Economists win Nobel prize for research on contracts

Two U.S.-based professors won the Nobel prize in economics today for their research on the best way to write contracts. Oliver Hart of Harvard University and Bengt Holmstrom of the Massachussetts Institute of Technology addressed questions such as when to give CEOs raises and whether to privatize public services. “Any modern compensation scheme is informed by their work,” Pennsylvania State University economist Ran Shorrer said. Hart argued in 1997 against the privatization of prisons, saying the incentive to reduce costs could lead to low quality. This year, the U.S. Department of Justice decided to stop using private prisons.

The Associated Press contributed to this report.