Michael Spence
Encyclopedia
Andrew Michael Spence is an American
economist
and recipient of the 2001 Nobel Memorial Prize in Economic Sciences
, along with George A. Akerlof
and Joseph E. Stiglitz
, for their work on the dynamics of information flows
and market development. He conducted this research while at Harvard University
. In the current technological environment—with ever more abundant information flows about market development, prices, profit margins, investment instruments and rates of return—their work is more relevant than ever.
Michael Spence is probably most famous for his job-market signaling model, which essentially triggered the enormous volume of literature in this branch of contract theory
. In this model, employees signal their respective skills to employers by acquiring a certain degree of education, which is costly to them. Employers will pay higher wages to more educated employees, because they know that the proportion of employees with high abilities is higher among the educated ones, as it is less costly for them to acquire education than it is for employees with low abilities. For the model to work, it is not even necessary for education to have any intrinsic value if it can convey information about the sender (employee) to the recipient (employer) and if the signal is costly.
Spence did his middle and high school education at the University of Toronto Schools
of the University of Toronto
. In 1966, he was awarded a Rhodes Scholarship
at Oxford University upon graduation from Princeton University
with a degree in Philosophy
. He studied Mathematics
at Oxford. Spence is a former Dean of the Stanford Graduate School of Business
and is presently the Chairman of the Commission on Growth and Development.
Spence joined the faculty of New York University Stern School of Business
on September 1, 2010.
He is currently a senior fellow at Stanford University
's Hoover Institution
.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
economist
Economist
An economist is a professional in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy...
and recipient of the 2001 Nobel Memorial Prize in Economic Sciences
Nobel Memorial Prize in Economic Sciences
The Nobel Memorial Prize in Economic Sciences, commonly referred to as the Nobel Prize in Economics, but officially the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel , is an award for outstanding contributions to the field of economics, generally regarded as one of the...
, along with George A. Akerlof
George Akerlof
George Arthur Akerlof is an American economist and Koshland Professor of Economics at the University of California, Berkeley. He won the 2001 Nobel Prize in Economics George Arthur Akerlof (born June 17, 1940) is an American economist and Koshland Professor of Economics at the University of...
and Joseph E. Stiglitz
Joseph E. Stiglitz
Joseph Eugene Stiglitz, ForMemRS, FBA, is an American economist and a professor at Columbia University. He is a recipient of the Nobel Memorial Prize in Economic Sciences and the John Bates Clark Medal . He is also the former Senior Vice President and Chief Economist of the World Bank...
, for their work on the dynamics of information flows
Information flow (information theory)
Information flow in an information theoretical context is the transfer of information from a variable x to a variable y in a given process.Not all flows may be desirable. For example, a system shouldn't leak any secret to public observers....
and market development. He conducted this research while at Harvard University
Harvard University
Harvard University is a private Ivy League university located in Cambridge, Massachusetts, United States, established in 1636 by the Massachusetts legislature. Harvard is the oldest institution of higher learning in the United States and the first corporation chartered in the country...
. In the current technological environment—with ever more abundant information flows about market development, prices, profit margins, investment instruments and rates of return—their work is more relevant than ever.
Michael Spence is probably most famous for his job-market signaling model, which essentially triggered the enormous volume of literature in this branch of contract theory
Contract theory
In economics, contract theory studies how economic actors can and do construct contractual arrangements, generally in the presence of asymmetric information. Because of its connections with both agency and incentives, contract theory is often categorized within a field known as Law and economics...
. In this model, employees signal their respective skills to employers by acquiring a certain degree of education, which is costly to them. Employers will pay higher wages to more educated employees, because they know that the proportion of employees with high abilities is higher among the educated ones, as it is less costly for them to acquire education than it is for employees with low abilities. For the model to work, it is not even necessary for education to have any intrinsic value if it can convey information about the sender (employee) to the recipient (employer) and if the signal is costly.
Spence did his middle and high school education at the University of Toronto Schools
University of Toronto Schools
The University of Toronto Schools is an independent secondary day school affiliated with the University of Toronto in Toronto, Ontario, Canada...
of the University of Toronto
University of Toronto
The University of Toronto is a public research university in Toronto, Ontario, Canada, situated on the grounds that surround Queen's Park. It was founded by royal charter in 1827 as King's College, the first institution of higher learning in Upper Canada...
. In 1966, he was awarded a Rhodes Scholarship
Rhodes Scholarship
The Rhodes Scholarship, named after Cecil Rhodes, is an international postgraduate award for study at the University of Oxford. It was the first large-scale programme of international scholarships, and is widely considered the "world's most prestigious scholarship" by many public sources such as...
at Oxford University upon graduation from Princeton University
Princeton University
Princeton University is a private research university located in Princeton, New Jersey, United States. The school is one of the eight universities of the Ivy League, and is one of the nine Colonial Colleges founded before the American Revolution....
with a degree in Philosophy
Philosophy
Philosophy is the study of general and fundamental problems, such as those connected with existence, knowledge, values, reason, mind, and language. Philosophy is distinguished from other ways of addressing such problems by its critical, generally systematic approach and its reliance on rational...
. He studied Mathematics
Mathematics
Mathematics is the study of quantity, space, structure, and change. Mathematicians seek out patterns and formulate new conjectures. Mathematicians resolve the truth or falsity of conjectures by mathematical proofs, which are arguments sufficient to convince other mathematicians of their validity...
at Oxford. Spence is a former Dean of the Stanford Graduate School of Business
Stanford Graduate School of Business
The Stanford Graduate School of Business is one of the professional schools of Stanford University, in Stanford, California and is broadly regarded as one of the best business schools in the world.The Stanford GSB offers a general management Master of Business Administration degree, the Sloan...
and is presently the Chairman of the Commission on Growth and Development.
Growth Commission
The Commission on Growth and Development was an independent body chaired by Michael Spence that brought together 22 policy-makers, academics, and business leaders to examine various aspects of economic growth and development.Launched in 2006, the Commission set out to take stock of the state of...
Spence joined the faculty of New York University Stern School of Business
New York University Stern School of Business
The Leonard N. Stern School of Business is New York University's business school. It was established in 1900 as the NYU School of Commerce, Accounts and Finance. In 1988 it was named after Leonard N. Stern, an alumnus and benefactor of the school...
on September 1, 2010.
He is currently a senior fellow at Stanford University
Stanford University
The Leland Stanford Junior University, commonly referred to as Stanford University or Stanford, is a private research university on an campus located near Palo Alto, California. It is situated in the northwestern Santa Clara Valley on the San Francisco Peninsula, approximately northwest of San...
's Hoover Institution
Hoover Institution
The Hoover Institution on War, Revolution and Peace is a public policy think tank and library founded in 1919 by then future U.S. president, Herbert Hoover, an early alumnus of Stanford....
.
External links
- Michael Spence Senior Fellow at Hoover InstitutionHoover InstitutionThe Hoover Institution on War, Revolution and Peace is a public policy think tank and library founded in 1919 by then future U.S. president, Herbert Hoover, an early alumnus of Stanford....
, Stanford UniversityStanford UniversityThe Leland Stanford Junior University, commonly referred to as Stanford University or Stanford, is a private research university on an campus located near Palo Alto, California. It is situated in the northwestern Santa Clara Valley on the San Francisco Peninsula, approximately northwest of San... - Signaling in Retrospect and the Informational Structure of Markets 2001 lecture at NobelPrize.org
- Profile and Papers at Research Papers in EconomicsResearch Papers in EconomicsResearch Papers in Economics is a collaborative effort of hundreds of volunteers in 57 countries to enhance the dissemination of research in economics. The heart of the project is a decentralized database of working papers, preprints, journal articles and software components. The project started...
/RePEc - Spence on Growth at EconTalkEconTalkEconTalk is a weekly podcast hosted by professor Russell Roberts at George Mason University. Roberts interviews guests—often professional economists—on topics in economics....
- Website for http://www.thenextconvergence.com/"The Next Convergence: The Future of Economic Growth in a Multispeed World" by Michael Spence