Prescott, Edward C. (1940-2022), was an American economist and professor who won the 2004 Nobel Prize in economic sciences. He shared the award with the Norwegian economist Finn E. Kydland. They received the award for their studies of economic policy and business cycles. A business cycle is the pattern of business activity in an economy. Prescott’s work greatly influenced the field of macroeconomic research—that is, research dealing with the economy as a whole.
In their 1977 article “Rules Rather than Discretion: The Inconsistency of Optimal Plans,” Prescott and Kydland identified problems in the ways that governments develop and implement economic policies. The two economists described a time consistency problem that takes place when policymakers abandon previous economic plans that people had expected would continue in the future. In their 1982 article “Time to Build and Aggregate Fluctuations,” they examined how technological advances and other factors cause fluctuations (upward and downward movements) in business cycles.
Prescott was born on Dec. 26, 1940, in Glens Falls, New York. In 1962, he earned a bachelor’s degree in mathematics from Swarthmore College in Swarthmore, Pennsylvania. In 1963, he received a master’s degree in operations research from Case Western Reserve University in Cleveland, Ohio. In 1967, he received a Ph.D. degree in economics from Carnegie Mellon University in Pittsburgh, Pennsylvania. Prescott taught at numerous universities, including the University of Pennsylvania, Carnegie Mellon University, the University of Minnesota, and Arizona State University. He died on Nov. 6, 2022.
