Nobel Winners in Economics: The Reluctant Celebrities

It was early on the morning of Oct. 10, the sun not yet up. A crank call, he figured, and rolled over.

Then the phone rang again. His wife, Cathie, fumbled for the receiver.

“If it’s a prank,” she whispered, “they’re doing a pretty good Swedish accent.”

At the same hour, near the campus of New York University in Manhattan, Thomas J. Sargent was already wide awake. He, too, had received an unexpected call.

Stockholm was on the line. The two men, intellectual sparring mates for more than 40 years, had won the Nobel in economic science. (They are to collect it on Saturday.)

And yet, in this time of economic angst, with the fate of the euro and the course of the global economy uncertain, these two Americans have reached the pinnacle of a profession that, to many, seems to have failed miserably. The financial crisis of 2008-09, the Great Recession, the debt mess in Europe — few economists saw all of it coming. For all its elegance, modern macroeconomics seemed to provide little help when the world needed it most.

Today, solutions to our economic troubles, from onerous government debt to high unemployment, remain elusive. And the field of economics, like Washington politics, seems as polarized as ever.

During the Great Depression, John Maynard Keynes held out remedies. His ideas have shaped many policy makers’ thinking ever since. Keynes maintained that market economies are inherently unstable and, if left to their own devices, can self-destruct. Hence governments, he argued, must sometimes intervene.

Mr. Sims and Mr. Sargent neither prescribe cures nor forecast the future. Nor do they deal in the sound bites of talking heads on cable TV. They are reluctant celebrities, men whose work can baffle even Ph.D.’s.

So it comes as a surprise, not least to Mr. Sims and Mr. Sargent, that these two now find themselves thrust into an uncomfortable spotlight. Conservative voices, like the editorial page of The Wall Street Journal, have claimed them as their own. The men’s work on economic cause and effect and the theory of rational expectations — which maintains that people use all the information available in making economic decisions — proves that Keynes had it wrong, these commentators say.

It would be a provocative thesis — if it were true. But Mr. Sims and Mr. Sargent say their work is being misread. Both, in fact, are longtime Democrats who maintain that government can, and should, play a role in economic affairs. They stand behind many recent policies of the Obama administration and the Federal Reserve. They even have some ideas about how European governments might defuse the running crisis on the Continent.

They won their Nobel for “their empirical research on cause and effect in the macroeconomy,” in the academy’s words. What that means, in part, is that they have done some serious math. Today, ideas they largely formed in the 1970s and ’80s help shape the thinking inside the Fed and on Wall Street.

Their work goes beyond old labels like Keynesianism and the monetarism of Milton Friedman. They have shown that fiscal and monetary policy are inextricably linked, and their research reflects the broad shift in economics from words to numbers — toward a level of empirical analysis that few outside the profession can readily grasp. But it contains a kernel of skepticism appropriate for these troubled times. In a world of uncertainty and constraint, cause and effect may not be what they seem. As a result, we must test and retest our assumptions — and try to prepare for the unexpected.

“The most impressive thing about them as scholars,” says David Easley, an economist at Cornell University, “is that in recent years they have questioned the assumptions of the models they helped to create, and they have been at the vanguard of the efforts to go beyond them.”

Mr. Sargent says his most important work is spoken “in the beautiful language of math.” He knows it’s not widely understood.

“The kind of work we do, that real economists do, will never catch on with the public,” he says.

THOMAS SARGENT, in a draft of his Nobel acceptance speech, refers to himself as an “American provincial.” On a recent afternoon, over a bowl of noodles at an Asian restaurant near N.Y.U. in Greenwich Village, he used football metaphors to discuss economics. He compared fiscal policymakers to coaches, with X’s and O’s. He often wears T-shirts, sweatshirts and baseball caps, gear as appropriate in Montana, where he keeps a cabin, as it is in Washington Square.

Born in 1943, the son of an insurance salesman and a social worker, Mr. Sargent grew up in Monrovia, Calif., east of Pasadena. He says he didn’t cut an impressive figure in high school. “I wasn’t the brightest kid, not by a long shot,” he says. “I was interested in football, in girls, in getting my work done with the least amount of effort.”

Economics? Please. “I think you’ve got to watch out for anybody in high school who says he wants to become an economist,” he says.

And yet, from an early age, Tom Sargent was acquainted with real-world economics. Both of his grandfathers were pretty much wiped out in the Depression, he says.

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