American winners
October 10, 2011
US economists Thomas Sargent and Christopher Sims have won the economics 2011 Nobel Prize for their work in showing how policy measures such as raising interest rates or cutting taxes affect the broader economy.
The Royal Swedish Academy of Sciences, which presented the award, said the 10-million-Swedish-krona ($1.5 million) prize recognized the empirical research of the two economists on "the cause and effect in the macroeconomy."
The research of Sargent, 68, a professor of economics at New York University, has centered on methods that use historical data to understand how systematic changes in economic policy affect the economy over time.
Sargent developed a mathematical model that he described in a series of articles in the 1970s.
Sims, also 68, is a professor of economics and banking at Princeton University. His work has focused on distinguishing between unexpected changes in variables, such as the price of oil or the interest rate, in order to trace their effects on important macroeconomic variables such as output and employment.
A way out of this 'mess'
In 1980, Sims wrote an article that introduced a new way of analyzing data using a model called "vector-autoregression."
"The methods that I've used and that Tom has developed are central for finding our way out of this mess," Sims, speaking on the telephone, told a news conference organized by the Academy.
One of the main tasks of macroeconomic research, the Academy said in a statement, is "to comprehend how both shocks and systematic policy shifts affect macroeconomic variables" such as gross domestic product (GDP) and inflation.
The research contributions of the two American academics, it said, "have been indispensable to this work."
Although both economists have conducted their research independently, "their contributions are complementary in many ways," the Academy added.
The academic paths of Sargent and Sims crossed at the University of Minnesota where the two professors did much of their early research in the 1970s and 1980s.
The economics prize, officially called the Svergies Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, was not part of the original group of awards set out by Nobel in 1895. It was established in 1968 by Sweden's central bank, the Riksbank.
Author: John Blau (AP, Reuters)
Editor: Martin Kuebler