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3 share Nobel for economics
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October 10, 2001: 12:48 p.m. ET
The 2001 Nobel prize for economics has been given to 3 U.S. economists.
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NEW YORK (CNNmoney) - The 2001 Nobel prize for economics was awarded Wednesday to three American professors, whose work on the business impact of asymmetric information laid the foundation for a theory of markets used today.
The theory of asymmetric information looks at the disparate levels of knowledge - perhaps about a product or service that necessarily separates, say, a vendor and a buyer - and how this disparity effects their transaction and the process.
"An example might be, when the owner of the firm knows more than the shareholders," Joseph Stiglitz, professor of economics, business and international affairs at Columbia University, and one of the three recipients, told CNNfn.
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Joseph Stiglitz | |
"So the theory asks, how can shareholders ascertain what the firm's real prospects are when they have less information," Stiglitz asked. "It's a pervasive aspect of modern economies."
Stiglitz, 58, is a former White House adviser and former Chief Economist of the World Bank.
The Royal Swedish Academy of Sciences said Stiglitz would share the prestigious $1 million prize with George Akerlof, 61, economics professor at University of California at Berkeley, and Michael Spence, 58, former dean of Harvard and Stanford universities.
"During the 1970s, this year's laureates laid the foundation for a general theory of markets with asymmetric information," the academy said in its citation.
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 CNNfn's Amanda Lang takes a closer look at the three U.S. economists and their achievements. |
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The work of the three economists showed how markets function imperfectly because participants have inadequate or uneven access to information, an obstacle that could, for example, make it difficult for lenders and investors to assess risks properly.
It challenged traditional economic theory that open and unregulated markets function perfectly and efficiently, and suggested that intervention by governments or other institutions may sometimes be needed to address imperfections.
The trio's contributions "form the core of modern information economics" and have led to practical applications in areas ranging from traditional agricultural markets to modern financial markets, the academy said.
-- from staff and wire reports 
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