The Department of Economics could soon boast the foremost theory department in the country with the arrival of MIT economic theorist Oliver Hart.

Hart, an expert in applied economic theory, accepted Harvard's tenure offer last week and will join the department in September. He is the second MIT professor to take a Harvard position this year, following Drew Fudenberg '78, who accepted in January.

"It's absolutely outstanding," said department Chair Benjamin M. Friedman '66. "He's a wonderful scholar and a splendid teacher."

An expert in applied economic theory, Hart is interested in the theory of contracts and their bearing on firms, business and employer-employee relations, said Professor of Economics Eric S. Maskin. Hart's work also extends into the area of corporate finance and competition across firms, said Maskin, who also left MIT for Harvard in 1985.

Hart, who is spending the year as a visiting professor at the London School of Economics, could not be reached for comment.

The arrivals of Hart and Fudenberg will strengthen the theory field of the Economics Department immensely, professors said.

"We've been trying to increase our theory for a long time," said Maskin. "Hart and Fudenberg together should tremendously help our field--we're celebrating these days."

Fudenberg, who is an expert in game theory, has been exploring the application of game theory principles to organizations. He has been studying the theory of contracts and the incentive schemes of workers, Fudenberg said last night.

Fudenberg said he will be teaching a first-year graduate theory sequence as well as both undergraduate and graduate courses in game theory.

Fudenberg said that with his and Hart's arrival, Harvard will probably have the strongest group of economic theory experts in the country.

"It's a great thing for us; it's nice to be part of the group," he said. "It was strong to begin with, but next year it will be the best one around."

Berkman Professor of Economics Andreu Mas-Colell said the department has been trying to expand its theory department since the departure many years ago of former Dean of the Faculty A. Michael Spence and the appointment last year of Wells Professor of Political Economy Jerry R. Green as provost.

"We have worked hard for this position," Mas-Colell said of Hart's acceptance. "We hope Professor Hart becomes neither a dean nor a provost."

But Harvard's gain could mean a serious depletion of MIT's economic department, which over the years has lost several professors to Harvard.

"One of the issues was whether we had to feel obligated to stay for the good of the department even if it wasn't the best for us," said Fudenberg. "We both wish MIT well... But people do what's best for them and hope it's reasonable. [MIT administrators] are actively working to recruit."

Some professors say there has always been a lot of mobility between MIT and Harvard, largely because of the two schools' proximity, which makes the prospect of moving a non-issue