Sweden debates the economics prize

from Peter Söderbaum

Newspaper debate in Dagens Nyheter (DN) about the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel

The debate started with an article by Bo Rothstein October 11 and ended with final comments by Rothstein October 19, 2015. Below are the titles of the 6 articles in English (and also in Swedish if someone wants to check the translation)

It is not realistic for me to translate all 6 articles to English and I am not sure if that would be correct from a copyright point of view. My own article which is the only contribution by a heterodox economist is however translated in its totality. Other articles are summarized by me below.

Bo Rothstein 2015-10-11 “The Economics Prize is against the spirit of Nobel´s will”( In Swedish: Ekonomipriset i strid med andan i Nobels testamente) Available paper and web

Bo Rothstein, a respected professor in political science initiated the debate. As a member of the Swedish Academy of Sciences he expressed his concerns about the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”. The award may be incompatible with the spirit expressed in Alfred Nobel´s will. There are signs that students of economics are affected negatively in a moral sense where even corruption is a possibility. Rothstein therefore recommends a moratorium for the economics prize until a careful study has been carried out about the options for the future.

Jan-Erik Lane 2015-10-14 ”Rational economists refrain from corrupt behavior” (Rationella ekonomer avstår från från korrupt beteende) (paper and web)

Jan-Erik Lane is a professor and is connected with the “New Public Management” approach. He questions Rothstein´s criticism of the economics prize and defends neoclassical theory with its “rational choice” theory and Economic Man assumptions. Economists are said to be conscious about the implications of the assumptions they make and there are alternatives to the most frequent assumptions.

Jan-Erik Lane finally sees it as an advantage that the economics prize has stimulated a debate about the discipline of economics.

Lars Calmfors 2015-10-15 ”Why the economics prize may be provocative” (Därför provocerar ekonomipriset) (paper and web)

Lars Calmfors is professor emeritus in economics. He has been head of the National Institute of Economics Research and is now part of public debate in Dagens Nyheter and elsewhere. Calmfors lists some of the many arguments that have been raised questioning the economics prize and admits that there are some problems but essentially defends the prize. According to him it is functioning well and respected internationally.

Peter Söderbaum 2015-10-19  ”The economics prize suffers from neoclassical monopoly (Monopol för neoklassisk teori skadar ekonomipriset) (only web)

It is a good thing that we have a debate about the economics prize ”in Memory of Alfred Nobel”. Bo Rothstein is on the right track when he discusses how the moral behavior of students of economics

may be affected in future professional roles with corruption as one of the possible implications. But the problem with the economics prize has to be discussed at a more fundamental level writes Peter Söderbaum.

One of the early winners of the economics prize, Gunnar Myrdal, repeatedly argued that values are always present in economics research and education. Economics is science but at the same time values and ideology. Criticism of economics may then refer to its scientific and/or its ideological aspect. Unfortunately Myrdal´s colleagues in economics have not understood or accepted this message.

Today one kind of economics, so called neoclassical theory, is dominating research and education to such a degree that one can refer to a monopoly. We are at the same time facing a scientific and an ideological monopoly. There is a role for neoclassical theory with its conceptual framework and ideology in a democratic society. What is unfortunate is the monopoly position for neoclassical theory and how it affects recruitment of researchers and lecturers, other incentives such as the economics prize included. Today there are several schools of thought that represent alternatives to neoclassical theory but which largely are excluded from university departments of economics. This is a case of scientific as well as ideological discrimination.

Just as is the case of the established Nobel Prizes, the Bank of Sweden Prize claims to encourage research contributions that benefit humankind. These judgments presumably include ideological elements. What are the important problems today when it comes to survival and welfare for people (and perhaps for ecosystems)? Is it economic growth in GDP-terms (which is essential in neoclassical theory) or is it climate, biological diversity, pollution of land and water? The central role of value issues suggests that the Bank of Sweden Prize should rather be compared with the Nobel Peace Prize.

Neoclassical theory is useful for some purposes but not for all purposes. Economic theory always starts with simplifying assumptions. There is a tendency, for example, in neoclassical theory to reduce all impacts to their monetary dimension. GDP-accounting is one example, Cost-Benefit Analysis another. Is this “monetary reductionism” appropriate when the big challenges are of a non-monetary kind (climate, biodiversity etcetera). Monetary trade-off reasoning appears questionable in relation to these issues.

Bo Rothstein´s proposal to scrutinize the economics prize from ideological and other viewpoints is pressing. For me it is also about how the economics prize tends to cement the present state of monopoly at university departments of economics. A more open and democratic economics where different schools of thought are considered is urgently needed. Today many students and scholars internationally call for a more pluralistic economics. My own interest is “ecological economics” which can be described as “economics for sustainable development”. Neoclassical economics has been in a monopoly position in a long period when development increasingly has become unsustainable. Should we be content with the perspective of neoclassical economists in relation to these challenges?

It may be noted that United Nations recently has acknowledged 17 different “sustainable development goals” where economic growth plays a less prominent role. These goals point in the direction of multidimensional analysis. From a democratic point of view, economics needs to mirror different versions of ideological orientations among citizens and politicians. The debate about the economics prize should therefore at the same time focus on options for economics as a science. The present scientific and ideological indoctrination at national and global levels, for example through the economics prize, need be replaced by a pluralist attitude where different schools of thought can coexist. Only in this way may the legitimacy of the prize be strengthened.

Peter Söderbaum, professor emeritus, ecological economics, Mälardalen University, Västerås, Sweden

Olof Johansson-Stenman och Erik Mohlin 2015-10-19 ”There is no scientific support for Rothstein´s arguments”(Rothsteins påståenden saknar vetenskapligt stöd) (only web)

A fourth comment to Bo Rothstein´s article was signed by two younger economists Olof Johansson-Stenman, Gothenburg University and Erik Mohlin Lund University. They argue that Rotstein´s concerns lack scientific support and point to difficulties in finding evidence of how students in economics may differ in ethical values from other students as a result of education.

Closing remark by Bo Rothstein 2015-10-19  ”Prominent economists point to the problem with ethics in economics” (Framstående ekonomer lyfter problemet med bristande etik) (only web)

In his closing remarks Bo Rothstein comments upon each of the four replies that he has received. When commenting upon my article he discusses how economics needs to be broadened and less isolated from other social and humanistic sciences. Jan-Erik Lane´s arguments that rational economists avoid corruption because it is irrational to go against the law is dismissed by pointing to the fact that some of the worst corrupted countries have instituted laws against corruption.

In other parts of his closing remark, Rothstein points to actors within the economics discipline who do not hesitate to see problems in how economists are educated. Rothstein even points to the Chair of the prize committee this year, Tore Ellingsen, and his judgments about economics “students as being relatively selfish”. Such selfishness is potentially dangerous for others that students are supposed to serve in different professional roles.

The question which comes back again and again in Rothstein´s text is as follows: Does a discipline that performs badly in relation to public interests deserve a prize in the name of Alfred Nobel?