Oliver Hart and Bengt Holmstrom won the Nobel Economics Prize from the Royal Swedish Academy, for their work on the contract theory.
Oliver Hart is an English born American economy professor at Harvad university. He studied Maths at King’s College (Cambridge) and Economics Sciences at Warwick’s University. Bengt Holmström is an MIT economic professor since 1994. He published a book in 2011 named « Inside and Outside Liquidity » with Jean Tirole (Nobel Economic Prize 2014).
They based their work on the corporate governance, bankruptcy legislation and political constitution. For example, their theory considers that, managers should get paid bonuses for their perfomance, or teachers pay’s should not just be based on students’ test scores, but set in a way that would also reward way they teach.
« This theory as really been incredibly important, not just for economics, but also for other social sciences » said Per Stromberg, member of the prize committee.
The co-winners divided their researchs. Hart has focused on the division of power in economic relationship while Holmstrom theory – from the 1970’s – was based on the performance measure in companies.
« My first action was to hug my wife » said Hart who was woken before 5am, waiting for the call phone. They will share the 8 million Swedish crown ($928,000) and will receive the Nobel laureate medal for their researchs.
Sylvain Girard, IEJ 3F