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Archive for the ‘Noble Prize’ Category

Tom Sargent’s Nobel lecture is one of the most interesting and topical ever.  As he says “between 1780 and 1884 . . . the United States faced institutional choices and policy choices that remind me today of present day Europe.”   In it he considers the question: should a government default on its debt?  Should a central government bail out subordinate states?  Should a monetary union precede a fiscal union or vice versa?  In short, the U.S. began without centralized fiscal power, much as Europe today.  The U.S.  Federal Government faced a fiscal crisis in the 1780’s which lead to increased fiscal authority for the Federal government (the Articles of the Confederation were replaced by the Constitution), which in turn was followed by Federal bailouts of state government debts in the 1790’s.  Fascinating stuff.  The lecture is here, starting at about the 17 minute mark (very nice introduction by my former colleague (and very smart and nice person) Per Krusell starting at about the 10 minute mark). Not sure why the Nobel folks can’t figure out how to edit out the first ten minutes of people filling the lecture hall.

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The Nobel Prizes  for Chris Sims and Tom Sargent were waaaay overdue (which is probably why so few faculty predicted these winner compared to past Northwestern Polls (see here)).  Tom and Chris have both made fundamental contributions in the evaluation and use of models of the economy as well as contributing to both the development of econometric methods and theoretical models.  Much of Tom’s and Chris’ work has been on the impact of monetary policy, and almost all current empirical work on monetary economics, and most empirical work in macroeconomics, follows the work of these two economists.   I couldn’t be happier with the choice.

I was Chris Sims’ colleague for 8 years, and I learned a huge amount listening to his comments in seminars, discussing economics at lunch, and advising students together.  Chris is spending his career showing the rest of the field what we can and cannot learn about models of the macroeconomy from economic data.  His research has time and again shown deep insight, applying complex statistical arguments to make clear the sources, strengths, and weaknesses of model identification and measurement.  And a Nobel prize could not be given to a nicer person.  In academe, where time is short and egos can get tangled up in research, Chris takes time with people, keeps debates about the facts not the personalities, and enjoys advising students.

Tom, who I know less well, has an incredible track record of research that spans decades.  I would be hard pressed to name an area of macroeconomics where a Sargent paper is not one of the key contributions.  In addition to a phenomenal set of research papers on identification and estimation of macroeconomic models, he has written the leading graduate textbook on macroeconomics, and is a tireless and inspiring teacher, with successful PhD students at top universities all over the globe. There are many aspects of Tom’s research to admire, but what I admire most is his (seeming) continual dissatisfaction with what we know that drives his continual innovation.  There are no sacred assumptions or previous results to be defended because they are his.  There is only the scientific method, and discipline of the real world we are trying to explain.

While I am pleased at the recognition for these particular contributions to macroeconomics, I am also very happy for Tom and Chris.  Congratulations to them, and I look forward to reading their newest papers and learning about their next ideas.

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