Award for economics pioneers who concentrate on the individual

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The Independent Online

This year's Nobel Prize in Economics has been shared by two Americans, James Heckman and Daniel McFadden, who laid the foundations for empirical research into the economic behaviour of individuals.

This year's Nobel Prize in Economics has been shared by two Americans, James Heckman and Daniel McFadden, who laid the foundations for empirical research into the economic behaviour of individuals.

Microeconometrics, as the field became known, uses large sets of data on thousands of individuals, households or firms to answer specific questions such as what determines whether someone works or where they live, or what are the effects of education on income. Increasingly powerful computers have steadily extended the scope of the practical questions economists can now address, and have arguably made the profession far more relevant to the real world.

This year's Nobel winners were pioneers of the methods for tackling such questions, marrying the foundations of economic theory with the application of new statistical methods to detailed data.

Each devised techniques for coping with statistically tricky special features of the figures, such as the fact that the data is not random but reflects individuals' self-selection, or the fact that people are making choices between a limited number of alternatives.

Andrew Oswald, Professor of Economics at Warwick University, said: "They have both played major roles in modern empirical economics. It is especially pleasing to see empirical research being recognised by the Nobel Committee."

Professor McFadden, running the Econometrics Laboratory at the University of California and due to spend 10 days at the Institute for Fiscal Studies in London later this month, did the research that shaped the development of San Francisco's Bart transport system. He also helped to estimate the cost of the damage caused by the 1989 Exxon Valdez oil spill.

Professor Heckman, 54,teaching at the University of Chicago and once a systems engineer in the aerospace industry, has looked at the labour market, assessing for example the effects of affirmative action programmes, taxes and unionisation. The work underpinned the assessment of "active labour market" policies to get people into jobs, and found, for example, that remedial training programmes have only very limited success.

His recent research has looked at the relationship between cognitive abilities and wages, assessing claims about inborn abilities made by the sociologists Richard Herrnstein and Charles Murray in The Bell Curve. He says the answer is that given abilities are unequally rewarded in the jobs market because of racial and sex discrimination.

The academy's citation said the prize went "to James Heckman for his development of theory and models for analysing selective samples and to Daniel McFadden for his development of theory and methods for analysing discrete choice".

The prize was established in 1968, 67 years later than the others. American citizens have dominated, but British winners include James Mirrlees in 1996 and Amartya Sen in 1998.

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