday for coverage of the final prize of the year, the Nobel Prize in Literature. Thanks for reading the blog!

13:20 Theory is cool

More from Nobel Committee member Persson:

"All research is interesting. These two are both pure theoriticians, and I think theory is pretty cool. Of course that's just my personal preference, there are others who think it should be possible to directly apply research to reality, but in this case, they put the spotlight on theory where you can also see the applications". 

12:45 Atlantic brain drain?

The Local's Emma Löfgren has just spoken to Nobel judge Mats Persson, who along with being a member of the Nobel Committee is also Professor at the Institute for International Economic Studies at Stockholm University. 

“Both of these [winners] are Europeans, and they both work in the US. That's a question to ask our politicians. Why is it that the world's foremost scientists, whether they're from Finland or the UK, leave Europe and move to the US?" asked Persson.


Mats Persson. Photo: Emma Löfgren

12:30 Further reading

Any economics lovers out there can read some detailed background information on Holmström and Hart's work in contract theory on the Nobel Prize website here. Not for the faint hearted. 

12:15 Nobel Prize-winning thoughts

Bengt Holmström is being interviewed in both Swedish and English by the journalists in attendance.

“The thing about contract theory is that whatever contract you write you always have to think about the other parties involved as well," he says. "It has to be looked at more broadly than from the point of view of the shareholder. You have to think about all the other parties that are involved.”

As for the answer to the big question everyone wants to ask: Holmström has yet to think about what he will do with his half of the eight million kronor ($924,000) prize money which will be shared between him and Hart. 

12:05 Who are the winners?

We mentioned earlier that only two Swedes have won a Nobel Prize in Economics, and that remains true, but Helsinki-born Finn Bengt Holmström is a Swedish speaker. He currently works at the Massachusets Institute of Technology in the US.

Fellow 2016 winner Oliver Hart meanwhile is a London-born Brit who works in the same state, at Harvard University in Cambridge, Massachusets, USA.   

12:00 The explanation

It's now time for experts from the Nobel Committee to try and break down the prize-winning work for us mere mortals.

The new theoretical tools created by Hart and Holmström are valuable to understanding real-life contracts and institutions, as well as potential pitfalls in contract design, Per Strömberg of the Nobel Committee explains.

This year's laureates developed a framework for analyzing the many issues in contractual design, with examples like performance-based pay for executives, deductibles and co-pays in insurance, and the privatization of public-sector activities highlighted.

Hart and Holmström launched contract theory as a fertile field of research, and have gone on to explore its many applications. The Nobel Committee labeled their work as “laying an intellectual foundation for designing policies and institutions in many areas”.  

11:50 The work...

Hart and Holmström win this year's Nobel Prize in Economics for their work in contract theory, we are told. 

We're now getting a breakdown of the research:

11:45 And the winner is...

11:40 We told you they're timely

Just under five minutes until we find out the winner of the 2016 Nobel Prize in Economics. 

11:35 The face behind the Nobel diplomas

Our editor Emma Löfgren has spoken to Ullastina Larsson, the Landskrona-based artist who makes the official Nobel diploma that will be handed to today's winner at the awards ceremony in December.

This is her third year – last year she painted the diplomas for the Physics Prize and was invited to the grand Nobel Banquet at Stockholm City Hall. “It's quite a thing to be part of,” she tells The Local. "I'm very honoured."

And no, she doesn't know who the winner will be either.


Ullastina Larsson. Photo: Emma Löfgren

11:30 Watch the announcement live

As a nice complement to our detailed coverage, the 2016 Nobel Prize in Economics announcement can be streamed live using the player below. The Swedes tend to be pretty punctual, so keep your eyes peeled in the minutes before 11:45.

 11:20 The favourites

There's no shortage of speculation over who may claim today's prize, but it's rarely an easy one to call. Swedish economics website Ekonomistas has put together a list of around 40 favourites, with American economist Paul Romer topping the list.

The Stern School of Economics at New York University even went as far as jumping the gun last week by sending out a press release congratulating Romer, one of their professors, on the prize win. They later apologized and called it a mistake, but do they know something we don't?

We could find out in 25 minutes, with the Nobel Prize in Economics due to be announced at 11:45 at the earliest.


Romer pictured in 2010. Photo: Virgina Mayo/AP/TT

11:10 The all important venue

The venue for the Economics Prize announcement, like the Physics and Chemistry announcements last week, is the Royal Swedish Academy of Sciences. It's a pretty glamorous old building:

11:00 A Swedish prize, but few Swedes

We mentioned earlier that the majority of the winners of the Nobel Prize in Economics are from the US, but it's also worth noting that the nation behind the prize has performed pretty poorly in the area.

The last Swede to be made a Nobel Laureate in the economics field was Bertil Ohlin way back in 1977, and the only other person from the nation to manage the same is Gunnar Myrdal in 1974. Could a third join them today? Find out in 45 minutes.


Gunnar Myrdal pictured in 1974. Photo: Marty Lederhandler/AP/TT

10.55 A look back to last year

For anyone who missed last year's prize, UK-born Angus Deaton won the Nobel Prize in Economics for his research on poverty, welfare and consumption. He was born in Edinburgh, Scotland, before later moving to the US in the 1980s.

By the way, the official title of today's prize is the Swedish Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. Just rolls off the tongue, doesn't it?

10:40 A Nobel Prize with a difference

 

Did you know that today's award is the only Nobel Prize not included in Alfred Nobel's last will and testament?

The Nobel Prize in Economics was established in 1968 to celebrate the Swedish central bank's 300th birthday, and after almost 50 years of existence it has gained a prestige worthy of its namesakes.

Americans have dominated the prize, with 55 of the 76 laureates holding US citizenship (including those with dual nationalities).

While we wait for the big announcement, here's The Local's Emma Löfgren en route to the venue with her own economical conundrum:

10:30 Nobel Prize in Economics 2016

Good morning and welcome to the penultimate day of Sweden's Nobel Prize announcement season, and it's one for the numbers people out there as economics is the topic of the day. We'll do our best to try and make sense of it all so you don't have to.

Our editor Emma Löfgren is on her way to the Economics Prize announcement at the Royal Swedish Academy of Sciences and she'll be live Tweeting on the ground in the build-up to the announcement at 11:45, while reporter Lee Roden is managing this live blog.

For anyone who missed last week's excitement, The Local covered the Physiology or Medicine, PhysicsChemistry and Peace #NobelPrize announcements in detail – including handy explanations of what it's all about from experts in the fields.  

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