Thomas J. Sargent

Thomas J. Sargent

Born	July 19, 1943 (1943-07-19) Pasadena, California
Nationality	American
Institution	New York University
Field	Macroeconomics, monetary economics
Alma mater	UC Berkeley B.A. Harvard University PhD
Influences	Robert Lucas, Jr.
Awards	NAS Award for Scientific Reviewing (2011) Nobel Memorial Prize in Economic Sciences (2011)
Information at IDEAS/RePEc

Interview with Thomas J. Sargent after his Nobel lecture

Thomas John "Tom" Sargent (born July 19, 1943) is an American economist, specializing in the fields of macroeconomics, monetary economics and time series econometrics. As of 2011, he ranks seventeenth among the most cited economists in the world.. He was awarded the Nobel Memorial Prize in Economic Sciences in 2011 together with Christopher A. Sims "for their empirical research on cause and effect in the macroeconomy".

Education

Sargent earned his B.A. from the University of California, Berkeley in 1964, being the University Medalist as Most Distinguished Scholar in Class of 1964, and his Ph.D. from Harvard in 1968. He held teaching positions at the University of Pennsylvania (1970–1971), University of Minnesota (1971–1987), University of Chicago (1991–1998), Stanford University (1998–2002) and Princeton University (2009), and is currently the Berkley Professor of Economics and Business at New York University (since 2002). He is a Fellow of the Econometric Society since 1976. In 1983, Sargent was elected to the National Academy of Sciences and also the American Academy of Arts and Sciences. He has been a senior fellow of the Hoover Institution at Stanford University since 1987, and a member of the Advisory Board of the Penn Institute for Economic Research at the University of Pennsylvania.

Professional contributions

Sargent is one of the leaders of the "rational expectations revolution", which argues that the people being modeled by economists can predict the future, or the probability of future outcomes, at least as well as the economist can with his model. The rational expectations modeling philosophy thus contains a thoughtful response to the question, If you are so smart, why aren't you rich?. Rational expectations was introduced into economics by John F. Muth, then Robert Lucas, Jr., and Edward C. Prescott took it much farther.

Sargent's main contributions to rational expectations were to:

• trace the implications of rational expectations, with Neil Wallace, for alternative monetary-policy instruments and rules on output stability and price determinacy.
• help make the theory of rational expectations statistically operational.
• provide some early examples of rational expectations models of the Phillips curve, the term structure of interest rates, and the demand for money during hyperinflations.
• analyze, along with Neil Wallace, the dimensions along which monetary and fiscal policy must be coordinated intertemporally.
• conduct several historical studies that put rational expectations reasoning to work to explain consequences of dramatic changes in macroeconomic policy regimes.

Sargent went on to refine or extend rational expectations reasoning by:

• studying the conditions under which systems with bounded rationality of agents and adaptive learners converge to rational expectations.
• using the notion of a self-confirming equilibrium, a weaker notion of rational expectations suggested by limits of learning models.
• studying contexts with with Lars Peter Hansen in which decision makers don't trust their probability model . In particular, Hansen and Sargent adapt and extend methods from robust control theory.

Sargent has pursued a research program with Lars Ljungqvist designed to understand determinants of differences in unemployment outcomes in Europe and the United States during the last 30 years. The key questions this program addresses are: 1) Why during the 1950s and 1960s was unemployment systematically lower in Europe than in the United States? 2) Why for two and a half decades after 1980 has unemployment been systematically higher in Europe than in the United States? In "Two Questions about European Unemployment", the answer is given that "Europe has stronger employment protection despite also having had more generous government supplied unemployment compensation". While this institutional differences remained the same over this time period, the microeconomic environment for workers changed, with a higher risk of human capital depreciation in the 1980s.

In 2011 Sargent was awarded the NAS Award for Scientific Reviewing from the National Academy of Sciences and, in September, he became the recipient of the 2011 CME Group-MSRI Prize in Innovative Quantitative Applications.

Sargent is known as a devoted teacher. Among his PhD advisees are men and women at the forefront of macroeconomic research. Sargent's reading group at Stanford and NYU is a famous institution among graduate students in economics.

Nobel Memorial Prize and lecture

On October 10, 2011, Sargent together with Chris Sims was awarded the Nobel Memorial Prize in Economic Sciences. The award cited their "empirical research on cause and effect in the macroeconomy". His Nobel lecture, titled "United States Then, Europe Now" was delivered on December 11, 2011.

Selected publications

• Sargent, Thomas J. (1971). "A Note on the Accelerationist Controversy". Journal of Money, Credit and Banking (Blackwell Publishing) 3 (3): 721–25. doi:10.2307/1991369. JSTOR 1991369. 
• Sargent, Thomas J., and Neil Wallace (1973). "The Stability of Models of Money and Growth with Perfect Foresight". Econometrica (The Econometric Society) 41 (6): 1043–48. doi:10.2307/1914034. JSTOR 1914034. 
• Sargent, Thomas J. (1979, 1987). Macroeconomic Theory. New York: Academic Press. ISBN 0-126-19750-4. 
• Sargent, Thomas J. and Lars P. Hansen (1980). "Formulating and Estimating Dynamic Linear Rational Expectations Models". Journal of Economic Dynamics and Control 2 (1): 7–46. doi:10.1016/0165-1889(80)90049-4. 
• Sargent, Thomas J. and Neil Wallace (1981). "Some Unpleasant Monetarist Arithmetic". Federal Reserve Bank of Minneapolis Quarterly Review 5 (3): 1–17. 
• Sargent, Thomas J. (1983). “The Ends of Four Big Inflations” in: Inflation: Causes and Effects, ed. by Robert E. Hall, University of Chicago Press, for the NBER, 1983, p. 41–97.
• Sargent, Thomas J. (1987). Dynamic Macroeconomic Theory. Harvard University Press. ISBN 0-674-21877-9. 
• Sargent, Thomas J. and Albert Marcet (1989). "Convergence of Least Squares Learning Mechanisms in Self-Referential Linear Stochastic Models". Journal of Economic Theory 48 (2): 337–368. doi:10.1016/0022-0531(89)90032-X. 
• Sargent, Thomas J. and Albert Marcet (1989). "Convergence of Least Squares Learning in Environments with Hidden State Variables and Private Information". Journal of Political Economy 97 (6): 251. doi:10.1086/261603. 
• Sargent, Thomas J. and Lars Ljungqvist (2000, 2004). Recursive Macroeconomic Theory. MIT Press. ISBN 0-262-12274-X. 
• Sargent, Thomas J. and Lars Hansen (2001). "Robust Control and Model Uncertainty". American Economic Review 91 (2): 60–66. doi:10.1257/aer.91.2.60. 

External links

• Homepage at the New York University website
• Sargent personal website