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Two
Receive $125,000 Nemmers Prizes
March
12, 2002
EVANSTON,
Ill. — Northwestern University today (March 12) announced the
winners of two prestigious awards in the fields of economics and
mathematics.
Dr.
Edward Prescott, Regnts’ Professor in the University of Minnesota’s
economics department and economic adviser to the Federal Reserve
Bank of Minneapolis, has been named the recipient of the Erwin Plein
Nemmers Prize in Economics. Dr. Yakov G. Sinai, professor of mathematics
at Princeton University, has received the Frederic Esser Nemmers
Prize in Mathematics. Both prizes carry stipends of $125,000.
Edward
Prescott
Prescott’s
work has focused on business cycles and economic fluctuations. He
has demonstrated that standard growth behavior historically studied
by microeconomists also can explain business cycle fluctuations
that macroeconomists have sought to understand. His theory that
a substantial part of business cycles are simply the best response
of the economy to policy changes that affect the economy’s
productivity is widely accepted in the field of economics.
"We’ve
learned that small fluctuations are not a problem, that the economy
is behaving as well as it can, and that we should focus on the bigger
picture," said Prescott. "Temporary depressions should
not drive us to adopt bad policies that will adversely affect the
economy over the long term."
"I
believe the government has begun to grasp this new economic understanding.
For example, thoughtful cost-benefit analyses are becoming the norm,
reducing the amount of abrupt policy shifting we’ve seen in
the past," said Prescott.
Prescott’s
work also has focused on the importance of an organization’s
ability and willingness to commit to specific policies over the
long term. Prescott argues that people put their trust in organizations
-- including government and corporations -- because they believe
those organizations will deliver on their commitments. Failure to
follow through on commitments would make people unwilling to invest
in those organizations in the future.
This
line of reasoning has been considered crucial in the development
of central banks that can act independently and maintain credibility
in the marketplace.
Dr.
Nancy Stokey, a University of Chicago professor of economics and
a member of the Nemmers selection committee, said that Prescott
was awarded the prize for his influential role in changing the direction
of macroeconomics. "The greatest real-world impact of Prescott’s
work comes as a result of his analysis of the time inconsistency
of optimal policy. His work, which shows how important it is for
a central bank to operate as an independent body, has influenced
the way monetary policy is conducted in many countries."
Another
selection committee member, University of California Los Angeles
professor of economics Dr. David K. Levine, said, "On the central
bank front, the government is a little bit like a dieter: there’s
always a temptation to cheat a little by printing some extra money
now, but always the knowledge that the government or dieter would
regret doing so in the long run. Giving responsibility to an independent
central bank is a commitment device: it makes it possible for the
government to avoid cheating, and more important - everyone knows
it."
Yakov
G. Sinai
Sinai’s
work deals with measuring dynamical systems, or systems that change
over time, such as weather, the motion of planets and economic systems.
These systems can be accurately measured in the short term (short
term being relative to the issue at hand); but when analyzed in
the long term, the systems are difficult to understand and predict.
Sinai
was the first to come up with a mathematical foundation for determining
the number that defines the complexity of a given dynamical system.
His mathematical system is called Kolmogorov-Sinai entropy.
"The
concept of entropy enables us to measure random and chaotic behavior
in systems," said Sinai. "There are many real-world applications—weather,
the stock market, and even social sciences."
"There
are precise solutions to these equations for very short periods
of time," said Dr. Zhihong Jeff Xia, a professor of mathematics
at Northwestern University and a member of the Nemmers selection
committee. "But if you want to look at long-term behavior,
like weather for the next five days to a week, then the system becomes
very complicated. This is when we see something called chaos."
"Kolmogorov-Sinai
entropy measures complexity, which is the first step. Then comes
finding patterns. Even though a system is complex, there are always
patterns—you just need to look at it the right way. Sinai was
the first one to recognize and study these patterns," said
Xia.
About
the Nemmers Prizes
"It
is a privilege for Northwestern to recognize these scholars,"
said Northwestern University President Henry S. Bienen. "Their
work has helped to shed light on important issues in mathematics
and economics that ultimately have relevance to all of us."
The
Nemmers Prizes are awarded to scholars who display outstanding achievement
in their discipline as demonstrated by major contributions to new
knowledge or the development of significant new modes of analysis.
Initiated in 1994, they are made possible through bequests from
the late Erwin E. Nemmers, a former member of the Northwestern University
faculty, and his brother, the late Frederic E. Nemmers, both of
Milwaukee. The prizes are awarded every other year.
For
more information, please visit: http://www.northwestern.edu/provost/awards/nem.html.
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