Europe on the brink. United States risks double-dip recession. Financial turmoil threatens world economy. Not the sort of headlines you would associate with a Nobel-prize-winning contribution to the progress of humanity. To their credit, recipients Christopher Sims of Princeton and Thomas Sargent of New York University did develop methods and models that are wisely used by economists around the world, including central banks. But it’s unclear what practical applications their findings have for the world’s current economic predicament.
Alfred Nobel himself was not shy about hiding his disdain for the dismal science, which was not part of the original set of awards given in his name. The Nobel prize in economics came into existence in 1968, when Sweden’s central bank decided to create it in the dynamite tycoon’s honor. As German journalist Karen Ilse Horn writes (Thanks to @RecklessMonkeys for bringing the quote to our attention):
Economics was nothing Alfred Nobel appreciated as such, even though he was himself a pretty successful businessman. Rather to the contrary: ‘I have no training in economics myself and also hate it from the bottom of my heart,’ he wrote.
The question appears worth asking: what exactly was the concrete contribution of Sims and Sargent? That answer, it seems, is a little harder to come by. Take Paul Krugman, who makes a living explaining the intricacies of economics to lay persons. This is what he had to say about the winners:
This is a statistical techniques prize — both men worked on methods for extracting insight from the data history provides us, which generally don’t offer anything like a controlled experiment.