Columbia Prof Wins Econ Nobel

Robert A. Mundell of Columbia University in New York won the Nobel Prize for economic sciences Wednesday for his analysis of exchange rates and how they affect monetary policies.

Mundell told CBS Radio News he learned of the prize upon arriving in London - and then dozed off. "My son Bill called from L.A. and gave me the good news."

"It doesn't make me a better economist than I was yesterday," he said, "I don't see that it'll change very much in my life, but it'll make my life more comfortable and I'm certainly very pleased at the great honor."

The Canadian-born economist "has established the foundation for the theory that dominates practical policy considerations of monetary and fiscal policy in open economies," the Royal Swedish Academy of Sciences said.

"His work on monetary dynamics and optimum currency areas has inspired generations of researchers. Mundell's contributions remain outstanding and constitute the core of teaching in international macroeconomics," the academy said.

Mundel said the timing of the Nobel Prize is good. "In a way, [his work] came to fruition just this year with the development of the European monetary union," he told CBS Radio News.

Mundell's most important work was done in the 1960s, the academy said. He served in the research department of the International Monetary Fund from 1961 to 1963, which "apparently stimulated Mundell's choice of research problems; it also gave his research additional leverage among economic policy makers," it said.

He published a pioneering article in 1963 on the short-term effects of monetary and fiscal policy in an open economy, the citation said. "The analysis is simple, but the conclusions are numerous, robust and clear."

"Mundell's considerations, several decades ago, seem highly relevant today," the academy said. "Due to increasingly higher capital mobility in the world economy, regimes with a temporarily fixed, but adjustable, exchange rate have become more fragile; such regimes are also being called into question," the academy said.

It added that Mundell's analysis has important implications for the single European currency launched by 11 members of the European Union.

The academy noted that Mundell also has demonstrated that higher inflation can induce investors to lower cash balances in favor of increased real capital formation.

"Mundell has also made lasting contributions to international trade theory. He has clarified how the international mobility of labor and capital tends to equalize commodity prices among countries, even if foreign trade is limited by trade barriers," the academy said.

Last year's award went to Amartya Sen, a scholar from India who developed a new understanding of the economic mechanisms underlying famines and poverty.

His work challenged the common view that a shortage of food is the most important explanation of famin. He said instead that high food prices and declining wages are in some cases responsible for widespread starvation.

Americans Robert Merton and Myron Scholes won the 1997 prize for their work on valuing risky "derivatives" investments such as stock options. That award was tarnished by the near-collapse last year of a giant hedge fund in which Merton and Scholes were partners.

The economics prize is the only Nobel not established in the will of Swedish industrialist Alfred Nobel, who invented dynamite. It was created in 1968 to mark the tercentenary of Sweden's central bank.

The literature Nobel was awarded Sept. 30 to German novelist Guenter Grass. The medicine prize was awarded Monday to Dr. Guenter Blobel, 63, a German native and U.S. citizen, who discovered how proteins find their rightful places in cells.

Gerardus 't Hooft and Martinus J.G. Veltman, both of the Netherlands, won the physics prize Tuesday for developing more precise calculations used to predict and confirm the existence of subatomic particles.

Ahmed Zewail, an Egyptian-American, won the chemistry prize Tuesday for pioneering the use of rapid-fire laser flashes that illuminate the motion of atoms in a molecule.

The final Nobel - the peace prize - is to be announced Friday in Oslo, Norway.

The prizes, worth $960,000, are presented on Dec. 10, the anniversary of Nobel's death.

By Susanna Loof