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2001 Nobel Prize in Chemistry.
     The Royal Swedish Academy of Sciences has decided to award the Nobel Prize in Chemistry for 2001 for the development of catalytic asymmetric synthesis, with one half jointly to
      William S. Knowles St Louis, Missouri, USA, and
      Ryoji Noyori Nagoya University, Chikusa, Nagoya, Japan,
"for their work on chirally catalysed hydrogenation reactions"
and the other half to
      K. Barry Sharpless the Scripps Research Institute, La Jolla, California,
"for his work on chirally catalysed oxidation reactions".

Mirror Image Catalysis
      Many molecules appear in two forms that mirror each other – just as our hands mirror each other. Such molecules are called chiral. In nature one of these forms is often dominant, so in our cells one of these mirror images of a molecule fits "like a glove", in contrast to the other one which may even be harmful. Pharmaceutical products often consist of chiral molecules, and the difference between the two forms can be a matter of life and death – as was the case, for example, in the thalidomide disaster in the 1960s. That is why it is vital to be able to produce the two chiral forms separately.
     The year 2001 Nobel Laureates in Chemistry have developed molecules that can catalyse important reactions so that only one of the two mirror image forms is produced. The catalyst molecule, which itself is chiral, speeds up the reaction without being consumed. Just one of these molecules can produce millions of molecules of the desired mirror image form.
      William S. Knowles discovered that it was possible to use transition metals to make chiral catalysts for an important type of reaction called hydrogenation, thereby obtaining the desired mirror image form as the final product. His research quickly led to an industrial process for the production of the L-DOPA drug which is used in the treatment of Parkinson's disease. Ryoji Noyori has led the further development of this process to today's general chiral catalysts for hydrogenation.
      K. Barry Sharpless, on the other hand, is awarded half of the Prize for developing chiral catalysts for another important type of reaction – oxidation.
      The Laureates have opened up a completely new field of research in which it is possible to synthesise molecules and material with new properties. Today the results of their basic research are being used in a number of industrial syntheses of pharmaceutical products such as antibiotics, anti-inflammatory drugs and heart medicines.

William S. Knowles, 84, born 1917 (US citizen). PhD 1942 at Columbia University. Previously at Monsanto Company, St Louis, USA. Retired since 1986.

Ryoji Noyori, 63 years, born 1938 Kobe, Japan (Japanese citizen). PhD 1967 at Kyoto University. Since 1972 Professor of Chemistry at Nagoya University and since 2000 Director of the Research Center for Materials Science, Nagoya University, Nagoya, Japan. http://www-noyori.os.chem.nagoya-u.ac.jp

K. Barry Sharpless, 60 years, born 1941 Philadelphia, Pennsylvania, USA (US citizen). PhD 1968 at Stanford University. Since 1990 W.M. Keck Professor of Chemistry at the Scripps Research Institute, La Jolla, USA. http://www.scripps.edu/chem/sharpless/kbs.html

Prize amount: SEK 10 million. Knowles and Noyori share one half and Sharpless receives the other half.

Three scientists share the year 2001 Nobel Prize in Chemistry: William S. Knowles, previously at Monsanto Company, St. Louis, Missouri, USA; Ryoji Noyori, Nagoya University, Chikusa, Nagoya, Japan and K. Barry Sharpless, The Scripps Research Institute, La Jolla, California, USA. The Royal Swedish Academy of Sciences has awarded the Prize for their development of catalytic asymmetric synthesis. The achievements of these three chemists are of great importance for academic research, for the development of new drugs and materials, and are being used in many industrial syntheses of pharmaceutical products and other biologically active substances. This is a description and background information about the scientists' award-winning discoveries.

Mirror Image Catalysis Chiral molecules
Figure 1. Chirality in the amino acid alanine is illustrated with models of its two forms, which are mirror images of each other. They are designated (S) and (R).

This year's Nobel Prize in Chemistry concerns the way in which certain chiral molecules can be used to speed up and control important chemical reactions. The word chiral comes from the Greek word cheir, which means hand. Our hands are chiral – our right hand is a mirror image of our left hand – as are most of life's molecules. If, for example, we study the common amino acid alanine (figure 1), we see that it can occur in two forms: (S)-alanine and (R)-alanine, which are mirror images.

However we twist or turn these forms, we cannot get them to overlap each other. Apparently, they do not have the same three-dimensional structure. The reason is that the carbon atom in the centre binds the four different groups H, CH3, NH2 and COOH, which are located at the corners of a tetrahedron. The unbroken bonds to NH2 and COOH indicate that these bonds are in the plane of the paper, whereas the black wedge shaped bond and the broken wedge shaped bond show that they are directed upwards and downwards respectively in relation to the plane of the paper.

It was the Dutch chemist J. H. van 't Hoff and the French chemist J. A. Le Bel who, independently of each other in 1874, discovered this tetrahedral arrangement of the groups around the central carbon atom. (van 't Hoff received the first Nobel Prize in Chemistry 1901, but for other discoveries.)

Thus the amino acid alanine occurs in two forms, called enantiomers. When alanine is produced in a laboratory under normal conditions, a mixture is obtained, half of which is (S)-alanine and the other (R)-alanine. The synthesis is symmetrical in the sense that it produces equal amounts of both enantiomers.

Asymmetric synthesis, on the other hand, deals with the production of an excess of one of the forms. Why is this so important? Let us go back to nature to find the answer.

Nature is chiral

One may well think that both forms of chiral molecules ought to be equally common in nature, the reactions should be symmetrical. But when we study the molecules of the cells in close-up, it is evident that nature mainly uses one of the two enantiomers. That is why we have – and this applies to all living material, both vegetable and animal – amino acids, and therefore peptides, enzymes and other proteins, only of one of the mirror image forms. Carbohydrates and nucleic acids like DNA and RNA are other examples.

Thus the enzymes in our cells are chiral, as are other receptors that play an important part in cell machinery. This means that they prefer to bind to one of the enantiomers. In other words, the receptors are extremely selective; only one of the enantiomers fits the receptor's site like a key that fits a lock. (This metaphor comes from another Nobel Laureate in Chemistry, Emil Fischer, who was awarded the Prize in 1902.)

Since the two enantiomers of a chiral molecule often have totally different effects on cells, it is important to be able to produce each of the two forms pure.

Drugs and the smell of lemons
Figure 2. (R)-limonene smells of oranges while its enantiomer (S)-limonene smells of lemons

Most drugs consist of chiral molecules. And since a drug must match the molecules it should bind to itself in the cells, it is often only one of the enantiomers that is of interest. In certain cases the other form may even be harmful. This was the case, for example, with the drug thalidomide, which was sold in the 1960s to pregnant women. One of the enantiomers of thalidomide helped against nausea, while the other one could cause foetal damage.

There are other, less dramatic examples of how differently the two enantiomers can affect our cells. Limonene, for example, is chiral, but the two enantiomers can be difficult to distinguish at first glance (figure 2). The receptors in our nose are more sensitive. One form certainly smells of lemons but the other of oranges.

Catalytic asymmetric synthesis - What is it?

It is very important for industry to be able to produce products as pure as possible. It is also important to be able to manufacture large quantities of a product. For this reason the use of catalysts is very important. A catalyst is a substance that increases the rate of the reaction without being consumed itself.

During the past few decades there has been intensive research into developing methods for producing - synthesising - one of the enantiomers rather than the other. In a synthesis starting molecules (substrate molecules) are used to build new molecules (products) by means of various chemical reactions. It is to researchers in this field that this year's Nobel Prize in Chemistry has been awarded. The Laureates have developed chiral catalysts for two important classes of reactions in organic chemistry: hydrogenations and oxidations.

Knowles' pioneer work

In the early sixties it was not known whether catalytic asymmetric hydrogenation was feasible, i.e. would it be possible to catalyse an asymmetric reaction to produce an excess of one of the enantiomers? The breakthrough came in 1968 when William S. Knowles was working at the Monsanto Company, St Louis, USA. He discovered that it was possible to use a transition metal to produce a chiral catalyst that could transfer chirality to a non-chiral substrate and get a chiral product. The reaction was a hydrogenation in which the hydrogen atoms in H2 are added to the carbons in a double bond. A single catalyst molecule can produce millions of molecules of the desired enantiomer.

Figure 3. Knowles exchanged the non-chiral phosphine triphenylphosphine in A to the chiral phosphine B and obtained a catalyst for asymmetric hydrogenation.

Knowles' experiments were based on two discoveries that had been made a few years previously. In 1966 Osborn and Wilkinson had published their pioneering synthesis of a soluble transition metal complex, (A in figure 3), that made it possible to catalyse a hydrogenation in solution. Their metal complex was not chiral. At the centre of the complex was the transition metal rhodium which bound four groups, ligands: three triphenylphosphine molecules and one chlorine.

The second discovery on which Knowles' pioneering work is based on, is Horner's and Mislow's syntheses of chiral phosphines, for example the enantiomer B shown in figure 3. Knowles' hypothesis was that it might be possible to produce a catalyst for asymmetric hydrogenation if the triphenylphosphine groups in Osborn and Wilkinson's metal complex (A) was replaced by one of the enantiomers of a chiral phosphine.

The phosphine first used by Knowles was not enantiomerally pure, yet it produced a mixture in which there was 15% more of one enantiomer than the other. In other words the enantiomeric excess was 15%.

Although this excess was modest and hardly of any practical use, the result proved that it was in fact possible to achieve catalytic asymmetric hydrogenation. Other scientists (Horner, Kagan, Morrison and Bosnich) reached similar results shortly afterwards and they have all contributed to open the door to a new, exciting and important field for both academic and industrial research.

Figure 4. In this industrial synthesis of L-DOPA developed by Knowles and co-workers the compound C was used as the starting material. In the chiral hydrogenation one of the enantiomers of DiPAMP was used. The enantiomer D was 97.5% of the product and after acid hydrolysis of D, L-DOPA was obtained.
The first industrial catalytic asymmetric synthesis

Knowles' aim was to develop an industrial synthesis of the amino acid L-DOPA, which had proved useful in the treatment of Parkinson's disease – a discovery for which A. Carlsson was awarded last year's Nobel Prize in Physiology or Medicine. By testing enantiomers of phosphines with a varied structure Knowles and his colleagues quickly succeeded in producing usable catalysts that provided a high enantiomeric excess, that is, principally L-DOPA.

The ligand later used in Monsanto's industrial synthesis of L-DOPA was the diphosphine ligand DiPAMP. A rhodium complex with this ligand (figure 4) gave a mixture of the enantiomers of DOPA in 100% yield. The product contained of 97.5% L-DOPA. Thus Knowles had in a short time succeeded in applying his own basic research and that of others to create an industrial synthesis of a drug. This was the first catalytic asymmetric synthesis. It has been succeeded by many others.

How does a chiral catalyst molecule work?
Figure 5. The hands on the right symbolise the catalyst and the hands on the left the products. They match better in the upper picture (the energy is lower) than in the lower picture.

What part does the catalyst molecule itself actually play in asymmetric hydrogenation? Studies by the inorganic chemist J. Halpern and others have clarified the reaction mechanism. The transition metal, rhodium for example, in figure 4, which binds the chiral diphosphine, has the ability to simultaneously bind both H2 and the substrate. The complex obtained then reacts and H2 is added to the double bond in the substrate. This is the vital hydrogenation stage, when a new chiral complex is formed from which the chiral product is released. Thus from a substrate that is not chiral, chirality has been transferred from the chiral catalyst to the product. This product contains more of one enantiomer than of the other, that is, the synthesis is asymmetric.

The reason for the enantiomeric excess is to be found in the hydrogenation stage, as the hydrogen can be added in two ways that give the different enantiomers at different rates. These two pathways utilise different transition complexes, which are not mirror images and therefore have different energy. Hydrogenation takes place more rapidly via the complex with the lowest energy, thus producing an excess of one of the enantiomers. This can be compared with the hands in a handshake (figure 5). The hands in a handshake between two right hands match better than a handshake between a right and a left hand.

In the development of better asymmetric hydrogenation catalysts it is important to increase the energy difference between the transition complexes in order to obtain, as a consequence, larger enantiomeric excess. This is of vital interest in industrial applications in which the aim is to achieve economy in the process and environmentally acceptable methods, that is, as few waste products as possible. This development has been led by another of this year's Laureates in chemistry, Ryoji Noyori.

Noyori’s general hydrogenation catalysts

The Japanese scientist Ryoji Noyori has carried out extensive and intensive research and developed better and more general catalysts for hydrogenation. The consequences of his research are of great importance.

Figure 6. The two enantiomers of Noyori's useful BINAP is shown together with an example of a stereoselective ketone reduction where the ester function is left intact.

In 1980 Noyori and co-workers published an article on the synthesis of both enantiomers of the diphosphine ligand BINAP (figure 6). These catalyse, in complexes with rhodium, the synthesis of certain amino acids with an enantiomeric excess of up to 100%. The company Takasago International uses BINAP in the industrial synthesis of the chiral aroma substance menthol, since the early 1980s.

But Noyori also saw the need for more general catalysts with broader applications. Exchanging rhodium, Rh(I), for another transition metal, ruthenium, Ru(II), proved, for example, to be successful. The ruthenium(II)-BINAP complex hydrogenates many types of molecules with other functional groups. These reactions give a high enantiomeric excess and high yields and can be scaled up for industrial use. Noyori's Ru-BINAP is used as a catalyst in the production of (R)-1,2-propandiol for the industrial synthesis of an antibiotic, levofloxacin. Similar reactions are used for the synthesis of other antibiotics. Figure 6 gives an example of a stereoselective ketone reduction.

Noyori's catalysts have found wide application in the synthesis of fine chemicals, pharmaceutical products and new, advanced materials.

Figure 7. The allylic alcohol is oxidized to the epoxide (R)-glycidol using the oxidising agent tertiary butylhydroperoxide in the presence of a catalyst. This catalyst is formed in the reaction mixture of titanium tetraisopropoxide and the diethylesther of naturally occurring D-tartaric acid. The metal simultaneously binds the chiral ligand, the hyperperoxide and the substrate, after which the chiral epoxidation takes place.
Sharpless' chirally catalysed oxidations

Alongside the advances in chirally catalysed hydrogenation reactions, Barry Sharpless has developed corresponding chiral catalysts for other important reactions, oxidations. While hydrogenation removes a functional group because the double bond is saturated, oxidation leads to increased functionality. This creates new possibilities for building new complex molecules.

Sharpless realised that there was a great need for catalysts for asymmetric oxidations. He also had ideas as to how these could be achieved. He has made several important discoveries which here are exemplified by his chiral epoxidation. In 1980 he carried out successful experiments that led to a practical method for the catalytic asymmetric oxidation of allylic alcohols to chiral epoxides. This reaction utilised the transition metal titanium (Ti) and chiral ligands and gave high enantiomeric excess. Epoxides are useful intermediary products for various types of synthesis. This method opened up the way for great structural diversity and has had very wide applications in both academic and industrial research. The synthesis of the epoxide (R)-glycidol is shown in figure 7.

Glycidol is used in the pharmaceutical industry to produce beta-blockers, which are used as heart medicines. Many scientists have identified Sharpless' epoxidation as the most important discovery in the field of synthesis during the past few decades.

Consequences and applications

Many of the applications of this year's Nobel Laureates' pioneering work have already been discussed. It is especially important to emphasise the great significance of their discoveries and improvements for industry. New drugs are the most important application, but we may also mention the production of flavouring and sweetening agents, and insecticides. This year's Nobel Prize in Chemistry shows that the step from basic research to industrial application could sometimes be a short one.

All around the world many research groups are busy developing other catalytic asymmetric syntheses that have been inspired by the Laureates' discoveries. Their discoveries have provided academic research with many important tools, thereby contributing to more rapid advances in research – not only in chemistry but also in materials science, biology and medicine. Their work gives access to new molecules needed to investigate hitherto undiscovered and unexplained phenomena in the molecular world.
Advanced scientific information (PDF)

2001 Nobel Prize in Economics.
      The Royal Swedish Academy of Sciences announces that it has decided to award the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel, 2001, jointly to
      George A. Akerlof, University of California at Berkeley
      A. Michael Spence Stanford University, and
      Joseph E. Stiglitz, Columbia University, USA
"for their analyses of markets with asymmetric information"
.

Markets with asymmetric information
      Many markets are characterized by asymmetric information: actors on one side of the market have much better information than those on the other. Borrowers know more than lenders about their repayment prospects, managers and boards know more than shareholders about the firm's profitability, and prospective clients know more than insurance companies about their accident risk. During the 1970s, this year's Laureates laid the foundation for a general theory of markets with asymmetric information. Applications have been abundant, ranging from traditional agricultural markets to modern financial markets. The Laureates' contributions form the core of modern information economics.
      George Akerlof demonstrated how a market where sellers have more information than buyers about product quality can contract into an adverse selection of low-quality products. He also pointed out that informational problems are commonplace and important. Akerlof's pioneering contribution thus showed how asymmetric information of borrowers and lenders may explain skyrocketing borrowing rates on local Third World markets; but it also dealt with the difficulties for the elderly to find individual medical insurance and with labour-market discrimination of minorities.
      Michael Spence identified an important form of adjustment by individual market participants, where the better informed take costly actions in an attempt to improve on their market outcome by credibly transmitting information to the poorly informed. Spence showed when such signaling will actually work. While his own research emphasized education as a productivity signal in job markets, subsequent research has suggested many other applications, e.g., how firms may use dividends to signal their profitability to agents in the stock market.
      Joseph Stiglitz clarified the opposite type of market adjustment, where poorly informed agents extract information from the better informed, such as the screening performed by insurance companies dividing customers into risk classes by offering a menu of contracts where higher deductibles can be exchanged for significantly lower premiums. In a number of contributions about different markets, Stiglitz has shown that asymmetric information can provide the key to understanding many observed market phenomena, including unemployment and credit rationing.
For more than two decades, the theory of markets with asymmetric information has been a vital and lively field of economic research. Today, models with imperfect information are indispensable instruments in the researcher's toolbox. Countless applications extend from traditional agricultural markets in developing countries to modern financial markets in developed economies. The foundations for this theory were established in the 1970s by three researchers: George Akerlof, Michael Spence and Joseph Stiglitz. They receive the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel, 2001, "for their analyses of markets with asymmetric information".

Markets with Asymmetric Information
      Why are interest rates often excessively high on local lending markets in Third World countries? Why do people who want to buy a good used car turn to a dealer rather than a private seller? Why does a firm pay dividends even if they are taxed more heavily than capital gains? Why is it advantageous for insurance companies to offer clients a menu of contracts where higher deductibles can be exchanged for lower premiums? Why do rich landowners not bear the entire harvest risk in contracts with poor tenants? These questions exemplify familiar – but seemingly different – phenomena, each of which has posed a challenge to economic theory. This year's Laureates proposed a common explanation and extended the theory when they argumented the theory with the realistic assumption of asymmetric information: agents on one side of the market have much better information than those on the other side. Borrowers know more than the lender about their repayment prospects; the seller knows more than buyers about the quality of his car; the CEO and the board know more than the shareholders about the profitability of the firm; policyholders know more than the insurance company about their accident risk; and tenants know more than the landowner about their work effort and harvesting conditions.
      More specifically, Akerlof showed that informational asymmetries can give rise to adverse selection on markets. Due to imperfect information on the part of lenders or prospective car buyers, borrowers with weak repayment prospects or sellers of low-quality cars crowd out everyone else from the market. Spence demonstrated that under certain conditions, well-informed agents can improve their market outcome by signaling their private information to poorly informed agents. The management of a firm can thus incur the additional tax cost of dividends to signal high profitability. Stiglitz showed that an uninformed agent can sometimes capture the information of a better-informed agent through screening, for example by providing choices from a menu of contracts for a particular transaction. Insurance companies are thus able to divide their clients into risk classes by offering different policies, where lower premiums can be exchanged for a higher deductible.

George Akerlof
      Akerlof's 1970 essay, "The Market for Lemons" is the single most important study in the literature on economics of information. It has the typical features of a truly seminal contribution – it addresses a simple but profound and universal idea, with numerous implications and widespread applications.
      Here Akerlof introduces the first formal analysis of markets with the informational problem known as adverse selection. He analyses a market for a good where the seller has more information than the buyer regarding the quality of the product. This is exemplified by the market for used cars; "a lemon" – a colloquialism for a defective old car – is now a well-known metaphor in economists' theoretical vocabulary. Akerlof shows that hypothetically, the information problem can either cause an entire market to collapse or contract it into an adverse selection of low-quality products.
      Akerlof also pointed to the prevalence and importance of similar information asymmetries, especially in developing economies. One of his illustrative examples of adverse selection is drawn from credit markets in India in the 1960s, where local lenders charged interest rates that were twice as high as the rates in large cities. However, a middleman who borrows money in town and then lends it in the countryside, but does not know the borrowers' creditworthiness, risks attracting borrowers with poor repayment prospects, thereby becoming liable to heavy losses. Other examples in Akerlof's article include difficulties for the elderly to acquire individual health insurance and discrimination of minorities on the labor market.
      A key insight in his "lemons paper" is that economic agents may have strong incentives to offset the adverse effects of information problems on market efficiency. Akerlof argues that many market institutions may be regarded as emerging from attempts to resolve problems due to asymmetric information. One such example is guarantees from car dealers; others include brands, chain stores, franchising and different types of contracts.
      A timely example might further illustrate the idea that asymmetric information can generate adverse selection. At first, firms in a new sector – such as today's IT sector – might seem identical to an uninformed bystander, while some "insiders" may have better information about the future profitability of such firms. Firms with lower than average profitability will therefore be overvalued and more inclined to finance new projects by issuing their own shares than high-profitability firms which are undervalued by the market. As a result, low-profitability firms tend to grow more rapidly and the stock market will initially be dominated by "lemons". When uninformed investors eventually discover their mistake, share prices fall – the IT bubble bursts.
      Apart from his research on asymmetric information, Akerlof has developed economic theory with insights from sociology and social anthropology. His most noteworthy contributions in this genre concern efficiency on labor markets. Akerlof points out that emotions such as reciprocity towards an employer or fairness towards colleagues can prompt wages to be set so high as to induce unemployment. He has also examined how social conventions such as the caste system may have unfavorable effects on economic efficiency. As a result of these studies, Akerlof's research is also well known and influential in other social sciences.

Michael Spence
      Spence asked how better informed individuals on a market can credibly transmit, "signal", their information to less informed individuals, so as to avoid some of the problems associated with adverse selection. Signaling requires economic agents to take observable and costly measures to convince other agents of their ability or, more generally, of the value or quality of their products. Spence's contribution was to develop and formalize this idea as well as to demonstrate and analyze its implications.
      Spence's pioneering essay from 1973 (based on his PhD thesis) deals with education as a signal of productivity on the labor market. A fundamental insight is that signaling cannot succeed unless the signaling cost differs sufficiently among the "senders", i.e., job applicants. An employer cannot distinguish the more productive applicants from those who are less productive unless the former find it sufficiently less costly to acquire an education that the latter choose a lower level of education. Spence also pointed to the possibility of different "expectations-based" equilibria for education and wages, where e. g. men and white receive a higher wage than women and black with the same productivity.
      Subsequent research contains numerous applications which extend this theory and confirm the importance of signaling on different markets. This covers phenomena such as costly advertising or far-reaching guarantees as signals of productivity, aggressive price cuts as signals of market strength, delaying tactics in wage offers as a signal of bargaining power, financing by debt rather than by issuing new shares as a signal of profitability, and recession-generating monetary policy as a signal of uncompromising commitment to reduce stubbornly high inflation.
      An early example in the literature concerns dividends. Why do firms pay dividends to their shareholders, knowing full well that they are subject to higher taxes (through double taxation) than capital gains? Retaining the profits within the firm would appear as a cheaper way to favor the shareholders through the capital gains of a higher share price. One possible answer is that dividends can act as a signal for favorable prospects. Firms with "insider information" about high profitability pay dividends because the market interprets this as good news and therefore pays a higher price for the share. The higher share price compensates shareholders for the extra tax they pay on the dividends.
      In addition to his research on signaling, Spence was a forerunner in applying the results and insights of the 1996 economics laureates, Vickrey and Mirrlees, to the analysis of insurance markets. During the period 1975-1985, he was one of the pioneers in the wave of game-theory inspired work that clarified many aspects of strategic market behavior within the so-called new theory of industrial organization.

Joseph Stiglitz
      One of Stiglitz's classical papers, coauthored with Michael Rothschild, formally demonstrated how information problems can be dealt with on insurance markets where the companies do not have information on the risk situation of individual clients. This work is an obvious complement to Akerlof's and Spence's analyses by examining what actions uninformed agents can take on a market with asymmetric information. Rothschild and Stiglitz show that the insurance company (the uninformed party) can give its clients (the informed party) effective incentives to "reveal" information on their risk situation through so-called screening. In an equilibrium with screening, insurance companies distinguish between different risk classes among their policyholders by offering them to choose from a menu of alternative contracts where lower premiums can be exchanged for higher deductibles.
      Stiglitz and his numerous coauthors have time and again substantiated that economic models may be quite misleading if they disregard informational asymmetries. Their common message has been that in the perspective of asymmetric information, many markets take on a completely different guise, as do the conclusions regarding appropriate forms of public-sector regulation. Stiglitz has analyzed the implications of asymmetric information in many different contexts, varying from unemployment to the design of an optimal tax system. Several of his essays have become important stepping stones for further research.
      One example is Stiglitz's work with Andrew Weiss on credit markets with asymmetric information. Stiglitz and Weiss show that in order to reduce losses from bad loans, it may be optimal for bankers to ration the volume of loans instead of raising the lending rate. Since credit rationing is so common, these insights were important steps towards a more realistic theory of credit markets. They have also had a substantial impact in the domains of corporate finance, monetary theory and macroeconomics.
      In collaboration with Sanford Grossman, Stiglitz analyzed efficiency on financial markets. Their key result is known as the Grossman-Stiglitz paradox: if a market were informationally efficient, i.e., all relevant information is reflected in market prices, then no single agent would have sufficient incentive to acquire the information on which prices are based.
      Stiglitz is also one of the founders of modern development economics. He has shown that asymmetric information and economic incentives are not merely academic abstractions, but highly concrete phenomena with far-reaching explanatory value in the analysis of institutions and market conditions in developing economies. One of his first studies of information problems dealt with sharecropping, an ancient, though still common, form of contracting.
      A sharecropping contract stipulates that the harvest should be divided between a landowner and his tenant in fixed shares (usually half each). Since the landowner is usually richer than the tenant, it would seem advantageous to both parties to let the landowner bear the entire risk. But such a contract would not give the tenant strong enough incentives to cultivate the land efficiently. Considering the landowner's inferior information about harvest conditions and the tenant's work effort, sharecropping is in fact the optimal solution for both parties.
      Joseph Stiglitz's many contributions have transformed the way economists think about the working of markets. Together with the fundamental contributions by George Akerlof and Michael Spence, they make up the core of the modern economics of information.
Useful Links/Further Reading
Advanced scientific information (PDF):
2000 The Nobel Prize in Physics is announced to go with one half jointly to Zhores Ivanovich Alferov, 70, A.F. Ioffe Physico-Technical Institute, St. Petersburg, Russia, and Herbert Kroemer,University of California at Santa Barbara, California, USA, "for developing semiconductor heterostructures used in high-speed- and opto-electronics" and one half to Jack S. Kilby, 76, Texas Instruments, Dallas, Texas, USA, "for his part in the invention of the integrated circuit"
      The researchers' work has laid the foundations of modern information technology, IT, particularly through their invention of rapid transistors, laser diodes, and integrated circuits (chips).
Modern information technology
     In today's society increasing amounts of information flow from our computers out through the optical fibres of the Internet and through our mobile telephones to satellite radio links all over the world. Two simple but fundamental requirements are put on a modern information system for it to be practically useful. It must be fast, so that large volumes of information can be transferred in a short time. The user's apparatus must be small so that there is room for it in offices, homes, briefcases or pockets.
     Through their inventions the year 2000 Nobel Laureates in physics have laid a stable foundation for modern information technology. Zhores I. Alferov and Herbert Kroemer have invented and developed fast opto- and microelectronic components based on layered semiconductor structures, termed semiconductor heterostructures. Fast transistors built using heterostructure technology are used in e.g. radio link satellites and the base stations of mobile telephones. Laser diodes built with the same technology drive the flow of information in the Internet's fibre-optical cables. They are also found in CD players, bar-code readers and laser pointers. With heterostructure technology powerful light-emitting diodes are being built for use in car brake-lights, traffic lights and other warning lights. Electric bulbs may in the future be replaced by light-emitting diodes.
      Jack S. Kilby is being rewarded for his part in the invention and development of the integrated circuit, the chip. Through this invention microelectronics has grown to become the basis of all modern technology. Examples are powerful computers and processors which collect and process data and control everything from washing machines and cars to space probes and medical diagnostic equipment such as computer tomographs and magnetic resonance cameras. The microchip has also led to our environment being flooded with small electronic apparatuses, anything from electronic watches and TV games to mini-calculators and personal computers.

     Zhores I. Alferov born 15 March 1930 in Vitebsk, White Russia, then the Soviet Union. Doctor's degree in physics and mathematics 1970 at A.F. Ioffe Physico-Technical Institute in St. Petersburg (then Leningrad), Russia. Director of this Institute since 1987. http://194.85.224.34/pti00002.html
      Herbert Kroemer born 1928 in Germany. Doctor's degree in physics 1952 at University of Göttingen. Employed among other places at RCA Laboratories, Princeton, NJ, USA 1954-57 and at Varian Associates, Palo Alto, CA, USA, 1959-66. Professor of Physics, University of Colorado, Boulder, 1968-76 and subsequently University of California at Santa Barbara, USA. http://www.ece.ucsb.edu/Faculty/Kroemer/default.html
      Jack S. Kilby born 8 November 1923 in Jefferson City, Missouri, USA. Employed at Texas Instruments since 1958. Professor at Texas A&M University 1978-85. http://www.ti.com/corp/docs/kilbyctr/jackstclair.shtml
     — Se otorga el premio Nobel de Física a Jack S. Kilby, por el primer circuito integrado, precursor del chip, 42 años después del hallazgo. Comparte el premio con Herbert Kroemer y Zhores Alfiorov, que desarrollaron los dispositivos semiconductores de alta velocidad.

More information: http://www.nobel.se/announcement/2000     Useful links/Further reading
2000 The Nobel Prize in Chemistry is awarded jointly to Alan J. Heeger, University of California at Santa Barbara, USA, Alan G. MacDiarmid,
University of Pennsylvania, Philadelphia, USA, Hideki Shirakawa, University of Tsukuba, Japan, "for the discovery and development of conductive polymers"
Plastic that conducts electricity
     We have been taught that plastics, unlike metals, do not conduct electricity. In fact plastic is used as insulation round the copper wires in ordinary electric cables.Yet this year's Nobel Laureates in Chemistry are being rewarded for their revolutionary discovery that plastic can, after certain modifications, be made electrically conductive.
     Plastics are polymers, molecules that repeat their structure regularly in long chains. For a polymer to be able to conduct electric current it must consist alternately of single and double bonds between the carbon atoms. It must also be "doped", which means that electrons are removed (through oxidation) or introduced (through reduction). These "holes" or extra electrons can move along the molecule -- it becomes electrically conductive.
     Heeger, MacDiarmid and Shirakawa made their seminal findings at the end of the 1970s and have subsequently developed conductive polymers into a research field of great importance for chemists as well as physicists. The area has also yielded important practical applications. Conductive plastics are used in, or being developed industrially for, e.g. anti-static substances for photographic film, shields for computer screen against electromagnetic radiation and for "smart" windows (that can exclude sunlight). In addition, semi-conductive polymers have recently been developed in light-emitting diodes, solar cells and as displays in mobile telephones and mini-format television screens.
     Research on conductive polymers is also closely related to the rapid development in molecular electronics. In the future we will be able to produce transistors and other electronic components consisting of individual molecules -- which will dramatically increase the speed and reduce the size of our computers. A computer corresponding to what we now carry around in our bags would suddenly fit inside a watch.

Alan J. Heeger, 64, was born in 1936 in Sioux City, Iowa. He is Professor of Physics and Director of the Institute for Polymers and Organic Solids at the University of California at Santa Barbara.
Alan G MacDiarmid, 73, was born in 1927 in Masterton, New Zealand (US citizen). He is Professor of Chemistry at the University of Pennsylvania.
Hideki Shirakawa, 64, was born in 1936 in Tokyo. He is Professor of Chemistry at the Institute of Materials Science, University of Tsukuba, Japan.
     — Se otorga el premio Nobel de Química a los estadounidenses Alan Heeger y Alan McDiarmid y al japonés Hideki Shirakawa por la creación de los plásticos conductores de electricidad.

Useful links/Further reading Advanced scientific information (PDF)::

1997 Nobel Peace Prize to the ICBL and to its coordinator Jody Williams.
     The Norwegian Nobel Committee has decided to award the Nobel Peace Prize for 1997, in two equal parts, to the International Campaign to Ban Landmines (ICBL) and to the campaign's coordinator Jody Williams for their work for the banning and clearing of anti-personnel mines.
      There are at present probably over one hundred million anti-personnel mines scattered over large areas on several continents. Such mines maim and kill indiscriminately and are a major threat to the civilian populations and to the social and economic development of the many countries affected.
      The ICBL and Jody Williams started a process which in the space of a few years changed a ban on anti-personnel mines from a vision to a feasible reality. The Convention which will be signed in Ottawa in December this year 1997 is to a considerable extent a result of their important work.
      There are already over 1000 organizations, large and small, affiliated to the ICBL, making up a network through which it has been possible to express and mediate a broad wave of popular commitment in an unprecedented way. With the governments of several small and medium-sized countries taking the issue up and taking steps to deal with it, this work has grown into a convincing example of an effective policy for peace.
      The Norwegian Nobel Committee wishes to express the hope that the Ottawa process will win even wider support. As a model for similar processes in the future, it could prove of decisive importance to the international effort for disarmament and peace.

     The notion of a landmines ban seemed fantastical when American Ms. Williams, Vietnam Veterans of America Foundation President Bobby Muller, and the head of a German medical relief organization, Medico International, launched their umbrella group in 1992. "When we began, we were just three people sitting in a room," said Ms. Williams. "None of us thought we would ever ban landmines. I never thought it would happen in just six years."
     One person, with no network and no access to big names, created a movement that has shaken governments. Back then, no one thought about landmines. Today, wherever you turn in the media, this is an issue." Beginning with a handful of non-governmental organizations, ICBL now comprises more than 1000 organizations in nearly 60 countries. Last month following final negotiations in Oslo, Norway, 89 countries adopted a treaty to ban landmines. Some 100 countries are expected to formally sign the accord in December 1997 in Ottawa, Canada.
      Ms. Williams's determination to eradicate landmines grew out of her humanitarian work in Central America in the 1980s. "I dealt with a lot of landmine victims," she said. "Children who were missing their arms or their legs. It was, in a way, a natural progression from my work in Central America to helping this cause."
1995 Nobel for Economics to U. of Chicago prof.         ^top^
      Born 15 September 1937 in Yakima WA, University of Chicago professor Robert E. Lucas, Jr., 58, won the Nobel Prize for Economic Science for his exploration of the relationship between human tendencies and macroeconomics. Incredibly, he became the sixth University of Chicago professor to be honored with the award in as many years. Lucas's work challenged the once sacrosanct assumptions of Keynesian economics. Where Keynes looked past the link between the public and macroeconomics, Lucas studied how people react to shifts in economic policy. The result was the "rational expectations" hypothesis: Lucas argued that people brace themselves for policy changes, which ultimately nullifies the government's efforts to boost the economy. While the academic community heaped praise on Lucas, he remained modest, reminding his peers and reporters that the search was still on for ways to better regulate the economy.
      The prize was awarded to Lucas for having developed and applied the hypothesis of rational expectations, and thereby having transformed macroeconomic analysis and deepened our understanding of economic policy.
Rational Expectations Have Transformed Macroeconomic Analysis and Our Understanding of Economic Policy
Robert Lucas is the economist who has had the greatest influence on macroeconomic research since 1970. His work has brought about a rapid and revolutionary development: Application of the rational expectations hypothesis, emergence of an equilibrium theory of business cycles, insights into the difficulties of using economic policy to control the economy, and possibilities of reliably evaluating economic policy with statistical methods. In addition to his work in macroeconomics, Lucas's contributions have had a very significant impact on research in several other fields.
Rational Expectations
     Expectations about the future are highly important to economic decisions made by households, firms and organizations. One among many examples is wage formation, where expectations about the inflation rate and the demand for labor in the future strongly affect the contracted wage level which, in turn, affects future inflation. Similarly, many other economic variables are to a large extent governed by expectations about future conditions.
     Despite the major importance of expectations, economic analysis paid them only perfunctory attention for a long time. Twenty years ago, it was not unusual to assume arbitrarily specified or even static expectations, for example that the expected future price level was regarded as the same as today's price level. Or else adaptive expectations were assumed, such that the expected future price level was mechanically adjusted to the deviation between today's price level and the price level expected earlier.
     Instead, rational expectations are genuinely forward-looking. The rational expectations hypothesis means that agents exploit available information without making the systematic mistakes implied by earlier theories. Expectations are formed by constantly updating and reinterpreting this information. Sometimes the consequences of rational expectations formation are dramatic, as in the case of economic policy. The first precise formulation of the rational expectations hypothesis was introduced by John Muth in 1961. But it did not gain much prominence until the 1970s, when Lucas extended it to models of the aggregate economy. In a series of path-breaking articles, Lucas demonstrated the far-reaching consequences of rational expectations formation, particularly concerning the effects of economic policy and the evaluation of these effects using econometric methods, that is, statistical methods specifically adapted for examining economic relationships. Lucas also applied the hypothesis to several fields other than macroeconomics.
The Phillips Curve Example
     The change in our understanding of the so-called Phillips curve is an excellent example of Lucas's contributions. The Phillips curve displays a positive relation between inflation and employment. In the late 1960s, there was considerable empirical support for the Phillips curve; it was regarded as one of the more stable relations in economics. It was interpreted as an option for government authorities to increase employment by pursuing an expansionary policy which raises inflation. Milton Friedman and Edmund Phelps criticized this interpretation and claimed that the expectations of the general public would adjust to higher inflation and preclude a lasting increase in employment: Only the short-run Phillips curve is sloping, whereas the long-run curve is vertical. This criticism was not quite convincing, however, because Friedman and Phelps assumed adaptive expectations. Such expectations do in fact imply a permanent rise in employment if inflation is allowed to increase over time. In a study published in 1972, Lucas used the rational expectations hypothesis to provide the first theoretically satisfactory explanation for why the Phillips curve could be sloping in the short run but vertical in the long run. In other words, regardless of how it is pursued, stabilization policy cannot systematically affect long-run employment. Lucas formulated an ingenious theoretical model which generates time series such that inflation and employment indeed seem to be positively correlated. A statistician who studies these time series might easily conclude that employment could be increased by implementing an expansionary economic policy. Nevertheless, Lucas demonstrated that any endeavor, based on such policy, to exploit the Phillips curve and permanently increase employment would be futile and only give rise to higher inflation. This is because agents in the model adjust their expectations and hence price and wage formation to the new, expected policy. Experience during the 1970s and 1980s has shown that higher inflation does not appear to bring about a permanent increase in employment. This insight into the long-run effects of stabilization policy has become a commonly accepted view; it is now the foundation for monetary policy in a number of countries in their efforts to achieve and maintain a low and stable inflation rate.
     The short-run sloping and long-run vertical Phillips curve illustrates the pitfalls of uncritically relying on statistically estimated so-called macroeconometricmodels to draw conclusions about the effects of changes in economic policy. In a 1976 study, introducing what is now known as the "Lucas critique", Lucas demonstrated that relations which had so far been regarded as "structural" in econometric analysis were in fact influenced by past policy. Two decades ago, virtually all macroeconometric models contained relations which, on closer examination, could be shown to depend on the fiscal and monetary policy carried out during the estimation period. Obviously, then, the same relations cannot be used in simulations designed to predict the effect of another fiscal or monetary policy. Yet this was exactly how the models were often used.
     The Lucas critique has had a profound influence on economic-policy recommendations. Shifts in economic policy often produce a completely different outcome if the agents adapt their expectations to the new policy stance. Nowadays, when evaluating the consequences of shifts in economic-policy regimes - for example, a new exchange rate system, a new monetary policy, a tax reform or new rules for unemployment benefits - it is more or less self-evident to consider changes in the behavior of economic agents due to revised expectations.
     How could researchers avoid the mistakes forewarned by the Lucas critique? Lucas's own research provided the answer by calling for a new research program. The objective of the program was to formulate macroeconometric models such that their relations are not sensitive to policy changes; otherwise, the models cannot contribute to a reliable assessment of economic-policy alternatives. It is easy to formulate this principle: the models should be "equilibrium models" with rational expectations. This means that all important variables should be determined within the model, on the basis of interaction among rational agents who have rational expectations and operate in a well-specified economic environment. In addition, the models should be formulated so that they only incorporate policy-independent parameters (those coefficients which describe the relations of the models). This, in turn, requires sound microeconomic foundations, i.e., the individual agents' decision problems have to be completely accounted for in the model. The parameters are then estimated using econometric methods developed for this purpose. Interesting attempts to derive and estimate such models have subsequently been made in several different areas, such as the empirical analysis of investment, consumption and employment, as well as of asset pricing on financial markets. The program can be difficult to implement in practice however, and not all attempts have been successful.
A Large Following
     Lucas formulated powerful and operational methods for drawing conclusions from models with rational expectations. These methods provided the means for rapid development of macroeconomic analysis and eventually became part of the standard toolbox. Without them, the outcome of the rational expectations hypothesis would have been limited to general insights into the importance of expectations instead of clear-cut statements in specific situations. Rational expectations have now been accepted as the natural basis for further studies of expectation formation with respect to limited rationality, limited computational capacity and gradual learning.
     Lucas has established new areas of research. After his pioneering work on the Phillips curve, the so-called equilibrium theory of business cycles has become an extensive and dynamic field, where the effects of real and monetary disturbances on the business cycle have been carefully examined. The equilibrium theory of business cycles initially relied on the assumption of completely flexible prices and immediate adjustment to equilibrium on goods and labor markets with perfect competition. However, Lucas's methodological approach is not incompatible with sticky prices and various market failures such as imperfect competition and imperfect information. Nevertheless, these frictions and imperfections should not be introduced in an arbitrary way, but should be explained as a result of rational agents' decisions and interaction in a well-specified choice situation. Interpreted in this way, Lucas's methodological approach has been accepted by nearly all macroeconomists. Indeed, the greatest advances in modeling frictions and market imperfections seem to have been made precisely when this methodological approach has been followed.
     Lucas's pioneering work has created an entirely new field of econometrics, known as rational expectations econometrics. There, the rational expectations hypothesis is used to identify the most efficient statistical methods for estimating economic relations where expectations are the key components. A number of researchers have subsequently made important contributions to this new field.
Other Contributions
In addition to his work in macroeconomics, Lucas has made outstanding contributions to investment theory, financial economics, monetary theory, dynamic public economics, international finance and, most recently, the theory of economic growth. In each of these fields, Lucas's studies have had a significant impact; they have launched new ideas and generated an extensive new literature.
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