Tuesday, October 11, 2011

The Nobel Prize in Economics This Year

The well-behaved media are reporting it in terms that will make most Americans doze off, such as this October 11, 2011 San Francisco Chronicle article:

The Nobel Memorial Prize in Economic Sciences was awarded Monday to Thomas Sargent of New York University and Christopher Sims of Princeton University for their research looking at the cause-and-effect relationship between economic policy and the broader economy.
Their work uses statistical analysis to determine whether a policy change that happened in the past affected the economy or whether it was made in anticipation of events that policymakers thought would happen later. This research has also helped economists better understand how people's expectations for policy affect the economy.

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/10/10/MNIJ1LFMMM.DTL#ixzz1aUieFSH4
On the other hand, the October 10, 2011 Investor's Business Daily has a somewhat more exciting discussion of what the Nobel Prize was awarded for:
The Nobel Prize for Economics goes to two Americans who have separately exposed the flaws in government stimulus spending. For a Keynesian president, it's the Anti-Peace Prize.
That can't be said for Thomas Sargent of New York University and Princeton's Christopher Sims, whose macroeconomics work has been of invaluable help to central bankers and other economic policymakers, and for which they now share this year's economics Nobel.
Sargent's discoveries in particular echo the rationale Republican leaders in Congress have presented in opposing the massive Democratic stimulus spending during the first two years of the Obama administration — that such spending seeks to give the economy nothing more than what House Budget Chairman Rep. Paul Ryan over the weekend aptly called a "sugar high."
Essentially, Professor Sargent says that Obama's Council of Economic Advisers are stuck in the state of economic theory for 1945: "surprisingly naive for 2009."  It was awfully nice of Obama to provide a real world example proving Sargent and Sims correct--that stimulus is not a long-term solution.

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