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Cooking the Books: A Nobel Prize for Non-Economics

The Nobel Prize for economics is not a real Nobel Prize in that it was not set up by Albert Nobel himself but only by the Bank of Sweden in 1968. It usually goes to some economist who has done research on some obscure aspect of the market economy or on some government economic policy in vogue at the time. If you read the Swedish Academy of Sciences’ reason for awarding this year’s prize to Lloyd Shapley and Alvin Roth you could be excused for thinking that this year was no different. According to the citation it was for having ‘generated a flourishing field of research and improved the performance of many markets’ and ‘for the practical design of market institutions’.

Actually, this just shows up how ignorant or, worse, how deliberately misleading (to create the impression that markets are eternal) is the Academy’s understanding of economics. A position shared by the Times (16 October) when it said that the winners’ ‘studies helped to improve efficiency in markets where price was not an issue.’ But a market where price is not involved is not a market. It’s an oxymoron.

What Shapley and Roth had in fact worked on was how to allocate resources to needs in a non-market context. As the Times went on to say, they worked out in theory (Shapley) and practice (Roth) how to match ‘doctors to hospitals, students to dorm rooms and organs to transplant patients,’ adding ‘such matching arrangements are essential in most Western countries where organ-selling is illegal, and the free market cannot do the normal work of resource allocation’ (like allocating organs to those who can pay the most).

Shapley is a mathematician not an economist and so not concerned with markets, while:

‘Professor Roth is regarded as an authority on a field known colloquially as “repugnance economics” – in essence, the study of transactions where the application of the price mechanism is regarded as morally repugnant, such as the sale of body parts, sperm and eggs, prostitution and even dwarf-throwing.’

So, we really are talking about a non-market way of allocating resources. As socialism will be a non-market society where the price mechanism won’t apply to anything, the winners’ research will be able to be used for certain purposes even after the end of capitalism; which is not something that can be said of the work of most winners of the Nobel Prize for Economics.

No doubt it would continue to be used to allocate organs to transplant patients and students to rooms. In fact, this last could be extended to allocating housing to people living in a particular area. While they may not get their first choice, people would get something for which they had expressed some preference and that corresponded to their needs and circumstances. It might even help answer Bernard Shaw’s question, ‘Who will live on Richmond Hill in socialism?’ Since socialism will be a non-market society the answer can’t be, as it is under capitalism today, ‘those who want to and who can afford to.’ This would not only be ‘repugnant’ but impossible.