The economy, the Nobel prize winner Oliver Hart and Bengt Holmstroem – The NINETEENTH Century

Bengt Ceremony and Oliver Hart

But to get a clearer idea of the impact of their studies, it is worth mentioning that, in 1997, a colleague of Hart to Harvard, Dale W. Jorgenson, had said that his work is “it has revolutionized the field of corporate finance”. While Holmstroem has contributed, among other things, to develop the theory of moral hazard and to identify the principle that “ignorance is bliss”. Themes become particularly hot in recent times, after the outbreak of the financial crisis, which examine how banks and other economic agents to take risks to be unjustified because they know that you will not face the full cost of failure.

In a recent work on the problems of liquidity of the markets has found that sometimes, during the financial crisis, “ignorance is bliss”, allowing the markets to remain liquid due to banks and other entities that continue their trade in spite of the difficulties that could be faced. As the experience of Hart - entered Harvard in 1993 after a degree at Cambridge in mathematics and a doctorate in Pricenton – , he has focused his research on the division of power in economic relations, including precisely the contract, and has also explored the effects that such divisions of power have on the corporate structure and finance.

His discovery of the "incomplete contracts", which expresses the idea that it is impossible to specify every type of event, and explore "the optimal allocation of control rights", i.e. which part has the right to take decisions and in what circumstances. Holmstroem has focused on the dynamics of the organization of the company, in particular on contracts and incentives, including corporate governance, remuneration of executives and restructuring processes. His "principle of informativita" determines how the contract is to tie the salary to the relevant information to establish the performance, weighing the risks and incentives.

Among the points examined also the possibility that employees may be rewarded with promotions, but that some of the members of a team can make “free-riding”, that is, exploit the labor of others without having merit. In recent years Hart and Holmstroem also have in-depth many of the applications of their "theory of contracts": in particular, the analysis of contractual arrangements "optimal" sets the stage for the definition of policies in different areas, starting with the legislation that governs bankruptcy and reorganization proceedings bancarotte up to issues of constitutional law

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