Nobel 2011 goes to Thomas Sargent and Christopher Sims

The blog post on predictions did mention Sargent but missed on Sims. Both have been on the perennial waiting list.

Anyways, both have got the prize for 2011:

The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2011 was awarded jointly to Thomas J. Sargent and Christopher A. Sims “for their empirical research on cause and effect in the macroeconomy”

Sargent is from NYU and Sims from Princeton..

As always useful stuff from Nobel Website on their works:

More accolades and summary of their work to follow.
Very timely as well from Nobel Committee. We are debating basics of economics post-crisis and not knowing what is causing what. Hope going back to their analysis does help.

How are GDP and inflation affected by a temporary increase in the interest rate or a tax cut? What happens if a central bank makes a permanent change in its inflation target or a government modifies its objective for budgetary balance? This year’s Laureates in economic sciences have developed methods for answering these and many of other questions regarding the causal relationship between economic policy and different macroeconomic variables such as GDP, inflation, employment and investments.

These occurrences are usually two-way relationships – policy affects the economy, but the economy also affects policy. Expectations regarding the future are primary aspects of this interplay. The expectations of the private sector regarding future economic activity and policy influence decisions about wages, saving and investments. Concurrently, economic-policy decisions are influenced by expectations about developments in the private sector. The Laureates’ methods can be applied to identify these causal relationships and explain the role of expectations. This makes it possible to ascertain the effects of unexpected policy measures as well as systematic policy shifts.

Though given last year’s prize was given on unemployment we hardly learnt anything from the trio as well. So should not expect too much in this  chaos of economic thought..
Loads of Links as always:
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