Subjects

Oliver Hart

Andrew E. Furer Professor of Economics,
Harvard University

2016 Nobel Prize in Economics

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Biography

British-born Harvard Economics professor Oliver Hart is the winner of the 2016 Nobel Prize in Economic Sciences. Hart is the world’s leading authority (along with his co-winner Bengt Holmström) on how to design the optimal contract. The author of Firms, Contracts, and Financial Structure, he is also an expert on the structure of the firm, corporate finance, and law and economics.

The optimal contract. Contracts define who can do what in a business relationship, but they can’t cover every possible situation. Oliver Hart knows how to design contracts that optimise the allocation of the rights to make decisions. For example, how do you provide the proper incentives and guarantees for a CEO’s compensation, or optimise employee performance, or find the right mix of deductibles and copays in an insurance policy?

The optimal institution. These frameworks can be used to design incentives, policies, and institutions, not just the scope of individual contracts. Examples include understanding which kinds of companies should merge, the balance between debt and equity financing, or the trade-offs between private and government-operated institutions like prisons and schools.

Credentials. Oliver Hart is the Andrew E. Furer Professor of Economics at Harvard University. He has testified as a government expert in two legal cases regarding whether spin-off businesses can be used to claim tax deductions. He is a Fellow of the Econometric Society, the American Academy of Arts and Sciences, the British Academy, and the American Finance Association. A member of the National Academy of Sciences, and has several honourary degrees. He has been president of the American Law and Economics Association and a vice president of the American Economic Association. He was educated at Cambridge University in England.

Books

Firms, Contracts, and Financial Structure

Clarendon Lectures in Economics — 1st Edition

Oliver Hart

This work uses recent developments in the theory of incomplete contracts to analyze a range of topics in organization theory and corporate finance. Beginning with a general model of the firm, Hart analyzes in greater depth the financial structure of firms, debt collecting and bankruptcy. Oliver Hart is a leading researcher in this area, and these Clarendon Lectures are an important contribution to contact theory. The work will be of interest to teachers, graduate students and advanced students of microeconomics, the theory of the firm, industrial organization, and finance.

Clarendon Press; 1 edition (December 7, 1995)

Praise

"This book, which synthesizes most of Oliver Hart's work since 1980, provides a clear introduction to the modern theory of the firm, and ultimately a very compelling answer to...fundamental questions in the form of the increasingly accepted Property Rights Theory of the Firm."
— Jeffrey Zwiebel, Economica

"I expect it to be essential reading for any economics or finance Ph. D. student interested in corporate finance. Thus, this volume should contribute to the development of the contracts approach to corporate finance....Firms, Contracts, and Financial Structure provides an excellent exposition of the incomplete contracts approach to the theory of the firm....[I]t is a fine survey of the author's contributions to the theory of firm boundaries and financial structure. As such, I commend it highly."
— Milton Harris, Review of Financial Studies

"A very clear, unified treatment of the implications of incomplete contracting. A truly solid foundation for the theory of integration and financial structure."
— Birger Wernerfelt, Sloan School, MIT

"I recommend this book to all who are interested in the theory of the firm and in Hart's current and recent contributions to this theory. There is much to applaud in the book."
— Harold Demsetz, University of California, Los Angeles

Videos

Prize Lecture: Oliver Hart, Laureate in Economic Sciences 2016