Former faculty member Thomas J. Sargent shares Nobel Prize in Economics

Thomas J. Sargent, a former University of Chicago faculty member in Economics and a visiting fellow in the Becker Friedman Institute for Research in Economics, was named Monday as a winner of the 2011 Nobel Memorial Prize in Economic Sciences.

Sargent, the Berkley Professor of Economics and Business at New York University, and Christopher A. Sims, the Harold H. Hem ’20 Professor of Economics and Banking at Princeton University, received the award for their “empirical research on cause and effect in the macroeconomy.”

“Thomas Sargent has shown how structural macroeconometrics can be used to analyze permanent changes in economic policy,” the Swedish Royal Academy of Sciences said in its announcement.

Sargent and his work are well-known at the University of Chicago, where many of his colleagues expressed their happiness about Monday’s news.

“I am thrilled and excited that Sargent and Sims received the prize. This was long overdue and is much deserved,” said Harold Uhlig, chair of Economics at UChicago. “This is a Nobel award squarely in the mainstream of our profession. They both have made fundamental contributions to our science, in particular on thinking about cause and effects of macroeconomic shocks, and teaching an entire generation to think about macroeconomics in terms of a dynamic, stochastic system.”

Uhlig added that he was a student of Sims at the University of Minnesota, as was Lars Peter Hansen, the David Rockefeller Distinguished Service Professor in Economics at UChicago. Sims was chair of Hansen’s PhD committee.

“I am delighted by this well-deserved recognition for Tom Sargent and Chris Sims,” said Hansen, research director of the Becker Friedman Institute, and a former student of both. “They have made seminal contributions to the fields of macroeconomics and time series econometrics. Among many other insights and contributions, their work helps us understand the effects of monetary and fiscal policy. Methods they developed have inspired a large and influential body of research, including my own.”

Robert Lucas, the John Dewey Distinguished Service Professor in Economics and winner of the 1995 Nobel Prize in Economic Sciences, added, "Both Tom and Chris have been recognized leaders in macroeconomics for decades. Back in the 1970s, Tom was the central figure in translating the idea of rational expectations into operational econometric models."

Sargent was Ford Foundation Visiting Research Professor in Economics at UChicago from 1976 to 1977, and David Rockefeller Professor in Economics at UChicago from 1991-98. He will be a visiting fellow at the Becker Friedman Institute for three years, beginning with a visit from April 29 to May 12, 2012. He is also an important scholar working on the Fiscal Imbalance Initiative for the institute.

Sargent is internationally known for his work in empirical and theoretical macroeconomics. He has conducted pioneering research analyzing how consumers and firms form expectations about future government policies, and his work has been instrumental in developing empirical versions of the theory of rational expectations.

One of Sargent’s interests is the economic trajectory of the post-World War II era, when many countries initially tended to implement a high-inflation policy, but eventually introduced systematic changes in economic policy and reverted to a lower inflation rate.

Sargent is the author of numerous books, including Robustness (2008) and Rational Expectations Econometrics (1991), both of which he co-wrote with Hansen.

His other books include Macroeconomic Theory (1979, 1987); Exercises in Dynamic Macroeconomics (1987); and Rational Expectations and Economic Practice (1981), which he co-edited with Lucas. He is also the co-author of The Big Problem of Small Change (2002), with Francois Velde, and Recursive Macroeconomic Theory (2000), with Lars Ljungqvist.

Sargent, who is also a senior fellow at the Hoover Institution, has received numerous honors, including the CME Group-MSRI Prize in Innovative Quantitative Applications, which he received in September.

In 1996, he received the $100,000 Erwin Plein Nemmers Prize in Economics. The prize is awarded bienially to scholars who display work of lasting significance in mathematics and economics.

Sargent received his BA from the University of California, Berkeley in 1964 and his PhD from Harvard University in 1968. He was on the faculties at the University of Pennsylvania and the University of Minnesota before coming to UChicago.

Created in 1968, the Nobel in economics goes each year to recipients chosen by the Royal Swedish Academy of Sciences. The official name of the award is the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.