John Bates Clark Award...

On Daron Acemoglu: In Search of Lost Times...

Casual observance of modern day Economics might lead one to believe that the discipline is devoted to manufacturing apologists for the status quo or Don Quixotes who charge up theoretical windmills riding their mathematical horses. But, like all casual empiricism, beyond a notional grain of truth, this is a false conclusion. The falsity of the original observation is perhaps best exemplified by the wide variety and extraordinary rigor displayed in the works of individuals who go on to win major prizes in the discipline. Every two years, one economist is typically awarded the John Bates Clark (JBC) Award – arguably, the most prestigious (and portentous?) award in the Economics, barring the Nobel itself. This year the award was received by Daron Acemoglu of MIT for a wide range of contributions – for most strikingly his work on the role of institutions in economic growth. The JBC award is given by the American Economic Association to the best economist in the US under the age of 40. (Analogously, mathematicians/computer scientists award the Rolf Nevallina every 4 years as well, won last by Madhusudan of MIT as well.)

An obvious question is. Why is this award prestigious?

The ‘prestige’ component is a natural implication of basic sampling theory. Because of the large sample of economists (real and “policy entrepreneurs” as Paul Krugman identifies some) in the US – the distribution of quality of research is arguably continuous (but unfortunately very rarely ‘differentiable’ vis-à-vis long term implications for the discipline). That is, there are large number of remarkable theorists and empiricists on either ends of the quality spectrum; unlike say in the Economics Association of Sri Lanka or Catalonia owning to their small samples to start with. Thus, prestige emerges by virtue of being conditionally selected from a large sub-sample comprising of other-wise extraordinarily (and sometimes preternaturally) gifted peers.

There is a second component as well. Part of the prestige arrives from the implicit assent by the discipline that this researchers' agenda deserves wider recognition. Most commentators on the JBC (see Stephen Dubner on previous winner Steve Levitt in the New York Times) have made a big deal out of the possible correlation between the JBC winners going on to win Nobel Prizes. The mechanics of how this correlation works is key to understanding how the discipline itself operates. Eleven out of the thirty winners of the JBC have gone on to win the Nobel itself. But as any decent teacher of econometrics will tell you that there is a certain degree of endogeneity in this correlation which makes any such conclusion spurious in a strict sense. Although the JBC in of itself is awarded for “promising work” and as an incentive for sustained contributions; what it more importantly does is provide marginally more visibility to otherwise hyper-competitive array of research agendas. (This blog reaffirms that.) Given this new found visibility, it is entirely conceivable that a large number of existing research work are either tweaked or new ones are spawned given the previous work. Since, the Nobel Prizes are typically given for influencing the course of the discipline and spawning a whole panoply of research ideas -- the JBC ends up, often enough, causing the Nobel prize -- conditional on the Nobel winner being an American.