Two Americans win the Nobel Prize in economics

By MARTHA IRVINE

Associated Press

CHICAGO — The Nobel Prize in economics today went to two American professors who developed ways to analyze how people make everyday decisions such as where to live, when to get a job and how to travel.

James J. Heckman of the University of Chicago and Daniel L. McFadden of the University of California at Berkeley were lauded for their efforts in the area of microeconometrics, which combines economics and statistics.

Their work in developing techniques to look at how people make lifestyle decisions contributed to the design of educational training programs, urban transportation systems and housing for the elderly, the Royal Swedish Academy of Sciences said in Stockholm.

McFadden and Heckman will split the prize, which is worth $915,000 this year.

"Economics is really about understanding the world — and changing it — and not in a messianic fashion but in an honest fashion," Heckman, 56, told a Chicago news conference via telephone. He was in Brazil to present a paper on the relationship between government policy and unemployment.

Heckman is the 21st scholar who has worked or studied at the University of Chicago to win the economics prize since its creation in 1968.

A native of Chicago, Heckman is best known for his studies of labor patterns — for example, examining when and how much married women work.

McFadden’s models aim at determining how people choose from different alternatives when deciding where to live, how to travel and what to buy. His work was instrumental in the design of the San Francisco commuter train system as well as investments in phone service and housing for the elderly, the academy said.

Heckman and McFadden "developed techniques that have really dominated everything I do for as long as I can remember," said Jeffery Evans, a scientist specializing in population and family data at the National Institutes of Health in Bethesda, Md. "They looked at the factors that produce different trajectories over one’s life. Their techniques allow us to accurately predict which factors are responsible for which effects."

McFadden, a native of Raleigh, N.C., said he was delighted that his work was recognized.

"The economics community is just a few thousand. I guess one always figures you have a one-in-a-thousand chance," the 63-year-old professor said.

He described his work as a way to study "what one might call ‘life’s big choice’ " such as when to marry and how many children to have.

McFadden also was recognized for methods used to evaluate the effects of the 1989 oil spill from the Exxon Valdez tanker off the Alaskan coast.

The Nobel in economics practically belongs to the University of Chicago. Among the biggest names to win the prize at the university are Milton Friedman and George Stigler.

"I’ll tell you one thing. I feel relieved to get a Nobel Prize because this tradition can be quite oppressive," Heckman said, drawing laughter from his colleagues.

Gary Becker, a University of Chicago economist who won the prize in 1992, said the university earned its reputation by bringing promising and even controversial economists on board.

The university, he said, was willing to put "chips in places where there’s a great deal of uncertainty," noting that Heckman’s early work in the 1970s was not widely accepted.

This year, the academy has focused on scientific discoveries applicable to everyday life instead of purely theoretical breakthroughs.

The Nobel Memorial Prize in Economics — the fourth in a week of awards — was not one of the original prizes established in Alfred Nobel’s will more than a century ago. It was created to mark the tricentennial of Sweden’s central bank.

The Nobel Prizes in medicine, physics and chemistry were announced earlier in the week. The literature award will be announced Thursday, and the peace prize, the only one awarded in Oslo, Norway, will be announced Friday.

The prizes always are presented on Dec. 10, the anniversary of Nobel’s death in 1896.

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