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© Steve Pease

Economics©

The Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel

A mouthful, the formal name for this Nobel is so long, it is typically shortened to 'The Nobel Prize for Economics." It was not part of Alfred Nobel's original legacy. Instead, on the 300th anniversary of its founding the chaps in charge of the Bank of Sweden offered to foot the bill for prize money if The Swedish Academy of Sciences would create and judge a new award for outstanding contributions in economics.

The Academy agreed, but its decision was not without controversy since some Laureates, Murray Gell-Man in particular, thought the importance of 'the Nobels" would be cheapened if a lesser science (economics) was recognized with an award. What next, anthropology or sociology? Later, three Laureates, Myrdal, Hayek, and Sen agreed with Gell Man and suggested its abolishment. This happened, of course, after they had already received their own Nobels. Their disdain arose because a prize was awarded to someone (Friedman) whose views differed sharply with their own.

Nonetheless, at its inception, those administering Nobels foresaw Economics evolving into an ever more rigorous, mathematical/statistical field, and with that in mind, they decided to go ahead. Thus in October, 1969, the Swedes began delivering annual announcements and invitations to attend the special December 10th dinner ceremony in Stockholm. The Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel was born.

As noted in an earlier chapter, this is the award John Nash (not Jewish) won. Nash was the brilliant (Beautiful Mind) Princeton mathematician who hoped for a Fields medal in mathematics, but took home a Nobel in Economics as a consolation prize. His contributions to game theory were regarded as important, but he could not be recognized until he emerged from paranoia. In the mid 1980s he started recovering and by 1990, the Committee began considering his nomination. In 1994, he was made an economics Laureate.

While Nobels have gone to many brilliant economists, the awards have frequently triggered controversy. Many prizes have gone for work in esoteric, highly mathematical, corners of the economic landscape and those have generally been unchallenged. But some of the less quantitative, more 'big picture," Nobels have gone for 'discoveries" that challenged the theories of earlier Laureates. Jews, Milton Friedman and Paul Samuelson, are a case in point. Samuelson's views appear to have shifted a bit to the right over the years, but when he first published his classic textbook, Economics, read by several generations of 'Economics 101" college students, Samuelson's notions were decidedly Keynesian. They contrasted sharply with the neoclassical Friedman who received the same award just six years after Samuelson.

According to Burton Feldman, author of The Nobel Prize, since its founding, roughly two-thirds of the Nobels have gone to neoclassicists and one-third to the neo-Keynesians. In 1974, Nobels were awarded to Gunnar Myrdal and Friedrich August von Hayek (both non-Jews). Since Myrdal and Hayek saw the economic world in nearly opposing terms, some, (including both Myrdal and Hayek), found the awards curious. Their concerns were only later widely publicized when Myrdal took exception to Friedman's award.

How one squares the notion that economics is a science, while awarding Nobels to recipients with views so at odds that their prescriptions for solving any particular economic problem would be diametrically opposed, has yet to be explained by the Academy. With the U.S. and world economy lingering between recession and expansion over the years, despite the input of thousands of economists, one might be inclined to think that perhaps Gell-Man was right.

One cannot know if they anticipated how the selections would turn out, but since that first year, this Nobel has become largely U.S. property. Of the fifty-five Prizes, 35.5 have gone to Americans (half United States and half Israel for Daniel Kahneman). The British are a distant second with eight. Norway has three and Sweden two. Six other countries have one, or half of one (Israel).

If the U.S. holds preeminence, so too do the Jews. Through 2004, twenty-one (38 percent) of the fifty-five Economics' Nobels have gone to Jews. (This includes two Laureates, Selten and Merton, whose fathers were Jewish but whose mothers were not.) Of the 35.5 U.S. Nobels, more than half (18.5) were won by Jews. All of the laureates, with the Jewish winners highlighted, are shown in Exhibit 8a.

John Bates Clark Medal in Economics

If anyone questions whether the 38 percent figure (Nobel prizes won by Jews) is a fluke, Jewish recipients of the John Bates Clark Medal confirm it is not. This award is akin to the Fields Medal in Mathematics. It is given every two years to a young (under age 40) American economist conducting important, ground breaking research. In part what makes the award so prestigious is its track record as a precursor to later Nobels. (Eleven of the 28 Clark medalists have gone on to become Nobel Laureates in later years.) The full list of recipients is shown as Exhibit 8b. Of the twenty-eight Medals given since inception, twenty (71 percent) have gone to Jews.

Other Great Economists

Not every great economist receives a Nobel or John Clark Bates Medal. Some die too soon. (You must be alive - and sane - to receive a Nobel.) David Ricardo was a British Jew who began to study economics after making a fortune on the London Stock Exchange. He was among the first to peg inflation to excessive bank lending (too much money in circulation chasing too few goods) and that led to a book and an act of Parliament (establishing England's Central Bank), akin to what we in the United States call the Federal Reserve.

Karl Marx might equally be classed a sociologist, historian, revolutionary, or economist. His Communist Manifesto (written with non-Jew Friedrich Engels) is his most famous work and it involves all four domains. Marx has the distinction of being the spiritual father of Soviet Communism which led over a billion people down the wrong road for a very long time. But, as an influential economist, non-Jew, Adam Smith is perhaps Marx's only peer.

Some great economists did not die too soon, but they did not earn a Nobel. Robert Rubin may be considered a Wall Street financier by some, but as Treasury Secretary under Bill Clinton (and with some help from fellow Jews Alan Greenspan and Lawrence Summers) he drove U.S. economic policy to one of the longest sustained periods of economic growth ever. In its September 29, 2003 issue, Fortune Magazine ranked him as one of the top three Treasury Secretaries of all time (out of 72). To make it even more interesting, the other two were a non-Jew, Alexander Hamilton, and a Jew, Henry Morgenthau, Jr. Two out of three 'ain't bad!" Conversely, Fortune's three worst Treasury Secretaries, Roger B. Taney, William A. Richardson and Ogden L. Mills were all non-Jews. Among prominent Jewish economists (and financiers) who have advised presidents over the years are: Bernard Baruch, Martin Feldstein, Otto Eckstein, Herb Stein, Alan Blinder, Arthur Okun, Walter Rostow, Murray Weidenbaum, and many others.

Whenever you want to curse airline deregulation for your lack of leg room or 'cattle-like" treatment in an airport or on an airplane, think of Alfred Kahn, the Carter Administration economist, who pioneered airline deregulation -- and who brought substantially lower ticket prices in the bargain. Robert Heilbroner wrote the classic The Worldly Philosophers, used as a basic economic history text in colleges for years. Julian Simon, a professor at the University of Maryland, made a famous $1,000 bet with Paul R. Ehrlich, author of The Population Bomb, over future prices of commodities. The bet was a proxy for testing Ehrlich's pessimistic forecasts of gloom and doom versus Simon's optimism. Simon won the bet. David Landes a Harvard Professor wrote, The Wealth and Poverty of Nations which, among other topics, teaches the importance of culture in shaping successful versus failing political economies.

John von Neumann was a mathematician, chemist, computer scientist, and meteorologist, but his (and non-Jew Oskar Morgenstern's) Theory of Games and Economic Theory Behavior was the seminal work in game theory. It ultimately laid the foundation on which John Nash later built his own game theory, advancing the field beyond von Neumann's pioneering effort. Ludwig von Mises was the Austrian economist who challenged what he viewed as the elitist and totalitarian nature of socialist ideology in his books Planned Chaos and The Anti-Capitalistic Mentality.

Jeffrey Sachs, now at Columbia has been a leading economist in the forefront of reforms in Bolivia, Poland and Russia. And one should not close without mentioning New York Times Columnist and John Clark Bates Medal Winner, Paul Krugman, who some Republicans believe manifests his frustration at not yet being named a Noble Laureate in frequent partisan screeds condemning the economics and politics of the Bush administration. Finally, and as identified in a preceding Chapter, Harvard's President, Lawrence Summers, a former Secretary of the Treasury in the Clinton Administration, was an academic and government economist before taking the reins at Harvard.

The Federal Reserve

Occasionally, there is discussion about whether the Chairman of the Federal Reserve Bank is the single most powerful man in the United States, or only second most powerful. Clearly the person heading the Fed is charged with keeping the U.S. economy heading in the right direction and hopefully averting a severe recession or a depression. And through much of post World War II, despite a few bumps along the way, the United States has put in an excellent economic performance. With few exceptions, most financial sages would agree the Fed Chairman has played a critical role in that performance.

There have only been thirteen Fed Chairmen. They include:

Of the thirteen, at least three are Jews: Eugene Meyer (father of Washington Post publisher, Kathryn Meyer Graham), Arthur Burns and Alan Greenspan. Eugene R. Black may also have been Jewish, but that is unconfirmed. Not counting Black, Jews have headed the Fed for 28 of its 91 years, including 26 of the last 35.

Also important was Paul Warburg, an immigrant German Jew and a driving force behind creation of the Fed. Warburg also served, albeit reluctantly, as one of President Wilson's five initial appointments to the Fed Board of Governors (from its 1914 inception until 1918) and was considered by some as the de facto Chairman. As noted on the Federal Reserve Bank of Minneapolis Web site, 'Benjamin Strong, governor of the Federal Reserve Bank of New York, considered Warburg 'the real head of the Board in Washington, so far as knowledge and ability go.'"

Arthur Burns ran the Fed from 1970 to 1978. It was perhaps the most challenging period since World War II. High inflation arising from funding the 1960's Federal Poverty programs and the Vietnam War were later made worse by the economic chaos arising from OPEC's oil embargo following the Yom Kippur War and subsequent OPEC induced oil shortages. A nearly 'perfect storm" laid the stock market low for years and with it came 'stagflation" (simultaneous high unemployment and high inflation.) This, and perceived raw materials shortages, led President Jimmy Carter to discuss our 'national malaise" on prime time television. Perhaps Arthur Burns' happiest day at the Fed was the one when he walked out the door for the last time.

Alan Greenspan, whose eighteen year term was chronicled by Bob Woodward in his book Maestro, receives near universal praise for leading the Fed through one of the most remarkable periods of economic growth in U.S. History. This was a period of numerous crises including: the stock market crash of 1987, the savings and loan melt down, the Long Term Capital liquidity crises, and the dot com bust - and ensuing recession, among others. Both Republicans and Democrats sing Greenspan's praises including then Treasury Secretary James Baker, who said of him 'To my mind there is only one person we can turn to," and President Bill Clinton who said, 'You've done a great job in a period when there was no rulebook to look to." Succeeding Greenspan will be a huge challenge for whomever next heads up the Fed.