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Nobel laureate talks about economic uncertainty

On March 18, 2014

2013 Nobel laureate and USU alumnus Lars Peter Hansen spoke to a full crowd in the Performance Hall on March 7 about the uncertainty of economics.

Hansen said there are two types of uncertainty in economics. There is the uncertainty from a researcher examining a model, and there is uncertainty among the players in the model. Often, economists simplify their models by ignoring the uncertainty of the players. In this case, players are investors, consumers and people participating in the economy.

“Models, at the end of the day, they’re wrong,” Hansen said.

Much of Hansen’s work has been trying to figure out how to model the uncertainty of the individuals within a model.

After the financial crisis, Hansen said he went to many conferences where people discussed financial policies.

“People would say, ‘This is a really complicated problem, therefore it requires a complicated solution,’ and I think that’s not the obvious conclusion,” Hansen said.

According to Hansen, not enough is known about the economy, and patterns to give a complicated answer. He believes simple, clear solutions would be more effective right now.

“Save the complexity until our full understanding catches up with things,” he said.

Hansen thinks the idea of uncertainty — the idea that people have a limited understanding — should play more of a role in policy discussions.

“Unfortunately, if you want to influence a politician … it’s more effective if a colleague stands up and pretends he knows everything,” Hansen said.

Along with two others, Hansen won the 2013 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.

Hansen attended Logan High School and graduated from USU in 1974 with a bachelor’s in mathematics and political science. He is a professor of economics at the University of Chicago.

At the University of Chicago, a conference for economics was held in his honor and the students wore T-shirts with a cartoon version of Hansen.

“I’m not quite sure it’s sunk in,” Hansen said. “The person I was five months ago and the person I am now, it’s the same person, except people treat me different.”

In addition to winning the 2013 Nobel Prize in Economic Sciences, Hansen has a long list of prestigious honors and awards, including an honorary doctorate from USU.

“One of the great benefits for us of Dr. Hansen’s recognition is we truly can say to our students that they can aspire to the greatest heights,” said USU President Stan Albrecht.

– mburnett@aggiemail.usu.edu
Twitter: @BurnettMaile

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