Economist Daniel McFadden Wins Nobel Prize By Genevieve Shiffrar October 11, 2000

From left to right: Dean of Social Sciences George Breslauer, Economist Daniel McFadden, Chancellor Robert Berdahl, L & S Chair of Deans Paul Licht, Arts and Humanities Dean Ralph Hexter

Daniel L. McFadden, E. Morris Cox Professor of Economics in the College of Letters and Science at U C Berkeley, has been awarded the Nobel Prize in Economic Sciences 2000.

Professor McFadden will share the prize with James J. Heckman of the University of Chicago for their work in separate areas of microeconomics. The two scientists will split the prize of nine million Swedish kroners (about $908,000 US) given by the Royal Swedish Academy of Sciences. Microeconomics involves the economic analysis of large groups of people, such as employees of a business or the elderly.

The Academy named McFadden for "his development of theory and methods for analyzing discrete choice," choices made from a limited number of alternatives. As an example of his work, in the 1970s McFadden predicted accurately commuters' discrete choices of transportation in connection with the new Bay Area Rapid Transit (BART) system by quantifying variables such as the cost of travel and the time spent traveling.

McFadden has applied his theory and methodology to a variety of situations, such as predicting housing choices and telephone service selection among the elderly. Currently, he is looking at the relationship between wealth of the elderly and their medical care. He has found that health care tends to decrease for the less wealthy when there is a mental health problem or a chronic illness. However, there is no correlation between wealth and health for mortality. Economists and other social scientists have used his methodology even more widely, adapting it for everything from predicting voting behavior to finding markets for new commodities. According to the Swedish Academy, McFadden's theory and methodologies for discrete choice have transformed empirical research.

Maurice Obstfeld, chair of the Economics Department, said that the name of the prize, officially the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel, is appropriate since McFadden places economics on a firm scientific basis.

Daniel McFadden, characterized by his colleagues as modest, kind, and thoughtful, was raised on a farm in North Carolina. He earned his undergraduate degree in physics and his doctorate in behavioral science (economics) from the University of Minnesota. He came to UC Berkeley as Assistant Professor of Economics in 1963. In 1978, he took a professorship at MIT but returned to Berkeley in 1990 as the E. Morris Cox Chair in the Economics Department. A year later, he established the Econometrics Laboratory, and began serving as its director.

Today, at 2:30 a. m., McFadden received the call from Stockholm and his life has been abuzz since. Colleagues say he's embarrassed by the media attention. He says he wishes he had tidied his office yesterday.

McFadden doesn't know what he is going to do with the prize money. At one point, he considered investing it in his small farm, producing grapes for Napa Valley wineries. Now, he has second doubts, describing the farm as a "money-losing business." Describing himself as always having "been motivated to solve the problems of the day"—we are confident his award money will be put to good use.

Related Links:

UC Berkeley's Special Coverage of McFadden's award features Quicktime videos, slide shows, and related news articles.

Royal Swedish Academy of Sciences

Daniel McFadden's web site