As in every other Nobel season, the run-up to the prize announcements has seen intense speculation on who will win them this year. The suspense over the economics Nobel will end on Monday. The discipline of economics is one of those rare ones where it is not unusual to find Indians among the list of contenders.

While the Nobel committee does not declare nominees, in the discussions by leading economists (in the blogosphere, and elsewhere), three Indian names invariably crop up as possible contenders in almost every Nobel season: Partha Dasgupta, Avinash Kamalakar Dixit and Jagdish Bhagwati.

Of the three, Bhagwati, the professor of economics, law, and international relations at Columbia University, is probably the most familiar name for most Indians. Although his contributions are largely in the area of trade theory, he is best known for being a champion of economic reforms, and for sparring with the only Indian Nobel laureate in economics so far, Amartya Sen, on the nature of state intervention in the economy in the run-up to the general election last year.

Dasgupta and Dixit are equally renowned names in the world of academia, but their research and ideas have not received as much attention in India as they deserve.

Of the three contenders, Dasgupta’s research perhaps has the greatest salience today as India and the world struggle to find a sustainable growth path that does not endanger the lives of the coming generations. An emeritus professor of economics at Cambridge University, Dasgupta is best known for his pioneering work in environmental and resource economics.

He has also written influential papers on topics as varied as game theory, technological innovation and malnutrition. But his key contribution lies in shaping how the world thinks about sustainable development. It was Dasgupta’s research that showed for the first time that the relevant measure of sustainable development is inter-generational well-being.

In a widely cited 1974 research paper, Dasgupta and his co-author, Geoffrey Heal, showed how to deal with the problem of non-renewable resources such as oil. In that paper and in a subsequent book, Economic Theory and Exhaustible Resources, Dasgupta and Heal outlined the patterns of resource extraction or consumption under different assumptions of social preferences.

To put it simply, they showed that a rising consumption path is feasible (if human-made capital could be substituted for resource extraction) and desirable if society placed more importance on the consumption needs of the future over that of the present (or current generation). The more egalitarian the social preferences, the flatter would be the consumption curve across time, Dasgupta and Heal showed. If social preferences were such that people were willing to sacrifice more for succeeding generations, future consumption (by future generations) would be higher than current consumption even without assuming substitutability.

Inter-generational well-being lay at the heart of Dasgupta’s conception of sustainable development. The sustainability of a development path should be judged on how it impacts future consumption patterns. Dasgupta showed that as long as the overall wealth of an economy does not diminish, growth is sustainable. But Dasgupta’s conception of wealth is much broader than those of other economists. Dasgupta not only includes physical and human capital in his conception of wealth but also includes natural capital.

In fact, Dasgupta has been the leading critic of traditional national account measurements since they neglect natural resources entirely. His critique has begun to bear fruit now. A 2012 United Nations report based on Dasgupta’s recommendations for the first time provided a holistic measure of national wealth for 20 large economies.

This comprehensive measure, called the inclusive wealth index (inclusive in the sense that it included both natural and man-made wealth) was based on three kinds of assets: manufactured, or physical, capital (machinery, buildings, infrastructure and so on); human capital (the population’s education and skills); and natural capital (including land, forests, fossil fuels and minerals).

Although the index is a rough measure since the valuation metrics for natural resources are subject to data limitations and the use of implicit prices, it signals the first serious attempt to account for losses (or gains) in national resources while evaluating the performance of an economy.

The major achievement of this index is that it turns the conflict between growth and environment, or the conflict between the uses of different resources, into an asset-management problem. Thus, a country might lose some amount of manufactured or natural capital and still make up for it through higher investments in human capital or infrastructure. There is one important caveat to this though: all kinds of natural capital (for instance, ecosystem services of forests that help regulate rains) may not be substitutable.

In the introduction to a 2014 book in honour of Dasgupta, Environment and Development Economics: Essays in Honour of Sir Partha Dasgupta, the editors Scott Barrett, Karl-Göran Mäler and Eric S. Maskin (who won the Nobel Prize in economics in 2007) call Dasgupta a “refined Malthusian".

“Dasgupta is a refined Malthusian in some ways," they wrote. “He sees nature’s resources as bounded but recognizes that human institutions can limit population and ease resource constraints. At the same time, he does not believe that nature’s constraints are endlessly mutable or that effective institutions can be counted on to spring up from nowhere just when they are needed. He does not fear that we will run out of resources; he fears we will undermine the ecological systems that support the human enterprise."

Dixit, like Dasgupta, is an acclaimed game theorist. Just like Dasgupta, his oeuvre is broad, stretching across various sub-disciplines of economics: international trade, organizational theory, growth and development, and institutional economics. Dixit is most famous for having developed an alternative to the traditional economic models based on perfect competition (in which each firm is assumed to be a price-taker).

In a 1977 research paper co-authored with Nobel laureate Joseph Stiglitz, Dixit developed a robust framework for analysing imperfect markets in which many firms have pricing power, a kind of market structure known as monopolistic competition.

While the idea of monopolistic competition as an intermediate form of market between the two extremes of monopoly and perfect competition was known to economists, the Dixit-Stiglitz model provided the first systematic account of what the market conditions would look like when there is some element of branding (or product differentiation) among firms, and economies of scale.

Given that the Dixit-Stiglitz model captured many elements of real economic markets better than the traditional workhorse model, it came to be used in a wide variety of settings. In their paper, Dixit and Stiglitz used the model to determine the level of product diversity in monopolistically competitive markets. But soon, the model was put to other uses.

Economists such as Nobel winner Paul Krugman used the Dixit-Stiglitz model to revolutionize trade theory by showing that economies of scale and imperfect competition can give rise to trade even in the absence of comparative advantage. Since then, the Dixit-Stiglitz model has formed the bedrock of what has come to be known as new trade theory.

In 2011, when one of the most prestigious journals in economics asked leading economists to compile a list of the top 20 research papers over the past century, the paper by Dixit found pride of place in that list.

Dixit’s research on governance has helped draw attention to the importance of institutional strength in determining economic outcomes, an area that was traditionally neglected in economics. In a 2014 interview to Mint, Dixit argued that there weren’t sceptics in the profession anymore who doubted the importance of good institutions.

“I don’t even know if it was a battle in the profession, but if it was, that’s over," said Dixit. “Just about everybody recognizes the importance of all kind of supporting institutions to ensure that market economies, or any economy for that matter, functions well."

Bhagwati’s arena of inquiry has perhaps been relatively narrower compared with Dixit and Dasgupta, but his research has been as profound, and has perhaps had the greatest impact on economic policymaking.

One of Bhagwati’s most cited research papers is a 1958 research paper in which he outlined the conditions under which an economy could witness what he termed as immiserizing growth, where growth (due to technical progress and factor accumulation) leads to a “sufficiently acute deterioration in the terms of trade which imposes a loss of real income outweighing the primary gain in real income due to the growth itself".

But it was his classic 1963 paper co-authored with the late V.K. Ramaswami that has had the greatest influence on how economists and policymakers view trade.

As Bhagwati’s former student and Mint columnist Vivek Dehejia pointed out sometime ago, that paper alone makes Bhagwati a deserving candidate for the Nobel Prize. When Bhagwati wrote that paper, the general consensus among economists was that trade barriers such as tariff walls were desirable in case of large economies which suffered from market imperfections.

Bhagwati and Ramaswami showed that the best response to such imperfections was to target the imperfection directly rather than to impose tariffs. Doing so would prevent the distortions associated with tariffs, the duo showed.

Bhagwati’s research laid the intellectual foundations for free trade and globalization. The formation of the global trading body, the World Trade Organization, owes much to Bhagwati’s research and his policy prescriptions. Writing about Bhagwati in the Financial Times newspaper, David Pilling called him “one of the most outstanding economists of his generation never to have won the Nobel Prize".

“The Nobel committee’s oversight is so well known that it has even made it on to The Simpsons (an American satirical sitcom), an episode of which features Bhagwati receiving the coveted prize," wrote Pilling. Krusty the clown, a popular character in The Simpsons, receives the Nobel peace award in that episode.

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