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Nobel Jews
Portrait of George A. Akerlof
Photo: Yan Chi Vinci Chow, https://www.flickr.com/photos/ticoneva/444805175/ · CC BY 3.0 via Wikimedia Commons

Sveriges Riksbank Prize in Economic Sciences · 2001

George A. Akerlof

Showed how hidden information can wreck a market, explaining why buyers fear lemons and why warranties, brands and fair rules matter.

The Nobel citation: “for their analyses of markets with asymmetric information”
Born
June 17, 1940, New Haven, CT, USA
Shared with
A. Michael Spence, Joseph E. Stiglitz
Affiliation at the time
University of California, USA

Economics prize

2001

Shared with 2 other laureates.

Age that year

61years

Born in 1940.

Sources cited

18

Fact-checked September 24, 2026.

  • Three journals turned down "The Market for 'Lemons'" before it was accepted. Two said its subject was too trivial to publish.
  • He wrote the 13-page lemons paper that later won him the Nobel Prize during his first year as an assistant professor at Berkeley.
  • At 11 or 12 he worked out for himself how one lost job can cost others theirs, which he later saw as the basic idea of Keynesian economics.
  • His grandfather, a pioneering heart specialist, was denied tenure at Johns Hopkins. Akerlof links this to the family's German Jewish ancestry.
  • He is married to the economist Janet Yellen, who later chaired the US Federal Reserve and served as Treasury Secretary.

The breakthrough

The market for lemons: how hidden information can shrink or kill a market

Picture a used-car lot. The seller knows whether a car is a good one or a "lemon", a car with hidden faults. The buyer can't tell by looking. So buyers offer a price that allows for the risk of a lemon: somewhere between what a good car and a bad car are worth. That price is too low for owners of good cars, so many keep them off the market. Now the cars for sale are worse on average, buyers lower their offers again, and more good cars drop out. In the extreme case the market collapses and deals that would have helped both sides never happen. Akerlof published this idea in 1970. It was the first formal analysis of what economists now call adverse selection: the people most eager to trade are often the ones holding the worst deal. He showed that the same trap appears far beyond cars. It explains why older people struggled to buy private health insurance, why village moneylenders in 1960s India charged interest rates about twice as high as lenders in big cities, and how employers can end up discriminating against minority workers. He also showed that many familiar features of the economy exist to fight the problem. Dealer guarantees, brand names, chain stores and franchises all give buyers reasons to trust what they cannot check for themselves. The Royal Swedish Academy of Sciences called the paper the single most important study in the economics of information.[3],[4],[5],[8]

“unemployment, with the financial hardship and the loss of identity that it entails, is a very major problem.”
George A. Akerlof, Akerlof explaining, in a 2003 essay for the Nobel Foundation, the concern about joblessness that drove his research, including the lemons paper.[5]

What it meant for humanity

Akerlof's work gave economists and policymakers a way to see a problem that everyone had felt but no one had modeled: when one side of a deal knows much more than the other, honest sellers and careful buyers can both lose out. Along with the work of Michael Spence and Joseph Stiglitz, the lemons paper became the core of modern information economics. Its logic now shapes how people think about insurance, lending, job markets and consumer protection. It explains why a buyer would rather pay more at a dealer who offers a guarantee, why vehicle-history reports have value, and why rules that force sellers to disclose information can help a market work. The US Federal Trade Commission's Used Car Rule, in force since 1985, requires dealers to post a Buyers Guide on each used car saying whether it carries a warranty. That rule tackles exactly the kind of information gap Akerlof described. His later work brought fairness, social norms and identity into economics. With Janet Yellen, he helped explain why unemployment can persist. Firms may pay more than the going wage to keep workers motivated, and small, nearly costless delays in changing prices and wages can add up to large swings in the whole economy. With Paul Romer, he argued that owners of failing banks and savings-and-loans could profit by "looting" institutions that taxpayers had insured. With Robert Shiller, he warned that competitive markets reward sellers who exploit people's weaknesses. Much of this work was driven by his lifelong concern about the damage unemployment does to people's lives.

  • The Royal Swedish Academy of Sciences called "The Market for 'Lemons'" the single most important study in the economics of information. It gave the first formal analysis of markets affected by adverse selection.[3],[4]
  • He showed that everyday institutions such as dealer guarantees, brand names, chain stores and franchising can be understood as ways to overcome buyers' lack of information.[4],[8]
  • Disclosure rules such as the US Federal Trade Commission's Used Car Rule, in force since 1985, require dealers to state whether a used car comes with a warranty. Such rules target the information gap Akerlof analyzed.[4],[15]
  • His 1993 paper with Paul Romer described how deposit insurance let owners of insolvent institutions profit at public expense, in the US savings-and-loan crisis and in Chile.[9]
  • With Rachel Kranton he pioneered identity economics, which studies how people's sense of who they are shapes their work, schooling and pay.[1],[7],[11]
  • In Phishing for Phools (2015), written with Robert Shiller, he argued that free markets systematically reward manipulation and deception as well as honest service.[10]

Impact in numbers

Akerlof's impact is a way of seeing markets, and we do not put a number on it. The lemons model and the wider theory of asymmetric information, built together with Spence and Stiglitz, are now part of the basic toolkit used to analyze insurance, credit, labor markets and consumer protection. They inform how regulators think about disclosure rules, how insurers design policies, and why guarantees, brands and history reports have value. But none of these outcomes can be traced to Akerlof alone, and no published estimate measures the benefit of his ideas, so any figure would be invented. The same is true of his work on efficiency wages, sticky prices and low-inflation policy with Janet Yellen, George Perry and William Dickens. It is also true of his analysis of looting in the savings-and-loan crisis with Paul Romer, and of the behavioral and identity economics he helped to build. These shaped research and policy debate over five decades. Their effects on people's lives are real, but they are spread across many hands and cannot honestly be counted.

EconomyFundamental science

No number is given here on purpose. Some contributions cannot be counted honestly, and we would rather describe them than invent a figure.

The double edge

We found no documented harm caused by Akerlof's work. The main debate is scholarly. His famous result, that a market can collapse entirely, was a stark theoretical case, and later models found that used-car markets need not shut down and that the losses from hidden information can be smaller than the simplest version of the model suggests. Akerlof himself said the paper gave examples of a market shrinking, possibly to the point of collapse, and that reading it as saying no goods could ever be traded exaggerated its claims. Some of his later work touched sensitive subjects, such as his 1996 argument with Janet Yellen that easier access to contraception and abortion helped drive the rise in births outside marriage. The authors explicitly opposed restricting either one. They called instead for help for poor families, such as a larger Earned Income Tax Credit.

  • Minor

    Real markets rarely collapse the way the simple model suggests

    Hendel and Lizzeri (1999) built a model of new and used goods together. In it the used market never shuts down, trade can be large, and distortions are lower than earlier models implied. The lemons logic still holds in their model: unreliable car brands lose value faster and trade less. But the dramatic collapse in Akerlof's paper is best read as a limiting case.[5],[14]

Against the odds

Akerlof grew up in an academic family in the postwar United States, in years he remembered as comfortable and happy, and describes no antisemitism aimed at him personally. His family's history shows the barriers American Jews had faced a generation earlier. He writes that his maternal grandfather, who had set up the first cardiology clinic in the United States at Johns Hopkins, was denied tenure there because of his German Jewish ancestry. The grandfather changed fields and became head of pharmacology at the University of Minnesota. In the same era, from the 1920s, Columbia, Harvard and Yale began limiting the number of Jewish students. They used tools such as "character" assessments, interviews and geographic preferences. These practices became hard to defend after the Holocaust, but Jewish enrollment only rose substantially in the 1960s. Akerlof entered Yale in 1958, as these barriers were falling. His own setbacks were professional and personal, and he wrote about them candidly. As a sickly child he was sent home from kindergarten. Three journals rejected his most important paper. After returning from India he suffered colitis and then severe depression caused by the drugs used to treat it, and in the 1970s Berkeley at first declined to promote him to full professor.

  • —

    Discrimination

    Akerlof writes that his grandfather, a cardiologist who founded the first cardiology clinic in the US at Johns Hopkins, was denied tenure because of his German Jewish ancestry. He moved to Minnesota to chair pharmacology.[1]

  • —

    Quota

    Yale, where Akerlof studied from 1958, was one of the Ivy League universities that had restricted Jewish admissions from the 1920s. Those limits were loosening only in the 1950s and 1960s.[7],[16]

  • 1967

    Other

    His prize-winning paper was rejected by three leading journals. Two called the topic trivial, and referees at the third argued that if it were right, economics would have to change.[5]

Jewish background

Jewish motherRelationship to Jewish identity not documented

Akerlof's father was a chemist who emigrated from Sweden. In his Nobel autobiography Akerlof writes that both of his mother's parents were of German Jewish descent. Her family had been in America for generations and produced physicians and chemists. Akerlof writes that this ancestry cost his grandfather, a cardiologist, tenure at Johns Hopkins. He presents his Jewish roots as family history. He describes no religious upbringing or practice, and we found no statement from him about his own Jewish identity. He meets our standard through his mother's Jewish descent.[1],[7],[17]

Key dates

  1. June 17, 1940

    Born in New Haven, Connecticut, to a Swedish-born chemist father and a mother of German Jewish descent.[1],[2]

  2. 1962

    Graduates from Yale University, having studied economics and mathematics.[1],[7]

  3. 1966

    Earns his PhD at MIT and becomes an assistant professor at the University of California, Berkeley.[1],[3]

  4. 1967

    Finishes "The Market for 'Lemons'" and sends it out. Three journals reject it while he spends a year at the Indian Statistical Institute in New Delhi.[1],[5]

  5. 1970

    "The Market for 'Lemons'" is published in the Quarterly Journal of Economics.[4],[5],[18]

  6. June 1978

    Marries the economist Janet Yellen. Both take posts at the London School of Economics.[1]

  7. 1980

    Returns to Berkeley as Goldman Professor of Economics.[2],[3]

  8. 1993

    Publishes "Looting" with Paul Romer, on how insured institutions were bankrupted for profit.[9]

  9. 1996

    With Janet Yellen, publishes an analysis arguing that easier access to contraception and abortion helped drive the rise in US births outside marriage.[13]

  10. October 10, 2001

    Shares the Nobel Memorial Prize in Economic Sciences with Michael Spence and Joseph Stiglitz for analyses of markets with asymmetric information.[2],[3]

  11. December 8, 2001

    Gives his Nobel lecture, "Behavioral Macroeconomics and Macroeconomic Behavior", in Stockholm.[6]

  12. 2009

    Publishes Animal Spirits with Robert Shiller, on how confidence, fear and ideas of fairness drive the economy.[7],[12]

  13. 2010

    Publishes Identity Economics with Rachel Kranton.[11]

  14. 2015

    Publishes Phishing for Phools with Robert Shiller, on manipulation and deception in markets.[10]

Sources

  1. 1.George A. Akerlof – Biographical · NobelPrize.org (Nobel Prize Outreach), 2001
  2. 2.George A. Akerlof – Facts · NobelPrize.org (Nobel Prize Outreach)
  3. 3.Press release: The Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel 2001 · Royal Swedish Academy of Sciences, via NobelPrize.org, 2001
  4. 4.Information for the public: Markets with Asymmetric Information (Economic Sciences 2001) · Royal Swedish Academy of Sciences, via NobelPrize.org, 2001
  5. 5.Writing "The Market for 'Lemons'": A Personal and Interpretive Essay, by George A. Akerlof · NobelPrize.org (Nobel Prize Outreach), 2003
  6. 6.George A. Akerlof – Prize Lecture: Behavioral Macroeconomics and Macroeconomic Behavior · NobelPrize.org (Nobel Prize Outreach), 2001
  7. 7.George Akerlof · Wikipedia
  8. 8.George A. Akerlof (Concise Encyclopedia of Economics biography) · Econlib, Liberty Fund
  9. 9.Looting: The Economic Underworld of Bankruptcy for Profit (Akerlof and Romer), Brookings Papers on Economic Activity 1993(2) · Brookings Institution, 1993
  10. 10.Phishing for Phools: The Economics of Manipulation and Deception (Akerlof and Shiller) · Princeton University Press, 2015
  11. 11.Identity Economics: How Our Identities Shape Our Work, Wages, and Well-Being (Akerlof and Kranton) · Princeton University Press, 2010
  12. 12.Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism (Akerlof and Shiller) · Princeton University Press, 2009
  13. 13.An analysis of out-of-wedlock births in the United States (Akerlof and Yellen) · Brookings Institution, 1996
  14. 14.Adverse Selection in Durable Goods Markets (Hendel and Lizzeri), American Economic Review 89(5) · American Economic Association, 1999
  15. 15.Used Car Rule (Used Motor Vehicle Trade Regulation Rule, 16 CFR Part 455) · US Federal Trade Commission
  16. 16.How the Ivy League's Jewish quotas shaped higher education (interview with Mark Oppenheimer) · Inside Higher Ed, 2022
  17. 17.Arthur D. Hirschfelder · Wikipedia
  18. 18.The Market for "Lemons": Quality Uncertainty and the Market Mechanism, Quarterly Journal of Economics 84(3), pp. 488–500 (bibliographic record) · RePEc / IDEAS, 1970

Fact-checked on September 24, 2026 by a separate AI fact-checking pass that re-opened the sources, with 8 corrections made. How we check

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