Oliver Hart
Harvard University
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Primary Section: 54, Economic Sciences Membership Type:
Member
(elected 2016)
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Biosketch
Oliver Hart works at the intersection of economics, finance, and law. His thesis was on the existence and optimality of competitive equilibrium when some markets are missing. Since then he has worked mainly on the economics of contracts, with a particular focus on situations where contracts are incomplete and a key question is how residual control rights—the right to make decisions unspecified in the contract—are allocated. He has applied these ideas to understanding the nature and boundaries of firms, the allocation of power between the providers and users of capital, the optimality of one share-one vote, and the importance of collateral in determining a firm’s financial capacity. Hart was born in London, and graduated from Cambridge University with a degree in mathematics, from Warwick University with an M.A. in economics, and from Princeton University with a PhD in economics. He taught at the Universities of Essex and Cambridge, and at LSE, before taking positions at MIT and then at Harvard, where he has been since 1993. He is a fellow of the British Academy and of the American Academy of Arts and Sciences, as well as being a member of the National Academy of Sciences.
Research Interests
Oliver Hart has for many years been interested in why parties write contracts that are incomplete, in the sense that they contain gaps and ambiguities. Economic theorists have found it hard to explain this under the assumption that people are fully rational. Hart has incorporated some ideas from behavioral economics to make progress. The idea is that one role of a contract is to get parties on the same page. If parties have different expectations about what will happen during their relationship they are likely to be disappointed and this can lead to bad feeling and withholding of cooperation. A contract, by delimiting the set of future options, can bring parties’ expectations into line. Unfortunately, getting people on the same page may require some rigidity in the contract and this may make it harder for them to adjust to future events. This approach can throw light on the nature of the employment relationship and on why firms respond to demand shocks by laying off workers rather than cutting wages. As well as pursuing this topic theoretically, Hart has recently tested some of the underlying behavioral assumptions in the lab.
