Nobel prize in economics goes to ... a woman!

Nobel prize in economics goes to ... a woman!

Hurrah! The Nobel prize for economics has just been awarded to a woman for the first time in its history. Elinor Ostrom won the award with fellow Oliver Williamson for their separate work in economic governance. The pair will share $1.44 million. Not bad for a lifetime’s work.

Why was this win important? Well, because the Nobel committee steered clear of other candidates whose work in any way was involved with the financial crisis. There had been a growing trend over the last few years to giving it to economists who had worked on finance. And even this year, the bookies' favourite was Eugene Fama, the economist who worked on something called , “efficient market hypothesis”.

if there was one economic theory that directly contributed to the economic mess we are in today, I would say his was it! Many see his work as providing financial markets with the theoretical and intellectual legitimacy that got us into the financial crisis in the first place!

How? Well his work believed that investors make mathematically optimal investment decisions with the information at their disposal. As a result, Eugene Fama, wrote, “actual market prices are, on the basis of all available information, best estimates of intrinsic values.” Fama called a market with this virtue an “efficient market” — and argued that the data showed that real-world financial markets are, in fact, efficient, or very nearly so.

But if the markets are already getting it so right, why did we have the crash that we had, and why are we in the world’s worst global recession for 85 years? And why didn’t a single economist shout “STOP” to the traders and investors that kept assuming that house prices would just continue increasing.

And whilst I am at it, why didn’t a single one of these clever economists see the crisis coming? Remember, when mainstream economist get their theories wrong, it is us in the real world that pay a very high price for them!

I am sure you can see why the Nobel committee decided not to court controversy this time around. They already have the Obama factor to contend with!