On Monday, the University of Chicago recognised two more Nobel economics laureates, as Eugene Fama and Lars Peter Hansen (along with Yale’s Robert Shiller) got calls from Stockholm.
Depending on whether you include people who were no longer affiliated with the university when they won, Chicago has now racked up 28 or 12 economics prizes — far more than any other institution.
So how has it become the Michael Jordan of economics Nobels?
We reached out to three members of the economics prize’s selection committee, and based on their responses, we’ve come up with three explanations.
It’s not about politics
The “Chicago School” of economics is best known for rejecting Keynesianism and government intervention in favour of allowing the free market and rational individuals to best allocate resources.
No one can doubt that school of thought’s influence — its proponents once took control of an entire country.
The question is why the Nobel committee — which is made up of people from a country known for its generous welfare state — appears to consistently reward such a theory.
The answer is, it does not.
In an email, Tore Ellingsen of the Stockholm School of Economics said that in no way was a group of Scandinavians endorsing the “Chicago School,” at least its ostensibly political component:
“…politics never had anything to do with it. But of course that’s for future historians to judge, with more knowledge and the benefit of distance. Moreover, although the prize is awarded in Sweden we always aim to reflect the best judgment of the whole profession, broadly defined.”
Ellingsen’s committee colleague, Peter Englund of the Stockholm School of Economics, said that whether because of geography or tradition, Chicago Nobel winners have been among the least inclined to leave academia for political appointments:
“Many of the great Chicago economists have had essentially their entire career in Chicago, perhaps more so than in other very good places. It must be something about the place that kept them there. Compared to east and west coast economists they also seem to be less attracted by (attractive for) policy jobs in Washington, which may also be a factor.”
A different kind of reputation
That retention rate probably has a lot to do with the school’s singular commitment to research, and the environment from which it emerges.
Which basically means faculty members will rip you to shreds if your work is not good enough.
Here’s what Per Krusell, another committee member based at Stockholm’s Institute for International Economic Studies, told us:
“Chicago ‘breaths economics’ (i.e., the science of economics) in a way I have never felt elsewhere. I gave talks there many times during my over 20 years as a researcher in the US and it was always the most challenging place to present your work because the researchers there are super-focused, stubborn, and smart and driven by understanding the world.
“This atmosphere sends signals to all faculty members (especially the young ones but really everyone) that there is one thing that counts, and only one thing: to break new ground in research.”
Englund also touted Chicago’s unique academic environment:
“The Prize is given for contributions that are ‘door openers’ in the sense that they allow us to see the world from a new angle. Such contributions are likely to emerge in research environments that are simultaneously generous to idiosyncratic ideas and maintain a critical and collegial attitude. I think this is a difficult balance to strike. Perhaps Chicago has done it better than many other places.”
So while it may always remain known for its “Chicago School” in mainstream thought, the university has earned a very different, though perhaps even more gratifying, reputation within academia.
Economics Nobels have only been around since 1969 — the prize was founded by Sweden’s central bank to commemorate its 300th anniversary.
Among the 74 all-time laureates, most happen to be clustered among seven-odd schools (again, it depends on how you count).
But how were those schools chosen?
The prize’s earliest recipients were rewarded for having established basic models still in use today.
And many happened to pass through Chicago at some point in their career.
So as its reputation grew, Chicago was able to become ever more selective about whom it added to its faculty.
“The department makes an effort to hire top people with a desire to do basic research,” Ellingsen said.
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