The Royal Swedish Academy - Nobel Prize Archive Web Site
WASHINGTON DESK - On Tuesday, the Royal Swedish Academy of Sciences awarded the Nobel Prize in economic sciences together with $1.1 million to two economists who will share the medal and the money.
The noted theorists are from Columbia University in New York and Cambridge University at Oxford. They studied how government and the private sector manipulate with incomplete information and often fail to achieve government and private sector aims.
Working independently, the noted eonomists developed theoretical solutions to economic planning and forecasting difficulties.
For example, Vickrey's economic calculations theorized possible methods for setting subway fares and bridge tolls, and pricing electricity provided by public utility companies. Following upon such speculative ideas, Vickrey went on to recommend government policy on methods for conducting sealed Treasury bonds auction sales.
On Tuesday, following the announcement from Stockholm that Vickrey had been designated for the Nobel Prize in economics, CNN carried a story that professor Vickrey has attracted attention at Columbia University in New York for his humorous and eccentric behavior.
For example, Vickrey was reported as advising the Clinton administration to ignore the $5.1 trillion National Debt, saying that if the U.S. were to balance its budget and eliminate the National Debt, the nation's economy would collapse.
Vickrey, the CNN story said, advised the Clinton administration to increase spending programs. The Los Angeles Times played a story on Wednesday that Vickrey had proposed methods to be used by the Clinton administration for the selling of band-spectrum licenses for tele-communications, including cellular phones and the Internet.
Sources at Columbia University told reporters on Tuesday that professor Vickrey is an outstanding theoretical economist but he doesn't have a head for business math. For example, sources said that Vickrey does not know the
value of money. 'He doesn't even know the amount of his own teaching salary.'
Ironically, the Royal Swedish Academy of Sciences credited the scholars with generating 'a better understanding' of an array of economic issues, including taxation, insurance, credit markets and even how private sector organizations should be structured and run from the top down.
Ironically, the Academy praised Vickrey, saying he had provided a theoretical framework for experts to think about such situations and apply the findings in such everyday applications as drawing up contracts that protect the financial interests of both parties.
In his lengthy academic career, Vickrey, a naturalized U.S. citizen and a native of Victoria, British Columbia, has pursued a variety of urban problems. On of his ideas dealt with traffic congestion. It was his notion that government should charge motorists a premium fee to use the roads during peak use-periods. Vickrey rarely uses the public roads himself. He prefers to use the sidewalks where his roller-skates speed him on his way to classes at Columbia.
Vickrey, was a conscientious objector in World War II, when he performed alternative service ostensibly designing a new inheritance tax scheme for Puerto Rico.
Told of his Nobel Prize award on Tuesday, Vickrey said 'I'll try to make the most of the opportunity to keep spreading some of my heretical ideas.'
Professor Mirrlees, was the first to develop and solve a mathematical model of an economy and the effects of income tax on it. Colleagues said Mirrlees' work is fundamental to economists' modern understanding of the income tax. His model is elementary to the modern analysis of complex information and incentive problems.
Mirrlees worked on some of Vickrey's ideas a quarter of a century after they first were made public, refining theories about the structure of an income tax.
Both of the winners are credited with providing ways to consider such hard-to-measure variables as incentive and capability in analyzing the economic activity of the private and public sectors.
Howard Hobbs, Ph.D.,chief economist at the Economics Institute and economics editor of the Republican said on Tuesday he had written to Columbia University and told them 'The Republican has followed the vital work and economic theory of Nobel Laureate William Vickrey since the early 1950's ..."
Hobbs wrote that "... during my graduate economics study in the California Legislature under Ford Fellow Grant No. 5721. William Vickrey's theories first came to our attention regarding taxation in his 1945 study ... on the opposing utility of the factors of efficiency and equity in the redesign of federal income taxation.'
Howard Hobbs wrote 'In fact, I discussed the contrasting tax concepts of Efficiency vs. Equity with Dick Nixon in Sacramento during a 1958 strategy session. Later, during Nixon's first term as president, he
took specific steps to redesign the federal income tax structure.'
Hobbs concluded 'I know he [president Nixon] still had in his mind my conference with him about the early work of professor Vickrey in that 1945 study; now the basis for the 1996 Nobel Prize in economics ... Democratic capitalism derives its incentives for social and economic competition and cooperation entirely from situational availability and strategic uses of information.'
Related Bibliographic References:
- Mirrlees, J.A., (1972) On Producer Taxation, Review of Economic Studies 39, 105-111.
- Mirrlees, J.A., (1974) Notes on Welfare Economics, Information and Uncertainty, in Balch, M., Mc Fadden, D., and Wu, S., (eds.) Essays in Equilibrium Behavior, Amsterdam: North Holland.
- Mirrlees, J.A., (1975) The Theory of Moral Hazard and Unobservable Behavior: Part I, Nuffield College, Oxford, mimeographed.
- Mirrlees, J.A., (1976) The Optimal Structure of Incentives and Authority within an Organisation, Bell Journal of Economics 7 , 105-131.
- Mirrlees, J.A., (1979) The Implications of Moral Hazard for Optimal Insurance, paper presented at a symposium in honor of Karl Borch, Uncertainty and Insurance in Economic Theory, Bergen.
- Vickrey, W., (1939) Averaging of Income for Income Tax Purposes, Journal of Political Economy 47, 379-397.
- Vickrey, W., (1945) Measuring Marginal Utility by Reactions to Risk, Econometrica 13, 319-333.
- Vickrey, W., (1947) An Agenda for Progessive Taxation, New York: Ronald Press.
- Vickrey, W., (1955) A Proposal for Revising New York’s Subway Fare System, Journal of The Operations Research Society of America 3, 38-69.
- Vickrey, W., (1960) Utility, Strategy, and Social Decision Rules, Quarterly Journal of Economics 74, 507-535.
- Vickrey, W., (1961) Counterspeculation, Auctions, and Competitive Sealed Tenders, Journal of Finance 16, 8-37.
- Vickrey, W., (1962) Auction and Bidding Games, in Recent Advances in Game Theory, Proceedings of a Conference, Princeton: Princeton University Press.
- Vickrey, W., (1968) The Problem of Progression, University of Florida Law Review, 437-450.
- Vickrey, W., (1969) Congestion Theory and Transport Investment, American Economic Review 59, 251-260.