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The Honolulu Advertiser
Posted on: Thursday, October 11, 2001

Part-time Maui resident 'stunned' by Nobel Prize

By Christie Wilson
Neighbor Island Editor

WAILEA, Maui — If it hadn't been for the steady stream of phone calls from reporters and well-wishers yesterday, A. Michael Spence would've been out windsurfing off Maui's north shore.

A. Michael Spence and two others laid the groundwork for a general theory about how people with differing amounts of information affect markets.

Christie Wilson • The Honolulu Advertiser

Instead, Spence, 57, and his wife, Monica, were celebrating the news that he and two other Americans had won this year's Nobel Prize for economics.

Spence, 58; George A. Akerlof, 61, of the University of California at Berkeley; and Joseph E. Stiglitz, 58, of Columbia University won the Nobel Prize in economics for research into how information affects markets.

The three men will share the $943,000 award.

The Spences have been coming to Maui for years, and last year they bought a condo at the Palms of Wailea II. They visit a half-dozen times a year, and Monica Spence described her husband as "a windsurfing fiend." The couple also enjoy golf and motorcycling.

Someone at Stanford University, where the economist is a professor emeritus, had asked the Spences how they could be contacted when the Nobel Prize was announced yesterday at about 3:30 a.m. Hawai'i time, but Spence said he didn't take seriously rumors that he was on the short list of potential winners for his work in the '70s on a theory now known as "information economics."

Spence, a former dean at both Stanford and Harvard, said he was "stunned and numb" after receiving the news in a phone call. "I didn't expect it at all. It's quite wonderful," he said.

The Spences cut short their 10-day vacation and returned to California last night.

The awards were announced yesterday by the Royal Swedish Academy of Sciences in Stockholm.

In the 1970s Spence, Akerlof and Stiglitz laid the groundwork for a general theory about how people with differing amounts of information affect markets. Their research helped economists explain the boom in high-tech stocks during the 1990s as well as its recent collapse.

Their research "helps people understand better when markets perform poorly," Spence said. All three winners looked into how markets perform when people have imperfect information.

Akerlof began exploring the topic in 1970 with the paper "The Market for Lemons," which used as an example car sales. "Markets such as for used cars tend to be rather screwed up," Akerlof said yesterday.

"When you buy a used car you're always careful, because you're wondering why that person is selling the car. When you're selling you're worried you're not going to get a good price. People are suspicious."

The works "form the core of modern information economics," the academy said.

The Associated Press contributed to this report.