International Economics Prize awarded to Torsten Persson
Torsten Persson, Professor at the Institute for International Economics Studies (IIES) at Stockholm University, is awarded the prestigious BBVA Frontiers of Knowledge Award.
The BBVA Frontiers of Knowledge Award in Economics, Finance and Management is awarded to IIES Professor Torsten Persson together with Timothy Besley (London School of Economics and Political Science, LSE) and Guido Tabellini (Bocconi University) for "illuminating the connections between the economic and political worlds" and "transforming the field of political economy".
A new field of study
The new political economy pioneered by the awardees has brought with it two main innovations: the primacy of empirical inquiry and the use of the tools and techniques of modern economic science. Their research forms the core of a whole new field of study - Modern Political Economy - that exhibits all the clarity of robust theory applied to solid, evidence-driven analysis.
Beyond simply seeking to understand the sociopolitical context for public policymaking, they model the behavior of agents - citizens, politicians and organizations - and make it the centerpiece of the theoretical framework, and then they develop empirical tests to find whether these theories are supported by the facts.
The early years
Persson and Tabellini met when their respective academic careers brought them to the United States in the mid to late 1980s. They believed that traditional analysis looked in one direction only; at the way that policymaking acted on the real economy. Researchers needed to dig deeper and ask how economic policies were actually shaped, meaning how they were chosen and how they reflected the institutional environment in which they were formed.
Observation and empirical analysis would take center stage, backed by interaction with other disciplines. Political scientists, for instance, had elucidated how different election systems tend to favor either single-party or coalition governments. Persson and Tabellini expanded on this insight to show that similar mechanisms could also determine such key economic variables as public spending and public debt, with frequent coalition governments favoring higher spending as well as higher debt. In other research, they argued that a country's economic growth can be structurally undermined by higher inequalities in wealth and income via policies which are less conducive to growth.
In 1995 Tim Besley was invited to a conference that Torsten Persson was organizing in Italy together with Tabellini in a bid to bring together researchers with an interest in this young and bourgeoning field. In the early 2000s, the three awardees joined an interdisciplinary research group on Institutions, Organizations and Growth, which still meets two or three times a year. Via discussions in that group – which continued during Persson’s repeated visits at the LSE – Besley and Persson began to do joint research. Their book Pillars of Prosperity (2011) is one of the most far-reaching works. There, they examine the determinants and consequences of what they called "state capacity". In their conception, state capacity has three interrelated pillars: the power to raise taxes, the ability to make and enforce laws, and the capacity to spend on things that make lives better, be it health systems, education systems or infrastructure.
Torsten Persson is the first researcher at Stockholm University to receive the award in any of the eight fields it is awarded, and the first Swede to receive it in the field of economics.
It is a great honor to receive this award, which draws attention to my most important field of research. It is a special privilege to share the award with Tim Besley and Guido Tabellini, two of my closest colleagues and best friends within the profession, says Torsten Persson.
The prize amount is EUR 400,000 and is shared equally between the three awardees.
Last updated: March 2, 2023
Source: Institute for International Economic Studies (IIES)