Congratulations are in order to Oliver Hart and Bengt Holmstrom, winners on 10 October of the Nobel Memorial Prize in Economics. Even though economics is not a full-fledged Nobel Prize, it has been earned by some splendid social scientists over the years — including a number of people who are not economists at all, from Herbert Simon and John Nash to Daniel Kahneman and Elinor Ostrom.
But one of the Ig Nobel’s charms is that this ridiculous research might actually tell us something about the world. David Dunning and Justin Kruger received an Ig Nobel prize in psychology for their discovery that incompetent people rarely realise they are incompetent; the Dunning-Kruger effect is now widely cited. Dorian Raymer and Douglas Smith won an Ig Nobel in physics for their discovery that hair and string have a tendency to become tangled — potentially an important line of research in understanding the structure of DNA. Most famously, Andre Geim’s Ig Nobel in physics for levitating a live frog was promptly followed by a proper Nobel Prize in the same subject for the discovery of graphene.
A whimsical curiosity about the world is something to be encouraged. No wonder that the credo of the Ig Nobel prizes is that they should make you laugh, then make you think. In 2001, the Ig Nobel committee did just that, awarding the economics prize to Joel Slemrod and Wojciech Kopczuk, who demonstrated that people will try to postpone their own deaths to avoid inheritance tax. This highlights an important point about the power of incentives — and the pattern has since been discovered elsewhere.
Alas, most economics Ig Nobel prizes provoke little more than harsh laughter. They’ve been awarded to Nick Leeson and Barings Bank, Iceland’s Kaupthing Bank, AIG, Lehman Brothers, and so on. The first economics prize was awarded to Michael Milken, one of the inventors of the junk bond. He was in prison at the time.
Fair game. Still, surely there is something in economics that is ludicrous on the surface yet thought-provoking underneath? (The entire discipline, you say? Very droll.)
Where is the award for Dean Karlan and Chris Udry? These two bold Yale professors wanted to figure out whether lack of access to crop insurance was damaging Ghana’s agricultural productivity, so they set up an insurance company, sold insurance to Ghanaian farmers, and accidentally got themselves on the hook for half a million dollars if it didn’t rain in Ghana. (Happy ending: it rained. Also, crop insurance is very helpful.)
Psychologists Bernhard Borges, Dan Goldstein, Andreas Ortmann and Gerd Gigerenzer found they could construct a market-beating portfolio of stocks by stopping people on street corners, showing them a list of company names, and asking which they recognised. Surely an Ig Nobel in finance?
Another psychologist, Dan Ariely, already shared an Ig Nobel prize for medicine in 2008 for demonstrating that expensive placebos work better than cheap placebos. But in recent research with Emir Kamenica and Drazen Prelec, described in Ariely’s forthcoming book Payoff, Ariely paid people to build robots out of Lego. The researchers’ aim: to examine the nature of the modern workplace by dismantling the Lego in front of their subjects’ eyes, to see if they could dishearten them. (They could.) An Ig Nobel in management beckons.
Richard Thaler deserves an Ig Nobel in economics for his long-running column Anomalies, in which he asked his fellow economists a series of questions that seem straightforward but are enormously difficult for economics to answer. Why do investment banks pay high wages even to the receptionists? Why do people overpay in auctions? Why are people often nice to each other? If the Ig Nobel committee wants to repeat the Andre Geim trick, it should hurry up: Thaler may well win the economics Nobel before his Ig Nobel can be awarded.
But my preferred candidate for an Ig Nobel prize in economics is Thomas Thwaites. A few years ago Thwaites set himself the simple-seeming task of replicating from scratch a cheap Argos toaster (retail price: £3.99). He smelted iron in a microwave, tried to produce plastic from potato starch, and generally made a colossal mess. His toaster cost £1,187.54, resembled a disastrously iced birthday cake and melted when plugged into the mains. (“A partial success,” says Thwaites.)
Thwaites’s toaster project thus tells us more about the brilliance and dizzying complexity of the interconnected global economy than any textbook could. He is a shoo-in for the economics Ig Nobel. Perplexingly, however, the Ig Nobel committee awarded him this year’s prize for biology instead after he attempted to live life dressed as a goat. How silly.
Written for and first published in the Financial Times.