A. Michael Spence, professor of Economics, won the third annual Graduates' Award for Good Teaching in Economics, Peter S. McKinney, dean of the Graduate School of Arts and Sciences, announced this week.

John Kenneth Galbraith, Warburg Professor of Economics Emeritus, established the prize upon his retirement. The award carries a $5000 stipend.

The selection committee, composed of five second-year graduate students in economics, looked for innovation in teaching and clarity of presentation, David Ellwood, a member of the selection committee, said yesterday.

"Spence displays an enthusiasm in teaching and an ability to cover things in depth, to step back from the economic models and see how realistic they really are," Ellwood added.

Dwight H. Perkins, chairman of the Economics department, said yesterday the "award was well deserved and goes to an excellent and enthusiastic teacher."

Spence taught at Stanford University before coming to Harvard two years ago.

"The basic teaching on the graduate level is very good and the prize and its winners have contributed toward this," he added.

The members of the selection committee, who were elected by other graduate economic students in December, also chose Martin S. Feldstein '61 and Dale W. Jorgenson, both professors of Economics, as runners-up for the prize.

In addition, they cited Gary E. Chamberlain '70, assistant professor of Economics, for his teaching ability. Galbraith stipulated that all winners and runners-up must be associate or full professors.