Nobel Prize Winners
The theories of these five men: John C.
Harsanyi, John Nash, Reinhard Selten,
Robert W. Fogel, and Douglass C. North,
made an abundant progress in the
Economic Sciences in America and the
economy. For these great accomplishments,
these five were awarded the Noble
Peace Prize in Economic Sciences in
1994(Harsanyi, Nash, Selten), and
1993(Forgel, North). The three economists who
was awarded the Noble Peace
Prize in 1994 for their excellent work and progress
in game theory was know
as pioneers in using games like chess and poker as the
foundation for
understanding complex economic issues. This was precisely half a
century
after John Von Neumann and Osar Morgenstern launched the field with
the
publication of "The Theory of Games and Economic Behavior." "John F.
Nash
of Princeton University(a American economists), John C. Harsanyi of
the
University of California at Berkeley(a Hungarian economist), and
Reinhard Selten
of the Rheinische Friedrich- Wilhelms-Universitat in Bonn(a
German economists),
shared the award, and the $930,000 cash award for their
achievements in
economics."1 The trios accomplishment portrayed the
significance of Von
Neumann and Morgenstern's contribution to game
theory, which was recognized by
economists and others almost immediately. The
lessons they drew from homely
games like chess and poker had exemplified
universal application to economic
situations in which the participants had
the power to anticipate and affect
other participants' actions. Harsanyi
stated "it is a theory of strategic
interactions...of rational behavior in
social situations in which each player
has to choose his moves on the basis
of what he thinks the other players’
counter moves are likely to be"2
Economists did not have an immediate success
in applying their insights to a
field whose preoccupation with the idea of"free competition" required that the
ability of each particular participant
to influence outcomes be negligible.
So instead, game theory found all kinds of
immediate applications in the
1950's to problems of the Cold War, everything
from airplane dog-fights to
doctrines of massive retaliation. "In book
'"Prisoner's Dilemma," writer
William Poundstone records the heady
intellectual excitement around the
Institute for Advanced Study at Princeton and
Rand Corp. in Santa Monica,
Calif., which was where much of the early work was
done."3 Nash hinted the
first formal breakthrough meanwhile he was still a
young instructor at the
Massachusetts Institute of Technology. He succeeded in
generalizing a set of
problems known to economists since the 1840's, when
Augustine Cournot
began writing about what might happen when two big companies
collide with one
another in the marketplace. Nash also formulated a universal"solution concept"
for many-person '"noncooperative" games (meaning
those in which has no
outside authority assures that players stick to some
predetermined rules).
His name was thus attached to the whole range of
possibilities that might
arise from successfully seeing through a rival's
strategy, they have been
called "Nash equilibria" ever since. "It was a
very deep achievement,"4 said
Princeton's Avinash Dixit, who was among those
who nominated Nash for the
prize. Nash accomplished many other things, including
introducing a formal
theory of bargaining into economics (which the Swedes did
not mention in the
main body of their citation). But he made his way mainly as a
pure
mathematician, doing widely admired work, exhibiting many of
the
eccentricities that are associated with the model of that professional
type.
Though Thomas Schelling, a University of Maryland economist
demonstrated how
many game theory concepts could be applied to economics. The
awards were given
to Harsanyi, 74, and Selten, 64. Both researchers proved
important mathematical
theorems while refining the concept of Nash
equilibria, and Harsanyi in
particular has ventured into topics of
philosophy. The two economists, Robert W.
Fogel and Douglass North, won
the Nobel Prize in 1993 were known as pioneering
economic historians for
economics. These two turned the theoretical and
statistical tools of modern
economics on the historical past: on subjects
ranging from slavery and
railroads to ocean shipping and property rights. Fogel,
a professor at the
University of Chicago, often is described as the father of
modern econometric
history. He’s especially noted for using careful empirical
work to overturn
conventional wisdom. North, a professor at Washington
University in St.
Louis, was honored as a pioneer in the "new" institutional
history. In the
Nobel announcement, they specifically mention North’s research
in 1968 that
showed how organizational changes played a greater role in
increasing
productivity than did technical change. "The Cambridge native has
also
written a series of books, including "The Rise of the Western World"
in
1971 and "Structure and Change in Economic History," which set out
with
clarity how the role of institutional change, and property rights, could
be
expected to play in a rigorous theory of economic development."5 Fogel
is
identified with two issues in particular. There was a 1964 book arguing
that the
spread of the railroad was not as important to the opening of the
American West
as had been argued by Joseph Schumpeter and Walt Rostow.
Using"counterfactual" arguments (supposing that things had happened
differently
than they did, and examining what the consequences would have
been) and a great
deal of benefit-cost analysis, Fogel argued that canals
would have done the job
just as well as the "iron horse," which probably
contributed no more than 3
percent to the growth of gross domestic product,
according to his calculations.
In a second, "Time on the Cross," written
with Stanley Engerman and
published in 1974, Fogel argued that the
institution of slavery had been more
profitable than previously thought. His
conclusion influenced a decade of
controversy, and he was said to be somehow
endorsing slavery. Fogel later
published a four-volume study called "Without
Consent or Contract," in which
he argued forcefully that slavery ended not
because it was economically
inefficient, but because it was morally
repugnant. "I think it was Bob Fogel
who coined the term cliometrics for the
application of econometric theory to
history,"6 said Harvard University
professor John Meyer. It was Meyer, with a
seminal paper on the economics of
slavery written with Alf Conrad in 1967, who
started the excitement over
using the econometric methods that emerged from
World War II to the study
history. Deeply embedded in North’s theories about
economic history is the
belief that technical innovations alone are not enough
to affect economic
development; institutions, such as laws, constitutions, and
norms of
behavior, play a vital role. He states that "Institutions form the
incentive
structure of a society, and the political and economic institutions,
in
consequence, are the underlying determinants of economic performance
North
also theorized that it is the interaction among such institutions
and
organizations as political parties, schools, churches, and trade unions
that
shapes the evolution of an economy. This mean, if the institutional
framework
rewards piracy, then piratical organizations will come into
existence; and if
the institutional framework rewards productive activities,
then
organizations/firms will come into existence to engage in productive
activities.
In 1968 he applied this theory to the great upswing in
productivity experienced
by the shipping industry in the 19th century. He
showed that the boom was caused
not by technical improvements, but rather by
efforts to reduce piracy and
improve emergency services. North also devoted a
lot of time to using his
theories to address the question, "Why do some
countries become rich while
others remain poor? In answering this question
North found out that it is
essential to understand that history repeatedly
demonstrates that the evolution
of phenomena including prejudice, myths, and
ideologies all play a great role in
explaining societies and change. Towards
the end of North’s Study, he merge
towards the theory that the past is an
ideal testing ground for hypotheses about
economics and the various forces
that propel economic development. He also
specifically stated that "Economic
history is about the performance of
economies through time,"7 which he stated
in his Nobel Peace Prize lecture.
The Game Theory and the theory of
Economic Development made an impact on the
American society that allowed
the society to improve in sensibility. Though Nash
and North was the main
source in creating the theories, the other three’s
input helped allow the
theories to be of more meaning to the society. These two
theories has and
will continue to influence other perceptions of the American
economy because
society learn and improve from each other, but the basis will
always remain.
Therefore, these five recipients will always remain and be
remembered as
being part of America’s Economic Science
history.
Bibliography
Business Week, Published, 1994 Harsanyi,
John C., Harsanyi Autobiographical
Essay Harsanyi, John C., Papers in
Game Theory, Published, 1982 New York Times,
Published, 1993 Nash, John,
Essays on Game Theory, Published, 1997 North,
Douglass C., Structure and
Change in Economic History, Published 1976 The Boston
Globe, Published
1994.