Former GSB Dean Michael Spence Awarded Nobel Prize in Economics
Spence also well-known for significant contributions to the GSB
Reporter Staff
Issue date: 10/15/01 Section: News
- Page 1 of 1
Former GSB Dean Michael Spence (1990-1999) has been awarded the prestigious Nobel Prize in Economics (together with George Akerlof, a professor at the University of California at Berkeley, and Joseph Stiglitz of Columbia University) for his work toward understanding how markets work when buyers and sellers have different information.
The prize is awarded annually by the Royal Swedish Academy of Sciences. It is considered the world’s most prestigious award for economic research.
According to published reports, during the 1970s, the three economists developed theories of how markets function when there is “asymmetric information,” meaning that some participants in an exchange know more than others about the value of the item being transferred.
Spence was contacted in Hawaii where he is on vacation and told the news. He was quoted as saying, “It’s wonderful. It’s an incredible honor to be recognized for something that people perceive as moving the ball down the field in one’s academic discipline.”
“Mike’s fundamental insight lets us understand a huge range of real world phenomena from the connection of earnings and education through competitive pricing to the use of apparently uninformative advertising,” said Professor John Roberts. “Such insights come very, very, rarely.”
Those familiar with Spence’s research say it showed that under certain conditions well-informed players can improve their market outcome by “signaling” their private information to those who know less. His economic models demonstrated how information could be used to communicate a superior position. For example, an auto dealer might be able to signal he had a better car by offering a warranty. The management of a firm might use an additional tax cost of dividends to signal high profitability. “Spence’s thesis was one of the great milestones of economic theory in the past fifty years,” said Professor David Kreps.
Added Stanford University President John Hennessy: “The recognition the Nobel committee has bestowed on Michael Spence reaffirms our conviction that a great business school must be driven by the desire to produce original research and create knowledge that benefits society. Professor Spence brings great honor to that idea and great honor to Stanford. His contributions to the university - as teacher, scholar and dean of the business school - have always been on the highest order. I know I speak for the entire Stanford community when I say that we are proud to call him a colleague.”
In its announcement, the Royal Swedish Academy of Sciences said that the winners’ contributions “form the core of modern information economics.” Their work has led to applications in areas ranging from agricultural markets to modern financial markets, according to the academy.
Contributions as Dean
During Spence’s tenure as Dean in the 1990s, the GSB built relationships between researchers and business and industry leaders, and put more emphasis on global management issues, the management of technology, and entrepreneurship. Applications for admission during those years rose to an all-time high of roughly 7,000 for the 360 spaces in an entering MBA class.
In a final report to the faculty senate as Dean, he wrote, "When future generations look back on this era in business education, I believe they will see this as a period of rapid change. Changes in technology alone, particularly in information technology, have had an immense impact on business organizations and on markets. In a global economy, with organizations that are increasingly geographically dispersed and complex, companies must maintain adequate levels of communication and control, all the while increasing speed and efficiency. Doing so requires that they-and their managers-understand in some depth the current and future technological possibilities and, as well, the potential impact on their markets and their companies. Aspiring to be the leading academic school of management in the world, we must continue to bring into our research the very interesting and challenging issues facing managers, without losing our academic rigor to the cry for relevance, and to bring these issues into the classroom quickly as well."
Notable developments during the Spence years:
* increased the number of elective courses that focus on global
management issues
* encouraged and supported faculty members doing international research and course development
* introduced the Global Management Program for MBA students
* established the Center for Entrepreneurial Studies to increase research and course development relating to growing firms
* revised the required core courses in the MBA program
* constructed the $31 million Schwab Residential Center to house graduate students and executive program participants and begun construction of a new faculty office building
* expanded the School's executive education program, introducing a dozen new programs and extending the offerings to a year-round schedule
* supported the Stanford Computer Industry Project, an interdisciplinary research project involving high-tech manufacturing firms and the schools of business and engineering and the Stanford Integrated Manufacturing Association (SIMA), another joint business-engineering program involving leading manufacturing firms
* recruited an impressive array of faculty, both senior scholars and people just beginning their academic careers, strengthening especially the areas of strategic management and human resources management
* recruited business leaders as lecturers, including several from high tech industries and venture capital firms
* provided support to develop innovative courseware and increase the number of cases written at the School.
* expanded alumni/ae events, including establishing a series of conferences on women's issues.
* raised $120 million to support these and other programs at the School.
On a national level, Spence served as chairman of the board on Science, Technology, and Economic Policy of the National Research Council, where he headed a distinguished panel of academics and business leaders that studied factors affecting the nation's economic growth, and economic policy surrounding science and technology. The board's first report, issued in 1994, called for changes in economic policy to achieve longer-term growth in productivity, employment, and living standards. He currently serves on the boards of directors of Bank of America; Sun Microsystems; General Mills, Inc.; Nike Inc.; and Siebel Systems, Inc.
Currently, Spence is the Philip H. Knight Professor of Economics and Management (Emeritus) at the Business School. He is an economist whose work has been recognized by the American Economic Association. He holds the John Bates Clark Medal, given biennially to a person under the age of 40 who has made a “significant contribution to economic thought and knowledge.” He is a fellow of the American Economic Association and a member of the Econometric Society and was elected to the American Academy of Arts and Sciences. At Princeton (Class of 1966), Spence played varsity hockey and earned his degree in philosophy summa cum laude. He was selected for a Rhodes Scholarship. He holds a MA from Oxford University and a Ph.D. from Harvard (1972). While teaching at Harvard, he received the John Kenneth Galbraith Prize for Excellence in Teaching at that institution. Immediately before coming to Stanford, Spence served as dean of the Faculty of Arts and Sciences at Harvard.
Recently, Spence developed, along with Garth Saloner, the GSB course S375: Electronic Commerce, which has also been the basis for a case book. It is a subject matter that Professor Haim Mendelson is also active in developing at the GSB. S375 examines how the internet changes the way in which goods and services flow through the supply chain from manufacturers and service providers to consumers. The course explores the underlying drivers of these threats and opportunities, the strategies that existing and new firms can implement to respond to them, and the possible evolution of competition and the organization of industry that may result. A range of issues in a wide variety of industries, for a variety of traditional and internet companies, are examined in both business-to-business and business-to-consumer contexts. It is a case-based course that draws primarily on cases written at Stanford for this purpose.
The prize is awarded annually by the Royal Swedish Academy of Sciences. It is considered the world’s most prestigious award for economic research.
According to published reports, during the 1970s, the three economists developed theories of how markets function when there is “asymmetric information,” meaning that some participants in an exchange know more than others about the value of the item being transferred.
Spence was contacted in Hawaii where he is on vacation and told the news. He was quoted as saying, “It’s wonderful. It’s an incredible honor to be recognized for something that people perceive as moving the ball down the field in one’s academic discipline.”
“Mike’s fundamental insight lets us understand a huge range of real world phenomena from the connection of earnings and education through competitive pricing to the use of apparently uninformative advertising,” said Professor John Roberts. “Such insights come very, very, rarely.”
Those familiar with Spence’s research say it showed that under certain conditions well-informed players can improve their market outcome by “signaling” their private information to those who know less. His economic models demonstrated how information could be used to communicate a superior position. For example, an auto dealer might be able to signal he had a better car by offering a warranty. The management of a firm might use an additional tax cost of dividends to signal high profitability. “Spence’s thesis was one of the great milestones of economic theory in the past fifty years,” said Professor David Kreps.
Added Stanford University President John Hennessy: “The recognition the Nobel committee has bestowed on Michael Spence reaffirms our conviction that a great business school must be driven by the desire to produce original research and create knowledge that benefits society. Professor Spence brings great honor to that idea and great honor to Stanford. His contributions to the university - as teacher, scholar and dean of the business school - have always been on the highest order. I know I speak for the entire Stanford community when I say that we are proud to call him a colleague.”
In its announcement, the Royal Swedish Academy of Sciences said that the winners’ contributions “form the core of modern information economics.” Their work has led to applications in areas ranging from agricultural markets to modern financial markets, according to the academy.
Contributions as Dean
During Spence’s tenure as Dean in the 1990s, the GSB built relationships between researchers and business and industry leaders, and put more emphasis on global management issues, the management of technology, and entrepreneurship. Applications for admission during those years rose to an all-time high of roughly 7,000 for the 360 spaces in an entering MBA class.
In a final report to the faculty senate as Dean, he wrote, "When future generations look back on this era in business education, I believe they will see this as a period of rapid change. Changes in technology alone, particularly in information technology, have had an immense impact on business organizations and on markets. In a global economy, with organizations that are increasingly geographically dispersed and complex, companies must maintain adequate levels of communication and control, all the while increasing speed and efficiency. Doing so requires that they-and their managers-understand in some depth the current and future technological possibilities and, as well, the potential impact on their markets and their companies. Aspiring to be the leading academic school of management in the world, we must continue to bring into our research the very interesting and challenging issues facing managers, without losing our academic rigor to the cry for relevance, and to bring these issues into the classroom quickly as well."
Notable developments during the Spence years:
* increased the number of elective courses that focus on global
management issues
* encouraged and supported faculty members doing international research and course development
* introduced the Global Management Program for MBA students
* established the Center for Entrepreneurial Studies to increase research and course development relating to growing firms
* revised the required core courses in the MBA program
* constructed the $31 million Schwab Residential Center to house graduate students and executive program participants and begun construction of a new faculty office building
* expanded the School's executive education program, introducing a dozen new programs and extending the offerings to a year-round schedule
* supported the Stanford Computer Industry Project, an interdisciplinary research project involving high-tech manufacturing firms and the schools of business and engineering and the Stanford Integrated Manufacturing Association (SIMA), another joint business-engineering program involving leading manufacturing firms
* recruited an impressive array of faculty, both senior scholars and people just beginning their academic careers, strengthening especially the areas of strategic management and human resources management
* recruited business leaders as lecturers, including several from high tech industries and venture capital firms
* provided support to develop innovative courseware and increase the number of cases written at the School.
* expanded alumni/ae events, including establishing a series of conferences on women's issues.
* raised $120 million to support these and other programs at the School.
On a national level, Spence served as chairman of the board on Science, Technology, and Economic Policy of the National Research Council, where he headed a distinguished panel of academics and business leaders that studied factors affecting the nation's economic growth, and economic policy surrounding science and technology. The board's first report, issued in 1994, called for changes in economic policy to achieve longer-term growth in productivity, employment, and living standards. He currently serves on the boards of directors of Bank of America; Sun Microsystems; General Mills, Inc.; Nike Inc.; and Siebel Systems, Inc.
Currently, Spence is the Philip H. Knight Professor of Economics and Management (Emeritus) at the Business School. He is an economist whose work has been recognized by the American Economic Association. He holds the John Bates Clark Medal, given biennially to a person under the age of 40 who has made a “significant contribution to economic thought and knowledge.” He is a fellow of the American Economic Association and a member of the Econometric Society and was elected to the American Academy of Arts and Sciences. At Princeton (Class of 1966), Spence played varsity hockey and earned his degree in philosophy summa cum laude. He was selected for a Rhodes Scholarship. He holds a MA from Oxford University and a Ph.D. from Harvard (1972). While teaching at Harvard, he received the John Kenneth Galbraith Prize for Excellence in Teaching at that institution. Immediately before coming to Stanford, Spence served as dean of the Faculty of Arts and Sciences at Harvard.
Recently, Spence developed, along with Garth Saloner, the GSB course S375: Electronic Commerce, which has also been the basis for a case book. It is a subject matter that Professor Haim Mendelson is also active in developing at the GSB. S375 examines how the internet changes the way in which goods and services flow through the supply chain from manufacturers and service providers to consumers. The course explores the underlying drivers of these threats and opportunities, the strategies that existing and new firms can implement to respond to them, and the possible evolution of competition and the organization of industry that may result. A range of issues in a wide variety of industries, for a variety of traditional and internet companies, are examined in both business-to-business and business-to-consumer contexts. It is a case-based course that draws primarily on cases written at Stanford for this purpose.