Hoover Senior Fellow Thomas Sargent wins Nobel in economics

Thomas Sargent is an expert in monetary economics, time series economics and macroeconomics. (Photo: Courtesy of NYU)

Hoover Institution economist Thomas J. Sargent, a leader in the field of macroeconomics and the rational expectations revolution, was named a recipient of the Nobel Memorial Prize in Economic Sciences today.

Sargent, 68, is a professor at New York University and a senior fellow at Stanford's  Hoover Institution.  He was a professor of economics at Stanford from 1998 to 2002 and has been a Hoover senior fellow since 1987.

The Nobel committee named Sargent for his work in research that sheds light on the cause-and-effect relationship between the economy and policy instruments such as interest rates and government spending. 

Sargent is an expert in monetary economics, time series economics and macroeconomics. He was one of the economists behind the rational expectations hypothesis that swept through macroeconomics in the 1970s. 

This altered the intellectual landscape with studies of areas such as the natural rate of unemployment, the neutrality of real interest rates with respect to money, dynamic labor demand and hyperinflation.

Sargent shared the prize, including the 10 million kronor ($1.5 million) cash award, with American Christopher A. Sims.

The Royal Swedish Academy of Sciences awarded the Medal for The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel to the two economists "for their empirical research on cause and effect in the macroeconomy."

"Although Sargent and Sims carried out their research independently, their contributions are complementary in several ways," the academy said in a press release. "The laureates' seminal work during the 1970s and 1980s has been adopted by both researchers and policymakers throughout the world. Today, the methods developed by Sargent and Sims are essential tools in macroeconomic analysis."

The academy published a short article about their work, The Art of Distinguishing Between Cause and Effect in the Macroeconomy, on its website.

The academy said Sargent has shown how structural macroeconometrics can be used to analyze permanent changes in economic policy.

"This method can be applied to study macroeconomic relationships when households and firms adjust their expectations concurrently with economic developments," the academy said in a press release. "He has examined, for instance, 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."

In a telephone interview with Adam Smith, the editorial director of Nobel Media, Sargent said he was in his study when he received the call from Stockholm.

"It's quite a time to be chosen to be a Nobel Laureate, with so much of the world's attention focused on the economy," Smith said. "Do you find it a daunting prospect to be the subject of so much media attention?"

"I don't know what's involved in that," Sargent said. "We're just bookish types that look at numbers and try to figure out what's going on."

From 1975 to 1987, Sargent was a professor of economics at the University of Minnesota. From 1992 to 1998, he was the David Rockefeller Professor at the University of Chicago.

A past president of the Econometric Society, the American Economic Association and the Society for Economic Dynamics, Sargent also won the Nemmers Prize in Economics in 1997.

He is a fellow of the American Academy of Arts and Sciences, the Econometric Society and the National Academy of Sciences.

Sargent was a first lieutenant and captain in the U.S. Army and is the author or co-author of five books. He earned his doctorate from Harvard University in 1968.

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