George Akerlof

Georgetown University / University of California, Berkeley

George Arthur Akerlof is an American economist, formerly at UC Berkeley and now at Georgetown University, who shared the 2001 Nobel Memorial Prize in Economic Sciences with Michael Spence and Joseph Stiglitz for analyses of markets with asymmetric information. Akerlof's 1970 paper 'The Market for Lemons' became one of the most influential papers in economics: it showed that when sellers know more about product quality than buyers — as in used car markets, insurance markets, and labor markets — asymmetric information can cause market failure, driving high-quality goods out of the market entirely. The lemons model provided the theoretical foundation for understanding adverse selection and moral hazard and has been applied to health insurance reform, financial regulation, development finance, and labor economics. Akerlof has also contributed significantly to macroeconomics, introducing the efficiency wage model with Janet Yellen, developing the concept of 'identity economics,' and contributing behavioral models of near-rational behavior and the economics of social norms.