Encyclopaedia Britannica's editors oversee subject areas in which they have extensive knowledge, whether from years of experience gained by working on that content or via study for an advanced degree. They write new content and verify and edit content received from contributors.
George A. Akerlof is an American economist who, with A. Michael Spence and Joseph E. Stiglitz, won the Nobel Prize for Economics in 2001 for laying the foundation for the theory of markets with asymmetric information.
Akerlof studied at Yale University (B.A., 1962) and the Massachusetts Institute of Technology (Ph.D., 1966). In 1966 he began teaching at the University of California, Berkeley, becoming Goldman Professor of Economics in 1980; he retired as professor emeritus in 2010. Akerlof also taught at various other institutions, including the London School of Economics and Georgetown University. His research often drew from other disciplines, including psychology, anthropology, and sociology, and he played an important role in the development of behavioral economics.
Akerlofâs study of markets with asymmetric information concentrated on those in which sellers of a product have more information than buyers about the productâs quality. Using the example of a secondhand-car market, he demonstrated that this could lead to âadverse selectionâ of poor-quality products, such as a defective car known as a âlemon.â In his 1970 seminal work âThe Market for Lemons: Quality Uncertainty and the Market Mechanism,â Akerlof explained how private or asymmetric information prevents markets from functioning efficiently and examined the consequences. He suggested that many economic institutions had emerged in the market in order to protect themselves from the consequences of adverse selection, including secondhand-car dealers who offered guarantees to increase consumer confidence. In the context of less-developed countries, Akerlofâs analysis explained that interest rates were often excessive because moneylenders lacked adequate information on the borrowerâs creditworthiness.
Akerlofâs numerous books included Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism (2009) and Phishing for Phools: The Economics of Manipulation and Deception (2016), both of which were written with Robert J. Shiller. Akerlof was married to Janet Yellen, who was the first woman to serve as chair (2014â18) of the Board of Governors of the Federal Reserve System.
