Sargent, Thomas John (1943-…), is an American economist who won the 2011 Nobel Prize in economic sciences. He shared the award with the American economist Christopher A. Sims. They received the award for developing new techniques in macroeconomics—the branch of economics that studies the workings of an entire economy. Their techniques were used to identify the effects of government policy on an economy.
Both men worked in the field of econometrics—a branch of economics that applies mathematics and statistics to economic theory. Sims’s primary contribution focused on the two-way cause and effect that exists between government policy and such macroeconomic conditions as inflation and unemployment. Sargent’s contribution focused on how people’s expectations influence the effects of these government policies.
Sargent pioneered the inclusion of rational expectations into econometrics. Rational expectations occur when people correctly understand all future effects of government policies and adjust their behavior. Say, for example, that a central bank, which is a government agency in many countries, lowers interest rates in an attempt to reduce unemployment. People might understand that lower interest rates will eventually lead to goods becoming more expensive and demand higher wages to pay for them. These higher wages discourage businesses from hiring more workers. The effect of the policy aimed at reducing unemployment ends up much smaller than intended. Sargent developed techniques for including these rational expectations into models predicting the true effects of government policies.
Sargent was born in Pasadena, California, on July 19, 1943. He received a bachelor’s degree from the University of California, Berkeley, in 1964. He earned a doctorate in economics from Harvard University in 1968. Sargent and Sims were classmates at Harvard during their time as graduate students. In 1968 and 1969, Sargent served in the United States Army.
In 1970 and 1971, Sargent taught at the University of Pennsylvania. He taught at the University of Minnesota from 1971 to 1987. Sims taught at Minnesota during much of the same period. Sargent has also held positions as visiting professor with several institutions, including the University of Chicago. He taught at Stanford University from 1998 to 2002 and at New York University starting in 2002. Sargent was a visiting professor at Princeton University, teaching jointly with Sims, when the men were told of their Nobel Prize.
