Home > Uncategorized > Key member of Swedish Academy of Sciences calls for immediate suspension of the “Nobel Prize for Economics”

Key member of Swedish Academy of Sciences calls for immediate suspension of the “Nobel Prize for Economics”

Bo Rothstein, an important member of the Royal Swedish Academy of Sciences, has today in Sweden’s most widely read newspaper called for an immediate declaration of a moratorium on the awarding of Sveriges Riksbank Prize for Economics in the name of Nobel and the Nobel Foundation.

Rothstein’s article argues that today with increasing success, economics as commonly taught in universities and endorsed by most winners of the economics prize promotes corruption in societies around the world.  Therefore he concludes that the Nobel Foundation’s awarding the economics prize is “in direct conflict with what Alfred Nobel decreed in his will.”

“I will,” writes Rothstein, “therefore now take the initiative in this matter.”

Below is a Google-translation of Rothstein’s article.  If someone can provide us with a better translation, we will post it.

The Prize in contravention of the spirit of Nobel’s will

Can contribute to increased corruption. Multiple independent research shows that those who study economics are more prone to corruption. And the behavior seems to be an effect of education. A price that risk contribute to increased corruption in the world is in conflict with the spirit of Nobel’s will, writes political science professor Bo Rothstein.   

Recent research has shown that corruption is a broader social problem than previously considered case. When comparing countries, finds research negative effects of corruption on almost every measure of human welfare such as infant mortality , economic prosperity , life expectancy, the number of children living in poverty , access to clean water , the number of women who die in childbirth , willingness to fix environmental problems and more. Corruption has also recently been shown to be an important explanation for both the civil war between the states.

Furthermore, the corruption also have strong links with more subjective measures such as the extent to which people consider themselves satisfied with their life, consider themselves to be happy and to what extent they believe they can generally rely on other people. Although measurements of the degree of corruption in various countries are associated with certain difficulties can well appreciate that more than seventy percent of the world population lives in countries with dysfunctional social institutions. This means that in itself is not lack of capital, skills or natural resources is the main problem but precisely corruption in public institutions.

There is of course no modern societies that are free of corruption, such a thing would be as utopian as a society free from crime. However, it is important to point out that widespread corruption is by no means something that only exists in developing countries. Several analyzes of, for example, Greece and Italy’s economic problems, pointing out precisely corruption as a root cause. There are also analyzes indicate that financial market collapse in 2008 can be explained in terms of corruption. As well as the level of crime, the degree of corruption among different communities. Societies that have comparatively low corruption usually most measures, to be countries in northwestern Europe as well as Australia, Canada and New Zealand. Compared with neighboring countries cope Botswana, Chile and Estonia well.

The causes of corruption are manifold, but a surprising result is that the population in countries with severe corruption is by no means internalize this behavior as part of their culture. On the contrary, they take in general strongly reject such behavior, and they also realize that corruption is difficult damaging their communities. The reason that they participate in this business is that they do not perceive that they have no real choice. The goods hardly be the only one in the village who do not pay the doctor under the table to get medical care for their children. It is probably not only useless but also dangerous to try to be the only honest police of a Mexican police force. Corruption is, in other words a so-called “frequency problem” in the sense that if one believes that the “all others” involved in this shady business so most either had to join or you see it as futile to resist.

A question then is where these ideas about “what everyone else is doing” comes from. The evidence suggests that these are generated by the political and economic elite of society occurs. If they are known to engage in all sorts of irregularities spreads this quickly downwards in the community. The German proverb “fish rots from the head down” seems to fit. The ethics of management for companies and public institutions shows up plays a big role and therefore the ethical dimension in the training of these groups is of great importance.

One problem in this regard is that there are interesting differences when one examines the perceptions of these ethical problems that the different university programs generate. Multiple independent research shows that those who study economics are more prone to corruption than those studying other subjects. This first appeared in a number of so-called experimental studies that put the students in various hypothetical situations. These have recently been supplemented by a study done on real data by René Ruske (published in the journal Kyklos 2015) as compared to members of Congress in the United States. His study shows that those members who have a degree in economics has had twice the risk of having been involved in corruption compared to those without this training. Reason for these results seems to be that there is an ideological element in business studies that emphasize the importance of selfish behavior – the notion of a so-called “homo economicus”. The experimental research additionally shows that this dysfunctional behavior is not just something the students bring to the program, but it is often an effect of what they learn.

These results are troubling because the economist training both as comprehensive and well often leads to high positions in society. It is also problematic in light of Sweden distributes one of the world’s most prestigious scientific awards in the subject, namely the Nobel Memorial Prize in Economic Sciences, in everyday speech the Nobel Prize in economics. The price was not found in Alfred Nobel’s original testament of 1895 but were added by a donation from Sweden Riksbank in 1968. Responsible party for the dividend is the Royal Swedish Academy of Sciences.

The price has been controversial partly because it was felt that economics is not a science of the same magnitude as for example physics and chemistry, partly because they considered it politicized as it is often distributed to economists who preached market liberalism choice. The first critical point, I consider incorrect but the other may have some justification for it. The problem I raise here is, however, of a much higher order. If it turns out that university education in economics, as it usually seems to occur, leading to increased tolerance to corruption is in the light of the above research findings very seriously. The Prize will then be in direct contravention of Alfred Nobel’s will, which stipulated that prices would be awarded to “those who, during the preceding year, shall have the greatest benefit on mankind.” A price that risk contribute to increased corruption in the world is of course the opposite.

As a member of the Royal Swedish Academy of Sciences, I will therefore now take the initiative in this matter should be urgently investigated. It turns out that these results have resistance must Sciences, whether to be true to its own ideals, quit his dedication to select the prize winners. The overall picture of research results provide arguably suggest that until such an investigation is completed, a moratorium should be declared on the price, that is, it should not be distributed. Nobel Foundation, which is responsible for the award ceremony, should also consider whether you really should concern itself with a price the effects of which can be in direct conflict with what Alfred Nobel decreed in his will.

Bo Rothstein, Professor of Political Science at the Universities of Gothenburg and Oxford.

Dagens nyheter, 11 October 2015

  1. John McDonald
    October 11, 2015 at 7:09 pm

    “…economics as commonly taught in universities and endorsed by most winners of the economics prize promotes corruption in societies around the world.”

    I can just hear the conservative Austrian friends and others saying, “corruption? – society? – what is that?”

  2. October 11, 2015 at 7:10 pm

    Question for Bo Rothstein. Do you think the following is true?

    “The main enabler of sizable asset price bubbles is keeping the real price histories rarely seen.” For example:
    http://showrealhist.com/yTRIAL.html

    Thank you.

  3. October 11, 2015 at 7:27 pm

    This is huge. Bo Rothstein is doing the world a great service here.

    • October 12, 2015 at 7:16 am

      Yes, this is not at all small peanuts.

  4. Marcelo
    October 11, 2015 at 7:44 pm

    I SADLY have to agree. And the latest case of Volkswagen, helps make the point

  5. Paul Schächterle
    October 11, 2015 at 8:54 pm

    The so called “Nobel Prize for Economics” is a pseudo-Nobel-prize and a fraud.

    Alfred Nobel did not have anything to do with economics and did not want such a prize.

    I can see only one motive to include the name “Nobel” in the name of the prize (“Sveriges Riksbanks pris i ekonomisk vetenskap till Alfred Nobels minne” – Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel) and to reward the prize in a manner similar to the real Nobel prizes. That motive is to fool the public and to leech on the reputation of the real Nobel prizes.

    Since the prize is a fraud it should not only be suspended — it should be abolished.

  6. October 11, 2015 at 9:03 pm

    Video: Philip Mirowski on INET – Why Is There a Nobel Memorial Prize in Economics?

  7. October 11, 2015 at 9:12 pm

    PS,
    Your ‘fool the public’ motive is credible, unfortunately. Late in this page
    http://www.showrealhist.com/RD_RJShomes_PSav.html
    see the section
    Bubbles relative to GDP

  8. October 11, 2015 at 9:56 pm

    Thank you Bo Rothstein,

    Economic prize winners preach deficit spending is a good way to boost growth and create green jobs. This is claimed in a global economy that requires 1.5 Earths for pollution recycling and resources. If everyone lived like europeans, the global economy would require three Earths.

    Social ecology sees deficit spending as a destroyer of democracy. This direction of thought is political and economists work hard to belittle it.

    • October 12, 2015 at 1:28 am

      “Economic prize winners preach deficit spending is a good way to boost growth and create green jobs.”

      I somehow don’t think that’s what he was referring to.

  9. Napita Nanette Ippolito
    October 12, 2015 at 4:08 am

    Bo Rothstein, Professor of Political Science at the Universities of Gothenburg and Oxford, is an excellent choice for the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.

    Our true economic heroes are educators who, like Bill McKibben, explain the deep dependence of economy on ecology (Deep Economy: The Wealth of Communities & the Durable Future), & who, like Bo Rothstein, expose the short-sightedness of the economic & status quo foisting acceptance of corruption as if selfishness were a sustainable foundation for a complex, worthy & equitable civilization.

    Heaven help us through the spreading economic upheaval if the Speakership of the United States House of Representatives (second in line of succession to the presidency) is bestowed upon first termer &Tea Party darling, Dave Brat, former Professor of Economics at Randolph-Macon College, a rejectionist whose hot-headed or poorly researched statements were recently ruled False on the Politifact Truth-O-Meter regarding members of his own party. Experienced legislators, including staunch conservatives, show legitimate concern for the devastating, spreading financial consequences of U.S. government grinding to a halt again without a continuing budget resolution. Cui bono? .

  10. October 12, 2015 at 5:50 am

    Here is a copy of the original article
    Any Swedes out there to tackle the translation?
    (I think Google did a lousy job)

    Kan bidra till ökad korruption. Flera oberoende forskningsrapporter visar att de som studerar ekonomi är mera benägna för korruption. Och beteendet tycks vara en effekt av utbildningen. Ett pris som riskerar bidra till ökad korruption i världen står i strid med andan i Nobels testamente, skriver statsvetarprofessorn Bo Rothstein.

    Senare års forskning har visat att korruption är ett mera omfattande samhällsproblem än vad som tidigare ansetts vara fallet. När man jämför länder finner forskningen negativa effekter av korruption för nästan alla mått på mänsklig välfärd såsom till exempel barnadödlighet, ekonomiskt välstånd, förväntad livslängd, antal barn som lever i fattigdom, tillgång till rent vatten, antal kvinnor som dör i barnsäng, villighet att åtgärda miljöproblem med mera. Korruption har nyligen också visat sig vara en viktig förklaring till såväl inbördeskrig som krig mellan stater.

    Vidare visar sig korruption också ha starka samband med mera subjektiva mått såsom i vilken utsträckning människor anser sig vara nöjda med sina liv, anser sig vara lyckliga och i vilken utsträckning de anser att de i allmänhet kan lita på andra människor. Även om mätningar av graden av korruption i olika länder är behäftade med vissa svårigheter kan man likväl uppskatta att drygt sjuttio procent av jordens befolkning lever i länder med dysfunktionella samhällsinstitutioner. Detta innebär att det i sig inte är brist på kapital, kunskaper eller naturtillgångar som är huvudproblemet utan just korruption i de offentliga institutionerna.

    Det finns naturligtvis inga moderna samhällen som är fria från korruption, något sådant vore lika utopiskt som ett samhälle fritt från kriminalitet. Det är emellertid viktigt att påpeka att omfattande korruption ingalunda är något som enbart finns i utvecklingsländer. Flera analyser av till exempel Greklands och Italiens ekonomiska problem pekar ut just korruptionen som en grundorsak. Det finns också analyser som pekar på att finansmarknadernas sammanbrott 2008 kan förklaras i termer av korruption. Liksom graden av kriminalitet varierar graden av korruption mellan olika samhällen. Samhällen som har jämförelsevis låg korruption brukar enligt de flesta mätningar vara länderna i Nordvästeuropa liksom Australien, Kanada och Nya Zeeland. Jämfört med närliggande länder klarar sig Botswana, Chile och Estland väl.

    Orsakerna till korruption är mångahanda men ett överraskande resultat är att befolkningen i länder med svårartad korruption ingalunda internaliserar detta beteende som en del av sin kultur. Tvärtom tar de i allmänhet starkt avstånd från sådant beteende och de inser också att korruption svårt skadar deras samhällen. Anledningen till att de deltar i denna verksamhet är att de inte uppfattar att de har något egentligt val. Det nyttar föga att vara den ende i byn som inte betalar läkaren under bordet för att få sjukvård till sina barn. Det är förmodligen inte bara meningslöst utan också livsfarligt att försöka vara den ende hederlige polisen i en mexikansk polisstyrka. Korruption är med andra ord ett så kallat ”frekvensproblem” i så måtto att om man tror att ”alla andra” sysslar med denna ljusskygga verksamhet så är de flesta antingen tvungna att delta eller ser man det som meningslöst att låta bli.

    En fråga är då varifrån dessa föreställningar om ”vad alla andra gör” kommer ifrån. Mycket tyder på att dessa genereras av hur den politiska och ekonomiska eliten i samhället uppträder. Om de är kända för att syssla med allehanda oegentligheter sprider sig detta snabbt neråt i samhället. Det tyska ordspråket ”fisken ruttnar från huvudet ner” tycks stämma. Den etik som ledningen för företag och offentliga institutioner visar upp spelar en stor roll och därför är den etiska dimensionen i utbildningen av dessa grupper av stor betydelse.

    Ett problem härvidlag är att det finns intressanta skillnader när man undersöker vilka föreställningar om dessa etiska problem som olika universitetsutbildningar genererar. Flera av varandra oberoende forskningsrapporter visar att de som studerar ekonomi är mer benägna för korruption än de som studerar andra ämnen. Detta visade sig först i ett antal så kallat experimentella studier där man försätter studenterna i olika hypotetiska situationer. Dessa har nyligen kompletterats av en studie gjord på verkliga data av René Ruske (publicerad i tidskriften KYKLOS 2015) som jämfört kongressledamöter i USA. Hans studie visar att de ledamöter som har en examen i ekonomi har haft en dubbelt så hög risk att ha varit involverade i korruption jämfört med de som inte har denna utbildning. Anledning till dessa resultat tycks vara att det finns ett ideologiskt moment i ekonomutbildningen som understryker vikten av själviskt beteende – föreställning om en så kallad ”homo economicus”. Den experimentella forskningen ger dessutom vid handen att detta dysfunktionella beteende inte enbart är något studenterna har med sig till utbildningen utan att det ofta är en effekt av vad de lär sig.

    Dessa resultat är bekymmersamma eftersom ekonomutbildningarna dels är så omfattande och dels ofta leder till höga positioner i samhället. Det är också problematiskt i ljuset av att Sverige delar ut ett av världens mest prestigefyllda vetenskapliga priser i ämnet, nämligen Sveriges Riksbanks pris i ekonomisk vetenskap till Alfred Nobels minne, i dagligt tal Nobelpriset i ekonomi. Priset fanns inte i Alfred Nobels ursprungliga testamente från 1895 utan lades till genom en donation från Sverige Riksbank 1968. Ansvarig instans för utdelningen är Kungliga Vetenskapsakademin.

    Priset har varit omstritt dels för att man ansett att ekonomi inte är en vetenskap av samma dignitet som till exempel fysik och kemi, dels för att man ansett att det politiserats då det ofta delats ut till ekonomer som predikat marknadsliberalismens primat. Den första kritikpunkten anser jag felaktig men den andra må ha visst fog för sig. Det problem jag lyfter här är emellertid av en betydligt högre dignitet. Om det visar sig att universitetsutbildning i ekonomi, såsom den vanligen tycks ske, leder till ökad tolerans för korruption är detta i ljuset av de ovan nämnda forskningsresultaten mycket allvarligt. Ekonomipriset kommer i så fall att stå i direkt strid med Alfred Nobels testamente som stadgade att priserna skulle tilldelas ”dem som under det förlupna året hafva gjort menskligheten den största nytta”. Ett pris som riskerar bidra till ökad korruption i världen är förstås raka motsatsen.

    Som ledamot av Kungliga Vetenskapsakademien kommer jag därför nu att ta initiativet till att denna fråga snarast bör utredas. Visar det sig att dessa forskningsresultat har beständighet måste Vetenskapsakademien, om man skall vara trogen sina egna ideal, avsluta sitt engagemang vad gäller att utse pristagare. Den sammantagna bilden av forskningsresultatet ger enligt mitt förmenande vid handen att till dess att en sådan utredning blir klar bör priset försättas i moratorium, det vill säga inte delas ut. Nobelstiftelsen, som ansvarar för prisceremonin, bör också överväga om man alls bör befatta sig med ett pris vars effekter kan stå i direkt strid med vad Alfred Nobel stadgade i sitt testamente.

    Bo Rothstein, professor i statsvetenskap vid universiteten i Göteborg och Oxford

  11. TG
    October 12, 2015 at 5:11 pm

    Brilliant! Yes!

    Economics is not the dismal science – it is the corrupt one.

  12. Bryan Snyder
    October 12, 2015 at 8:18 pm

    I might have taken this seriously if it had not been delivered by a Political Scientist.

  13. John Hermann
    October 13, 2015 at 2:07 am

    Whenever you see the words “Nobel prize in economics” appearing in the outpourings of lazy journalists and mass media outlets, you should immediately correct it wherever possible … pointing out that it is not a Nobel prize, but rather, it is the Swedish central bank’s prize in economics. It should also be pointed out that Alfred Nobel hated economists.

  14. October 14, 2015 at 2:49 pm

    Interesting, so the academy is blaming the recipients of the price for promoting corruption and not the academy’s decision to grant the price to people whose work has promoted corruption? I find it hard to believe that The Royal Academy is lacking candidates whose research in economics is focused in the betterment of society in order to award the Nobel price. It seems unfair to throw everyone in the same bag and ban the issuance of the award based on their inability to value work that is not focused on the grounds of neo liberal values.

  15. October 17, 2015 at 8:12 pm

    Here is the translation of Bo Rothstein´s article: http://rothstein.dinstudio.se/empty_21.html

  16. October 18, 2015 at 4:02 am

    Change the prize name from “Economics” to “Moral Economics”, “Evolutionary Economics”, “New Economic Thought” or such and it might be worth keeping. Otherwise, Mr. Rothstein makes timely and profound points of high importance.

  17. October 18, 2015 at 1:12 pm

    The architecture that grew out of the industrial revolution, on which capital markets today justify their operation, now finds its “raison d’etre” shaking under its own weight. The cold hard fact is that this architecture has not only seen its day; it is like an insidious disease working against human survival.

    All around us there are indications of the failure of past economic theory; from the recent debacle on Wall Street to unemployment on Main Street, from the toxic tar sands in Canada to the overfishing of tuna in the oceans, from the increasing CO2 in the biosphere to the acidification of the oceans. And this failure extends well beyond these few observations. Planet Earth is telling us something. It is pointing to its rejection of our capital market economic system.

    The key fault is the unfettered operation of capital markets. These markets have grown to a size where they are energizing ecologically and socially destructive forces of a magnitude that has never before been seen in the history of the planet. Resource allocation is being misguided and misappropriated on a massive scale. Irreparable planetary damage is being done. Fingers can be pointed in many directions for this such as human greed, political dysfunction, just plain stupidity; however, the rules under which capital markets have been operating since they took form from the beginning of the industrial revolution onward must take primary blame.

    Your profession has come forward with no new ideas to stem the tide. You and those like you need to be thinking and writing and speaking about new economic theory. It is not happening. Physical scientists throughout the world have been describing the ecological problems with great clarity; it is time for economists to offer economic solutions. So far, there is only silence.

    Boiled down into a few words; our resource exploitive capital market system needs to be transformed into a constrained yet incentive directed algorithmic driven market system emphasizing the equitable and humanistic provision of both the material and psychological needs of all humanity. The long lasting functionality of all the earth’s resources to meet these needs must take on the highest priority. Every element of today’s energy intensive market driven consumerism must be made to meet this planetary survival/functionality test.

    How can we mechanistically achieve this? Negative external costs and positive incentives must be built into every investment decision. And these costs and incentives must be applied to every human economic activity from the mine to the chemistry lab to the assembly line to the opera house to the athletic field to the hospital. Economic outcomes with negative social and/or ecological value must be recognized. Negative externalities need to be measured and priced in up front so as to discourage, temper, or at the extreme eliminate investment.

    Every investment decision must be internally priced to reflect its socially constructive or destructive outcome. Croplands, grasslands, forests, fisheries, inorganic resources; all of the earth’s natural resources, must be internally priced so as to prevent their exploitation and damage to the planet.

    In our present world, none this is happening on a broad enough scale to make a difference. We see punitive cigarette and liquor taxes and some others like them, but across the board, any form of build-in of “negative external” cost reflecting ecological considerations is almost nil. Disincentives/Incentives in vital areas like energy have been poorly handled. The most simple questions such as; is this or that delivering real worth to society and to the health of the planet are being avoided. As I am certain you are aware; some progress is being made in northern Europe, but I am sure you will agree with me that on a world scale it is insignificant.

    Humanity is crying out for an entirely new form of economic/monetary theory. Social/political theory must necessarily be a part. A response is coming from some enlightened intellectuals in the world community; however, there is at present no universal consensus, nor are there long term solutions at hand. Our species remains in gridlock. Your economics profession remains notably silent, content on using its advanced theories of algorithms for trading purposes, but not for the above.
    How much time do we have to come up with a revised capital market system? Some highly accredited scientists say our present trajectory will present very serious planetary problems within the next fifty years and they even point to the end of our species after three hundred.

    Will our great and great-great grandchildren find themselves at the bottom of Dante’s inferno with no escape? There is this possibility. The time has come for humanity to recognize that unless it can change the way it prices what it desires to consume, the biblical prophecy of the end of times may very well prove to be self-fulfilling.

    • October 18, 2015 at 10:22 pm

      This is a timely and moving comment. I wish to challenge only this:

      “Your profession has come forward with no new ideas to stem the tide. You and those like you need to be thinking and writing and speaking about new economic theory. It is not happening. Physical scientists throughout the world have been describing the ecological problems with great clarity; it is time for economists to offer economic solutions. So far, there is only silence.”

      If the problem is indeed large scale share trading, didn’t James Tobin offer the solution of a transaction tax? E F Schumacher was a very competent economist, who offered the solution of “Small is Beautiful” (1973) in the traditions of Buddhism and G K Chesterton’s Catholic Distributism – which “had been found difficult and never tried” until the post-war construction of the European Economic Community. In 1929 Josiah Stamp, a Christian director of the Bank of England, had famously directed attention to the roots of the Slump, now manifest in the transformation of a cooperative EEC into a giant competitive EU:

      “”Banking was conceived in iniquity and was born in sin. The bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough deposits to buy it back again. However, take away from them the power to create money and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of bankers and pay the cost of your own slavery, let them continue to create money.” In other words, his solution is “Don’t”.

      Today (but not “so far”) there may only be silence. Yet why seek solutions only from inbred economists manifestly incapable of offering any? Study those offered by brilliant art critic John Ruskin in the 1860’s, the Nobel-winning physicist Frederick Soddy in the 1920s and those now being sounded out piecemeal by non-economists, here in the RWER blog: my own being inspired by Ruskin and post-war Catholic Social Teaching but rooted in physical and information systems analysis, mathematical logic and philosophy of science. Briefly, I am suggesting that the alternative to Stamp’s monetary banking is the already existing credit card economy in which bankers merely account for one’s own use of credit and our repayment by earning one’s keep doing what needs doing “to renew the face of the earth”.

      “Humanity is crying out for an entirely new form of economic/monetary theory.” But would you recognise one if you saw it? Will you hear it if you listen in the wrong place?

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