Two Americans Grab Economics Prize

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Two Americans won the Nobel Prize in economics Wednesday for developing theories on how people make decisions about how they work, study and shop.

James J. Heckman, 56, of the University of Chicago, and Daniel L. McFadden, 63, of the University of California at Berkeley, were cited for theories and methods in statistical analysis that have had wide-ranging practical applications, according to the citation by the Royal Swedish Academy of Sciences.

McFadden's work laid the foundation for an economic theory by which individuals choose their place of occupation or residence, leading among other things to the San Francisco BART transportation system and investments in phone service and housing for the elderly.

"I'm interested in choice behavior. Economists have a theory of choice which is that people act in their self interest," McFadden said. "I worked out a way in which that theory could be applied to what one might call life's big decisions like whether to get married or not, how many children to have, what occupation to go into," he told CBS News Correspondent Frank Settipani.

Daniel McFadden (L) and James Heckman (R)

"It's certainly nothing that I was waiting up for all night," Heckman chuckled. "It came as a complete surprised."

"It's delightful of course to have your work recognized and realize that it is appreciated," echoed McFadden.

Heckman's methodological breakthroughs regarding self-selection in the mid-1970s showed a correlation between education and wages. His research included "looking at the value of non-market time: How much is a housewife's work valued, how much value do we place on the time of an unemployed worker," he told CBS Radio News.

"With the help of Heckman's models, you can figure out what effects one year of education will have on wages, and one can study the differences in wages between men and women given a certain education and age," said Karl-Gustav Joereskog, a member of the academy.

McFadden said there are practical uses for the economic tools he developed. "They are used in political science to predict the outcome of elections. They are used in transportation to plan transportation systems. They appear in the background as part of the analysis that is done for a great deal of policy work."

The prize is worth $915,000 this year.

The Nobel Memorial Prize in Economics — the fourth in a week of awards — was established outside Alfred Nobel's will to mark the 1968 tricentennial of Sweden's central bank.

On Tuesday, the Nobel Prizes in physics and chemistry were won by six scientists who helped bring about the Information Revolution of ever-smaller and faster personal computers, pocket calculators, cell phones, CD players, lifelike TV screens and Gameboys.

The physics prize went to Jack Kilby, who invented the integrated circuit at Texas Instruments in 1958, and two physicists whose work contributed to satellite and cell phone technology: Herbert Kroemer of the University of California-Santa Barbara and Zhores Alferov of the A.F. Ioffe Physico-Technico Institute in St. Petersburg, Russia.

The chemistry prize went to Alan Heeger, 64, of the University of California-Santa Barbara, Alan MacDiarmid, 73, of the University of Pennsylvania and Hideki Shirakawa, 64, of the University of Tsukuba in Japan.

The three modified plastics so they can conduct electricity; the pioneering work with "brilliant plastics" could someday lead to computers as small and light as a wristwatch.

This year's medicine prize went to Arvid Carlsson of Sweden and Americans Paul Greengard and Eric Kandel for discoveries about how messages are transmitted between brain cells, leading to treatments of Parkinson's disease and depression.

Carlsson, 77, a professor emiritus of the University of Goteborg in Sweden, Greengard, 74, of Rockefeller University in New York and Kandel, 70, an Austrian-born U.S. citizen with Columbia University in New York shared the prize.

The literature award will be announced Thursday and the peace prize, the only one awarded in Oslo, Norway, will be announced Friday.

The prizes always are presented Dec. 10, the anniversary of Nobel's death in 1896.

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