US scoops Nobel economics prize

He is the sixth American to win a Nobel Prize this year, with only the literature and peace prizes remaining.

Professor Phelps, 73, was educated at Amherst and Yale and now teaches at Columbia University in New York.

The Swedish Academy said his work "deepened our understanding of the relation between short-run and long-run effects of economic policy".

The economics prize has been funded by the Swedish Central Bank since 1969, and has been dominated by Americans.

"I tried to put the people back into our economic model"
Edmund S Phelps, Nobel Prize in Economics

It is the only one of the awards not established in the will left by Swedish industrialist Alfred Nobel 111 years ago, and its official title is the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.

The prize of 10m kronor ($1.4m, £723,000) will be awarded in a ceremony in Stockholm on 10 December.

The prize this year represents a return to a more traditional economic approach, after last year's award to game theorists Thomas Schelling and Robert Aumann.

Professor Phelps has been concerned with explaining the relationship between unemployment and inflation, which had been described by some economists as a trade-off.

He argued that inflation expectations could become embedded in the economy, leading to stagflation despite high unemployment.

This also meant that if inflation expectations were kept in check, the economy could run at a lower level of unemployment than would otherwise be the case.

Such views helped influence central banks to try and curb inflationary expectations promptly.

Professor Phelps said of his work:

"I tried to put the people back into our economic model and inparticular to take into account their expectations about what other economic actors are doing at the same time and in the future."

RELATED INTERNET LINKS
Nobel Foundation
Home Page - Edmund Phelps
The BBC is not responsible for the content of external internet sites