Two economists Oliver Hart and Bengt Holmstrom have won the 2016 Nobel Memorial Prize in Economic Sciences. Both of them will share 8 million kronor, or about $930,000.
Royal Swedish Academy of Sciences has selected them for their contributions to contract theory which tells how contracts help people deal with conflicting interests.
Their individual theories on contract theory are valuable to the understanding of real-life contracts and institutions, as well as potential pitfalls in contract design. For example, contract theory can be used to analyze performance-based pay for CEOs or deductibles and co-pays for insurance.
Their work provided economists microecomic tools to understand interactions between entities, such as design of performance incentives in firms, corporate governance, privatisation, constitutional law and entrepreneur-investor relationships.
Oliver Hart: He was born in 1948 in London, UK. He holds Ph.D. from Princeton University, US. Presently, he is Andrew E. Furer Professor of Economics at Harvard University, US.
Bengt Holmström: He was born in 1949 in Helsinki, Finland. He holds Ph.D. from Stanford University, US. Presently he is Paul A. Samuelson Professor of Economics and Professor of Economics and Management at Massachusetts Institute of Technology (MIT), US.
About Nobel Memorial Prize in Economic Sciences
In 1968, Sweden’s central bank had added the economic sciences prize as a memorial to Nobel. Thus, economics award is not a Nobel Prize as the others prizes which were established by Swedish industrialist Alfred Nobel in 1895.