Oliver Hart and Bengt Holmstrom were awarded the Nobel Memorial Prize in Economics

Oliver Hart and Bengt Holmstrom were awarded the 2016 Nobel Memorial Prize in Economic Science for their work on improving the design of contracts, the deals that bind together employers and their workers, or companies and their customers.

About Oliver Hart :

Oliver Simon D’Arcy Hart is a British-born American economist and the Andrew E. Furer Professor of Economics at Harvard University. Together with Bengt R. Holmström, he received the Nobel Memorial Prize in Economic Sciences in 2016.

• Oliver Hart was born in Britain to Philip D’Arcy Hart, a famous seminal medical researcher from Great Britain, and Ruth Mayer, Both his parents were Jewish, while his father was a member of prominent noble Jewishfamily Montagu—Oliver’s grand-grandfather was Samuel Montagu, 1st Baron Swaythling.
• Hart is an American citizen and Jewish.He is married to writer Rita B. Goldberg, a Harvard literature professor and author of the second-generation Holocaust memoir “Motherland: Growing Up With the Holocaust.” They have two sons and two grandsons.
• Hart earned his A.in mathematics at King’s College, Cambridge, in 1969 (where his contemporaries included the former Bank of England Governor Mervyn King), his M.A. in economics at University of Warwick in 1972, and his Ph.D. in economics at Princeton University in 1974. He then became a fellow at Churchill College, Cambridge, and a professor at the London School of Economics.
• In 1984, he returned to theS., where he taught at the Massachusetts Institute of Technologyand, since 1993, at Harvard University. He was chairman of the Harvard economics department from 2000 to 2003.
• He is a fellow of the American Academy of Arts and Sciences, of the Econometric Society, of the American Finance Association, a corresponding fellow of the British Academy, and a member of the National Academy of Sciences.
• He has been president of the American Law and Economics Associationand vice president of the American Economic Association, and has several honorary degrees.
• Hart won the Nobel Prize in Economics in 2016 for his work on contract theory.
• Hart is an expert on contract theory, theory of the firm, corporate finance, and law and economics. His research centers on the roles that ownership structure and contractual arrangements play in the governance and boundaries of corporations.
• He has used his theoretical work on firms in two legal cases as a government expert Black and Decker v. U.S.A. and WFC Holdings Corp.

About Bengt Holmstrom :

Bengt Robert Holmström is a Finnish economist who is currently Paul A. Samuelson Professor of Economics at the Massachusetts Institute of Technology. Together with Oliver Hart, he received the Central Bank of Sweden Nobel Memorial Prize in Economic Sciences in 2016.

• Holmström who belongs to the Swedish speaking minority of Finland received his S. in mathematics and science from the University of Helsinki, a Master of Science degree in Operations Research from Stanford University in 1975, and his Ph.D. from the Graduate School of Business at Stanford. He has been on the faculty of M.I.T. since 1994.
• Prior to that he served as an associate professor at the Kellogg Graduate School of Management at Northwestern University and as the Edwin J. Beinecke Professor of Management at Yale University’s School of Management.
• Holmström was elected Alumnus of The Year by the University of Helsinki Alumni Association in 2010.
• Holmström is particularly well known for his work on principal-agent theory. More generally, he has worked on the theory of contracting and incentives especially as applied to the theory of the firm, to corporate governance and to liquidity problems in financial crises.
• Holmström is a fellow of the American Academy of Arts and Sciences, the Econometric Society and the American Finance Association, and a foreign member of the Royal Swedish Academy of Sciences and the Finnish Academy of Science and Letters.
• In 2011, he served as President of the Econometric Society. He holds honorary doctorate degrees from the Stockholm School of Economics, Sweden, the University of Vaasa and the Hanken School of Economics in Finland. Most recently he was awarded the 2012 Banque de France-TSE Senior Prize in Monetary Economics and Finance, the 2013 Stephen A. Ross Prize in Financial Economics and the 2013 Chicago Mercantile Exchange – MSRI Prize for Innovative Quantitative Applications.
• Holmström was a member ofNokia’s board of directors from 1999 until 2012. He is a member of the Board of the Aalto University.
• In 2016 Holmström won theNobel Prize in Economics together with Oliver Hart “for their contributions to contract theory”.

About the Prize :

Dr. Holmstrom, a professor at the Massachusetts Institute of Technology, has had a particular influence on executive pay practices. Dr. Hart, a professor at Harvard, has contributed to the debate about the outsourcing of public services like prisons and garbage collection.

• The prize committee in recent years has shied away from grand economic theories, instead rewarding economists who develop careful insights about smaller questions. Macroeconomics, the field devoted to those broader questions, has fallen into something of an existential crisis in recent years. There is, for now, greater certainty about the value of work on a smaller scale.
• Dr. Holmstrom’s work has focused on employment contracts. Companies would like managers to behave as if they owned the place: working hard and minding costs while taking smart risks. Employees, on the other hand, would like to be paid as much as possible while working no harder than necessary. And performance is difficult to assess.
• Dr. Hart’s work begins from the observation that contracts are incomplete instruction manuals. They cannot specify what to do in every case. Instead, they must stipulate how decisions should be made.