Economics: the Nobel Prize that does not exist

Pablo Martín de Holan. Professor. IE Business School

4 December 2009

As weird as this may sound, the Nobel Prize for Economics does not exist. Alfred Nobel, the man who discovered dynamite and then eased his conscience by creating the most prestigious awards in the world, did not include this particular science for reasons best known to himself…

This year’s Nobel Prize in Economics was awarded to Professors Elinor Ostrom (the first woman to receive it) and Oliver Williamson for their sophisticated analyses of the economic governance of the commons and of the firm, respectively.

Fortunately, the panegyric collated to the news includes a simplified version of their publications, for those mortals who have not been given the grace of understanding the impenetrable gobbledygook with which certain economists try to describe the world. All this is praiseworthy, deserving of the highest admiration we owe to both laureates whose impeccable credentials, research skills, and scientific rigor we can but admire. Indeed, both Doctors have earned our highest respect for their award, and along with it our best desires for a prosperous continuation of their work and many more years of successful publications.

It is not my intention to insult with my words the ´tragic science´ (The moniker used by The Economist to describe the science that was used as a source of inspiration for its name, given that I am pretty sure they know what they are talking about), bestowed with the improbable task of predicting the unpredictable and later explaining why the previous predictions were incorrect yet the present ones should be listened to with the greatest attention because, Yes, Ma´am, these are the right ones I am telling ya.

As I was saying, it is not my goal to criticise economics and those who practice it for their lack of objectiveness, their deplorable results, or both simultaneously. Au contraire, I believe we should emphasise the relevance of this science for modern-day societies, because economics studies the allocation of scarce, valuable resources to various and often competing economic activities, and can tell us how to invest them to produce the highest individual and collective returns.
Yet, economists and their science make my work arduous: things would be simpler indeed if the Nobel Prize in Economics were real. But no: it is a mystification of a profession that not only explains us how we behave as though we did not know, but also pontificates about how we should behave if we want everybody to be better off, belittling us if we fail to follow its dogma, even though we patiently explain that money is not more important for happiness than love but less so, and that a kiss from a loved one makes us happier than an ounce troy of gold, as long as our basic needs are covered. Because the Nobel Prize in Economics does not really exist.

Let me explain. In 1890, Mr Alfred Nobel, creator of the famous award that bears his patronymic, was already world-famous. He was the inventor of dynamite and other explosives (and owner of Bofors, originally a steel mill and one of the firms that profited the most by selling them), and enjoyed a sound reputation, albeit not always positive, and a considerable fortune. In spite of his nearly-universal fame, Mr. Nobel self-confidence was eroded by remorse, showing also the high moral fibre of his soul: he had discovered one of the most effective ways to eliminate fellow human beings and their assets by blowing them to smithereens, together or in isolation. Gelignite and dynamite, two remarkably stable and convenient explosives had many very legitimate peaceful purposes, but they were used mainly for war and destruction: mutilating, killing and injuring people and damaging objects were their main functions on this earth: they were valuable because they made people suffer, or suffer and die.

With great “remorse that made him walk on thorns”, Alfred realised that in this case it had been easier to do than to undo: developing the family of explosives was his business, but preventing its use was beyond his control, in the same way that years later Albert Einstein would regret his involuntary contribution to the development of the atomic bomb. Horrified by the magnitude of the destruction and other ancillary tragedies his intellect had made possible, he decided to leave 93% of his fortune for the creation and eternal maintenance of a prize for ´the most important discovery, contribution or improvement for humanity´ in several areas of knowledge.

As the will stated, these prizes would be given each year by the Nobel Foundation to one of the candidates chosen by the committees created accordingly by the Swedish Academy of Sciences and the parliament of the Kingdom of Norway. Furthermore, the foundation (mandated to invest wisely the lump sum to make it grow ad vitam aeternam) was also to celebrate the cause of science that places knowledge before vile money, that of the art that delights the soul, and that of peace, which fosters harmony among Nations.

No sooner said than done: in his testament and last will, written in 1895, Alfred indicated that the prize was to be given to the five sciences he so admired: medicine or physiology, chemistry, physics, literature and, probably urged on by his conscience, peace, which is not a science but helps prevent the most disastrous consequences of explosives. Some historians tell us that mathematics were also considered for a sixth prize but discarded because a former girlfriend of Mr. Nobel had run away with a mathematician. Angered by the news, Nobel decided to rob Mathematics of its well deserved recognition and that is how this important branch of human knowledge remained prize-less, living proof that even the most righteous souls have their weak moments and their bad days. (Truth be told, it would seem that there is no convincing proof of this, either to confirm it or to refute it)

However, nothing was said of Economics. Dear Alfred didn´t mention it, perhaps because he didn´t consider it a science, or maybe he considered it a science but not one that was worthy of admiration, or perhaps he was having a busy day and just forgot about it, or maybe the explanation rests on more cryptic reasons that will be clarified eventually by experts. And so the world turned until a group of economists rebelled against the unbearable Nobellian omission: economics was missing in the Olympus of the intellect, the place where true Semi-Gods live, cogitate and sometimes pick fights with one another.

Such a void had to be corrected regardless of the explicit desires of the deceased himself: economists know more and better than us mortals and that includes exalted philanthropists like Alfred Nobel RIP. However, as one cannot always do what one wants, these people discovered that Mr Nobel, by then laid to rest, was unable to change his last will and testament and even less able to accommodate their expansive desires. (Mathematicians, apparently more skilled in love making than in marketing, created in 1924 the J.C. Fields medal, also called the “Nobel of Mathematics” even if its name comes from the Canadian professor who bequeathed the money to fund it).

Discouraged but not beaten, the economists then decided to convince the Bank of Sweden to provide funds and choose and give an annual prize whose name contain surreptitiously the word ‘Nobel’. As a result, in 1969 the Central Bank of the Kingdom of Sweden (which, apparently, has ample resources to divert to these activities, in addition or perhaps instead of the ones mandated in its chart by the Sovereign of Sweden) decided to create the (and I quote) ´Prize of the Bank of Sweden in Economic Sciences in Memoriam of Alfred Nobel´. This somewhat arcane official name has been changed 10 times since then, an average of once every four years, going from the “Prize in Economic Science” to the “Prize in Economic Science in Memory of Alfred Nobel”, passing by the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel” to its present incarnation, the “Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel,” and that is how I know that Riks means National in Swedish.
Indeed, a praiseworty task for economists: improving the posthumous legacy of Dear Alfred, imposing praise in the light of his clumsy omission, so clumsy that some feel it was akin to gross, even criminal neglect. And to add to the confusion, the prize is also awarded by the Royal Science Academy of Sweden and the prize ceremony is identical to that of the other five and everyone dresses up in black ties for the event, except for women who wear more heterogeneous but equally appropriate regalia.

Even the medal is similar, who would have thought, but of course not identical because the design of the Nobel medal, the real one, is protected by copyright, something economists almost always defend. Ever since, this pseudo-Nobel prize which resembles as much to a Nobel prize as tofu resembles to Kobe beef, is awarded on Dec 10th, anniversary of the passing away of Alfred N.
It is not up to me to disentangle the mysterious motivations of those who created this curious award or that of those who are proud to receive it. Without entering into psychoanalytical speculations, I am very surprised by the need of this profession, generally austere to say the least, to increase its prestige as if it were a shampoo for dyed or damaged hair, but as I am neither an economist nor a psychiatrist I must confess that it leaves totally perplexed, as does the shame that the lack of prize creates among those who, for whatever unconfessable reasons have chosen the tragic science to earn their keep.

I do understand, however, that I have been swindled. Champagne is only Champagne if it comes from Champagne, and this Nobel has nothing to do with Mr Nobel. Indeed, his surname is used in vain to justify the prize as if his poor soul were not mortified enough at having invented a weapon of mass destruction. As a result, every year I have a hearty laugh at the expense of a profession that is so insecure that it needs to invent imaginary recognitions to convince itself and others of how useful it is.

And I also reconsider the power symbols have for deceiving the unwary, in a skilful but perverse manipulation of cause and effect that would earn a failure to a student in Economics: it isn´t that economics has a Nobel Prize because it is a science, but rather that a putative Nobel Prize in Economics was invented because it needed to buy the scientific legitimacy it didn´t have, something it shared and will share with every human science (also called “soft sciences” because of their limited ability to predict, and their penchant to explain), from psychology to urbanism, not to mention my beloved sociology which dutifully feeds me and pays the rent but does not have a prize.

Therefore, I might start a campaign to create the deserved Nobel Prize in Sociology, another of the historical oversights of the thoughtless yet generous Mr. Nobel. And, since my limited resources do not extend to financing it, I humbly offer myself as the chairman of the selection committee: there is no doubt that I more than deserve the position, and if I don´t deserve it for my achievements, well appearances will just have to be deceiving. As our grandmothers used to say: some (intellectual) skeletons are best left in the closet.

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