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The science of predicting Nobel economics winners

Britain's Professor Peter Higgs gestures, during a press conference, in Edinburgh, Scotland Friday, Oct. 11, 2013. Nearly 50 years after they came up with the theory, but little more than a year since the world's biggest atom smasher delivered the proof, Professor Higgs and Belgian colleague Francois Englert won the Nobel Prize in physics Tuesday for helping to explain how matter formed after the Big Bang.

Scott Heppell/AP

Early Monday morning, the Royal Swedish Academy of Sciences will name this year's winner of the Nobel Prize for economic sciences, an honour that brings more than $1-million (U.S.) and instant fame to researchers who toil in obscurity.

An ocean and a continent away, analyst David Pendlebury will be watching it live on his computer at home in Bend, Ore., southeast of Portland, rising before 2:30 a.m. local time to try to catch names he recognizes.

He's more than an interested observer. As the brains behind Thomson Reuters's Science Watch, he has predicted 32 winners of the four Nobel science prizes since 2002, including this week's winners of the physics prize, François Englert and Peter Higgs.

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No bookmakers' websites take bets on the winners of the four science prizes, unlike the high-profile awards for peace and for literature (the latter of which was won this week by Canada's Alice Munro). Followers of the science prizes look to Mr. Pendlebury's online predictions for the favourites to win this year or coming years.

There are four science categories: medicine, physics, chemistry and economics, officially known as the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. Mr. Pendlebury has correctly predicted the current or eventual winner in economics seven times.

To do so, he takes an approach that is exactly the opposite of the way the Nobel juries pick laureates, even if he reaches the same conclusion.

To come up with the names of the economists whose work is the most influential, he uses Thomson Reuters' database of scientific and scholarly publications. He identifies the important fields of research and compiles the names of those whose work is most often cited.

"Citations in the literature can be seen as repayments of intellectual debts that one scholar owes to another," Mr. Pendlebury said. "So it's a formal system and you are supposed to be very diligent about repaying your intellectual debts."

Nobel juries, in contrast, use a peer review method, interviewing people in the field and judging the influence of the nominees.

The front-runners for the economics prize this year, according to Mr. Pendlebury, are:

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For modelling and forecasting
Sir David Hendry, University of Oxford; M. Hashem Pesaran, University of Southern California; and Peter Phillips, Yale University. These researchers pioneered the use of math, statistics and computer science to model economic and business scenarios. Their forecasting methods are used by central banks and companies to guide economies and make business decisions.

For theories of regulation
Sam Peltzman, University of Chicago, and Richard Posner, U.S. appeals court judge. Judge Posner's 1972 book, Economic Analysis of Law, explored how regulation affects diverse areas such as drug addiction and religion and has been cited 4,600 times. Mr. Peltzman's work includes a 1975 paper that found seat belt laws encouraged risky driving that outweighed the safety benefits.

For empirical microeconomics
Joshua Angrist, MIT; David Card, University of California, Berkeley; and Alan Kreuger, Princeton University. Microeconomists study small groups to predict how larger economies or markets react. Mr. Kreuger and Mr. Card (a Canadian) created a stir in 1994 by showing that higher minimum wages for fast-food jobs in New Jersey did not cause the employment rate to fall relative to neighbouring Pennsylvania.

Canadians who have won the Nobel economics prize:

Robert Mundell, 1999; born in Kingston, Ont.; for work in currency systems.

Myron Scholes, 1997; born in Timmins, Ont.; for work in valuing stock options.

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William Vickrey, 1996; born in Victoria; for work in incentives.

By the numbers

Amount of each Nobel Prize, in U.S. dollars, this year. If winners share a prize, they share the money.

Number of economic sciences laureates from 1969 to 2012.

Number of women who have won the economics prize (Elinor Ostrom in 2009).

Average age of economics prize winners.

Age of the youngest economics laureate, Kenneth Arrow, who won in 1972.

Age of the oldest economics prize winner, Leonid Hurwicz, who won in 2007.


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