The Economics of Economics Awards

At the annual meeting of the American Economic Association, its president announced that the Clark Medal, presented biennially to the top economist under age 40 (former winner Steve Levitt), will henceforth be given annually.

Along with other medals, this will mean that we give up to four medals each year. Sounds like a lot, but in this profession the supply of honors is very small relative to the demand (the number of economists).

The sociologists present many more per capita, and I believe that is also true in other disciplines. The more awards you give out, the less worthwhile they are to current and past winners. (One Nobelist I know has often complained about the quality of his successors, implying that their awards devalue his.) From an efficiency viewpoint, the purpose of these awards should be to maximize the incentives to produce great work.

I wonder, however, whether the elasticity of supply of effort in response to awards exceeds zero — and I frankly doubt it.

I believe that such awards only represent rents to the recipients and have no incentive effects, so that the only question about them involves the distribution of rents among potential recipients. Regardless, though, deciding upon the number of honors in an association, fraternity, university, or other organization is a tough but important question.

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  1. Chris Milroy says:

    To what extent can we take these awards as signaling devices which focus the attention of people outside the field on important results in the field? If high-quality people get awards, and observers can be informed of that quality by awards, such observers may feel more comfortable with the profession due to their ability to evaluate it with reference to a manageable set of datapoints.

    In that case, the awards may, on net, bring in benefits to the whole field rather than just recipients, depending on the amount of substitution that takes place.

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  2. Snidely says:

    Adding additional awards will only devalue the award for previous (and all future) recipients. You only want true excellence to be rewarded. That;s why the hall of fame concept is better than annual awards. Some perspective allows a more rational review of the work. It’s even more important in economics where the impact of a new theory may not be readily known until decades later. The hall of fame doesn’t help econ professors get tenure, but it is a more objective way of valuing their contribution.

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  3. Joe Smith says:

    Men are motivated by only three things: gold, girls or glory.

    I expect that the giving of a high profile award, like a Nobel Prize, has a halo effect and communicates to those still working in the field that their work is important and is an expression of community values.

    A similar effect probably works with the giving of medals for courage. No one charges an enemy machine gun in the hope of winning a medal per se but they might be more likely to do it if they have been taught through public examples that society values courage.

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  4. Marc Robinson says:

    I disagree about the elasticity. One prominent economist tried very hard to get a Nobel, adjusting his research topics, citing the work of Swedish economists, and increasing his research output. The fact that this effort was ineffective – at least to date – is interesting as well. Economics as a profession has benefited enormously from the decision of the Bank of Sweden to endow a Nobel Memorial Prize and of the press and king to give it the same attention as the other Nobels. This has attracted numerous graduate students into the discipline, creating a different sort of positive elasticity.

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  5. Debbie R. says:

    For this award given only to people under the age of 40 it seems particularly unfair to award it only every two years.

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  6. AB says:

    Debbie, that rule has just been changed. They are now rewarding economists every year. The rumor around here (Chicago) is that is because many committee members joining the committee this year felt Levit’s coauthor, List, was robbed last year and now he is too old to win. That is what people at the annual meetings were saying too, where it was changed.

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