It's all a big lie. There is no "Nobel Prize" in Economics.
It's all a big lie. There is no "Nobel Prize" in Economics.
The fake Nobel economics prize was part of a ploy to de-democratize control over economic decisions. And it worked!
Another year, another round of Nobel Prizes, and yet another opportunity to remind people that — unlike the other Nobel Prizes — there is no actual Nobel Prize in Economics. There never has been.
The fake Nobel prize in economics was part of a propaganda ploy hatched in the 1960s by Sweden’s activist central bank to imbue neoclassical (aka neoliberal) economic theories with mainstream credibility and respect. The plan was to give what was in essence a radical political ideology the sheen of a real, hard science — in line with the Nobel prizes in chemistry and physics and biology.
That history is reflected in this year’s winners — two obscure economists working in a very narrow field: a subset of game theory that deals with optimizing auctions. Wow! Wait, auctions? Huh?
We’re surrounded by oligarchy, austerity, corporate power over every aspect of our lives, environmental destruction on a global scale. And we’re talking designing slightly more efficient auctions? I don’t know about you, but it seems like some seriously narrow-minded accountant-type work given our dire apocalyptic times.
I’m not the only one who thinks so. Economist Branko Milanovic explicitly criticized the award for highlighting fringe free-market tweekers, while passing over economists who are actually tackling important political questions and trying to make sense of our world and our time — things like China’s recent transformation and growth, or the political failure of Russia’s privatization, or the possible ties between slavery and capitalism, or the effect of monopolies on society. Instead, while the world burns, the prize was awarded to two narrowly focused technocrats whose only contribution to society has been to make markets more efficient.
I agree with Branko. But the problem is that the fake Nobel prize in economics has always had a political objective — and a very particular institutional history.
The prize was designed to take economics out of the realm of politics and thrust it into the realm of hard sciences. The point was to make people think economics ran on immutable and natural laws — kinda like physics. The larger agenda was to unshackle society from post-WWII Keynesianism. Specifically: to weaken democratic and state control over economic decisions.
People forget that economics has historically been a synonym for politics and ideology — in fact, one of the early founders of the profession explicitly called economics “political arithmetic,” a term that describes what’s going on better than anything we use today.
So the fake Nobel economics prize was part of a larger political movement among American and European corporate elites to depoliticize — that is, to de-democratize — control over economic decisions. The point was to take it out of the public realm and place it back into the hands of private interests. So it’s not surprising that this history continues to exert influence on the prize today. In that sense, the prize is part of the problem. By normalizing neoliberal economic ideology, it helped cause the very apocalypse we’re facing in our age of late industrial capitalism.
I wrote about this prize’s forgotten history years ago. Searching around for the article, I found it had all but been erased from the Internet. It’s almost impossible to find using Google. So I’m reprinting it below.
—Yasha Levine
PS: I just found out that a book came out on this very same topic — four or five years after I published my article. It’s called The Nobel Factor: The Prize in Economics, Social Democracy, and the Market Turn. I haven’t read it yet, but it looks great.
As Branko described it in his review:
Avner Offer and Gabriel Söderberg (“The Nobel factor: the prize in economics, social democracy and the market turn”) look at the strange death of social democracy at the hands of market liberalism. That death was accelerated by the role of the Nobel prize in economics that conferred to economics an allure of science and that was used to much greater profit by neoliberal economists to push for their version of economic policies.
The Nobel Prize in Economics? There is no Nobel Prize in Economics
Yasha Levine • October 2012
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 retrograde free-market economics credibility and the appearance of scientific rigor. 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.”
Here’s a Nobel family member describing it: “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 “It’s most often awarded to stock market speculators. . . . 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 anniversary 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.
Scientists never had much respect for the new economic Nobel prize. In fact a scientist who headed Nixon’s Science Advisory Committee in 1969 was shocked to learn that economists were even allowed on stage to accept their award with the real Nobel laureates. He was incredulous: “You mean they sat on the platform with you?”
That hatred continues to simmer below the surface, and periodically breaks through and makes itself known. Most recently, 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 be utterly meaningless.
The question is: Why would a prize that draws so much hatred and negativity from the scientific community be added to the Nobel roster so late in the game? And why economics?
To answer that question we have to go back to Sweden in the 1960s.
Around the time the prize was created, Sweden’s banking and business interests were busy trying to ram through various free-market economic reforms. Their big objective at the time was to loosen political oversight and control over the country’s central bank.
According to Philip Mirowski, a professor at the University of Notre Dame who specializes in the history economics, the “Bank of Sweden was trying to become more independent of democratic accountability in the late 60s, and there was a big political dispute in Sweden as to whether the bank could have effective political independence. In order to support that position, the bank needed to claim that it had a kind of scientific credibility that was not grounded in political support.”
Promoters of central bank independence made their arguments in the language of neoclassical market efficiency. The problem was that few people in Sweden took their neoclassical babble very seriously, and saw their plan for central bank independence for what it was: an attempt to transfer control over economic matters from a democratically elected government and place into the hands of big business interests, giving them a free hand in running Sweden’s economy without pesky interference from labor unions, voters and elected officials.
And that’s where the Swedish Central Bank Prize in Economic Sciences came in.
The details of how the deal went down are still very murky. What is known is that in 1969 Sweden’s central bank used the pretense of its 300th anniversary to push through an independent prize in “economic science” in memory of Alfred Nobel, and closely link it with the original Nobel Prize awards. The name was a bit longer, the medals looked a little different and the award money did not come from Nobel, but in every other way it was hard to tell the two apart. To ensure the prize would be awarded to the right economists, the bank managed to install a rightwing Swedish economist named Assar Lindbeck, who had ties to University of Chicago, to oversee the awards committee and keep him there for more than three decades. (Lindbeck’s famous free-market one-liner is: “In many cases, rent control appears to be the most efficient technique presently known to destroy a city — except for bombing.”)
For the first few years, the Swedish Central Bank Prize in Economics went to fairly mainstream and maybe even semi-respectable economists. But after establishing the award as credible and serious, the prizes took a hard turn to the right.
Over the next decade, the prize was awarded to the most fanatical supporters of theories that concentrated wealth to the top .0001%.
In 1974, five years after the prize was first created, it was awarded to Friedrich von Hayek, the leading laissez-fair economist of the 20th century and the godfather of neoclassical economics. Milton Friedman, who was at the University of Chicago with Hayek, was not far behind…
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