By
The Associated Press
STOCKHOLM, Sweden - Two American professors who developed ways to analyze how people make basic lifestyle decisions such as how much to work and where to live were awarded the Nobel Prize in economics yesterday.
Theories developed by James J. Heckman, 56, of the University of Chicago, and Daniel L. McFadden, 63, of the University of California at Berkeley have contributed greatly to employment training programs and transportation and communication systems, according to the citation from the Royal Swedish Academy of Sciences. The academy cited the two for their work in microeconometrics, which combines both economics and statistics.
The men will split the prize, which is worth $915,000 this year.
Heckman is best known for labor force studies that focus on how various groups, such as married women, decide when to work and how much.
"Heckman's work is a good example of integrating theory and practice, especially when planning policy within the labor market," academy member Joergen Weibull said. "His studies showed how education affects wages, and he suggested models for use when planning employment programs which are still being used today when governments plan policy."
McFadden's models aim at determining how people will choose from different alternatives when deciding where to live, how to travel and what to buy. His work was instrumental in the design of the San Francisco BART commuter train system as well as investments in phone service and housing for the elderly, the academy said.
"The train stations are in the right places. There are sufficient parking spaces for vehicles, and people perceive the prices to be right," said Karl-Gustav Joereskog, a member of the academy.
McFadden, a native of Raleigh, N.C., said he was delighted that his work was recognized.
"What I did in working with that theory was to develop models to figure out a way to study what one might call 'life's big choice.' Like the choice of occupation, when to get married and how many children to have," he told The Associated Press.
McFadden also was recognized for methods used to evaluate the total damage of the 1989 oil spill from the Exxon Valdez tanker off the Alaskan coast and its effects on society.
"The economics community is just a few thousand," he said of the award. "I guess one always figures you have a one in a thousand chance."
Heckman, who was on a trip to the Brazilian city of Rio de Janeiro, said he was "honored and flattered and happy" with the award.
"If it makes people read my work more, then that's fine," he said. Asked what he would do with the prize money, he joked: "I'm going to pay a lot of taxes." Heckman was in Rio for the annual meeting of the Latin America and Caribbean Economic Association, which starts today.
"I have been a big fan of Heckman for quite awhile," said Anders Bjoerklund, an economics professor at Stockholm University. "One of his major applications is the evaluation of labor market programs ... to train unemployed people to get a job and to earn more than they would have otherwise."
The Nobel Memorial Prize in Economics - the fourth in a week of awards - was not one of the original prizes established in Alfred Nobel's will. It was created in 1968 to mark the tricentennial of Sweden's central bank.
Canadian economist Robert A. Mundell won last year's economics prize for his innovative analysis of exchange rates, which helped lay the intellectual groundwork for Europe's common currency.
This year, the academy has focused on discoveries applicable to everyday life instead of hypothetical questions in picking its winners.
