Professor Christopher Sims of Princeton University and Professor Thomas Sargent of New York University shared this year's Nobel prize in economics for their work on measuring causes and effects of government policy on the economy.
At a press conference held at Princeton University, Professor Sargent explains:
SOUNDBITE: THOMAS SARGENT, WINNER, NOBEL PRIZE IN ECONOMICS AND PROFESSOR AT NEW YORK UNIVERSITY (ENGLISH) SAYING:
"We build models where people's expectations about what the government is going to do are really important in influencing events. And those expectations can't be just arbitrary, because they depend partly on what the government is going to do. And what the government is going to do partly depends on those expectations."
While the work is extremely timely given the global economic crisis, the two do not offer solutions, saying there are no easy answers, calling the global crisis "a mess."
The two took particular note of Europe, urging a creation of a fiscal union to avoid the collapse of the common currency:
Professor Sims:
SOUNDBITE: CHRISTOPHER SIMS, WINNER, NOBEL PRIZE IN ECONOMICS AND PRINCETON UNIVERSITY PROFESSOR (ENGLISH) SAYING:
"My view is that if the euro is to survive it will have to work out, the euro area will have to work out, a way to share fiscal burdens and connect fiscal authority to the ECB and the role of lender of last resort. Right now none of those connections are clear. And if those connections remain unclear or people try to go back to a system in which there is in fact no central fiscal backing for the ECB I think the prospects for the euro are dim."
The prize, awarded by the Royal Swedish Academy of Sciences, is $1.5 million.
Bobbi Rebell, Reuters.