Awards for the Modelmakers

Economists in recent years have become the most influential of all scholars, taking their place as fixtures in the chancelleries, banks and board rooms of the world. Last week two longtime leaders in this increasingly glamorous science were finally given the ultimate honor, the first Nobel Prize in Economics, the only new category added to the awards since they were started in 1901. The $72,700 prize was shared by Dr. Ragnar Frisch, 74, of Norway, and Dr. Jan Tinbergen, 66, of The Netherlands. The award was for their joint development in the 1930s of the esoteric but highly influential field of econometrics, which employs mathematical models to analyze an economy, predict its course and help to select policies that will alter its future.

Practitioners of econometrics use countless statistics to build complex mathematical models (see cut). The statistics are weighted according to the economists' own idea of their importance, and the result is intended to serve as a picture of the real world. The models vary, but they usually contain data about prices, wages, spending, savings, interest rates--and how a change in one will theoretically affect the others. Like the design for a new airplane, the model can be "tested" in a computer without the risk of painful mistakes. Even if the results are not wholly accurate, the discipline of building a model enhances understanding of economic problems. Modelmaking is an important part of France's Le Plan, and in the U.S., the Federal Reserve Board is trying econometrics to aid its forecasts of business activity.

Ragnar Frisch, who is widely regarded as the father of the modern planned economies of Scandinavia, believes that computers will soon help make planning popular in all countries. But he admits that models are far harder to build for rich, complex countries than for simpler economies. "Frisch and I started this work in the 1930s, in the days of the economic depression," says Jan Tinbergen. "We wanted to draw a plan to fight depression causes and keep unemployment under control." In recent years, Tinbergen has devoted all of his time to the problems of underdeveloped countries, where econometrics seems well suited to government-diverted economies, and he has set up 20 economic institutes in such distant corners of the world as Turkey, India and Chile.

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