- The Washington Times - Monday, October 9, 2006

NEW YORK (AP) — An American economist who developed theories about unemployment that better capture how workers and companies actually make decisions about jobs has been named winner of the 2006 Nobel Memorial Prize in Economic Sciences.

Edmund S. Phelps, 73, a professor at Columbia University in New York, was lauded yesterday for research into the relationship between inflation and unemployment, giving governments better tools to formulate economic policy.

The Royal Swedish Academy of Sciences, which announced Mr. Phelps’ selection in Stockholm, said in its citation that “Phelps’ work has fundamentally altered our views on how the macroeconomy operates.”

Americans have swept all the Nobels announced so far this year, with Mr. Phelps being the sixth named. The economics prize carries an award of $1.4 million.

Two other Nobel prizes have yet to be announced — the winner of the prize for literature will be announced Thursday, followed Friday by the Nobel Peace Prize.

Mr. Phelps told reporters in his New York apartment that he learned of the prize in a phone call from Sweden that woke him early in the morning.

He said he had waited for the award for a long time, but wasn’t expecting it this year.

“I thought for a time I would get it in my 60s, then I thought I would get it in my 70s and, more recently, I’ve been thinking that I would get it in my 80s,” he said.

He planned to teach his class yesterday at Columbia — and share some champagne with his colleagues.

Mr. Phelps was born in Chicago and earned his bachelor’s degree at Amherst College in Amherst, Mass., in 1955 and his doctorate at Yale University in 1959. He has been the McVickar professor of political economy at Columbia since 1982.

The Swedish academy cited research by Mr. Phelps that challenged the prevailing view in the 1960s that there was a predictable tradeoff between inflation and unemployment. That view held that any government wanting to reduce joblessness by stimulating the economy would have to tolerate rising prices as a result.

Mr. Phelps argued that this view didn’t take workers’ or companies’ decision making into account, and his research showed that their expectations about both unemployment and inflation affected their actions.

Mr. Phelps told reporters yesterday that his goal was to make economic theory better reflect the real world.

The economics prize has been given out annually since 1969. It is the only one of the awards not established in the will left by Swedish industrialist Alfred Nobel 111 years ago.

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