'A Nobel For the Big Big Questions'

In a rather critical analysis of the 2024 Economics Nobel, commentator Noah Smith has questioned the prize's shift back to 'big-think' theories. He argues that Acemoglu, Johnson, and Robinson's (the winner of the 2024 Economics Nobel) influential work on institutions and development, while intriguing, lacks robust empirical validation. From his blog: The science prizes rely very heavily on external validity to determine who gets the prize -- your theory or your invention has to work, basically. If it doesn't, you can be the biggest genius in the world, but you'll never get a Nobel. The physicist Ed Witten won a Fields Medal, which is even harder to get than a Nobel, for the math he invented for string theory. But he'll almost certainly never get a Physics Nobel, because string theory can't be empirically tested.

The Econ Nobel is different. Traditionally, it's given to economists whose ideas are most influential within the economics profession. If a whole bunch of other economists do research that follows up on your research, or which uses theoretical or empirical techniques you pioneered, you get an Econ Nobel. Your theory doesn't have to be validated, your specific empirical findings can already have been overturned by the time the prize is awarded, but if you were influential, you get the prize.

You could argue that this is appropriate for what Thomas Kuhn would call a 'pre-paradigmatic' science -- a field that's still looking for a set of basic concepts and tools. But it's been 55 years since they started giving the prize, and that seems like an awfully long time for a field to still be tooling up. Meanwhile, making 'influence within the economics profession' the criterion for successful research seems a little too much like a popularity contest. It's how you end up with prizes like the one in 2004, which was given to some macroeconomic theorists whose theory said that recessions are caused by technological slowdowns and that mass unemployment is a voluntary vacation.

In recent years, that looked like it might be changing. Often, the prize was given to empirical economists associated with the so-called 'credibility revolution' -- basically, quasi-experiments. Those cases include Goldin in 2023, Card/Angrist/Imbens in 2021, and Banerjee/Duflo/Kremer in 2019. And when it was given to theorists, they tended to be game theorists whose theories are very predictive of real-world outcomes -- Milgrom/Wilson in 2020, Hart/Holmstrom in 2016, Tirole in 2014, and Roth/Shapley in 2012. Even when the prize was given to macro -- a field where validity is much harder to establish -- it was given to economists whose theories have seen immediate application to pressing problems of the day, such as Bernanke/Diamond/Dybvig in 2022 and Nordhaus in 2018.

In other words, the recent Nobels have made it seem like economics might be becoming more like a natural science, where practical applications and external validity are the ultimate arbiter of the value of research, rather than cultural influence within the economics profession. But this year's prize seems like a step away from that, and back toward the sort of big-think that used to be more popular in the prize's early years.

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