Essay, Research Paper: Nobel Prize Winners

Economics

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The theories of these five men: John C. Harsanyi, John Nash, Reinhard Selten,
Robert W. Fogel, and Douglass C. North, made an abundant progress in the
Economic Sciences in America and the economy. For these great accomplishments,
these five were awarded the Noble Peace Prize in Economic Sciences in
1994(Harsanyi, Nash, Selten), and 1993(Forgel, North). The three economists who
was awarded the Noble Peace Prize in 1994 for their excellent work and progress
in game theory was know as pioneers in using games like chess and poker as the
foundation for understanding complex economic issues. This was precisely half a
century after John Von Neumann and Osar Morgenstern launched the field with the
publication of “The Theory of Games and Economic Behavior.” “John F. Nash
of Princeton University(a American economists), John C. Harsanyi of the
University of California at Berkeley(a Hungarian economist), and Reinhard Selten
of the Rheinische Friedrich- Wilhelms-Universitat in Bonn(a German economists),
shared the award, and the $930,000 cash award for their achievements in
economics.”1 The trios accomplishment portrayed the significance of Von
Neumann and Morgenstern's contribution to game theory, which was recognized by
economists and others almost immediately. The lessons they drew from homely
games like chess and poker had exemplified universal application to economic
situations in which the participants had the power to anticipate and affect
other participants' actions. Harsanyi stated “it is a theory of strategic
interactions...of rational behavior in social situations in which each player
has to choose his moves on the basis of what he thinks the other players’
counter moves are likely to be”2 Economists did not have an immediate success
in applying their insights to a field whose preoccupation with the idea of
“free competition” required that the ability of each particular participant
to influence outcomes be negligible. So instead, game theory found all kinds of
immediate applications in the 1950's to problems of the Cold War, everything
from airplane dog-fights to doctrines of massive retaliation. “In book
'”Prisoner's Dilemma,” writer William Poundstone records the heady
intellectual excitement around the Institute for Advanced Study at Princeton and
Rand Corp. in Santa Monica, Calif., which was where much of the early work was
done.”3 Nash hinted the first formal breakthrough meanwhile he was still a
young instructor at the Massachusetts Institute of Technology. He succeeded in
generalizing a set of problems known to economists since the 1840's, when
Augustine Cournot began writing about what might happen when two big companies
collide with one another in the marketplace. Nash also formulated a universal
“solution concept” for many-person '”noncooperative” games (meaning
those in which has no outside authority assures that players stick to some
predetermined rules). His name was thus attached to the whole range of
possibilities that might arise from successfully seeing through a rival's
strategy, they have been called “Nash equilibria” ever since. “It was a
very deep achievement,”4 said Princeton's Avinash Dixit, who was among those
who nominated Nash for the prize. Nash accomplished many other things, including
introducing a formal theory of bargaining into economics (which the Swedes did
not mention in the main body of their citation). But he made his way mainly as a
pure mathematician, doing widely admired work, exhibiting many of the
eccentricities that are associated with the model of that professional type.
Though Thomas Schelling, a University of Maryland economist demonstrated how
many game theory concepts could be applied to economics. The awards were given
to Harsanyi, 74, and Selten, 64. Both researchers proved important mathematical
theorems while refining the concept of Nash equilibria, and Harsanyi in
particular has ventured into topics of philosophy. The two economists, Robert W.
Fogel and Douglass North, won the Nobel Prize in 1993 were known as pioneering
economic historians for economics. These two turned the theoretical and
statistical tools of modern economics on the historical past: on subjects
ranging from slavery and railroads to ocean shipping and property rights. Fogel,
a professor at the University of Chicago, often is described as the father of
modern econometric history. He’s especially noted for using careful empirical
work to overturn conventional wisdom. North, a professor at Washington
University in St. Louis, was honored as a pioneer in the “new” institutional
history. In the Nobel announcement, they specifically mention North’s research
in 1968 that showed how organizational changes played a greater role in
increasing productivity than did technical change. “The Cambridge native has
also written a series of books, including “The Rise of the Western World” in
1971 and “Structure and Change in Economic History,” which set out with
clarity how the role of institutional change, and property rights, could be
expected to play in a rigorous theory of economic development.”5 Fogel is
identified with two issues in particular. There was a 1964 book arguing that the
spread of the railroad was not as important to the opening of the American West
as had been argued by Joseph Schumpeter and Walt Rostow. Using
“counterfactual” arguments (supposing that things had happened differently
than they did, and examining what the consequences would have been) and a great
deal of benefit-cost analysis, Fogel argued that canals would have done the job
just as well as the “iron horse,” which probably contributed no more than 3
percent to the growth of gross domestic product, according to his calculations.
In a second, “Time on the Cross,” written with Stanley Engerman and
published in 1974, Fogel argued that the institution of slavery had been more
profitable than previously thought. His conclusion influenced a decade of
controversy, and he was said to be somehow endorsing slavery. Fogel later
published a four-volume study called “Without Consent or Contract,” in which
he argued forcefully that slavery ended not because it was economically
inefficient, but because it was morally repugnant. “I think it was Bob Fogel
who coined the term cliometrics for the application of econometric theory to
history,”6 said Harvard University professor John Meyer. It was Meyer, with a
seminal paper on the economics of slavery written with Alf Conrad in 1967, who
started the excitement over using the econometric methods that emerged from
World War II to the study history. Deeply embedded in North’s theories about
economic history is the belief that technical innovations alone are not enough
to affect economic development; institutions, such as laws, constitutions, and
norms of behavior, play a vital role. He states that “Institutions form the
incentive structure of a society, and the political and economic institutions,
in consequence, are the underlying determinants of economic performance North
also theorized that it is the interaction among such institutions and
organizations as political parties, schools, churches, and trade unions that
shapes the evolution of an economy. This mean, if the institutional framework
rewards piracy, then piratical organizations will come into existence; and if
the institutional framework rewards productive activities, then
organizations/firms will come into existence to engage in productive activities.
In 1968 he applied this theory to the great upswing in productivity experienced
by the shipping industry in the 19th century. He showed that the boom was caused
not by technical improvements, but rather by efforts to reduce piracy and
improve emergency services. North also devoted a lot of time to using his
theories to address the question, “Why do some countries become rich while
others remain poor? In answering this question North found out that it is
essential to understand that history repeatedly demonstrates that the evolution
of phenomena including prejudice, myths, and ideologies all play a great role in
explaining societies and change. Towards the end of North’s Study, he merge
towards the theory that the past is an ideal testing ground for hypotheses about
economics and the various forces that propel economic development. He also
specifically stated that “Economic history is about the performance of
economies through time,”7 which he stated in his Nobel Peace Prize lecture.
The Game Theory and the theory of Economic Development made an impact on the
American society that allowed the society to improve in sensibility. Though Nash
and North was the main source in creating the theories, the other three’s
input helped allow the theories to be of more meaning to the society. These two
theories has and will continue to influence other perceptions of the American
economy because society learn and improve from each other, but the basis will
always remain. Therefore, these five recipients will always remain and be
remembered as being part of America’s Economic Science history.
Bibliography
Business Week, Published, 1994 Harsanyi, John C., Harsanyi Autobiographical
Essay Harsanyi, John C., Papers in Game Theory, Published, 1982 New York Times,
Published, 1993 Nash, John, Essays on Game Theory, Published, 1997 North,
Douglass C., Structure and Change in Economic History, Published 1976 The Boston
Globe, Published 1994.

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