Economists are in the dog house after a succession of bad calls, from the failure to spot the 2008 banking crash to the impact of the Brexit vote, which many said would be terrible and has so far only dented growth.
That means any cheering for the winner of the Nobel prize in economics when it is announced on Monday might be muted. What economist can expect a hero’s welcome when the standing of the profession with the general public is probably at an all-time low?
Will the prize awarding committee decide that the equilibrium models it has rewarded for so many years are broken and choose from outside the mainstream? From the look of the runners and riders nominated by Thomson Reuters, who are singled out for the number of citations in journals and reports and articles they have produced, the mainstream still rules.
They are all from major US universities and appear to accept the basic tenets of the profession. Worse, according to Kingston University’s Steve Keen, they tinker with the existing models of economic activity rather than accept the models are wrong.
The Sveriges Riksbank prize in economic sciences in memory of Alfred Nobel may not be among the official prizes, being devised at a later date than the prizes for chemistry and medicine, but it is still an important guide to how the profession thinks about the world, and how connected it is to the real economy.
Olivier Blanchard
Blanchard came to prominence as chief economist at the International Monetary Fund. Appointed by former French finance minister Dominique Strauss-Kahn to bring a less conservative influence to bear, he was left high and dry when Strauss-Kahn was forced to quit following a sex scandal, and the right of centre Christine Lagarde took over. He stepped down last year to become the C. Fred Bergsten senior fellow at the Washington-based Peterson Institute. He is also an economics professor at MIT.
George Osborne took him to task while chancellor after Blanchard said the UK’s severe austerity measures were “playing with fire”. The Frenchman apologised, and has since made strides in explaining why mainstream macroeconomic models can be so wide of the mark. More specifically he has studied economic fluctuations and how they affect employment.
Edward Lazear
Lazear was not educated at the notoriously free market Chicago University economics department, but he has taught there. He has since returned to California and is the Morris Arnold and Nona Jean Cox senior fellow at Stanford’s Hoover Institution, where he is a professor of human resources, management and economics.
His research centres on employee incentives and how they can improve productivity. He has taken these studies and almost turned them into a management guide, using economic models to show how employees can be made to work more efficiently.
Marc Melitz
A professor of political economy in Harvard’s department of economics, Melitz’s citations reached a peak in 2014, and that might mean he is out of the running. But giving him the award would show the Nobel committee’s despair at the anti-globalisation sentiment seen in Europe and the US.
His work is known for showing how free trade weeds out weaker businesses and allows those that win international deals to flourish.
Last year’s winner was the Scottish economist Angus Deaton, who won for his work studying poverty, so there could be a swing to the right this year for the sake of balance.
Paul Romer
The World Bank’s new chief economist is endlessly cited as a possible winner after making his reputation in the 1980s with his study of economic growth and technological change.
In recent years Romer has come to criticise the mainstream economic establishment, arguing against the fashion for mathematical equations in econometrics, which dominates university teaching, preferring economics that takes human behaviour into account.
New York University’s Stern Business School, where he teaches, caused a storm on Thursday when it inadvertently published a press release naming him as the 2016 winner and inviting journalists to a press conference. A very embarrassed official quickly took down the release and the Nobel committee said a decision had yet to be made.
