The Nobel Prize

2014 Jean Tirole (b. 1953)

Jean Tirole is one of the most influential economists of our time. He has made important theoretical research contributions in a number of areas, but most of all he has clarified how to understand and regulate industries with a few powerful firms.

Many industries are dominated by a small number of large firms or a single monopoly. Left unregulated, such markets often produce socially undesirable results – prices higher than those motivated by costs, or unproductive firms that survive by blocking the entry of new and more productive ones.
From the mid-1980s and onwards, Jean Tirole has breathed new life into research on such market failures. His analysis of firms with market power provides a unified theory with a strong bearing on central policy questions: how should the government deal with mergers or cartels, and how should it regulate monopolies?
Before Tirole, researchers and policymakers sought general principles for all industries. They advocated simple policy rules, such as capping prices for monopolists and prohibiting cooperation between competitors, while permitting cooperation between firms with different positions in the value chain. Tirole showed theoretically that such rules may work well in certain conditions, but do more harm than good in others. Price caps can provide dominant firms with strong motives to reduce costs – a good thing for society – but may also permit excessive profits – a bad thing for society. Cooperation on price setting within a market is usually harmful, but cooperation regarding patent pools can benefit everyone. The merger of a firm and its supplier may encourage innovation, but may also distort competition.
The best regulation or competition policy should therefore be carefully adapted to every industry’s specific conditions. In a series of articles and books, Jean Tirole has presented a general framework for designing such policies and applied it to a number of industries, ranging from telecommunications to banking. Drawing on these new insights, governments can better encourage powerful firms to become more productive and, at the same time, prevent them from harming competitors and customers.

2013 Robert J. Shiller (b. 1946)

Robert J. Shiller is Sterling Professor of Economics, Department of Economics and Cowles Foundation for Research in Economics, Yale University, and Professor of Finance and Fellow at the International Center for Finance, Yale School of Management. He received his B.A. from the University of Michigan in 1967 and his Ph.D. in economics from the Massachusetts Institute of Technology in 1972. He has written on financial markets, financial innovation, behavioral economics, macroeconomics, real estate, statistical methods, and on public attitudes, opinions, and moral judgments regarding markets.

Professor Shiller was awarded the 2013 Nobel Prize in Economic Sciences, together with Eugene Fama and Lars Peter Hansen of the University of Chicago, "for their empirical analysis of asset prices."


His 1989 book Market Volatility (MIT Press) is a mathematical and behavioral analysis of price fluctuations in speculative markets. His 1993 book Macro Markets: Creating Institutions for Managing Society's Largest Economic Risks (Oxford University Press) (available via subscribing libraries on Oxford Online) proposes a variety of new risk-management contracts, such as futures contracts in national incomes or securities based on real estate that would permit the management of risks to standards of living. His book Irrational Exuberance(Princeton 2000, Broadway Books 2001, 2nd edition Princeton 2005) is an analysis and explication of speculative bubbles, with special reference to the stock market and real estate. His book The New Financial Order: Risk in the 21st Century (Princeton University Press, 2003) is an analysis of an expanding role of finance, insurance, and public finance in our future. His book Subprime Solution: How the Global Financial Crisis Happened and What to Do about It, published in September 2008 by Princeton University Press, offers an analysis of the housing and economic crisis and a plan of action against it. He co-authored, with George A. Akerlof, Animal Spirits: How Human Psychology Drives the Economy and Why It Matters for Global Capitalismpublished in March 2009 by Princeton University Press. His latest book, Finance and the Good Society, was published in April 2012 by Princeton University Press.

2013 Lars Peter Hansen (b. 1952)


Lars Peter Hansen is an internationally known leader in economic dynamics who works at the boundary of economics and statistics. He was recently awarded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for his early research.  Hansen shares this honor with Eugene Fama and Robert Shiller.
Hansen’s early research in econometrics was aimed at developing time series statistical methods to investigate one part of an economic model without having to fully specify and estimate all of the model ingredients. The applications he explored with several coauthors included systems that are rich enough to support models of asset valuation and to identify and clarify empirical puzzles, where real-world financial and economic data were at odds with prevailing academic models.
Hansen is recognized for making fundamental advances in our understanding of how economic agents cope with changing and risky environments. He has contributed to the development of statistical methods designed to explore the interconnections between macroeconomic indicators and assets in financial markets. These methods are widely used in empirical research in financial economics. 
Hansen’s recent work focuses on uncertainty and its relationship to long run risks in the macro economy. He explores how models that incorporate ambiguities, beliefs, and skepticism of consumers and investors can explain economic and financial data and reveal the long-term consequences of policy options. Hansen and coauthors have recently developed methods for modeling economic decision-making in environments in which uncertainty is hard to quantify.  They explore the consequences for models with financial markets and characterize environments in which the beliefs of economic actors are fragile.
Currently, Hansen is co-principal investigator on a research initiative with the Macro Financial Modeling Group (MFM) that works to develop macroeconomic models with enhanced linkages to financial markets, with the aim of providing better policy tools for monitoring so-called systemic risks to the economy. He is also contributing his expertise on decision-making under uncertainty to a collaborative effort as part of the Center for Robust Decision Making on Climate and Energy Policy (RDCEP) to develop dynamic economic models in which economic activity could influence the climate. 

Before receiving the Nobel Prize in Economic Sciences, he received several other awards and honors. Hansen won the 2010 BBVA Foundation Frontiers of Knowledge Award in the Economics, Finance and Management “for making fundamental contributions to our understanding of how economic actors cope with risky and changing environments.” He also received the CME Group-MSRI Prize in Innovative Quantitative Applications in 2008 and the Erwin Plein Nemmers Prize in Economics from Northwestern University in 2006.

He was selected to deliver the Princeton Lectures in Finance at the Bendheim Center for Finance in December 2010, the Tjalling C. Koopmans Memorial Lectures at Yale in September 2008, and the Third Toulouse Lectures in Economics at the Universit√© de Toulouse in May 2005.

Hansen joined the faculty of the University of Chicago's Department of Economics in 1981 and has served as department chairman and director of graduate studies. He is now David Rockefeller Distinguished Service Professor of Economics, Statistics, and the College. Hansen guides the scholarly direction of the Becker Friedman Institute and chairs the Institute Research CouncilHe was one of the forces, along with John Cochrane and John Heaton, behind the 2006 creation of the Joint PhD Program in Financial Economics which is run jointly by Chicago Booth School of Business and the Department of Economics.  
Hansen is a fellow of the National Academy of Sciences and the American Finance Association. He also is a member of the American Academy of Arts and Sciences and past president of the Econometric Society.
He holds a bachelor's degree in mathematics and political science from Utah State University and a doctorate in economics from theUniversity of Minnesota.  Hansen also received an honorary doctorate from Utah State University in 2012.

2013 Eugene F. Fama (b. 1939)

Eugene F. Fama is widely recognized as the "father of modern finance." He is the joint recipient of the 2013 Nobel Prize in Economic Science with Lars Peter Hansen of the University of Chicago and Robert J. Shiller of Yale University. Fama's financial research is well known in both the economics and investment community. He is strongly identified with research on markets, particularly with regard to the efficient market hypothesis. Through his research he has brought an empirical and scientific rigor to the field of investment management, transforming the way finance is viewed and conducted.

He is a prolific author and researcher, having written two books and published more than 100 articles in academic journals. Fama is among the most cited of America's researchers. He focuses much of his study on the relation between risk and return and implications for portfolio management.

Fama has received numerous awards and honors. He was the 2007 recipient of the Fred Arditti Innovation Award given by the CME Center for Innovation. In announcing the year's award, Myron S. Scholes, Nobel Prize-winning economist and chairman of CME's Competitive Markets Advisory Council said, "Eugene Fama has had pathbreaking insights into the functioning of markets, asset pricing theory, and corporate finance that have benefited market participants worldwide. He has written extensively on the efficiency of markets, setting the backdrop for the transfer of risks through futures contracts such as those traded on the CME. His innovative research has resulted in his participation in the development of many new finance products and in the development of new futures contracts for hedging risks."

2012 Lloyd S. Shapley (b. 1923)

Lloyd Shapley was born on June 2, 1923, in Cambridge, Massachusetts, one of the sons of Martha (Betz) and the distinguished astronomer Harlow Shapley, both from Missouri.[5] He attended Phillips Exeter Academy and was a student at Harvard when he was drafted in 1943. He served in the Army Air Corps in Chengdu, China and received the Bronze Star decoration for breaking the Soviet weather code.[6] After the war, he returned to Harvard and graduated with an A.B. in mathematics in 1948. After working for one year at the RAND Corporation, he went to Princeton University where he received a Ph.D. in 1953. His thesis and post-doctoral work introduced the Shapley value and the core solution in game theory. After graduating, he remained at Princeton for a short time before going back to the RAND corporation from 1954 to 1981. Since 1981 he has been a professor at UCLA.


Along with the Shapley valuestochastic games, the Bondareva–Shapley theorem (which implies that convex games have non-empty cores), the Shapley–Shubik power index (for weighted or block voting power), the Gale–Shapley algorithm (for the stable marriage problem), the concept of a potential game (with Dov Monderer), the Aumann–Shapley pricing, the Harsanyi–Shapley solution, the Snow–Shapley theorem for matrix games, and the Shapley–Folkman lemma & theorem bear his name.