Home > Uncategorized > Sherlock Holmes of the year — ‘Nobel prize’ winner Bengt Holmström

Sherlock Holmes of the year — ‘Nobel prize’ winner Bengt Holmström

from Lars Syll

Oliver Hart and Bengt Holmström won this year’s ‘Nobel Prize’ in economics for work on applying contract theory to questions ranging from how best to reward executives to whether we should have privately owned schools and prisons or not.

Their work has according to the prize committee been “incredibly important, not just for economics, but also for other social sciences.”

Asked at a news conference about the high levels of executive pay, Holmstrom said,

It is somehow demand and supply working its magic.

Wooh! Who would have thought anything like that.

What we see happen in the US, the UK, Sweden, and elsewhere, is deeply disturbing. The rising inequality is outrageous – not the least since it has to a large extent to do with income and wealth increasingly being concentrated in the hands of a very small and privileged elite.

Societies where we allow the inequality of incomes and wealth to increase without bounds, sooner or later implode. The cement that keeps us together erodes and in the end we are only left with people dipped in the ice cold water of egoism and greed.

And all this ‘Nobel prize’ laureate manages to come up with is demand and supply ‘magic.’

Impressive indeed …

  1. Dave Raithel
    October 14, 2016 at 3:33 am

    “It is somehow demand and supply working its magic.”… I heard a preacher-man on the radio today justify his voting for Trump by observing (and I paraphrase): The Bible is full of stories of God using Evil men for His purposes. …

  2. robert locke
    October 14, 2016 at 1:15 pm

    Salaries are set by those who wields the power within the corporation to set them. It has nothing to do with laws of supply and demand, everything to do with decision making process in firms. We all know this is true.

  3. C-R D
    October 14, 2016 at 4:49 pm

    At this juncture we should stop focussing on the laureates and question the role of the Nobel Committee. Is it composed of ideologues or dangerously incompetent individuals?

  4. Mo Allah yidi
    October 14, 2016 at 5:18 pm

    I used to respect the Nobel Academy but after investigating some works awarded then i noticed that those works had nothing to do with impact but region and academic status. Why is it that non professors cannot win the Nobel? why do most luareates come from Europe and America? the reason is because they have the highest concentration of Academia and not highest concentration of research impact. Believe me when i say that Nobel economic prize has got nothing to do with research impact but with the status of professorship. like it was awarded to Eugine for none sense work on Stock prizes

  5. October 14, 2016 at 6:26 pm

    High executive salaries, and high salaries in other venues as well, are a direct outgrowth of removal of high tax rate brackets.

  6. October 16, 2016 at 5:16 pm

    History has shown that meritocracy in combination with economic reward as an upward mobility driver in time produces a calcified top-down society. This pattern has been and continues to be the same in all societies. Future generations become an entrenched moneyed oligarchy grounded on nepotistic loyalty. We humans are programmed that way. We are economic and nepotistic animals. As a result, throughout human civilization going back to the very beginning, we can see that economic power is always rigged in favor of the oligarchic blood line by way of massive wealth transfers to succeeding generations. With it comes political privilege, intermarriage among the privileged, superior education and superior medical care.

    European history is replete with this story as is Asian history. China today even with its recent socialist communist past is following this pattern. Soviet Marxism itself could not defy the rule. In America we saw it early on with the concentration of wealth and privilege in the North and South before and after the Gilded Age.(1865–1900) In the roaring twenties we saw it. Now in the twenty-first century we are seeing it again.

  7. October 17, 2016 at 7:28 am

    Robert says, “Salaries are set by those who wield the power within the corporation.” C-R D say, “At this juncture we should stop focusing on the laureates and question the role of the Nobel Committee.” Mo Allah yidi says, “… it was awarded to Eugine for none sense work on Stock prizes.” David Anderson says, “History has shown that meritocracy in combination with economic reward as an upward mobility driver in time produces a calcified top-down society.” These statements make sense to us, even if we do not agree with them because we share a common set of values, attitudes, standards, and expectations, even if we began our lives with different languages. But this stuff has roots, a history, evolves and changes. Saying power is the root of decisions and actions tells us nothing. Revealing the history of the invention of power and its uses does. What is the history of creating laureates and how do prizes like the Nobel play into that? What is the history of the invention of academia and academics, and what is the story of the evolution of the work and assessment of academic work and academics? Tell us about the invention of merit and its use as meritocracy. Reveal the development of the relationship between these and the arrangements of patterns in collective life. This all could help us better understand how economics became such a dismal dismal way of life, and why and how economics continues to plague our world like the black death of the Middle Ages.

  8. robert locke
    October 17, 2016 at 1:50 pm

    “But this stuff has roots, a history, evolves and changes. Saying power is the root of decisions and actions tells us nothing. Revealing the history of the invention of power and its uses does.”

    Historians describe this often in their work, I have. The most recent foray into the subject was done by Alfred D Chandler, Jr. in his work on the rise of the visible hand of management in giant firm, which he documented extensively in his many publications. Chandler looked on the development positively, others have criticized the dark side of this management history, but the whole discussion that tells us much about the root of decisions and action in the modern corporation is lost on economists who exclude it from their purview. Ken, without economists discussing the history, we are lost as an intelligent venue for debate.

    • October 18, 2016 at 8:05 pm

      Thanks, Robert. I agree. Economists puzzle me. They appear to have no curiosity. Being a scientist is impossible without curiosity. I agree with Feynman that it is curiosity, rather than skills with mathematics or even observational skills that makes a good scientist. It’s interesting to consider the roots of the lack of curiosity of economists. When I work with them they always testify as if there is no question to which they do not know the answer. Since that’s not the case I guess I spent too much time asking them questions (under oath mind you) that could not be answered or that had multiple answers. And then watching them squirm under cross examination. The better ones had developed the skill of stepping out of their “professional” economist persona when necessary. After all, if they screwed up the testimony they likely would not attract other clients. Sticking with professional economist answers often ended with that result. Being practical people they had no problem dumping accepted economic parlance and theory when that need arose. Most fun I ever had was with a University of Notre Dame economist and Says Law. My question was simple, as were the possible answers, Why was electricity demand declining as electricity production capacity increased? The most often answer given is that people decided they could live just as well with less use of electricity. The economist concluded there was some sort conspiracy in place to force people to reduce electricity use, with lots of harmful propaganda attached to it. Maybe he just didn’t read anything except the Wall Street Journal.

  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s