Oliver Hart

Oliver Hart
Born	Template:Birth year and age
Birthplace	London, England, United Kingdom
Nationality	British, American
Occupation	Economist, academic
Title	University Professor
Employer	Harvard University
Known for	Contract theory, theory of the firm, incomplete contracts
Awards	Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel (2016)

Oliver Simon D'Arcy Hart (born 1948) is a British-born American economist who holds the position of University Professor at Harvard University, the institution's highest faculty honor. He is best known for his foundational contributions to contract theory, particularly his development of the theory of incomplete contracts, which has had far-reaching implications across economics, law, corporate governance, and public policy. In 2016, Hart was jointly awarded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for his contributions to contract theory, sharing the honor with Finnish economist Bengt Holmström. Over the course of a career spanning more than four decades, Hart has shaped the way economists and legal scholars think about the boundaries of firms, the allocation of ownership rights, and the role of contracts in economic life. In more recent years, he has turned his attention to questions of corporate social responsibility and shareholder values, arguing that shareholders do not always seek to maximize purely financial returns. In October 2025, Hart was appointed Visiting Professor in the Department of Finance and the Global School of Sustainability at the London School of Economics and Political Science.

Early Life

Oliver Hart was born in 1948 in London, England. He grew up in the United Kingdom during the postwar period. Details regarding his family background and upbringing remain largely private. Hart has maintained British citizenship while also holding American citizenship following his long residence and academic career in the United States.

Education

Hart received his higher education at some of the most prestigious institutions in the English-speaking world. He studied mathematics as an undergraduate before turning to economics for his graduate work. Hart earned a doctorate in economics, which provided the foundation for his subsequent academic career focused on microeconomic theory, the theory of the firm, and contract theory. His doctoral training exposed him to the rigorous analytical methods that would characterize his later work on property rights and incomplete contracts.

Career

Academic Positions and Early Work

Hart's academic career took him through several leading universities on both sides of the Atlantic before he settled at Harvard University. His early research focused on the theory of the firm, building on and extending the pioneering work of Ronald Coase and others who had sought to explain why firms exist and what determines their boundaries. Hart's approach was distinctive in its emphasis on the role of ownership and control rights in situations where contracts are necessarily incomplete—that is, where it is impossible or prohibitively costly to specify in advance what should happen in every possible future contingency.

This framework, which became known as the theory of incomplete contracts, represented a major departure from the standard economic assumption that contracts could be written to cover all relevant eventualities. Hart argued that because real-world contracts inevitably leave gaps, the allocation of residual control rights—the right to make decisions in circumstances not covered by the contract—becomes critically important. This insight had profound implications for understanding the structure of firms, the division of assets between parties, and the consequences of mergers and acquisitions.

Harvard University

Hart joined the faculty of Harvard University, where he would spend the most productive phase of his career. He was appointed the Andrew E. Furer Professor of Economics, a named chair that reflected his standing within the department and the university. At Harvard, Hart continued to develop his theory of incomplete contracts, producing a series of influential papers and books that extended the framework to a wide variety of economic problems.

His work at Harvard addressed questions such as: When should the government provide public services directly, and when should it contract with private firms? What determines the optimal scope of a firm? How should ownership of assets be allocated in joint ventures and partnerships? These questions had practical as well as theoretical significance, and Hart's answers drew on his rigorous analytical framework to provide insights that were adopted by policymakers, legal scholars, and business practitioners.

In March 2020, Harvard University elevated Hart to the rank of University Professor, the institution's highest faculty honor. The title of University Professor is reserved for individuals whose research contributions are recognized as having transcended the boundaries of a single discipline. At the time of the appointment, Hart held the Andrew E. Furer Professorship of Economics. The designation underscored the breadth of Hart's influence, which extended well beyond economics into law, political science, and organizational theory.

Contract Theory and the Nobel Prize

Hart's most celebrated intellectual contribution is his development of the theory of incomplete contracts, work that was recognized with the 2016 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. He shared the prize with Bengt Holmström, a Finnish economist at the Massachusetts Institute of Technology, who was cited for his complementary contributions to contract theory, particularly in the area of incentive design and moral hazard.

The Nobel committee recognized Hart for providing "a comprehensive framework for analyzing many diverse issues in contractual design, including under what conditions businesses should merge, the proper mix of debt and equity financing, and under which circumstances institutions such as schools and prisons should be privately or publicly owned." Hart's framework showed how the allocation of property rights and control rights affects the incentives of the parties involved in economic relationships, and how these incentive effects in turn shape the efficiency of economic outcomes.

Hart delivered his Nobel Prize Lecture on December 8, 2016, at the Aula Magna, Stockholm University, where he was introduced by Professor Tomas Sjöström. The lecture provided an overview of the intellectual development of incomplete contract theory and its applications to questions of firm boundaries, corporate governance, and public policy.

Central to Hart's Nobel-recognized work was a series of papers co-authored with various collaborators, including Sanford Grossman and John Moore. The Grossman-Hart model and the Hart-Moore model became foundational references in the economics literature. These models formalized the idea that when contracts are incomplete, the party who owns an asset has residual control rights over that asset—the right to decide how the asset is used in circumstances not anticipated by the contract. This allocation of control rights affects the parties' incentives to invest in the relationship, and therefore the efficiency of the overall arrangement.

The practical applications of Hart's theory are extensive. His framework has been used to analyze privatization decisions, showing that private ownership may create stronger incentives for cost reduction but may also lead to quality deterioration when quality is difficult to specify contractually. This analysis was applied to debates over the privatization of prisons, hospitals, schools, and other public services, providing a rigorous analytical basis for policy discussions that had previously relied more on ideology than on formal economic reasoning.

Work on Corporate Governance and Shareholder Values

In the years following his Nobel Prize, Hart turned increasingly to questions of corporate governance and the social responsibility of firms. In a notable departure from the traditional economic view associated with Milton Friedman—that the sole responsibility of business is to maximize shareholder value—Hart argued that shareholders themselves may have preferences that go beyond purely financial returns.

In a 2020 reflection published by ProMarket, Hart addressed how the world had changed since Friedman published his famous 1970 essay arguing that the social responsibility of business is to increase its profits. Hart contended that "shareholders don't always want to maximize shareholder value," suggesting that investors may care about environmental, social, and governance (ESG) considerations and that corporate decision-making should reflect these broader preferences. This line of research represented a significant intellectual evolution for Hart, who had built his earlier career on models that focused primarily on efficiency and incentive alignment rather than on the social objectives of economic agents.

Hart's work in this area has contributed to a broader scholarly and policy debate about the purpose of the corporation in the twenty-first century. His arguments carry particular weight given his status as a Nobel laureate and his deep expertise in the formal analysis of contracts and property rights. By grounding the case for broader corporate objectives in the preferences of shareholders themselves—rather than in external moral imperatives—Hart offered a framework that was consistent with economic theory while also responsive to growing public demands for corporate accountability on issues such as climate change, inequality, and social justice.

Engagement with Public Issues

Hart has periodically engaged with public debates beyond the strictly academic sphere. In a 2025 interview with the Catalan newspaper Diari ARA, Hart commented on the political situation in the United States, particularly former President Donald Trump's policies toward universities and foreign students. Hart, who has spent most of his career at Harvard University—an institution that was the subject of federal government scrutiny and restrictions on foreign students under the Trump administration—expressed concern about the broader implications of these policies. "I hope we can survive Trump, and not just us, but the country and the world as well," Hart stated in the interview. His comments reflected broader anxieties within the American academic community about government policies affecting higher education and international academic exchange.

Visiting Professorship at LSE

In October 2025, the London School of Economics and Political Science announced the appointment of Hart as Visiting Professor in its Department of Finance and the Global School of Sustainability (GSoS). The appointment represented a return to the United Kingdom for Hart, who had been born and educated in England before building his career in the United States. The dual affiliation with the Department of Finance and the Global School of Sustainability reflected the breadth of Hart's current research interests, which span traditional questions of financial economics and corporate governance as well as newer concerns about sustainability and the role of firms in addressing environmental and social challenges.

The LSE appointment also signaled the continued relevance of Hart's theoretical framework to contemporary policy debates. The Global School of Sustainability, established to address pressing global challenges related to climate change and sustainable development, stood to benefit from Hart's expertise in analyzing the institutional and contractual arrangements that shape how firms and governments respond to these challenges.

Recognition

Hart's contributions to economics have been recognized with numerous honors and awards over the course of his career. The most prominent of these is the 2016 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, which he shared with Bengt Holmström for their contributions to contract theory.

In 2020, Harvard University conferred upon Hart the title of University Professor, the institution's highest honor for a faculty member. The distinction is reserved for scholars whose work has had an impact that crosses disciplinary boundaries, and the appointment placed Hart among a small and select group of Harvard faculty to hold the title.

Hart has also been recognized with a knighthood, as indicated by his use of the title "Sir" in the LSE announcement of his visiting professorship in 2025. The knighthood reflects the British government's recognition of his contributions to the field of economics.

His appointment as Visiting Professor at the London School of Economics in 2025, jointly in the Department of Finance and the Global School of Sustainability, constituted a further mark of professional recognition, underscoring his continued influence in economics and related fields well into his seventh decade of life.

Hart has been elected to fellowship in a number of learned societies and professional organizations. His work has been cited thousands of times in the academic literature, and his models of incomplete contracts are standard components of graduate economics curricula worldwide.

Legacy

Oliver Hart's intellectual legacy rests primarily on his development of the theory of incomplete contracts, a body of work that transformed the way economists analyze firms, organizations, and the role of ownership in economic life. Before Hart's contributions, mainstream economic theory tended to treat firms as "black boxes"—entities that transformed inputs into outputs according to a production function, without much attention to their internal structure or the contracts that held them together. Hart's work, along with that of his collaborators, opened up the black box and provided a rigorous analytical framework for understanding why firms are organized the way they are, why some activities are carried out within firms while others are conducted through market transactions, and how the allocation of property rights affects economic efficiency.

The Grossman-Hart model and the Hart-Moore model have become foundational references in the fields of industrial organization, corporate finance, and law and economics. These models are taught in graduate programs around the world and continue to generate new research extending and refining the basic framework. Hart's analysis of the privatization of public services has been particularly influential in policy circles, informing debates about the appropriate role of government in the provision of services ranging from education to incarceration.

In his more recent work on shareholder values and corporate social responsibility, Hart has contributed to an important and ongoing rethinking of the purpose of the corporation. By arguing that shareholders may have preferences that extend beyond financial returns, Hart has provided intellectual support for the growing movement toward stakeholder capitalism and ESG investing, while grounding these ideas in the rigorous analytical framework of contract theory and property rights economics.

Hart's 2025 appointment at the London School of Economics, in both the Department of Finance and the Global School of Sustainability, exemplifies the breadth of his continuing influence. His work bridges the traditional concerns of economic theory—efficiency, incentives, property rights—with the urgent contemporary challenges of sustainability, corporate governance, and the social responsibilities of economic institutions.

As one of the most influential economists of the late twentieth and early twenty-first centuries, Hart's body of work has shaped not only academic research but also practical policy in areas ranging from corporate law to government contracting. His theory of incomplete contracts remains one of the central pillars of modern economic analysis, and his more recent contributions continue to push the boundaries of the field in new and consequential directions.