Berkeley - George A. Akerlof, an economics
professor at the University of California, Berkeley, was named
the 2001 co-winner of the Nobel Prize in economic sciences
today (10/10/01). It is the second consecutive year in which
the Nobel has gone to a UC Berkeley economist.
Akerlof, described by a colleague as "a citizen of the
profession," is the author of a landmark study on the role
of asymmetric information in the market for "lemon" used
cars. His research broke with established economic theory
in illustrating how markets malfunction when buyers and
sellers - as seen in used car markets - operate under different
information. The work has had far-reaching applications
in such diverse areas as health insurance, financial markets
and employment contracts.
Akerlof shares the prize with economists A. Michael Spence
of Stanford University and Joseph E. Stiglitz of Columbia
University for their contributions to the analyses of markets
with asymmetric information.
Akerlof, 61, is UC Berkeley's 18th Nobel Prize winner.
He is the university's fourth economics professor and the
third in seven years at the university to be so honored.
Economics professor Daniel McFadden shared the prize last
year. The now-deceased John Harsanyi, a professor of economics
and business administration, won the Nobel Prize in 1994;
and Gerard Debreu, a professor emeritus of economics and
mathematics, won the prize in 1983.
Since joining UC Berkeley's economics department in the
College of Letters & Science as an assistant professor in
1966, Akerlof has been recognized for his research that
borrows from sociology, psychology, anthropology and other
fields to determine economic influences and outcomes. His
areas of expertise include macroeconomics, poverty, family
problems, crime, discrimination, monetary policy and German
Akerlof is married to economist Janet L. Yellen, the Eugene
and Catherine M. Trefethen Professor at UC Berkeley's Haas
School of Business and professor of economics. Yellen served
as chair of the President's Council of Economic Advisers
from 1997 to 1999 and was a member of the Board of Governors
of the Federal Reserve System. Akerlof and Yellen have worked
together on numerous research projects. Their son Robert,
20, is a junior at Yale University. "He has real flashes
of insight into human problems, into what may explain social
phenomena," Yellen said. "It's wonderful to work with him;
he's so original."
colleague and fellow Nobelist McFadden said Akerlofs
receipt of the Bank of Sweden Prize in Economic Sciences
in Memory of Alfred Nobel resulted from what amounted to
a revolution in the understanding of what makes markets
work, a revolution that was led by Akerlof. McFadden, who
lives near Akerlof, dropped by to congratulate him in person
early this morning.
Akerlof's award today came as no surprise to many of his
fellow economists at UC Berkeley and around the country.
"More than any other person in economics, George has worked
to show how the insight from sociology and psychology could
broaden, enrich and increase the power of economics. He
is, in my opinion, perhaps the most imaginative and creative
applier of insights from other disciplines," said Henry
Aaron, senior fellow at the Brookings Institution.
"George Akerlof's contributions to economics have been
fundamental, from his celebrated paper describing the role
of asymmetric information between buyers and sellers in
the market for 'lemons' to his work that helped launch the
burgeoning field of behavioral economics," said Alan Auerbach,
chairman of UC Berkeley's economics department. "All the
while, he has made crucial contributions to macroeconomic
theory, thereby demonstrating the extraordinary breadth
of his interests."
Christina D. Romer, a colleague in the economics department
at UC Berkeley, wrote in a 1996 evaluation of Akerlof's
work that he was almost certainly destined to win a Nobel
Prize. She praised his path-breaking work that incorporates
psychological insights into models of economic behavior.
Also known as an outstanding professor, Akerlof earns teaching
evaluations by his students that "are simply off the charts,"
Romer said. His commitment to the university, the economics
department and his students "is legendary," Auerbach said.
"George is a kind generous, and enthusiastic person who
loves economics," Romer said. "He contributes immeasurably
to the department by simply being the kind of person he
The native of New Haven, Conn., developed a keen interest
in economics as a child growing up in the shadow of the
Great Depression of the 1930s, an era he called the "catastrophe
that took over the world."
"I've always been interested in why people are poor," he
said. "What economics is about is trying to prevent poverty
insofar as that is possible."
Akerlof earned a bachelor's degree at Yale in 1962 and
a PhD at the Massachusetts Institute of Technology in 1966.
He is a Non-resident Senior Fellow at the Brookings Institution
and a research associate of the Canadian Institute for Advanced
Research. He also is one of five Richard and Rhoda Goldman
Distinguished Professors in the College of Letters & Science,
appointed in 1997 for five-year terms.
Additional awards he has received include a Guggenheim
Fellowship, Fulbright Fellowship, Fellow of the Econometric
Society and Fellow of the American Academy of Arts and Sciences.
He served as senior staff economist with the Council of
Economic Advisers from 1973-1974 and was visiting research
economist in the special studies section of the Federal
Reserve System Board of Governors from 1977 to 1978.
He is a former Cassel Professor of Economics with Respect
to Money and Banking at the London School of Economics,
and visiting professor at the Indian Statistical Institute
in New Delhi.
In "An Economic Theorist's Book of Tales" (Cambridge University
Press, 1984), Akerlof discussed his approach to his work.
"Economic theorists, like French chefs in regard to food,
have developed stylized models whose ingredients are limited
by some unwritten rules," he wrote. "Just as traditional
French cooking does not use seaweed or raw fish, so neoclassical
models do not make assumptions derived from psychology,
anthropology, or sociology. I disagree with any rules that
limit the nature of the ingredients in economic models."