Professor A. Michael Spence Shared 2001 Nobel Prize
Courtesy Stanford GSB Archive
Research by Spence, who won the prize with two other academics, explained how information affects markets.
A. Michael Spence, Philip H. Knight Professor and dean, emeritus of Stanford Graduate School of Business, was awarded the 2001 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. He shared the prestigious prize with George A. Akerlof of the University of California at Berkeley and Joseph E. Stiglitz of Columbia University.
The Royal Swedish Academy of Sciences awarded the prize for the trio’s work in information economics. In the 1970s, Spence and his fellow laureates laid the groundwork for a theory about markets with so-called “asymmetric information.”
The Royal Swedish Academy of Sciences said that the winners’ contributions “form the core of modern information economics” — leading to applications in areas ranging from agricultural to financial markets.
“Mike’s fundamental insight lets us understand a huge range of real-world phenomena, from the connection of earnings and education through competitive pricing, to the use of apparently uninformative advertising,” said colleague John Roberts, the John H. Scully Professor of Economics, Strategic Management, and International Business, emeritus at Stanford Graduate School of Business. “Such insights come very, very, rarely.”
Research into “asymmetric information” gave economists a way to measure factors such as risks faced by lenders lacking information about borrowers’ creditworthiness. It also explored how people with inside knowledge of a technology company’s financial prospects gained an edge over other investors, while those who didn’t fully understand a company’s finances may invest unwisely.
The award, said then Stanford President John Hennessy, “reaffirms our conviction that a great business school must be driven by the desire to produce original research and create knowledge that benefits society.”
“We’re immensely proud that Michael’s work has been recognized,” said Robert Joss, then dean of Stanford’s Graduate School of Business. In 2001, Spence became GSB’s third Nobel laureate in economics, following awards to Myron S. Scholes, the Frank E. Buck Professor of Finance, emeritus, in 1997, and William Sharpe, the STANCO 25 Professor of Finance, emeritus, in 1990.
Read the full, original story for more about Spence’s reaction to receiving the award, and his pioneering work in information economics.
