George Akerlof

George Akerlof is an American economist whose work showed how unequal information can distort markets. His 1970 paper on the market for “lemons” helped establish information economics.

Janet Yellen: An American economist who served as chair of the Federal Reserve and secretary of the treasury. Yellen, Akerlof’s wife, is also an economist whose research addresses labor markets and macroeconomics.
Information asymmetry: A situation in which parties to an exchange have different information about relevant qualities or actions. The lemons problem is a specific case of buyers and sellers knowing different things.
The Market for Lemons: George Akerlof’s 1970 article explaining how asymmetric information can reduce trade in markets for quality-uncertain goods. This paper introduced the canonical lemons model and established Akerlof’s influence on information economics.
Efficiency wage: A wage set above the level that clears the labor market, often to improve worker productivity or retention. Akerlof’s work helped develop explanations for why employers may pay wages above market-clearing levels.
Used car: A previously owned motor vehicle sold again, often with quality that is difficult for buyers to assess. Used cars supplied Akerlof’s vivid example of how sellers’ superior knowledge can undermine exchange.
Michael Spence: An American economist known for analyzing signaling under asymmetric information. Spence shared the 2001 economics Nobel with Akerlof for analyses of markets with asymmetric information.
Adverse selection: A market problem in which hidden characteristics affect who chooses to participate in an exchange. When buyers offer an average price, owners of high-quality goods may withdraw, worsening the pool.
University of California, Berkeley: A public research university in Berkeley, California. Akerlof held a long academic appointment at Berkeley, where much of his later work was based.
Fair wage–effort hypothesis: A theory that workers’ effort depends partly on whether they consider their pay fair. Akerlof and Janet Yellen formalized how perceived fairness can affect wages and productivity.
Market failure: A situation in which market outcomes do not allocate resources efficiently under a stated social criterion. The lemons model demonstrates how private information can prevent mutually beneficial trades.

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