Oliver Hart and Bengt Holmström just won the 2016 Nobel Prize in economics

Oliver Hart and Bengt Holmström just won the 2016 Nobel Memorial Prize in Economics.

They were given the prize for work on contract theory and providing “a comprehensive framework for analysing many diverse issues in contractual design, like performance-based pay for top executives, deductibles and co-pays in insurance, and the privatisation of public-sector activities.”

The prize is given to an economist who has made a substantial contribution toward the subject, with an award of 10 million Swedish krona.

Unlike Nobel honours in other sciences and areas, the economics award is a collaboration between Sweden’s central bank, called the Sveriges Riksbank, and the Nobel Foundation.

The prize has previously gone to such major names as Milton Friedman, Paul Krugman, and Friedrich von Hayek. Political scientists whose work has influenced economics as a discipline have also been honoured in the past.

Last year it went to Deaton was given the prize for his work on “consumption, poverty, and welfare.”

NOW WATCH: Scientifically proven things men can do to be more attractive

NOW WATCH: Money & Markets videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.