Economics Nobel goes both ways

ECONOMICS is the only field in which two people can share a Nobel prize for saying opposing things. This old joke, provoked by the 1974 prize that went to ideological antagonists Friedrich August von Hayek and Gunnar Myrdal, is proving relevant again. Eugene Fama, Lars Peter Hansen and Robert Shiller all worked on financial markets efficiency and drew separate, if not opposing, conclusions. This is a welcome reminder that the dismal science has few absolute truths to offer - mostly questions to explore.

Hansen's merits are methodological. His key innovation, the Generalised Method of Moments (GMM), is a popular econometric technique with applications in micro and macro-economics, used to uncover relationships between variables in uncertain, complex economic environments - such as asset markets.

Unlike Hansen, Fama and Shiller are mostly known for the conclusions they - or often, others - draw from their academic work. Fama is one of the founding fathers of the "efficient market hypothesis", which roughly holds that financial markets always send the right price signals. Shiller, on the other hand, seems to have spent decades debunking the EMH, collecting empirical evidence that markets are prone to bubbles and irrational exuberance.