![\"Hart](\"\/wp-content\/uploads\/2023\/06\/hart-holstrom-nobel-prize-winners-economic-sciences_20161011.webp\")
<\/p>\n<\/p>\n
Bengt Holmstr\u00f6m, left, and Oliver Hart, right, share this year’s Nobel Prize in economics for their research on contract theory. Cr\u00e9dits: http:\/\/money.cnn.com\/<\/p>\n
\u00a0<\/p>\n
Two professors from Harvard and MIT have been awarded the Nobel Prize in economics for contributions to contract theory — the agreements that shape business, finance and public policy.<\/strong><\/p>\n Oliver Hart, 68, a British economist teaching at Harvard, and Bengt Holmstr\u00f6m, 67, a Finnish economist teaching at MIT, were announced as the winners Monday by the Royal Academy of Sciences in Stockholm, Sweden.<\/p>\n \u00abContracts are essential to the functioning of modern societies,\u00bb the academy said in its announcement. \u00abHart’s and Holmstr\u00f6m’s research sheds light on how contracts help us deal with conflicting interests.\u00bb<\/p>\n What they won for<\/strong><\/p>\n Among the contracts they have studied is Holmstr\u00f6m’s research on employment contracts, including between CEOs and shareholders.<\/p>\n \u00abIn economics we don’t really take a stand on the size of the bonus, though they seem extraordinarily high,\u00bb Holmstr\u00f6m told reporters when asked about the multi-million-dollar bonuses paid to modern CEOs.<\/p>\n Hart’s research has looked at whether providers of public services, such as schools, hospitals, or prisons, should be publicly or privately owned. The research showed that \u00abincentives for cost reduction are typically too strong,\u00bb the academy said. Privatizing those types of services can lead to a reduction in quality greater than the advantages of cost savings.<\/p>\n \u00abHart and his co-authors were particularly concerned about private prisons,\u00bb the academy said. \u00abFederal authorities in the United States are in fact ending the use of private prisons, partly because — according to a recently released U.S. Department of Justice report — conditions in privately-run prisons are worse than those in publicly-run prisons.\u00bb<\/p>\n Who won in the past<\/strong><\/p>\n Hart’s and Holmstr\u00f6m’s is little-known outside of the world of economics. Some past winners have been more familiar to the general public.<\/p>\n