On the Nobel Prize in Economics*

Eugene Fama and Lars Peter Hansen of the University of Chicago--along with Robert Shiller of Yale--have ended up sharing the prize for this year. Fama and Shiller are on different sides of the asset-pricing debate; Fama is a major proponent of the Efficient Market Hypothesis, and Shiller is . . . well . . . very much not a major proponent of EMH, so the awarding of the prize this year reflects the major split in the economics community that exists concerning asset-pricing.

I was curious as to how Paul Krugman would greet the news that Eugene Fama--he of the Dreaded Chicago School of Economics--was awarded the Nobel, and sure enough, Krugman didn't disappoint those who are used to the way in which he dismisses and insults intellectual opponents. Shorter Krugman: Fama is awesome because he set up an intellectual rubric against which alternatives could be tested, and Shiller is even more awesome because he showed how Fama was wrong, and by the way, Krugman has graciously decided to ignore the "foolish things" (by Krugman's lights) that Fama has said. Also, it's great that the prize committee both gave Fama a share in the Nobel while pointing out that he's oh-so-terribly wrong.

This, by the way, is Paul Krugman being gracious, which goes to show that however one prices certain assets, grace and class are always at a premium with some people.

*It's actually the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, which means that it is not one of the original Nobel prizes mentioned in Alfred Nobel's will. I'm sure that neither Fama, nor Hansen, nor Shiller will lose sleep over this fact.