Sargent earned his B.A. from the University of California, Berkeley in 1964, being the University Medalist as Most Distinguished Scholar in Class of 1964, and his Ph.D. from Harvard in 1968. He held teaching positions at the University of Pennsylvania (1970–1971), University of Minnesota (1971–1987), University of Chicago (1991–1998), Stanford University (1998–2002) and Princeton University (2009), and is currently a Professor of Economics at New York University (since 2002). He is a Fellow of the Econometric Society 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, and a member of the Advisory Board of the Penn Institute for Economic Research at the University of Pennsylvania.
Sargent is one of the leaders of the "rational expectations revolution", which argues that the people being modeled by economists can predict the future, or the probability of future outcomes, at least as well as the economist can with his model. Rational expectations was introduced into economics by John F. Muth, then Robert Lucas, Jr., and Edward C. Prescott took it much farther.
Sargent's main contributions to rational expectations were to:
- trace the implications of rational expectations, with Neil Wallace, for alternative monetary-policy instruments and rules on output stability and price determinacy.
- help make the theory of rational expectations statistically operational.
- provide some early examples of rational expectations models of the Phillips curve, the term structure of interest rates, and the demand for money during hyperinflations.
- analyze, along with Neil Wallace, the dimensions along which monetary and fiscal policy must be coordinated intertemporally.
- conduct several historical studies that put rational expectations reasoning to work to explain consequences of dramatic changes in macroeconomic policy regimes.
In 1975 he and Neil Wallace proposed the Policy-ineffectiveness proposition, which refuted a basic assumption of Keynesian economics.
Sargent went on to refine or extend rational expectations reasoning by:
- studying the conditions under which systems with bounded rationality of agents and adaptive learners converge to rational expectations.
- using the notion of a self-confirming equilibrium, a weaker notion of rational expectations suggested by limits of learning models.
- studying contexts with Lars Peter Hansen in which decision makers do not trust their probability model. In particular, Hansen and Sargent adapt and extend methods from robust control theory.
Sargent has also been a pioneer in introducing recursive economics to academic study, especially for macroeconomic issues such as unemployment, fiscal and monetary policy, and growth. His series of textbooks co-authored with Lars Ljungqvist are seminal in the contemporary graduate economics curriculum.
Sargent has pursued a research program with Lars Ljungqvist designed to understand determinants of differences in unemployment outcomes in Europe and the United States during the last 30 years. The key questions this program addresses are: 1) Why during the 1950s and 1960s was unemployment systematically lower in Europe than in the United States? 2) Why for two and a half decades after 1980 has unemployment been systematically higher in Europe than in the United States? In "Two Questions about European Unemployment", the answer is given that "Europe has stronger employment protection despite also having had more generous government supplied unemployment compensation". While this institutional differences remained the same over this time period, the microeconomic environment for workers changed, with a higher risk of human capital depreciation in the 1980s.
In 2011 Sargent was awarded the NAS Award for Scientific Reviewing from the National Academy of Sciences and, in September, he became the recipient of the 2011 CME Group-MSRI Prize in Innovative Quantitative Applications.
Sargent is known as a devoted teacher. Among his PhD advisees are men and women at the forefront of macroeconomic research. Sargent's reading group at Stanford and NYU is a famous institution among graduate students in economics.
University of California at Berkeley, B.A., June, 1964 Harvard University, Ph.D., March 1968.
January1967 – January1968, Research Associate, Carnegie Institute of Technology
February 1968 – December 1969 First Lieutenant and Captain, U.S. Army. Served as Staﬀ Member and Acting Director, Economics Division, Oﬃce of the Assistant Secretary of Defense (Systems Analysis)
January 1970 – June 1971 Associate Professor of Economics, University of Pennsylvania
September 1971– June 1987 Associate Professor of Economics, University of Minnesota; Professor from July 1975
January1970 – June 1973; 1979 – present Research Associate, National Bureau of Economic Research
January 1973 – December 1973 Member, Brookings Panel on Economic Activity
September 1976– June 1977 Ford Foundation Visiting Research Professor of Economics, University of Chicago
June, 1971 – June 1987 Advisor, Federal Reserve Bank of Minneapolis
September 1981– June 1982 Visiting Professor of Economics, Harvard University and Research Associate, National Bureau of Economic Research
August 1985– March 1987 Visiting Scholar, Hoover Institution, Stanford University, Stanford, California March 1987 – present Senior Fellow, Hoover Institution, Stanford University, Stanford, California July 1991 – July 1998 David Rockefeller Professor of Economics, University of Chicago July 1998 – September 2002 Donald Lucas Professor of Economics, Stanford University
September 2002 – present Professor of Economics, New York University
Honors and Awards
University Medalist as Most Distinguished Scholar in Class of 1964, University of California – Berkeley.
Fellow of Econometric Society, 1976.
Mary Elizabeth Morgan Prize for Excellence in Economics, awarded by University of Chicago, 1979.
Fellow of National Academy of Sciences, April 1983.
Fellow of American Academy of Arts and Sciences, May 1983.
Recipient of 1996–97 Erwin Plein Nemmers Prize in Economics from Northwestern University. Honorary doctorate, Stockholm School of Economics, 2003.
Honorary doctorate in economics, European University Institute, 2008.
Corresponding Fellow, British Academy, 2011.
National Academy of Sciences Award for Scientiﬁc Reviewing, 2011.
CME Group-MSRI Prize in Innovative Quantitative Applications, 2011.
Honorary Doctorate, University of Bern, 2011. Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, 2011.
Honorary doctorate of sciences, University of Minnesota, 2013.
Recursive Macroeconomic Theory, Third Edition, with Lars Ljungqvist, MIT Press, 2012.
Robustness, with Lars Peter Hansen, Princeton University Press, 2008.
The Big Problem of Small Change, with Fran¸cois Velde, Princeton University Press, 2002.
The Conquest of American Inﬂation, Princeton University Press, Princeton, N.J., 1999.
Bounded Rationality in Macroeconomics, Oxford University Press, Oxford, 1993.
Rational Expectations and Inﬂation (reprinted articles), New York: Harper and Row, second edition, 1992. (Referred to below as REI). Rational Expectations Econometrics (with Lars Hansen), Westview Press, Boulder, 1991.
Exercises in Dynamic Macroeconomic Theory (with Rodolfo Manuelli), Cambridge, MA: Harvard University Press, 1987.
Dynamic Macroeconomic Theory, Cambridge, MA: Harvard University Press, 1987.
Energy, Foresight and Strategy, editor. Washington: Resources for the Future, 1985.
Rational Expectations and Econometric Practice, edited with Robert E. Lucas, Jr. Minneapolis: University of Minnesota Press, 1981.
(Referred to below as REEP). Macroeconomic Theory, New York: Academic Press, 1979. Second edition, 1987.