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Stanford Report, October 10, 2001

Spence shares Nobel with Joseph Stiglitz, former Stanford professor

Michael Spence of Stanford is sharing this year’s Nobel for economics with George A. Akerlof of the University of California at Berkeley and Joseph E. Stiglitz, a former Stanford economics professor who now teaches at Columbia University.

Stiglitz first came to Stanford as a professor of economics from 1974 to 1976 and he returned to the same position in 1988. From 1992 until this summer, Stiglitz was the Joan Kenney Professor of Economics – a post previously held by Nobelist Kenneth Arrow. Stiglitz also was a senior fellow at Stanford’s Hoover Institution.

In the early 1990s, Stiglitz went on leave from the Economics Department to work in Washington, D.C. He first served as a member of President Bill Clinton’s Council of Economic Advisers in 1993 and became the group’s chairman in 1995. From 1997 until late 1999, Stiglitz was chief economist at the World Bank. He taught at Stanford in Washington before moving to Columbia University, where he is now professor of economics, business and international affairs.

Outside the world of politics, Stiglitz is best known for his work as a founder of the “economics of information” in the 1970s. In awarding the prize, the Royal Swedish Academy of Sciences cited Stiglitz’s concept of “screening.” “Stiglitz showed that an uninformed agent can sometimes capture the information of a better-informed agent through screening, for example by providing choices from a menu of contracts for a particular transaction. Insurance companies are thus able to divide their clients into risk classes by offering different policies, where lower premiums can be exchanged for a higher deductible,” the academy said in a statement.

Earlier in their careers, both Spence and Stiglitz were consecutive recipients of the prestigious John Bates Clark Medal, awarded by the American Economic Association every two years to an outstanding economist under 40. (Stiglitz was given the medal in 1979, Spence in 1981.)