Spence, Andrew Michael (1943-…), is an American economist who won the 2001 Nobel Prize in economic sciences. Spence shared the award with fellow American economists George A. Akerlof and Joseph E. Stiglitz for their work in analyzing market systems. The three economists helped develop the field of economics of information, which stresses the importance of information on market functions. Much of Spence’s work involved markets with asymmetric information—that is, markets in which participants have different amounts and different types of information.
Spence described the use of communication techniques known as market signals as a way to avoid many of the problems caused by asymmetric information. Spence showed that well-informed people can improve their situations by signaling their information to others. For instance, the seller of an automobile may know that the car is of high quality, but potential buyers may be uncertain of the car’s quality. The seller can signal the car’s high quality by offering a warranty. Spence applied similar theories to the labor market, describing how job applicants can use education as a signaling device.
Spence was born in Montclair, New Jersey, on Nov. 7, 1943. He received a bachelor’s degree in philosophy from Princeton University in 1966 and a bachelor’s degree in mathematics from Oxford University in the United Kingdom in 1968. He earned his doctor’s degree in economics from Harvard University in 1972. From 1975 to 1990, he was a professor of economics and business administration at Harvard. Spence became a professor of economics at Stanford University in 1990. From 1990 to 1999, he served as the dean of the Stanford Business School.
