Post date: Oct 10, 2011 3:55:12 PM
United States economists Thomas Sargent and Christopher Sims win the 2011 economics Nobel prize for work on the relationship between policy measures and how they can affect the economy.
STOCKHOLM, SWEDEN (OCTOBER 10, 2011) (REUTERS) - Americans Thomas Sargent and Christopher Sims shared the 2011 Nobel prize in economics on Monday (October 10) for providing ways to understand the impacts of policy changes or shocks like surging oil prices on output, inflation or employment.
The Royal Swedish Academy of Sciences, which made the award, said the 10 million crown (1.5 million United States dollar) prize recognised their "empirical research on cause and effect in the macroeconomy" and said their work laid the foundation for modern macroeconomicanalysis.
"The Royal Swedish Academy of Sciences has decided to award the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for 2011 to Thomas J. Sargent of New York University, New York, United States and Christopher A Sims, Princeton University, Princeton, United States for their empirical research on cause and effect in macroeconomy," said the Secretary-General of the Royal Swedish Academy of Sciences, announcing the winner.
Speaking by telephone, Sims told a news conference hosted by the Academy after the prize was announced that he had been woken by the telephone and was surprised to hear that he had won the prize.
"I was thinking, well maybe it is the Nobel prize," he said.
Sims, from Princeton University said his and Sargent's methods were "essential to finding our way out of this mess" which the global economy was now in but offered no quick solutions.
"If I had a simple answer to that I would have have been spreading it around the world. There is no simple solution to it. It requires a lot of slow work looking at data unfortunately, so I don't have any simple answers but I think that the methods that I've used and that Thomas developed are central to finding our way out of this mess," he said.
Sargent's work focused on systemic policy shifts, while Sims was more interested in shocks to the economy, such as surging oil prices, or a sharp drop in household consumption.
Sargent, 68, who is professor of economics and business at New York University, developed a mathematical model in his work and described it in a series of articles in the 1970s.
Sims, professor of economics and banking at Princeton, wrote an article in 1980 which introduced a new way of analysing data using a model called vector-autoregression.
Professor of Economics and member of the prize committee Tore Ellingsen said Sargent's and Sims' research was very important.
"It is very important if you want to understand whether a policy led to an increase in unemployment, decrease in unemployment, increase in production or a decrease in production then this is now a matter of science and not merely your subjective opinion about which policy caused what," he said.
The economics prize, officially called the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, was established in 1968. It was not part of the original group of awards set out in dynamite tycoon Nobel's 1895 will but was established by Sweden's central bank, the Riksbank.