George Akerlof (b. 1940)
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Who They Were
George Akerlof (born 1940) is an American economist best known for opening up the study of markets in which buyers and sellers hold different information. A professor associated with the University of California, Berkeley, and later Georgetown, he made his mark early with a 1970 paper that became one of the most influential articles in modern microeconomics. His later work ranged into macroeconomics and the role of psychology in economic behaviour, including a 2009 book, Animal Spirits, written with Robert Shiller, which revived Keynes's intuition about confidence and was widely discussed during the 2008 financial crisis. In 2001 he shared the Nobel Memorial Prize in Economic Sciences with Michael Spence and Joseph Stiglitz for the analysis of markets with asymmetric information. He has remained an active and wide-ranging contributor to economic thought.
Key Contributions
Akerlof's 1970 paper The Market for Lemons showed that when sellers know more than buyers about the quality of what they are selling, good products can be driven out of the market entirely. Using the example of used cars, he demonstrated that if buyers cannot distinguish quality, they will only pay an average price, which drives the better goods out and lowers the average further, an unravelling caused by adverse selection. This insight launched the economics of asymmetric information and helped explain the existence of institutions such as warranties, licensing and reputation. In later work he brought psychology and social norms into economics, and with Robert Shiller he revived the animal spirits account of how confidence and panic drive the wider economy. He shared the Nobel Memorial Prize in 2001 with Spence and Stiglitz.
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American economist and 2001 Nobel laureate whose paper The Market for Lemons launched the economics of asymmetric information. Play the games that feature George Akerlof: