Thomas J. Sargent

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Lore & Background

Sargent graduated from Monrovia High School, then earned his B.A. from the University of California, Berkeley in 1964, being the University Medalist as Most Distinguished Scholar in Class of 1964. He earned his PhD from Harvard in 1968 under the supervision of John R. Meyer. His classmates at Harvard included Christopher A. Sims. After serving in the U.S. Army as a first lieutenant and captain, he moved on to teaching. He held teaching positions at the University of Pennsylvania (1970–71), University of Minnesota (1971–87), University of Chicago (1991–98), Stanford University (1998–2002), and Princeton University (2009). He is currently a professor of economics at New York University (since 2002). He previously held the position of President of the American Economic Association and the Econometric Society, where he has been a fellow since 1976. In 1983, Sargent was elected to the National Academy of Sciences and also the American Academy of Arts and Sciences. He has been a senior fellow of the Hoover Institution at Stanford University since 1987.

Reader's Guide

Thomas J. Sargent's significance lies in his foundational contributions to the rational expectations revolution. With Neil Wallace, he proposed the policy-ineffectiveness proposition in 1975, which challenged a basic assumption of Keynesian economics. His work with Wallace traced the implications of rational expectations for alternative monetary-policy instruments and rules on output stability and price determinacy, and analyzed the dimensions along which monetary and fiscal policy must be coordinated intertemporally. Sargent helped make the theory of rational expectations statistically operational and provided early examples of rational expectations models of the Phillips curve, the term structure of interest rates, and the demand for money during hyperinflations. He later studied conditions under which systems with bounded rationality and adaptive learners converge to rational expectations, and used the notion of a self-confirming equilibrium. With Lars Peter Hansen, he adapted and extended methods from robust control theory for contexts where decision makers do not trust their probability model. With Lars Ljungqvist, he pursued research on European versus U.S. unemployment, addressing why unemployment was systematically lower in Europe in the 1950s and 1960s but higher for two and a half decades after 1980. Their answer: "Europe has stronger employment protection despite also having had more generous government supplied unemployment compensation," combined with a higher risk of human capital depreciation in the 1980s. Sargent also pioneered recursive economics and co-authored seminal textbooks with Ljungqvist. In 2016, he helped found the non-profit QuantEcon project for open source computational tools in economics. His Nobel Prize in 2011, shared with Christopher A. Sims, recognized their "empirical research on cause and effect in the macroeconomy."

Did You Know?

• Sargent was the University Medalist as Most Distinguished Scholar in his Class of 1964 at UC Berkeley.
• He served in the U.S. Army as a first lieutenant and captain before beginning his teaching career.
• In 2007, his Berkeley graduation speech was only 335 words long.
• He appears playing himself in a television commercial for Ally Financial, answering 'No' when asked if he can predict CD rates two years from now.
• Sargent helped found the non-profit QuantEcon project in 2016, dedicated to open source computational tools for economics.