Michael Spence (b. 1943)
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Who They Were
Michael Spence (born 1943) is an American economist recognised for his work on how information is transmitted in markets where some participants know more than others. He has held academic posts at institutions including Harvard and Stanford, where he also served as a dean, and he has engaged extensively with questions of economic growth and development in later decades. His foundational contribution came in the theory of signalling, part of the broader analysis of markets with asymmetric information that transformed microeconomics from the 1970s onward. In 2001 he shared the Nobel Memorial Prize in Economic Sciences with George Akerlof and Joseph Stiglitz for their analyses of markets with asymmetric information. Beyond his theoretical work, he has chaired international commissions on economic growth and written for broad audiences on the future of the global economy.
Key Contributions
Spence's central contribution is the theory of market signalling. Where George Akerlof had shown that hidden information can cause markets to unravel, Spence examined how the better-informed side of a market can credibly convey what it knows. His classic example is education as a job-market signal: even if schooling did nothing to raise a worker's productivity, high-ability workers can find it less costly to acquire credentials, so education can serve as a signal that separates them from others and lets employers infer quality they cannot directly observe. Within the framework recognised by the 2001 Nobel, signalling by the informed side complements Joseph Stiglitz's analysis of screening by the uninformed side. This work is central to the modern understanding of adverse selection, signalling and screening. He shared the Nobel Memorial Prize in 2001 with Akerlof and Stiglitz.
On EconRecall
American economist and 2001 Nobel laureate whose theory of market signalling explained how the informed side conveys credible information. Play the games that feature Michael Spence: