The Yale School of Management extends its congratulations to Bengt Holmström on being awarded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, commonly known as the Nobel Prize in economics, for 2016.
Holmström was a faculty member at the Yale School of Management from 1983 through 1994.
Holmström, the Paul A. Samuelson Professor of Economics at MIT, was recognized along with Harvard professor Oliver Hart for seminal contributions to contract theory, particularly work that has increased “understanding of real-life contracts and institutions.” The announcement from the Royal Swedish Academy of Sciences cited papers Holmström authored from the late 1970s through the early 1990s examining the challenges in structuring contracts between principals and agents. Holmström’s work looked at how to link pay to performance in a variety of settings, such as when an owner can’t observe all of an employee’s work or when members of a team can free ride on the labor of others.
Robert J. Shiller, Yale’s Sterling Professor of Economics at Yale, who won the Nobel in 2013, commented, “Bengt was a colleague of mine at SOM for a dozen years. He was a great colleague then, helping me with ideas, and continues to be so today. His work on contracts and the theory of the firm is inspirational, since it gets at the deep principles that underlie the success of such institutions in the modern market economy, and how they might be improved. We live in a world with imperfect information, moral hazard, firm-specific human capital, with a need to delegate, to incentivize, and to write long-term contracts in a rapidly changing world. Bengt brings economic theory into that real world.”
Gary Gorton, the Frederick Frank Class of 1954 Professor of Finance at Yale SOM, who has collaborated with Holmström, said, “This a well-deserved prize for Bengt Holmström. He is a uniquely creative economist, who has made foundational contributions to the field.”
Sharon Oster, the Frederic D. Wolfe Professor of Management and Entrepreneurship at Yale SOM, added, “Bengt was a much valued member of our faculty for a number of years. In addition to the groundbreaking research he did while here—much of it noted by the Nobel committee—Bengt was an active member of the MBA teaching faculty. Bengt was one of the early faculty to do joint teaching with a member of another disciplinary group, teaching a course on organizations with a member of the OB faculty. Many of us still on the faculty recall with affection Bengt’s sense of fun and camaraderie.”
Other Nobel laureates with Yale SOM connections include Oliver E. Williamson, an emeritus professor at the University of California, Berkeley, who previously taught at Yale SOM. He won the prize in 2009.