[Curator’s note: The following material quotes and paraphrases extensively from articles posted by the Nobel Prize Committee, the Princeton Alumni Weekly, and The Daily Princetonian; see Sources below for details.]
Sveriges Riksbank Prize in Economic Sciences/ Nobel Prize in Economics 2001
The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2001 was awarded jointly to George A. Akerlof, A. Michael Spence and Joseph E. Stiglitz "for their analyses of markets with asymmetric information."
Through his research on markets with asymmetric information, Michael Spence developed the theory of “signaling” to show how better-informed individuals in the market communicate their information to the less well informed to avoid the problems with adverse selection. His own research emphasized education as a productivity signal in job markets, while subsequent research has suggested many other implications, e.g., how firms may use dividends to signal their profitability to agents in the stock market.
Spence was born November 30, 1942, in Montclair New Jersey. His father was based in Ottawa as a member of the War Time Prices and Trades Board, the Canadian version of wartime price controls. That work entailed frequent trips to Washington to coordinate with their American counterparts. New Jersey was half-way between the two capitals, so although he grew up in Canada during and after the war until leaving for college in the United States, he managed to also be an American by birth.
His father was the son of the registrar of the University of Manitoba. He was an intellectual by instinct (he had a PhD from Northwestern University in Commerce and Finance) and in another time, might very well have chosen a career in academic life. His son learned from him to love precision in thought, the power of abstraction and the use of symbols to capture structures and relationships. His father was also a very good athlete and they spent a lot of time playing basketball, football, hockey, "just about anything."
His mother was the only child of his grandparents, who lived in Minnesota at the time of her birth and later moved to Winnipeg. She was strong-willed, demanding and very supportive all at the same time. Spence credits her with a kind of tenacity (sometimes referred to as stubbornness) that served him well.
The educational institutions and the teachers from whom he had the privilege of learning, were especially important, as family being excellent and a liberating force. His middle and high school in Canada, UTS, attached to the College of Education at the University of Toronto, was not dissimilar to the Lab School at the University of Chicago. It was then and it still is excellent in two respects. The teaching achieved a very high average quality and topped out in the superlative range, and the students were without question in the same league.
All the schools and universities he attended seemed to be excellent in measurable ways at the time. The combination of a workable basic formula and the capacity to improve over time was what one hoped for in any aspect of society: business, government, the non-profit sector. Thus, the pattern of excellence was repeated at Princeton, Oxford and Harvard. There were probably many reasons for the high standards and the continuous improvement. One was the healthy synergy between teaching and research – the excitement of the research was transmitted to the learning process, and the energy and curiosity of the students produced new ideas in research. A second was competition. All those institutions had very successful competitors who, with the help of vigilant alumnae and alumni, kept them constantly on their toes.
Spence attended Princeton as an undergraduate student and graduated summa cum laude with a B.A. in philosophy in 1966, completing a senior thesis titled "Freedom and Determinism". While at Princeton he also played varsity hockey. His son, Graham, graduated from Princeton in 2001.
“I should like to acknowledge and thank Gilbert Harmon, Richard Ludwig and Robert Kuenne at Princeton University. They are largely responsible for my interest in philosophy and economics and for the interest I developed in trying scholarship and teaching as a career.”
Spence then studied at Magdalen College, University of Oxford as a Rhodes Scholar and received a B.A./M.A. in mathematics in 1968. Spence began graduate studies in economics at Harvard University with the support of a Danforth Graduate Fellowship in the fall of 1968. He received a Ph.D. in economics in 1972, completing a dissertation titled "Market signaling" under the supervision of Kenneth Arrow and Thomas C. Schelling. Spence was awarded the David A. Wells Prize for outstanding doctoral dissertation in 1972. As a graduate student at Harvard, he was a research assistant to former President Shapiro for two summers.
Nobel Prize with other Princeton faculty
In 2001, three professors affiliated with the greater Princeton community shared the 2001 Nobel Memorial Prize in Economic Science: Joseph E. Stiglitz, A. Michael Spence '66, and George A. Akerlof.
“The three won the prize for their study of the effects of 'asymmetric information' in markets. Prior to their work, most analyses assumed that buyers and sellers in markets were equally well informed," Economics Department Chair Bernanke explained. "These economists showed that if information is 'asymmetric,' that is, one side of the market is better informed than the other, market outcomes can be very different — and in particular, markets may not work well or even fail to operate at all."
Spence is The Philip H. Knight Professor and Dean, Emeritus of Economics at Stanford Graduate School of Business and the Chairman, Advisory Board of Stanford Institute for Innovation in Developing Economies.
Spence joined the New York University Stern School of Business, Professor of Economics on September 1, 2010. As of 2011, he joined the faculty of SDA Bocconi School of Management in Italy. He is a Senior Fellow at the Hoover Institution and the Philip H. Knight Professor and Dean Emeritus of Management in the Graduate School of Business at Stanford University. He was the dean of Stanford Business School from 1990 to 1999. As dean, he oversaw the finances, organization, and educational policies of the school. He taught at Stanford GSB as an associate professor of economics from 1973 to 1975.
From 1975 to 1990, he served as professor of economics and business administration at Harvard University, holding a joint appointment in its business school and the Faculty of Arts and Sciences. In l983, he was named chairman of the economics department and George Gund Professor of Economics and Business Administration. Spence was awarded the John Kenneth Galbraith Prize for excellence in teaching in 1978 and the John Bates Clark Medal in 1981 for a “significant contribution to economic thought and knowledge.”
From 1984 to 1990, Spence served as the dean of the Faculty of Arts and Sciences at Harvard, overseeing Harvard College, the Graduate School of Arts and Sciences, and the Division of Continuing Education.
He returned to Stanford to serve as serve as Philip H. Knight Professor and dean of Stanford Business School from 1990 to 1999. As dean, he oversaw the finances, organization, and educational policies of the school.
Other Activities and Honors
From 1977 to 1979, he was a member of the Economics Advisory Panel of the National Science Foundation and in 1979 served as a member of the Sloan Foundation Economics Advisory Committee. At various times, he has served as a member of the editorial boards of American Economics Review, Bell Journal of Economics, Journal of Economic Theory, and Public Policy.
He has served as member of the boards of directors of Bank of America, General Mills, Siebel Systems, Nike, and Sun Mircosystems, and a number of private companies. From 1991 to 1997, he was chairman of the National Research Council Board on Science, Technology, and Economic Policy.
Among his many honors, Spence was elected a fellow of the American Academy of Arts and Sciences in 1983 and was awarded the David A. Wells Prize for outstanding doctoral dissertation at Harvard University in 1972.
He is a member of the American Economic Association and a fellow of the American Academy of Arts and Sciences and the Econometric Society.
• Les Prix Nobel. The Nobel Prizes 2001, Editor Tore Frängsmyr, Nobel Foundation, Stockholm, 2002. This autobiography/biography was written at the time of the award and later published in the book series Les Prix Nobel/ Nobel Lectures/The Nobel Prizes. The information is sometimes updated with an addendum submitted by the Laureate. Copyright © The Nobel Foundation 2001. A. Michael Spence – Biographical. NobelPrize.org. Nobel Prize Outreach AB 2022.
• Exhibition page photograph courtesy of NYU