15 October 2011

Nobel Prize in Economics

The Nobel Prize in Economics this year went to Thomas J. Sargent and Christopher A. Sims "for their empirical research on cause and effect in the macroeconomy."

A representative from "Nobel Media" spoke to each man soon after they learned of their award, and recorded the interview. I'll just quote a snippet of each here.

The rep said to Sargent, "It's quite a time to be chosen to be a Novel Laureate, with so much of the world's attention focused on the economy," and then asked, "Do you find it a daunting prospect to be the subject of so much media attention?"

Sargent replied: "Well, I ... sorry, I don't know what's involved in that. You know, we're just ... yeah, we're just bookish types that look at numbers and try to figure out what's going on. So, I don't know what to say to that!"

In the interview with Sims, the rep asked about the difference between the two new laureates and their approaches to getting at macroeconomic causality.

Sims said that Sargent's aproach "is to start with a model economy for the most part ... and then [he] tries to fit it to data and run his experients in it. I usually start with a statistical model of the data and then add economic assumptions sparingly until I can begin to get answers."

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Knowledge is warranted belief -- it is the body of belief that we build up because, while living in this world, we've developed good reasons for believing it. What we know, then, is what works -- and it is, necessarily, what has worked for us, each of us individually, as a first approximation. For my other blog, on the struggles for control in the corporate suites, see www.proxypartisans.blogspot.com.