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There Is No Nobel Prize in Economics

It's awarded by Sweden's central bank, foisted among the five real prizewinners, often to economists for the 1% -- and the surviving Nobel family is strongly against it. This 2012 article is from Alternet, Oct 12.

by Yasha Levine

It’s Nobel Prize season again. News reports are coming out each day sharing the name of the illustrious winner of the various categories — Science, Literature, etc. But there’s one of the prizes that’s a little different. Well, that’s putting it lightly… you see, the Nobel Prize in Economics is not a real Nobel. It wasn’t created by Alfred Nobel. It’s not even called a “Nobel Prize,” no matter what the press reports say.

The five real Nobel Prizes — physics, chemistry, literature, peace, and medicine/physiology — were set up in the will left by the dynamite magnate when he died in 1895. The economics prize is a bit different. It was created by Sweden’s Central Bank in 1969, nearly 75 years later. The award’s real name is the “Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.” It was not established by Nobel, but supposedly in memory of Nobel. It’s a ruse and a PR trick, and I mean that literally. And it was done completely against the wishes of the Nobel family.

Sweden’s Central Bank quietly snuck it in with all the other Nobel Prizes to give economics credibility. One of the Federal Reserve banks explained it succinctly, “Few realize, especially outside of economists, that the prize in economics is not an “official” Nobel. . . . The award for economics came almost 70 years later—bootstrapped to the Nobel in 1968 as a bit of a marketing ploy to celebrate the Bank of Sweden’s 300th anniversary.” Yes, you read that right: “a marketing ploy.”

“The Economics Prize has nestled itself in and is awarded as if it were a Nobel Prize. But it’s a PR coup by economists to improve their reputation,” Nobel’s great great nephew Peter Nobel told AFP in 2005, adding that “There is nothing to indicate that [Alfred Nobel] would have wanted such a prize.”

Members of the Nobel family are among the harshest, most persistent critics of the economics prize, and members of the family have repeatedly called for the prize to be abolished or renamed. In 2001, on the 100th anniversery of the Nobel Prizes, four family members published a letter in the Swedish paper Svenska Dagbladet, arguing that the economics prize degrades and cheapens the real Nobel Prizes. They aren’t the only ones.

In 2004, three prominent Swedish scientists and members of the Nobel committee published an open letter in a Swedish newspaper savaging the fraudulent “scientific” credentials of the Swedish Central Bank Prize in Economics. “The economics prize diminishes the value of the other Nobel prizes. If the prize is to be kept, it must be broadened in scope and be disassociated with Nobel,” they wrote in the letter, arguing that achievements of most of the economists who win the prize are so abstract and disconnected from the real world as to utterly meaningless.

The 1997 award was shared by economists Robert Merton and Myron Scholes for their work in figuring out how to value derivatives so as to minimize risk. The two economists used their Nobel-worthy economic models to run “the world’s biggest hedge fund,” which was called Long Term Capital Management (LTCM). And the fund really lived up to its name. Nine months after winning the Swedish Central Bank Prize in Economics, LTCM went belly-up, racking up over $1 billion in losses over a period of just two days. It was bailed out by then-Federal Reserve Chairman Alan Greenspan, who considered LTCM “too big to fail.”

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JJS: Over fifteen years ago, the New Yorker did an article on an economist who crusaded against this faux prize. The author pointed out that the money for the prize comes not just from the central bank of Sweden but from several central banks of several major nations. Furthermore, Alfred Nobel also did not leave any money for mathematicians (some say because his girlfriend was having an affair with one). Rather than create a faux Nobel, mathematicians instead created their own prize, the Field Medal. The source of its prize money, I do not know, but top number-crunchers shouldn’t have any problem cracking the stock market, should they?

It’d be honorable of economists to rename that prize they get. It’d also show some enlightenment for them to quit claiming to be neutral on ethics and admit that property arrangements -- fair or not -- greatly shape economies. Just as it’d be scientific of them to note that your spending for things that people do produce -- cars, clothes, computers -- differs greatly from your spending for things that people do not produce -- land, oil, airwaves. Your first sort of spending rewards effort so recipients produce more and restock their shelves, growing the economy. Your second sort of spending rewards privilege so recipients produce less, lobby more, and become parasites on the economy.

What can you do about it? Forget economics; study geonomics! And once you master the 18-year land-price cycle, you could find yourself sitting pretty.

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Editor Jeffery J. Smith runs the Forum on Geonomics and helped prepare a course for the UN on geonomics. To take the “Land Rights” course, click here .

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