Robert Hall and Michael Woodford won the Nobel for showing how to steady economies, and a jar of fermenting flour did it too.
Robert Hall and Michael Woodford won the economics Nobel for showing how policy can steady economies. A lab then tested their models against a jar of sourdough starter. The jar did just as well, and nobody has slept since.
"...and then it rose past the line, so we raised rates, and the recession just stopped," said Oskar Brandt, the technician who feeds the jar. He was still holding the spoon.
Some background first. Americans Robert Hall and Michael Woodford won the Nobel prize in economics on Monday. They showed how central banks and governments can calm the booms and busts that wreck people's lives. It is careful, useful work. I have read the coverage. It is fine.
The bigger news is from my lab. On Saturday we finished a study comparing their models with a jar of sourdough starter.
A sourdough starter is flour and water you leave out until it comes alive.
We built twenty-six pretend economies on a computer. Every one of them was sliding into a recession. Thirteen got policy advice based on the prize-winning work. The other thirteen got the jar.
The jar's method was simple. When the starter climbed above a pen mark on the glass, we raised interest rates. When it sank, we cut them.
An interest rate is the price of borrowing money. The jar does not know this.
Both groups recovered at the same speed. We checked the numbers twice. The chance this was luck is small. Not zero. Small.
We have asked the jar to stop rising until we understand it. It has not agreed. — Dr. Ingrid Solberg
Solberg chairs the Nordic Council for Steady Prices, a group that met for the first time on Sunday because of this study. She has called for a review of every economics degree issued since bread was invented. "If yeast can do this, we need to know what the rest of us have been doing," she said. "Ideally before the yeast asks."
What it means
I want to be careful. We cannot say the starter is smarter than the winners. It only did the same job without a degree, a salary or a pulse in the usual sense.
We also cannot say who should run the world's money now. But it may be the thing at the back of your fridge. My team has not slept. One postdoc has started apologising to the toaster.
The prize ceremony is in December. The jar will not attend. It does not travel well, and it would make the dinner awkward.
Brandt has fed it every morning since Saturday. He says it is the most important job he has ever had. Before this, he worked at a bank.
