Akerlof, George Arthur (1940-…), is an American economist who won the 2001 Nobel Prize in economic sciences. Akerlof shared the award with fellow American economists A. Michael Spence and Joseph E. Stiglitz for their work in analyzing market systems. The three economists developed the field of economics of information, which stresses the importance of information on market functions. Akerlof is best known for his pioneering analysis of markets with asymmetric information—that is, markets in which participants have different amounts and different types of information. Akerlof has also explored how anthropology, sociology, psychology, and other factors can be incorporated into economic analysis.
Akerlof’s most famous work is his 1970 essay “The Market for ‘Lemons’: Quality Uncertainty and the Market Mechanism.” In it, he used the buying and selling of used automobiles to illustrate the inefficiencies of a market with asymmetric information. The seller of a used car, Akerlof reasoned, has more information about the car’s quality than potential buyers have. As a result, the seller has the advantage of knowing what price is fair. However, uncertainty about the car’s quality could make potential buyers less willing to pay a fair price for the car. Prices could then become lower, and owners of high-quality cars would be unable to sell them for what they are worth. This situation could lead to higher-quality cars being removed from the market, leaving only lower-quality cars for sale.
Akerlof was born in New Haven, Connecticut, on June 17, 1940. He received his bachelor’s degree from Yale University in 1962 and his doctor’s degree from the Massachusetts Institute of Technology in 1966. Akerlof became a professor of economics at the University of California at Berkeley in 1966. He has also taught at the London School of Economics, and served as an economic adviser to President Gerald Ford.
