By Adam Gorlick
Bengt Holmstrom, one of the winners of this year’s Nobel prize in economics, has strong ties to Stanford and spent a year at the Stanford Institute for Economic Policy Research collaborating with faculty while conducting his own research.
Holmstrom, a professor at the Massachusetts Institute of Technology, shares the Nobel with Harvard’s Oliver Hart for their theoretical work on contracts. Holmstrom’s research focused on the designs of workplace contracts.
He received his master’s of science from Stanford in 1975. Three years later, he earned his PhD from the Stanford Graduate School of Business, where Robert Wilson — now the Adams Distinguished Professor of Management, Emeritus — was his advisor.
“Bengt has made a major mark on economics,” said Alvin Roth, a SIEPR senior fellow who won the Nobel Memorial Prize in Economics in 2012 and also studied under Wilson. “This is a very distinguished choice by the Nobel committee.”
Wilson called Holmstrom’s dissertation an “already brilliant work on contract theory.”
“He’s made steady contributions to this subject, and they’ve been fundamental to progress,” he said.
Holmstrom was a visiting professor of research at Stanford between 1985 and 1986. In 2010, he was at SIEPR as the Wolfson Distinguished Visiting Professor.
“Based on the year he spent with us at SIEPR, I can state that the honor is well deserved,” said John Shoven, a SIEPR senior fellow who was the institute’s director during Holmstrom’s visit. “Bengt has done path-breaking work in the area of incentive-compatible executive compensation.”
During his time at SIEPR, Holmstrom collaborated closely with several researchers and also participated in events geared toward spreading his ideas beyond a solely academic audience.
“He showed that he is not only an economic theorist, but is also able to communicate his brilliant ideas in ways that business people and others can understand them,” said Greg Rosston, a SIEPR senior fellow and former deputy director.
At MIT, Holmstrom served as doctoral dissertation advisor to Jonathan Levin, now dean of the GSB and a SIPER senior fellow who earned his PhD in 1999.
“Every economist in the profession has enormous respect for the standard Bengt Holmstrom and Oliver Hart set as scholars and as people,” Levin said. “I was fortunate to have Bengt as my PhD supervisor and continue to look up to his profoundly influential work on contract theory.”
Holmstrom’s longtime friend, Paul Milgrom, called him a “man with very high standards of excellence, both in scholarship and his personal life.”
“We had great fun and some success, too, doing theory research together,” said Milgrom, a SIEPR senior fellow who was Holmstrom’s mentee while he was a graduate student at Stanford in the 1970s and later his colleague at Northwestern and Yale universities. “It is a real pleasure for me to congratulate him on his prize.”
As one of SIEPR’s Distinguished Visitors, Holmstrom joined a roster of senior faculty members, researchers and policymakers who spend up to a year in residence at the institute.
“The program gives SIEPR and the greater Stanford community an important way to connect and collaborate with a broad range of economists, including some of the most important and influential scholars in the field,” said Mark Duggan, the Trione Director of SIEPR.