This year’s Nobel Prize in economics, the Royal Swedish Academy of Sciences announced Monday, will go to Oliver Hart and Bengt Holmstrom for “their contributions to contract theory.” Mr. Hart, born in Britain, is a professor at Harvard. Mr. Holmstrom, born in Finland, is a professor at MIT.

 

To understand their work, start with a pillar of economics that I teach on the first day of class: Incentives matter. Mr. Hart and Mr. Holmstrom take that principle and run with it, seeking to understand incentives within both individual companies and the larger market structure.

 

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