Finance and economics: Free exchange: Hard bargains
Two economists win the Nobel prize for their work on the theory of contracts.
Economics can seem a rather bloodless science.
In its simplest models, prices elegantly balance supply and demand, magically directing individuals’ pursuit of their own self-interest towards the greater good.
In the real world, humans often undermine the greater good by grabbing whatever goodies their position allows them.
The best economic theorizing grapples with this reality, and brings us closer to understanding the role of power relationships in human interactions.
This year’s Nobel prize for economic sciences—awarded to Oliver Hart and Bengt Holmstrom—celebrates their study of economic power, and the tricky business of harnessing it to useful economic ends.
Behind the dull-sounding “contract theory” for which the two were recognised lies an important truth: that when people want to work together, individual self-interest must be kept under control.
在两人因之而得到承认的听上去无趣的 “契约理论” 背后存在着一个重要的真相：当人们想要一块工作时，个人的自身利益必须处于被控制之下。
For a chef and a restaurant-owner to work together productively, for example, the owner must promise not to use the power he has to change the locks in order to deny the chef his share of future profit.
Mr Hart, a British economist working at Harvard University, tackled power dynamics while seeking to explain the existence of firms—a question which has troubled economists since the work of the late Ronald Coase, another Nobelist, starting in the 1930s.
Firms provide some advantage over dealing with others through exchanges of cash for services in the open market, but economists have struggled to pinpoint what that advantage is.
The difficulty in writing contracts that cover all future situations seems to be crucial.
Agreeing beforehand how any hypothetical future windfall or loss ought to be shared can be impossible.
Yet the uncertainty of working without such a complete contract could be big enough to prevent potentially profitable partnerships from forming.
In work with Sanford Grossman, (an economist who might plausibly have shared the prize) , Mr Hart reasoned that firms solve this problem by clever use of the bargaining power bestowed by the ownership and control of key assets, such as machines or intellectual property.
在与桑福德·格罗斯曼 (一位本应合理地分享今年诺奖的经济学家) 的合作中，哈特断定，企业是通过对所有权以及机器和知识产权等关键资产的控制权所赐予的议价权的灵活运用来解决这一问题的。
Instead of fussing over how to divide up the spoils in every possible future, in other words, workers agree to sell their labour to a firm that owns the machinery or technology they use, in the knowledge that ownership gives the firm the power to hoover up a disproportionate share of the profits.
This power comes with costs as well as benefits, which help shape how big companies become and exactly what they do.
In other work, Mr Hart noted that workers and managers who look after equipment can make decisions to improve its productivity (like maintaining the machinery and investing in training) .
But just how much time and energy they spend on such efforts depends on what share of future profits they can expect.