Not so sexy: winning the Nobel Prize for Poverty
This year’s Noble Prize in Economics has been won by three laureates: Abhijit Bannerjee; Ester Duflo and Michael Kremer, representing MIT and Harvard. (https://www.bbc.com/news/world-asia-india-50048519). The subject matter is a noble cause; also, the economics of winning a Nobel Prize are significant and go beyond the cash value.
While perhaps not very sexy subjects: economics, nor poverty; the benefits of the laureates’ work are significant as well as the prize substantial to the successful laureate. For the latter the benefits are numerous.
The Prize comes itself comes with a cash award and a medal. The cash component is Swedish Krona 8.0 million (approximately €1.2m or US$1.0m). The prize money is split equally if there are multiple winners. In addition, winner receives a medal (composed of 175 grams of 24-karat gold) has an intrinsic market value of US$10,000; higher for its scarcity value.
But the Nobel Prize is not about the money. It is the recognition and prestige associated with it. Certainly for the individual, collective efforts of co-workers. One can trade on a reputation. Also this kudos translates into dollars and value for the associated institutions and universities through fund-raising, transactions as well as attracting better quality students and faculty. Ask Harvard or University of Chicago.
There are some interesting statistics about the Nobel Prize winners. There have been 597 prizes awarded to 950 Laureates to date, yet only 54 have been women. The youngest was 17 (for the Nobel Peace Prize and this year’s Economics Laureate at 47; and 25 years for the traditional ones, announced in Stockholm); the eldest 90 years old. As to nationality the US leads with 29%, followed by the UK (16%), Germany (14%), the bulk of the remaining 41% from greater Europe; then Asia and Latin America.
Looked at it in another way, what was the investment to win a Nobel Prize? Certainly, it is not a specific target for many institutions and individuals (and there are some). However, the kudos of wining is certainly a motivational driver for many scientists. It has been estimated that in 2010 alone over US$ one trillion was spent on pure R&D activities. Consider that Just one basis-point (1/10th of a percent) is equal to US$ 1 billion (1,000,000,000). So, was that the Nobel motivational investment? Go figure!
Money in and money out. So, what did the laureates spend their winnings on? Well while a million sounds a great deal, especially to a silver haired academic or author, it doesn’t go that far. There are some immediate costs just to attend the prize-giving celebrations. On average these incidentals (for clothes, travel, lodging and food, etc) can run up to $20,000 for the prize-giving weekend. Though the banquet, on 10 December in Stockholm, is for free.
Frank Wilczek–Physics 2004 stashed his cash in a savings account. Others paid down debts or mortgages. One laureate built a croquet lawn (Richards Roberts – Medicine 1993; several have funded family education, other transactions or endowed scholarships or given it to charity. Some laureates have felt it was a joint effort, as did John Mather – Physics 2006; with 1,500 co-workers. He donated the prize to a dedicated foundation. That was the feeling Dr. Alvin Roth gave Justin Jenk, who co-hosted the prize winner at the Stockholm School of Economics back in 2012. It is a feeling echoed by this year’s winners.
On a lighter note, the Nobel Prize is the inspiration for a whole sub-industry, such as these spoof awards. The trading dynamics and economics of this sub-industry are significant.
Finally, how much is a year of life worth? The average age of Nobel Prize winner is 63 years. A study by the ‘Journal of Health Economics’ suggested that Nobel Prize winners had an extra two-year life expectancy compared to their peers. Now that is of value.
Justin Jenk is a Director at Gate Capital Group, a specialist investment firm based in London (justin@gatecapitalgroup.com).