American wins 2006 Nobel economics prize

He said this isn’t easy because people make decisions with incomplete information about the state of the world and how the economy works.

“It’s a great big mess, but I think the messiness was not sufficiently appreciated earlier,” he said.

John B. Taylor, a professor of economics at Stanford University in California, who worked earlier on projects with Phelps at Columbia, called the award “a great honor ... for a brilliant man who has made many contributions to economics.”

He said Phelps did his work at a time economists believed that a government couldn’t lower unemployment without triggering inflation.

“He said, let’s look at the decisions the workers and the firms make,” Taylor said. “They’ll make their decisions on real factors — productivity, the state of demand in that market, things like that. So the overall inflation rate can be higher or lower, but there will be the same unemployment rate.”

In its citation, the academy said that Phelps had advanced the understanding of the trade-offs between full employment, stable pricing and rapid growth, all of which are the central goals of any sound economic policy.

The economics prize has been given out annually since 1969.

Last year’s winners were Robert J. Aumann, a citizen of Israel and the United States, and American Thomas C. Schelling, for their work in game-theory analysis.

The economics prize is the only one of the awards not established in the will left by Swedish industrialist Alfred Nobel 111 years ago.

The medicine, physics, chemistry, literature and peace prizes were first awarded in 1901, while the economics prize was set up separately by the Swedish central bank in 1968.

Last week, the Nobel medicine prize went to Andrew Z. Fire and Craig C. Mello for discovering a powerful way to turn off the effect of specific genes. John C. Mather and George F. Smoot won the physics prize for work that helped cement the big-bang theory of how the universe was created.

American Roger D. Kornberg won the prize in chemistry for his studies of how cells take information from genes to produce proteins, a process that could provide insight into defeating cancer and advancing stem cell research.

The Nobel prizes are presented Dec. 10, the anniversary of the death of their founder. The peace prize is awarded in Oslo and the other Nobel prizes are presented in Stockholm.

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