The Bank of Sweden committee awarded its fake Nobel prize in economics to Finn Kydland and Edward Prescott Monday afternoon. I'm agnostic toward Mr. Kydland, but Edward Prescott is the latest in a long line of certifiable quacks prized by the committee. Mr. Prescott, who teaches at Arizona State, but previously taught at Minnesota, and Carnegie-Mellon is probably most famous for arguing in a respected journal, that the Great Depression was the result of workers taking a long vacation (so that's what all those Okies were doing on Route 66, they were headed to California to tour Yosemite, not to work picking lettuce for $1.00 a day.) Prescott is also famous for claiming his macroeconomics students never heard of John Maynard Keynes.
Unlike in the physical sciences, where Nobel prizes are awarded for verifiable achievement considered to be of great importance in chemistry, physics, or medicine, the economics award is routinely given to individuals whose work is simply wrong, and often proved wrong before they receive the award, like in 1995 when University of Chicago economist Robert Lucas received the prize for "rational expectations", the preposterous theory that human beings act like perfect, utilitarian robots in an economic context. Lucas had stopped doing work in rational expectations long before he was ever prized, then six-years later the committee prized Spence, Akerlof and Stiglitz for research that flatly contradicted Lucas's theory. In 1974 they gave the Bank of Sweden prize to Myrdal and Hayek, two men who theorized on the same issues and came to polar opposite conclusions. In 1997 the committee prized Merton and Scholes for techniques used to model risky derivatives, while both men were on the payroll of Long Term Capital Management, a hedge fund that went bankrupt less then a year later, using the techniques Merton and Scholes had been given the Bank of Sweden prize for. Then of course there was the prizing of Ronald Coase, for his work on property rights. The Coase theorem stipulated that pollution can best be controlled by the free market, without getting into the details, his theory has so many holes in it, Coase himself admits it has no following, except on the Bank of Sweden committee apparently. And let me not forget Milton Friedman, who made being wrong about everything lucrative, so long as you taught at, or you matriculated from the University of Chicago.