Nobel laureates: Common good requires incentives, high-quality education and freedom of choice
The new graduate school and research institution Helsinki Graduate School of Economics, or Helsinki GSE, had its official opening ceremony 24 October 2018. The Nobel Memorial Prize for Economics 2016 winner, MIT Professor Bengt Holmström questioned in his keynote the often-repeated reason for the predominance of universities in the United States.
’Discussions in Europe keep repeating the trope that universities in the US perform well because they have a lot of money. I would counter this and say that money tends to follow the best people and ideas. I had the choice of going to Harvard or Yale when I was starting my career, but decided to go to Northwestern instead, because the top experts of my field worked there—and it remains one of my best decisions to date.’
Society expects universities to come up with new innovations. Instead of only ‘thinking big’, Holmström thinks innovating requires boundaries and restrictions.
’You can’t think outside the box unless you have a box to begin with. In the US, the first two years on doctoral studies equal attending lectures. After that, students are taught to raise the right questions—instead of having the correct answers—which is extremely difficult. How to recognize and frame problems so that they can be solved?’
Solving wicked societal problems such as climate change is made even more wicked by the fact that the common good and private good are—at least at first—at odds. Jean Tirole, Nobel Memorial Prize in Economics 2014 laureate and Professor of the Toulouse School of Economics said that reaching the common good requires incentives, such as emission trading and tax reform
’We want to believe in green growth, but what politicians really should face up to is that stopping climate change also requires financial investment,’ Tirole said.
‘Contrary to populist remarks, economics involves making a lot of difficult choices.’
Jutta Urpilainen, Member of the Finnish Parliament, echoed Professor Tirole’s sentiment during the panel discussions.
‘When I was the Minister of Finance I had to face several wicked problems for which there are no definite solutions. I greatly appreciated the dialogue I had with economists then, even though politicians always have the responsibility of any decisive measures made.’
One of the goals of Helsinki GSE is to involve economics with decision making in as early stages in the process as possible. Professor Matti Liski said that economics is being applied in many fields already, from urban planning to energy production.
’The social welfare and health care reform in Finland will create a new market worth billions of euros, and setting it up will greatly demand economics.’
Jean Tirole (Toulouse School of Economics) received The SverigesRiksbank Prize in Economic Sciences in Memory of Alfred Nobel in 2014, and Bengt Holmström (Massachusetts Institute of Technology, MIT) in 2016. Tirole was awarded for his research on market power and regulation, Holmström for his contributions to contract theory.
Helsinki GSE is a postgraduate school and research institution for economics founded by Aalto University, Hanken School of Economics, and University of Helsinki. It offers top-level education to future economists by crossing disciplinary boundaries. Helsinki GSE produces high-quality research that will have significant scientific and societal impact, both in Finland and internationally.
Jean Tirole and Bengt Holmström. Photo: George Atanassov
Panelists: Aalto University Professor Matti Liski, Aktia Bank’s Chief Economist Heidi Schauman, Permanent Secretary of the Ministry of Finance Martti Hetemäki, and Member of Parliament Jutta Urpilainen. Photo: George Atanassov
Aalto University, Professor
Helsinki GSE, Academic Director
tel. +358 50 353 7651