We are saddened to share the news that our colleague, Edward C. Prescott, passed away on Sunday, November 6, 2022. Ed was a revolutionary thinker in economics and played a fundamental role in transforming the Research Division of the Federal Reserve Bank of Minneapolis into one of the premier research institutions in macroeconomics in the world.
Ed was a Bank consultant starting in 1981 and an employee since 2003. Along with Robert Lucas, Thomas Sargent, and Neil Wallace, he led the revolution to reintegrate macroeconomics and microeconomics, much of which arose within the powerful research partnership between the Minneapolis Fed and University of Minnesota.
Ed shared the 2004 Nobel Prize in Economics with Finn Kydland “for their contributions to dynamic macroeconomics: the time consistency of economic policy and the driving forces behind business cycles.” Ed and Finn argued that setting policy in the absence of a commitment to a long-term plan typically leads to poor outcomes, because policymakers will try to influence the future with current promises that they later will not fulfill. They also laid the foundations for modern business cycle modeling, steering it away from the simple empirical equations of the Keynesians of the 1970s to models in which consumers and firms make purposeful choices.
Ed’s work has had profound influence on monetary policy. His research on time inconsistency provided a rationale for the adoption of inflation targeting by many central banks around the world. Likewise, the models that central banks currently use to inform their policy discussions are direct descendants of the business cycle models that Ed developed.
Perhaps even greater than these contributions is Ed’s legacy of mentoring, advising, and inspiring the numerous cohorts of research assistants, economists, and presidents of the Minneapolis Fed. We extend our deepest sympathies to his wife, Jan, and his children, Ned, Wynne, and Andy. He will be immensely missed by all of us, both as a friend and a colleague.
Remembrances from colleagues
“Ed Prescott joined the Minneapolis Federal Reserve Bank in 1981—and we have not been the same since. So much of his work challenged the way we modeled economic policy, forcing us to dig deeper into our theories and tests of our theories against data.
“I will always remember Ed’s passion for his research, as well as for his colleagues. He would often show up at a colleague’s office asking about their research and when it would be ready to publish.
“For those of us that were lucky enough to be Ed’s colleagues, we were not surprised that he received the Nobel Prize. His work had been influencing both economic research and policy for years.
“For me personally, I have lost a colleague, a mentor and a dear friend. He will be missed.”
—Art Rolnick, former director of research at the Federal Reserve Bank of Minneapolis
“When I was a second-year graduate student, contemplating quitting economics altogether, Ed invited me to spend a year as his research assistant at the Federal Reserve Bank of Minneapolis.
“Seeing first-hand Ed’s enthusiastic embrace and encouragement of new ideas and sharing some of his own inspired me to spend my life doing economics. He was an amazing mentor not only to me but to legions of graduate students.
“If we count in his intellectual legacy both Ed’s students and his students’ students then his legacy involves many hundreds of economists all over the world who are trying to carry it on. You will be sorely missed by all of us.”
—Patrick Kehoe, monetary advisor at the Federal Reserve Bank of Minneapolis
“I met Ed Prescott on the first day of class for Industrial Organization in my second year of graduate school. After introducing himself, he asked the students to introduce themselves, and to briefly describe their research interests.
“One after the other (there were about a dozen of us) we would try to string together a few complete sentences, realizing we probably had little to say, but excited about the prospect of telling Ed about the little we had. Who knows, maybe we had a good idea. And after each one of us spoke, Ed would tell us we were onto something. And he would tell us about related literature, or facts about the world, that greatly enhanced what we had said. Yup, we were onto something.
“This was my first experience with Ed. And it was the same thereafter. I am extremely grateful to have met and worked with such a supportive, creative, and helpful advisor, colleague, and friend. Thank you Ed.”
—Jim Schmitz, senior research economist at the Federal Reserve Bank of Minneapolis
The Minneapolis Fed is collecting remembrances from colleagues to share with Ed’s family. If you would like to contribute a message, please email Mpls.Research.Info.Svcs@mpls.frb.org.