 Good morning to everybody. I'm the last one to speak on economic topics this morning. And the topic of my talk is the economic prices in economics. And then Professor Hopper invited me to deliver a speech on this topic, for which I gratefully thank him. Of course, I accept it with a lot of enthusiasm, but also with some apprehension. And the reason for this is that to cast a critical opinion on this price implies a critical attitude toward virtually the entire economics profession as it has developed at least during the last 40 years. And this is a very serious implication because it puts into question the scientific value of the activity of tens of thousands of researchers in economic science. However, like everybody here, I believe that an argument should be judged on its own validity and not on the grounds of its implications. And this implies that one should not be reluctant to re-examine an institution, such as the Nobel Prize in Economics. To begin with, let me first clarify that the Nobel Prize in Economics is not a genuine Nobel Prize. It was established only in 1968 by the Central Bank of Sweden on the occasion of its teresentenary. The idea came from the then Central Bank's governor, Per Osbrink, and initially met some resistance by the Swedish Royal Academy of Sciences, which, of course, was invited to become the awarding authority for the new prize as it has been playing this role for the prizes in chemistry and physics. However, the Academy's consent was won by the active lobbying of three people, Assar Lindbeck, economic advisor to the Central Bank governor, Erich Lundberg, professor of political economy at Stockholm University, and Gunnar Mirdal, himself member of the Swedish Royal Academy of Sciences, and a future laureate. Now, the agreement of the Nobel Foundation was easy to secure, as the Foundation would receive additional funding by the Central Bank of Sweden. In addition, the exact name of the new award, the Central Bank of Sweden Prize in Economic Science in Memory of Alfred Nobel, was meant to dissipate any possible confusion with the five original prizes. However, everything else was set up in such a way that confusion would be guaranteed. The procedures for nominating, selecting, and awarding laureates were directly borrowed from, and as a matter of fact, integrated into the procedures used by the Nobel Committees in Chemistry and Physics. After a few years, the Swedish Royal Academy discontinued calling the prize by its full name. At the same time, the Nobel Foundation started providing extensive informational details about the prize exactly as it did for the five genuine prizes. And the thought after effect of assimilating the newly created prizes to the Nobel prizes, or as some would say, to borrow symbolic capital, has been achieved at perfection. It could not be denied that the prize has been a remarkable success to the extent that it lets the American Economic Association to discontinue awarding the Francis Walker Medal in 1977. It could not be denied also that this success received support, even though mainly implicit, from the economic profession. The so-called scholarly journals have published only one single article about the prize in 1985 by Assar Lindbeck himself, who at that time served as chairman of the prize committee. Published books on the prize either offer reverential biographical sketches in one single instance by the laureates themselves, or consist in popularizations of the laureates' theories, the common theme of which is presented as the wish to improve human condition. Some criticisms of the prize have found, however, their way in the everyday press. The grand-grand-nephew of Alfred Nobel, Peter Nobel, has been emphasizing for the last 10 years that the Swedish Central Bank has engaged into a trademark infringement by awarding the prize to stock market speculators, which did not reflect Nobel spirit of improving the human condition. The prize committee is most commonly accused of ideological bias in favor of neoclassical, monetarist, and free market approaches, developed primarily by American men, and against less mainstream and more socially oriented paradigms, developed by male but also female scholars from the developing world. Thus, the prize will reflect and reinforce the existing race in gender-power hierarchies in economics, and its exclusive focus on social relations in terms of prices and markets would be a barrier to new thinking. It is quite clear that these criticisms are fundamentally rooted in the Marxist class analysis, in the same way that Marxist class analysis correctly identifies the issue of class exploitation as historically prevalent, but provides a faulted explanation thereof. I believe the Marxist criticism of the prize is correct in its structure, but faulted in essence. In my opinion, a review of the prize committee's justifications for its choices of laureates as revealed by its presentation speeches and press releases demonstrates, indeed, a clear ideological bias, but only in favor of pro-government and anti-private property theories. And my attempt to demonstrate this anti-free market bias of the Nobel Prize in economics is directly linked to a criticism launched initially by Friedrich von Hayek, himself a laureate of the prize, together with Mirdall in 74. Hayek's banked speech focused on two reasons for which he would have decidedly advised against the creation of the prize would he have been consulted. The only reason that Hayek emphasizes is the high authority the prize confers on a single individual, which in the social sciences, according to him, translates into an undeserved strong influence over laymen. The other reason, namely the apprehension that the selection committee may tend to accentuate the swings of scientific fashion has been proved unfounded according to Hayek himself by his own receiving the prize. However, Hayek's prize was only the sixth of a long series and the subsequent 35 prizes offer enough empirical material to reconsider Hayek's opinion that no particular fashion in economics would be promoted by the prize. The fashion that the prize promotes, in my opinion, is characterized by the use of mathematical models and econometrics by a misrepresentation of the market process and by a defense of all forms of government interventionism. That way, I hope to show that statism has been the driving force behind the prize. When awarding the first prize to professors Frisch and Thindurgen for their pioneering efforts in the development of economics into a mathematically specified and quantitatively determined science, the academy took stock of the line of research that had characterized the development of economics in prior decades. In particular, the academy noted that, quote, one essential object of the laureate's research has been to get away from the vague, more literary type of economics, end of quote. Hence, from its very inception, the prize announced its little respect for all scientific achievements accomplished by verbal economists and decided to promote the new view that economic science is only mathematics and measurement. From the outset, the prize appears in radical opposition to a centuries-long tradition in social sciences. It has been promoting the new mathematical approach to the study of economic phenomena into closely interconnected fields, mathematically formalized theory and empirical research. The rewarded contributions to mathematically formalized theory are overwhelming. Hicks and Aral in 72 for applying differential analysis, Leontief in 73 for his input-output model, Kantorovich and Koopens in 75 for applying linear programming to the problem of allocating resources, Dubru in 83 for incorporating the mathematical theory of sets into economic theory, and Ale in 88 for his rigorous mathematical description of market economy. The prizes of 94, 96 and 2005 went to game theorists for their formal analysis of strategic interactions. Now, the prize committee's choice to promote formal mathematical analysis has important implications for the scientific content and substance of the distinguished contributions. A major problem with the construction of social theories and mathematical foundations lies in mathematics complete independence from and indifference to human action. By themselves, abstract mathematical categories cannot account for the real-world purposeful human behavior. The essence and consequences of different types of action cannot be understood by means of mathematics. Moreover, a formal mathematical analysis could actually lead to an effective loss of knowledge. A case in point is the vanishing of the fundamental distinction between voluntary exchange and forced transfers, so much present in the pre-mathematical verbal economics. Now, this one dimension of human action in this specific distinction cannot be accounted for by mathematical economics, as exemplified in particular by game theory. The so-called non-cooperative game theories which have been the core of this discipline and the very justification for giving the price to John Nash, seem inappropriate for representing the market process. After all, market exchanges are by definition cooperative as they presuppose the respect of the exchangers and third parties property. Accordingly, non-cooperative action implies either isolated action or violation of private property. What game theory has achieved is to completely delude these important distinctions. Competition between buyers and sellers is represented as a trade war and analyzed as if it were a case of armed conflict. Similarly, the imposition of a tax or of regulatory norm is analyzed exactly if it were a case of peaceful exchange between the tax and the taxa. The end result is a misrepresentation of social cooperation, but also government is de facto legitimized as its aggressive and anti-private property nature is being watered down. Hence, mathematical economics is not neutral with respect to the scientific conclusions it raises. As far as the validation process of its conclusions is concerned, mathematical economics faces a second fundamental problem, namely the issue of causality. If mathematics is indifferent to the category of causality as it is, how then could a social law that is a definitive causal relation between social phenomena be established? Here steps in the second leg of the mathematical economics promoted by the price, namely empirical research. Almost every award attribution mentions the empirical base of the laureate's scientific work. Moreover, a substantial number of prizes have been delivered exclusively for advances in econometrics, that is, the area of statistical methods for treatment of data. After the initial prize to Frisch, who had been the founder of the econometric society, the 1980 prize rewarded Lawrence Klein for his pioneering construction of econometric macro models. All these macro models are today used by government and intra-governmental institutions for forecasting the future and fine-tuning macroeconomic policies. As a complement to the macroeconomics, microeconomics was rewarded by the 2000 prize to Heckman and McFadden. In 2003, Engel and Granger were distinguished for introducing new methods for dealing with time-varying volatility. But I believe the most representative of all prizes in econometrics is the 89 award to Havelmau for his clarification of the probability theory foundations of econometrics. The prize to Havelmau is as far as the academy has ever gone in the field of epistemology, which makes it worth examining in some detail. From the outset, the academy declares that economics is an empirical science, the development of which is based on at least two fundamental requirements. One of these requirements is the creation of theories which reflect reality. These are the aforementioned mathematical models. These theories, the second requirement, is a methodology which can be used to quantify and test theoretical relations on the basis of empirical observations. However, the testing of economic theories faces a fundamental problem related to the lack of full conformity between economic relations and available data. And it is for his proposed solution to this very problem that Havelmau was distinguished. The solution he offers, and which is characteristic of the economic science that the prize wants to promote, consists in the reformulation of economic theories in probabilistic terms. Then the academy concludes that methods used in mathematical statistics could be applied to derive stringent conclusions about underlying relations from the available random sample of empirical observations. Hence, the prize promotes positivism without ever naming it. It de facto denies the possibility to arrive at universally valid economic laws by the use of logic. It adheres to the view that knowledge in the social sciences is to be acquired through the same methods that are used by natural sciences. Now, one of the implications of this approach to economics is the relativism of the results of research. As another random set of data derives from other individuals or at other times could confirm different, if not opposite, theoretical relations. And this is actually revealed in a number of prizes with conflicting results. The 93 prize was awarded to Fogel and North for finding out that technological change was not essential for economic growth. Now, this is in direct contradiction with the 87 prize to Sol who found out that technological change was accounting for at least two-thirds of economic growth. Similarly, the 2004 prize was awarded to Kidland and Prescott for having demonstrated that shocks on the supply side may cause the business cycle. And this, of course, is in stringent contradiction with the view that business cycles are caused by demand shocks. And this view underlies the work on stabilization policy by Friedman, rewarded in 76, by Olin and Mead, rewarded in 77, and by Mühndel, distinguished in 99. Notice also that this relativism of conclusions opens the way for an infinite number of prizes being given as any previous assumption could be contradicted by a new set of data. These contradictions, however, seem not to bother the prize committee. The relativism of the economic conclusions is even used to put into question the validity of some approaches that are critical about government policies. Thus, in 82, when rewarding Stigler for his empirical work on economic legislation as being designed by the state in order to favor special group interests, the economy of this life is still unknown. Now, what does it imply? This implies a negation of the possibility to arrive at some general and universal propositions about government regulation, and hence to make a logical critique of governments. In a sense, by promoting the type of fashionable mathematical economics, the Swedish academy has been making the negative case against logical critiques of governments. I believe also that the academy has been equally active in making the positive case for government interventions through the specific content of economic contributions that it has chosen to distinguish. In their substance, the distinguished theorists cover an extremely wide range of economic disciplines. In my opinion, the vast majority of rewarded contributions, however, share in common two basic views. The first view is that the market process is inefficient, and according to the second view, the failures of this inefficient market process needs to be corrected, and government policies are well-fit for achieving this goal. In other words, the government should macro-manage the economy. Let me first deal with the support inefficiencies of the market process. Now, at the surface, the price committee pays due tribute to Adam Smith's demonstration of the spontaneous coordination brought about by the market process. As a matter of fact, all distinctions attributed for advancing the so-called general equilibrium theory pay due tribute and establish such a positive link to Adam Smith. However, there is a nuance here. The price committee believes that the invisible hand of Smith is operating only under some ideal conditions. The real world is a completely different matter. It is filled with imperfections, which are sources of actual market inefficiencies. Now, this view has been expounded by the price committee in 83, while rewarding Dubru for establishing the conditions which guarantee that the price mechanism brings about an efficient utilization of resources. The committee very quickly clarified that this does not necessarily imply a recommendation for laissez-faire. Why? Because there remains the empirical task to assess the extent to which these conditions are fulfilled in an actual economic system. And a non-negligible number of prizes have been won precisely by economists who have developed rationalizations for the alleged market imperfections. Already in 72, a role was distinguished for having demonstrated that there exist general tendencies towards inoptimality in the allocation of resources between research and investment in real capital. In other words, the market would be short-sighted. In 82, Stigler was rewarded for having established the area of economics of information which explains price rigidities and provides a significant point of departure for current research on the ultimate origins of unemployment and inflation. In other words, unemployment and inflation would be a market-driven phenomenon. In 2001, Arkelov received the price for extending this view about the imperfection of information and he even claimed that the market may actually not come into being as informational asymmetries could prevent mutual transactions from occurring. There could be spontaneous mechanisms for solving this problem, but they would be costly themselves which would again mean that the allocation of resources by the market is somehow inefficient. The transaction costs for which calls received the price in 91 also imply in the committee's own assessment that the administrative management of resources in some conditions is more efficient than an allocation of resources that relies on the price mechanism. So in a nutshell, the price has rewarded abundant contributions to the market failure doctrine. Studies of government failures or of market successes have not won the committee's appreciation to any comparable degree. Thus, even when enumerating causes contributions, the committee simply omits to mention the laureates' work on the market's capacity to provide public goods. As a matter of fact, no price has been awarded yet for an in-depth analysis of the essence of governments and of the consequences of their policies. Indeed, such a price would contradict the committee's praise for contributions to the theory of macro-managing the economy. Now the simplest dimension of the theory of economic macro-management is stabilization policy. Stabilization policy is followed by governments in order to smooth the fluctuations of economic activity over the cycle and to make sure the full employment of resources and especially labor. The price committee has taken an apparently ambiguous position on the issue of stabilization policy efficiency. The 76th prize distinguished Friedman for having focused on the importance of money and of unpredictable time lags. The 99th prize rewarded Mundel for having integrated external trade relations and capital movements into the analysis of monetary and fiscal policies. With Mundel, the efficiency of stabilization policy becomes even the main determinant of the optimal size of areas on which a single currency should be used. Now the prices to Friedman and Mundel should not be understood and are definitely not presented by the awarding committee as criticisms of the crude Keynation view that deficit government spending can stabilize the economy. Rather, the rewards theories which are accepting the essence of the Keynation approach and are trying to render stabilization policy ever more efficient. The prize committee has taken an apparently different stance in later years. The price to Kidland and Prescott in 2004 clearly acknowledged the failure of Keynation type counter-cyclical policies which had resulted into stagnation. The Academy distinguished the laureates for their work on expectations and for showing that society could gain from prior commitment to economic policy. Similarly, Phelps was rewarded in 2006 for his analysis of inter-temporal trade-offs in macroeconomic policy. The integration of expectations into the analysis has had, however, a very limited impact on the assessment of economic policy. The recognition that isolated and discretionary policy actions may be inefficient did not lead the prize committee to reject stabilization policy. Rather, it moved it to the view that policy actions at different times should be coordinated and that this inter-temporal consistency would then lead to even improved efficiency. So what appears to be a critique but actually is a rehabilitation of stabilization policy has its roots in the so-called Lucas Critique which the prize committee eventually endorsed in 85. The hypothesis of rational expectations for which Lucas was distinguished had actually been rejected implicitly by the prize committee in 81 when Tobin was congratulated for having referred to the stickiness of wages in his refutation of the rational expectations assumption. I believe the Academy decided to reward Lucas only after it became increasingly clear that rational expectations are an all-purpose assumption that could integrate into and even reinforce the conclusions of Key Nation models. The Lucas Critique states that because individuals can anticipate correctly the results of policy actions and hence change their behavior, the structural relations assumed by macroeconomic models may not hold true. This critique appears to be relatively weak, in my opinion, for at least two reasons. First, it misses the essentialist point that economic policy must be constrained by economic laws implied from the reality of human action. Indeed, if this were not the case, economic relations would be contingent upon the will of the policymakers and it would be meaningless to speak of economic science at all. Second, because it does not adopt this essentialist approach, the Lucas Critique focuses exclusively with the technical problems of how to construct formal models with rational expectations. The end result is not a critique, but again a reformulation of macroeconomic policy. Now, stabilization policy is only one dimension of the theory of macro-managing the economy. A much more abstract but crucial aspect at the are of is a so-called welfare or social choice theory. In a nutshell, social choice theory studies collective actions and establishes the conditions under which individual choices could be considered as socially optimal, that is as promoting society's welfare. Social choice theory offers a fundamental justification for any policy action taken by governments. Now, for any student of marginalism, social choice theory based on aggregation of individual preferences appears as an intellectual error. If individual's welfare could not be compared, how then could the very notion of social welfare be conceived of? The Price Committee in 72 rewarded a role for a critique in this direction, which nevertheless seems to be noticeably mild. A role showed that if individual preferences are assumed to possess a number of mathematically determined qualities, and if social preferences are to possess the same mathematical qualities, then social choices must be taken by a single will and imposed upon society. In other words, a role was rewarded for having shown that dictatorial central tanning is the decision process which is most compatible with mathematically formulated general equilibrium theory. Now, it may be a role while mentioning at this stage that the early prizes have shown a lot of sympathy for the Soviet Union. In 71, when rewarding cuisines, the Committee congratulated the Soviet Union for its economic performance. In 75, when distinguishing Kantorovich for his influence on the economic debate in the Soviet Union, the Price Committee reported loudly the latest findings of the Soviet mathematical school. As a matter of fact, the early prizes have been all focused on the possibility for and techniques of central planning. In my opinion, this also explains why from the Austrian School of Economics, Ludwig von Mises never got the price, and also why Mr. Hayek, whose critique of socialism is significantly less radical, was distinguished. Actually, from the wording of the Price Committee, one wonders whether Hayek was not rewarded for advancing the idea of market socialism. And as we heard yesterday, later writings by Hayek may give some credit to this interpretation. I believe this distinction by the Price Committee of our all findings in social choice theory must be seen precisely in this context of a favorable bias towards central planning. Now, even though central planning has been discarded by reality itself, the Price Committee did not see in the failure of collectivism an empirical reputation of mainstream social choice theory. In 1998, it rewarded Sam for his work on so-called reasonable comparisons between individual preferences. These reasonable comparisons, supposedly by pass are all strategic and would provide theoretical foundations for reconstructing social preferences out of aggregation among individuals. Again, for the student of marginalism, Sam is being distinguished for having rehabilitated welfare theory on grounds that are clearly contradictory with the notion of subjective preferences. Indeed, on which objective basis, neutral to individual's preferences, could one consider that some comparisons of utility are reasonable while others are not. However, whatever the scientific validity of Sam's work, it could not be denied that his conclusions provide an intellectual justification for policies pursued by democratically elected governments. Now, I try to show that the Price Committee by its choices of laureates in economics has promoted scientific endeavors which minimize the importance of the market process and support the rise of governments. But I believe that one should also pay attention to some additional rhetoric used by the Price Committee. When referring to high-ex contributions to business cycle theory, the committee merely noted that his theory of business cycles and his conception of the effects of monetary and credit policies attracted attention and devolved animated discussion. He tried to penetrate more deeply into the business cycle mechanism than was usual at that time. Now, to me, it is unclear whether the Price Committee considered high-ex attempt successful or not and whether it describes to them some value out of time. The next year, however, while contributions to the theory of optimal allocation of resources were distinguished, the committee clearly indicated that the laureates have been able to achieve highly significant results. Furthermore, observed the difference when in 1979 the committee distinguished Arthur Levis who has come to be known for two explanatory models which with the simplicity of genius mark out the causes of poverty. In other words, Levis is a genius for having shown that poverty could originate inside the market process but of course not from governmental policies. And just for the sake of another example, Muneau's research agenda very much influenced by a state at the IMF from 61 to 63 is given the status of a quasi prophecy. Now, I believe the biggest problem that such a pro-government and anti-market bias is raising for the Nobel Prize is its relation to truth. The single goal of scientific research should be the discovery of new knowledge either through correcting past errors or through the discovery of previously unknown truths. Truth, however, does not appear to be the primary concern of the Prize Committee in economics. In his article on the Nobel Prize, Lindbeck summarized the committee's criteria for selecting laureates in the following way. It is also clear that the Prize Awarding Authority has tried to favor constructive contributions rather than contributions that are destructive in the sense of mainly launching criticism that does not lead anywhere. To provide childers on which other scholars can stand and thus climb higher has been favored over attempts to show that everybody else is wrong. Now, this clearly shows that criticism and the possibility that errors could be committed by laureates is somehow impossible. Now, this comment in my opinion perfectly reveals that the actual goal of the Prize Committee has been to promote the mathematical fashion in economics irrespectfully of its validity. And I believe this neglect for truth is essentially a reflection of the Prize Committee's endorsement of the status agenda. Thank you.