Nobel economics prize awarded to Milgrom and Wilson for auction theory work - as it happened

Graeme Wearden

from on 2020-10-12 12:01 (#5915P)

Robert Wilson and Paul Milgrom are sharing the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for their work on auctions

Earlier:

1.01pm BST

So, that's the 2020 Nobel Prize season wrapped up for another year.

Here's our news story on Paul Milgrom and Robert Wilson's success today....

12.39pm BST

In a rather lovely development, Paul Milgrom has told Reuters that Robert Wilson woke him up this morning to tell him their shared happy news:

Milgrom told Reuters that Wilson, who lives across the street from him in Stanford, California, came to knock on his door in the pre-dawn hours to tell him of their shared award because his phone had been on silent mode so he could sleep.

Milgrom played down the winner's curse, saying the main thing was to be aware of it.

12.09pm BST

Here's the FT's take on why they won..

Mr Wilson showed why rational bidders tended to place bids below their own best estimate of the common value - because they were worried about the winner's curse" of paying too much and losing out, the committee said.

Mr Milgrom formulated a more general theory of auctions that allowed for calculating both common values and private values that vary from bidder to bidder.

12.06pm BST

Correction: This year's prize is worth 10 million Swedish Krona - not 9m as I wrote earlier (now corrected).

Apologies, I'd forgotten it went up this year.

11.55am BST

Today's announcement is a double win for Stanford, as both Paul Milgrom and Robert Wilson are based there.

This year's Laureates, Paul Milgrom and Robert Wilson, have studied how auctions work. They have also used their insights to design new auction formats for goods and services that are difficult to sell in a traditional way, such as radio frequencies. Their discoveries have benefitted sellers, buyers and taxpayers around the world.

People have always sold things to the highest bidder, or bought them from whoever makes the cheapest offer. Nowadays, objects worth astronomical sums of money change hands every day in auctions, not only household objects, art and antiquities, but also securities, minerals and energy. Public procurements can also be conducted as auctions.

11.34am BST

Q: What will you use the prize money for, now you've bought the ski boots already?

Robert Wilson replies that he can't do much travelling with it during the pandemic. [reminder, his share is 5m krona, or around $560,000].

Probably I'll just save it for my wife, my children.

We have a phrase... you put it in a sock". Save it, and wait for another time.

11.29am BST

Q: how has the internet changed the world of auctions?

It's changed it very profoundly", Robert Wilson replies. Thanks to the Internet, auctions are run on a continual basis by various enterprises.

11.23am BST

Robert Wilson is on a rather crackly phone now (he's based at Stanford University in California, where it's 3am!)

Q: How are you feeling about your win?

It's very happy news, We're very glad about it.... It's very early in the morning here.....

It you look at an advertisement from a search engine - that advertisement was probably sold at an auction

It's something that you encounter a lot, but I'm not myself much of a participant in auctions.

My wife points out to me that we bought ski boots on eBay. I guess that was an auction.

11.08am BST

The Academy then produce a picture of Edvard Munch's The Scream.

Not, as you might expect, to sum up 2020. But as an example of how items have private values, as well as common value components.

The auction theory developed by Paul Milgrom and Robert Wilson has been instrumental when designing new and complex auction formats....and implemented all around the world -- to sell radio spectrum, fishing quotas, airport landing slots and electricity allowances.

11.01am BST

In the 1960s, Robert Wilson began to investigation auctions with a common value - one that is unknown beforehand, but is the same to all bidders, the Academy continues.

That could be bidding for fishing quotas - where the value is determined by not only the quota, but the future value of the fish. Bidders need to estimate that value, so they could potentially overpay.

This is something known as the Winner's Curse.

10.57am BST

Auctions are everywhere. People use auctions to buy and sell items on internet sites, explains the Royal Academy.

Electricity markets are organized as auctions. Financial assets, CO2 emissions allowances and radio spectrum are all organised as auctions.

The auction theory provided by Paul Milgrom and Robert Wilson is key for understanding how these objectives can be reached.

10.50am BST

The 2020 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel has been awarded to Paul R Milgrom, and Robert B Wilson.

They are being recognised for their work on auction theory, and the invention of new auction formats....

10.48am BST

The announcement is underway, at the Royal Swedish Academy of Sciences in Stockholm.

Goran K. Hansson, general secretary of the Royal Academy, says this year's award is for auctions.....

10.44am BST

10.28am BST

Three years ago, the economics prize was behavioural economist Richard Thaler, who pioneer the nudge theory'.

Thaler joked that he would spend the 9m krona prize as irrationally as possible", but also had these encouraging words for those of us who never came top of the class....

I wasn't a great student. My thesis advisor famously said that, when interviewed about my time at graduate school, We didn't expect much of him'.

"I wasn't a great student. My thesis advisor famously said: 'We didn't expect much of him'" - Richard Thaler, 2017 Laureate in Economic Sciences.

Tomorrow the recipient(s) of the 2020 Prize in Economic Sciences will be announced - stay tuned!#NobelPrize pic.twitter.com/aSKLn4xL0I

10.24am BST

Elinor Ostrom was the first woman to be awarded the Prize in Economic Sciences.

She was awarded the prize for work on human cooperation, showing how natural resources can be shared sustainably by a community without central authorities or privatisation.#NobelPrize pic.twitter.com/HReYXTBacJ

10.21am BST

Data analytics firm Clarivate has also produced a list of economic professors who could win today, based on academic citations. All based in the USA, they are:

10.13am BST

Swedish news site The Local has rounded up some of the possible winners of the Nobel economics prize:

American Claudia Goldin, whose research has focused on inequality and the female labour force, is one of the favourites to become the third woman to receive the prize.

Another likely contender is her compatriot Anne Krueger, formerly the number two, and briefly the managing director, at the International Monetary Fund (IMF), who has studied rent-seeking and is a free trade activist.

American Paul Milgrom, 72, together with compatriot Robert Wilson, 83, are once again predicted as favourites for their work on commercial auctions.

Israeli-American Joshua Angrist, a professor at the Massachusetts Institute of Technology in the US, has also been proposed for research into the impact of factors such as class size and study length on academic success and the labour market.

10.10am BST

It's nearly time to learn which esteemed economist(s) are being recognised for their pioneering work in the so-called dismal science".

Over in Stockholm, the Royal Swedish Academy of Sciences is preparing to award the 2020 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. The announcement is due in about 35 minutes....

Hey, it's economics #NobelPrize day!

Still time to defuse the (usual) trolls... pic.twitter.com/T3m6U5Is54

In 2019, colleagues and married couple Esther Duflo and Abhijit Banerjee received the news that they had been awarded the 2019 Prize in Economic Sciences. They became the fifth couple to share a prize.

Who will receive the call this year? Stay tuned to find out very soon. pic.twitter.com/W5ynsGiCwC

9.52am BST

While millions of UK workers face jobs uncertainty, some senior bankers have been seeing out the lockdown in luxurious holiday homes abroad.

But not for long! The Financial Times reports that City of London's top banks are clamping down on staff who have been working from overseas villas since the pandemic forced offices to close.

Senior executives at several large US and European banks confirmed that they were taking a tougher line on the hundreds of staff who began working thousands of miles away because of Covid-19, either to be closer to family or to wait out lockdowns in their more spacious holiday homes.

The main driver for getting people back to the UK is concern about the tax and regulatory consequences of having staff in other countries for an extended period of time. Some banks have summoned their people back to the UK, even if they do not have to come into the office.

Banks call back stayaway staff abroad amid tax warning https://t.co/Txk0ORzLik

9.17am BST

London's stock market has begun the new week quietly.

The FTSE 100 index of blue-chip shares has dipped by 8 points to 6007, having closed at a three-week high on Friday night.

9.02am BST

Faced with a troubled economy and rising unemployment, the Bank of England has asked Britain's commercial banks if they are ready for interest rates to be cut below zero.

As part of this work, we are requesting specific information about your firm's current readiness to deal with a zero Bank Rate, a negative Bank Rate, or a tiered system of reserves remuneration - and the steps that you would need to take to prepare for the implementation of these.

We are also seeking to understand whether there may be potential for short-term solutions or workarounds, as well as permanent systems changes."

Industry figures are understood to have warned Bank officials that their systems cannot currently cope with a zero or negative value for interest rates, as they were designed only for positive values.

So it would take weeks - and vast sums of money - to upgrade their computers.

8.35am BST

Anger over job cuts has forced British Airways' CEO to step down this morning.

My colleague Mark Sweney explains:

Alex Cruz has stepped down as chief executive of British Airways in the wake of heavy criticism of the handling of 12,000 job cuts at the airline.

Cruz will be replaced by Sean Doyle, the chief executive of Aer Lingus. Doyle will also take over Cruz's role as non-executive chairman of BA after a transition period. Both carriers are part of airline group IAG.

8.32am BST

Many small UK businesses fear that they might not survive the Covid-19 pandemic, according to a survey from legal firm Fladgate today.

It found that a fifth of SMEs consider their business to already be in distress, with a further 64% just about surviving on current support measures.

This should be seen as a loud Mayday call by UK SMEs. As the bedrock of the UK's economy, any recovery plan must address the needs of these firms.

Government support cannot and will not continue forever. Private investment, therefore, presents a long-term and sustainable solution for troubled SMEs. As government support schemes draw to a close, private investors provide not only critically needed capital but invaluable guidance and support as businesses look to recover financially.

8.10am BST

The IPPR is urging UK chancellor Rishi Sunak to restructure his job support schemes, or see 1.8m people lose their jobs.

The IPPR thinktank has calculated that the current programmes only protect one of every ten positions currently at risk.

The key flaw in the schemes identified by the research is that only a narrow set of workers earning between 625 and 987 a month would be expected to benefit. Those who fall below the lower bound do not qualify for the Job Retention Bonus and the bonus is too small to be an incentive to keep workers earning above the higher band. This means only about one in ten workers currently on furlough could benefit from the current job support schemes, according to IPPR.

It is shocking how narrow the range of workers is who would benefit from the current government schemes. Overall, nine in ten jobs at risk will not be saved by the schemes, at great and wider economic cost.

A design change to employment support schemes could save hundreds of thousands of viable jobs and hugely improve value for money. It would target resources at those firms that truly need it rather than paying out money to all firms that used job support schemes at some point - including those that are now doing fine or even profited from the pandemic.

7.59am BST

The Institute of Public Policy Research, another leading think tank, also fears that UK unemployment could head towards 3m soon.

They, like the CEBR, don't believe Rishi Sunak's latest moves will protect many of the jobs most at risk.

The IPPR is warning of nearly three million job losses. It adds that almost two million people of the three million people presently on furlough had been working in viable roles - that is jobs that are likely to return once Covid-19 restrictions are lifted.

The government's jobs support schemes will preserve only about 230,000, meaning that just under 1.8 million viable jobs are still at risk.

7.58am BST

The performing arts are particularly vulnerable to the looming surge in unemployment, with live theatre performances and concerts are still thwarted by Covid-19.

On Wednesday, Parliament square was filled with 400 musicians, playing parts of Holst's Mars', a thunderous and foreboding composition. The performance was part of a musical protest to raise awareness of the hardship that freelance musicians face amid the coronavirus pandemic. They have been hit particularly hard by the virus, which makes live music events almost an impossibility, threatening the livelihoods of venues, musicians and other people working in the industry.

Many performing artists feel let down by the government with the support for the creative sector doing relatively little for the bulk of musicians and the brooding atmosphere created by the performance in Parliament Square foreshadowed fears about jobs and livelihoods beyond the creative industries.

7.18am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

The job market outlook is negative for the coming months...

...the coming winter looks set to be a tough one.

The newly announced furlough scheme is well targeted to soften the blow for businesses in the hospitality sector which now seem most at risk from another shut down. However, from March/ April we know that there are a range of economic knock-on effects from lockdowns and not all businesses in need will find that they are eligible.

So while the scheme is an important lifeline for pubs and restaurants, our rough-and-ready estimates show that it will save at most 150,000 - 250,000 of the 1.5m jobs we estimated will be lost by Christmas."

The strong Q3 performance was driven by consumer spending and the release of pent-up demand as COVID-19 restrictions were relaxed.

However, these effects will wane heading into Q4, while the economy will also face the end of the furlough scheme and likely higher unemployment, tighter COVID-19 restrictions and uncertainties around the future of the UK-EU trading relationship.

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