The Region

A Model Celebration

Published December 1, 2004  | December 2004 issue

Ed Prescott's work has transformed economic theory and methodology, influenced the international conduct of monetary policy and shaped several generations of economists. A day after the Nobel award was announced on Oct. 11, many of those economists flew in from around the country to attend a Minneapolis Fed reception in honor of Prescott; others sent statements from afar. A 30-foot banner proclaimed "Congratulations Ed!" and balloons echoed the sentiment. For five hours, colleagues, co-authors, and former and current students celebrated the award and gave tribute, sharing stories about Ed Prescott with respect, humor and deep affection.

"I was one of the lucky people to be able to talk to Ed on Monday [the day he heard about the prize]," said Randall Wright, a University of Pennsylvania economist. "I said, 'Ed, you must feel pretty good' and he said, 'yeah, I went to Starbucks and they gave me a free coffee.'"

A former student of Prescott's, Ayse Imrohoroglu of Turkey, said that many of her friends had congratulated her on her thesis adviser receiving the Nobel. "But they don't understand," said Imrohoroglu, now a professor at the University of Southern California. "He's not a thesis adviser. He's so much more than that to all his students. I couldn't find the word, perhaps because my English is not that good, but I'm sure there is some word that would describe someone that is a great friend, a great teacher, a great mentor, a great buddy, someone you will know for the rest of your life you can depend on."

John Boyd of the University of Minnesota's Carlson School of Management offered a toast that only economists could appreciate: "I drink to the 'Equity Premium Puzzle,'" referring to an influential 1985 Prescott paper about the inexplicably large gap between returns on stocks and bonds.

"When I first met him as a grad student, he was confident, fearless, told you exactly what he meant. He really hasn't changed a bit in 40 years," said 1995 Nobel Laureate Robert Lucas, who came from Chicago to join the celebration. "The Nobel people cited two papers out of the vast body of Ed's work. There are so many breakthroughs in this body of work, so many instances of taking a sharp break from the past. ... And people followed. ...

"His methodological contributions have been, if anything, broader than the substantive contributions," continued Lucas. "He liberated all of us to look at numbers, to push our theories in a quantitative direction, not wait for permission from anyone else. ... He changed the way I practice economics, the way that all of us do."

"Ed Prescott has been the center, the core of this department for close to 24 years," said Art Rolnick, director of the Minneapolis Fed's research department. "Because of Ed, I've been able to attract some of the best scholars in our profession. His work ethic is amazing; his insights have been phenomenal. That Ed Prescott has won the Nobel prize in economics comes as no surprise to any of his colleagues here in Minneapolis."

And Richard Rogerson from Arizona State University pointed out that Prescott is one of a kind, a uniqueness that doesn't jibe with the models used by economists. "Think about that framework which Ed has helped to popularize," said Rogerson, referring to mathematical models in which individuals are identical and interchangeable. "And then think about Ed's role both in all of our lives and in the profession, because Ed stands in sharp contrast to that. ... Ed is not one of those people who did something that somebody else was going to do anyway. ... Today is a very special day for us to truly celebrate the achievements of Ed the individual, to what he's given to the profession and to each of us. So Ed, I toast to you."

As do we all.