International desk – Two professors from Harvard and MIT have been awarded the 2016 Nobel Prize in economics for contributions to contract theory.
The theory on agreements that shape business, finance and public policy.
Oliver Hart, a British economist teaching at Harvard, and Bengt Holmström, a Finnish economist teaching at MIT, were announced as the winners Monday by the Royal Academy of Sciences in Stockholm, Sweden.
“Contracts are essential to the functioning of modern societies,” the academy’s said in its announcement.
“Hart’s and Holmström’s research sheds light on how contracts help us deal with conflicting interests.”
Among the contracts they have studied is Holmström’s research on employment contracts, including between CEOs and shareholders, and Hart’s work on whether providers of public services, such as schools, hospitals, or prisons, should be publicly or privately owned.
The Nobel prize in economics has been awarded since 1969.
Princeton University Professor Angus Deaton won the prize in 2015 for his work on poverty, according to CNN.