Andrew Michael Spence is an American economist and recipient of the 2001 Nobel Memorial Prize in Economic Sciences, along with George Akerlof and Joseph E. Stiglitz, for their work on the dynamics of information flows and market development.
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Andrew Michael Spence (born November 7, 1943, Montclair, New Jersey) is an American economist and recipient of the 2001 Nobel Memorial Prize in Economic Sciences, along with George Akerlof and Joseph E. Stiglitz, for their work on the dynamics of information flows and market development.
Spence is probably most famous for his job-market signaling model, which essentially triggered the enormous volume of literature in this branch of contract theory. In this model, employees signal their respective skills to employers by acquiring a certain degree of education, which is costly to them. Employers will pay higher wages to more educated employees, because they know that the proportion of employees with high abilities is higher among the educated ones, as it is less costly for them to acquire education than it is for employees with low abilities. For the model to work, it is not even necessary for education to have any intrinsic value if it can convey information about the sender (employee) to the recipient (employer) and if the signal is costly.
Spence did his middle and high school education at the University of Toronto Schools of the University of Toronto. In 1966, he was awarded a Rhodes Scholarship at Oxford University upon graduation from Princeton University with a degree in philosophy. He studied mathematics at Oxford. Spence is a Philip H. Knight Professor Emeritus and former Dean of the Stanford Graduate School of Business; he is the Chairman of the Commission on Growth and Development.
Spence joined the faculty of New York University's Stern School of Business on September 1, 2010. He joined the faculty of SDA Bocconi School of Management in Italy in July 2011.
He is a senior fellow at Stanford University's Hoover Institution. Spence is also a Commissioner for the Global Commission on Internet Governance. Additionally, Spence is also a member of the Berggruen Institute's 21st Century Council.
He has also been a consistent contributor to Project Syndicate, an international newspaper syndicate, since 2008. Among his beliefs are that high-frequency trading should be banned.
Spence had both Bill Gates and Steve Ballmer in a graduate-level economics class at Harvard. In a 1999 Fortune interview, however, Gates and Ballmer admitted not attending class —they passed only after cramming for four days before the final.
Honors and awards
Spence is an Honorary Fellow of Magdalen College, Oxford, where he studied as a Rhodes Scholar.
Spence currently lives in Milan, Italy with his wife and children.