Times Are Hard For Nobel-Winners Too

Here's the news all of you Nobel hopefuls were dreading. The Nobel endowment has taken a hit, and will be reducing the cash prizes from $1.4 million to $1.1 million. You might think, as the Nobel prize in economics is actually a a faux-Nobel, funded by the Swedish central bank, that economists would be immune. Our Nobel-winners (just like those of us who are on central bank payrolls) basically live off seignorage. Tough luck, though. The NYT article informs us that:

The Nobel Memorial Prize in Economic Science — technically not one of the original prizes — is also being scaled back.

Should we worry about the incentive effects? Dale Mortensen says there's no problem:

At the time you’re doing your work you’re not exactly striving for the Nobel Prize, but to make a contribution, make your name, maybe make tenure. The Nobel is a great honor that comes much later in life. The money itself is a windfall. It probably wouldn’t matter what the amount is, although it’s nice to have.

Actually, Peter Diamond tells us that the cash prize is the tip of the iceberg:

One of the things that comes with the prize, besides the prestige and the money, is the opportunities to make more money.

Maybe Diamond should tell Mortensen about this.