Life and Thought
Michael Spence is an American economist and winner of the 2001 Nobel Prize in Economics. Through his theory of job market signaling, he showed how, under asymmetric information, agents convey hidden quality to others by investing in observable signals. He is also a former dean of Stanford Graduate School of Business and chaired the Commission on Growth and Development.
Michael Spence was born on 7 November 1943 in the United States. He earned his bachelor's degree in philosophy at Princeton University, studied mathematics at the University of Oxford as a Rhodes Scholar, and completed his doctorate in economics at Harvard University. He taught at Harvard and Stanford, served as dean of Harvard's Faculty of Arts and Sciences from 1984 to 1990, and was dean of Stanford Graduate School of Business from 1990 to 1999.
His scholarly reputation rests chiefly on the paper "Job Market Signaling" (1973) and the book *Market Signaling* (1974). In these works he examines a market in which one party, such as a job applicant, knows his or her own quality while the other, the employer, does not. He argues that applicants can pass their hidden information on to employers by acquiring signals such as educational credentials, which are cheaper to obtain for more capable individuals. On this basis, equilibria arise in which the level of education serves as a signal even if it adds no skill.
In 2001 he shared the Nobel Prize in Economics with George Akerlof and Joseph Stiglitz for the analysis of markets with asymmetric information. In later decades his focus shifted to development economics and globalization. He chaired the Commission on Growth and Development from 2006 to 2010 and wrote *The Next Convergence: The Future of Economic Growth in a Multispeed World* (2011). He has also been a professor at the Stern School of Business at New York University and a senior fellow at the Hoover Institution.