Press Release: The Bank of Sweden Prize in Economic Sciences
in Memory of Alfred Nobel 2002
9 October 2002
Royal Swedish Academy of Sciences has decided that the Bank
of Sweden Prize in Economic Sciences in Memory of Alfred Nobel,
2002, will be shared between
Princeton University, USA
“for having integrated insights from psychological research
into economic science, especially concerning human judgment and
decision-making under uncertainty”
Vernon L. Smith
George Mason University, USA
“for having established laboratory experiments as a tool in
empirical economic analysis, especially in the study of alternative
Psychological and experimental economics
Traditionally, much of economic research has
relied on the assumption of a “homo śconomicus” motivated
by self-interest and capable of rational decision-making. Economics
has also been widely considered a non-experimental science, relying
on observation of real-world economies rather than controlled laboratory
experiments. Nowadays, however, a growing body of research is devoted
to modifying and testing basic economic assumptions; moreover, economic
research relies increasingly on data collected in the lab rather
than in the field. This research has its roots in two distinct,
but currently converging, areas: the analysis of human judgment
and decision-making by cognitive psychologists, and the empirical
testing of predictions from economic theory by experimental economists.
This year’s laureates are the pioneers in these two research
Daniel Kahneman has integrated insights from psychology into
economics, thereby laying the foundation for a new field of research.
Kahneman’s main findings concern decision-making under uncertainty,
where he has demonstrated how human decisions may systematically
depart from those predicted by standard economic theory. Together
with Amos Tversky (deceased in 1996), he has formulated prospect
theory as an alternative, that better accounts for observed behavior.
Kahneman has also discovered how human judgment may take heuristic
shortcuts that systematically depart from basic principles of probability.
His work has inspired a new generation of researchers in economics
and finance to enrich economic theory using insights from cognitive
psychology into intrinsic human motivation.
Vernon Smith has laid the foundation for the field of experimental
economics. He has developed an array of experimental methods, setting
standards for what constitutes a reliable laboratory experiment
in economics. In his own experimental work, he has demonstrated
the importance of alternative market institutions, e.g., how the
revenue expected by a seller depends on the choice of auction method.
Smith has also spearheaded “wind-tunnel tests”, where
trials of new, alternative market designs – e.g., when deregulating
electricity markets – are carried out in the lab before being
implemented in practice. His work has been instrumental in establishing
experiments as an essential tool in empirical economic analysis.
Daniel Kahneman, born 1934 (68 years) in Tel Aviv, Israel (US
and Israeli citizen). PhD from University of California at Berkeley
in 1961. Since 1993, Eugene Higgins Professor of Psychology and Professor
of Public Affairs at Princeton University, NJ, USA.
Vernon L. Smith, born 1927 (75 years) in Wichita, KS, USA (US
citizen). PhD from Harvard University in 1955. Since 2001, Professor
of Economics and Law at George Mason University, VA, USA.
The Prize amount: SEK 10 million, will be shared equally among
Contact persons: Katarina Werner, Information assistant,
phone +46 8 673 95 29, firstname.lastname@example.org
and Eva Krutmeijer, Head of information, phone +46 8 673 95 95,
+46 709 84 66 38, email@example.com