NOBEL PRIZE IN ECONOMICS
October 11, 2000

James J. Heckman, American, 56, University of Chicago Daniel L. McFadden, American, 63, University of California, Berkeley

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Two American professors were awarded this year's Nobel Prize in economics for their pioneering 1960s and 1970s work predicting basic lifestyle choices. James Heckman, 56, and Daniel McFadden, 63, will share the $913,100 prize for their studies on how people decide where to live, how much to work, and how long to continue their education. The two economists specialize in microeconometrics -- a combination of statistics and microeconomics, the economic study of individuals and firms. Their findings are now used throughout the social sciences. McFadden, a professor at the University of California at Berkeley, examined how people choose among a limited set of alternatives. "What I did was to take the economic theory of self-interest, which governs economic behavior, and apply it to life's big decisions: when to get married, how many children to have, what occupation to choose, " McFadden said. His work was instrumental in designing the San Francisco Bay Area Rapid Transport system, calculating the demand for housing for the elderly, and determining investment in phone services. Heckman, a professor at the University of Chicago, designed statistical methods to evaluate the effectiveness of job training programs and employment subsidies. He also made it possible to estimate how the length of unemployment affects chances of getting a job. "Heckman has improved our understanding of the labor market and salaries," said Bertil Holmlund of Uppsala University, a member of the Nobel Prize Committee. "He is at the forefront of our understanding of the welfare system in the US" The two winners have been friends and colleagues for years. McFadden "was never my teacher in the classroom, but in life he taught me a lot," Heckman said. "So much of my work is based on his methods." McFadden said he will spend his share of the prize on his farm in northern California's wine country. Heckman quipped that he will "pay a lot of taxes."