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Last October’s economics NobelPrize announcement was greetedwith much joy—but no surprise—atthe Minneapolis Fed. After all, thetwo laureates, Thomas Sargent andChristopher Sims, had long affilia-tions with the Research departmentat the bank as well as with theeconomics department at theUniversity of Minnesota. And theywere instrumental in forging a part-nership between the two institutionsduring the 1970s that saw the devel-opment of major breakthroughs ineconomic thought and continues toproduce cutting-edge research to this day.So it was natural that the Minneapolis Fed

should host a conference in honor of the twoscholars. Economists from all over the world whostudied with or were influenced by Sargent andSims came to the bank on May 4 and 5 to pay trib-ute to them and to present research that followstheir enduring legacy.Both men have produced an extensive range of

contributions to many areas of economics—macro-economics, econometrics, financial economics, andmonetary theory and policy analysis, for example.But the thread that binds this work is devotion todevelopment of mathematical models and empiricalmethods (with an important role for expectations)in order to rigorously investigate how economic“shocks,” as well as policy changes, influence themacroeconomy.Consistent with this breadth, the research pre-

sented at the conference spanned a variety of topics.For example, New York University’s GiovanniViolante kicked off the second day, presenting jointresearch with the Minneapolis Fed’s JonathanHeathcote and Kjetil Storesletten about how workers’ability to insure against risks to their earnings relatesto the recent rise in inequality in the United States.The clever innovation in their paper involves fittingthe model to data to measure how insurance haschanged over time.Not surprising, in light of the recent financial

crisis, many papers were on financial topics or onthe intersection of macroeconomics and finance.

Celebration Time (Series)Others covered topics in publicfinance, business cycles and infor-mation economics. (Papers andpresentations can be found onlineat: minneapolisfed.org/research/events/2012_05-04/index.cfm.) But the conference wasn’t all seriousresearch. Participants shared stories,some heartwarming and somehumorous, about studying andworking with Sargent and Sims.These included dinner remarks byMinneapolis Fed President NarayanaKocherlakota (see page 2).And then there were the skits,

in which conference organizers gently lampoonedSargent’s and Sims’ personalities. One highlightwas a reenactment of a collaboration by the two,played by Heathcote and Cristina Arellano, inwhich Nobel laureates Edward Prescott andRobert Lucas, playing themselves, walked throughand mocked them. “What is all this mumbo-jumboengineering gobbledygook?” Prescott asked. “Idon’t know,” Lucas responded, “but we’d betternot get involved.”When a research conference is held in someone’s

honor, the honoree doesn’t usually present his orher own work. But in this case, each day of theconference finished with one laureate presentingnew research of his own: Sargent’s paper looked atoptimal taxation policies when consumers can’tperfectly smooth out shocks to their incomes andtaxes are used for redistribution; Sims presented amodel to explain how prices often make bigjumps, rather than adjusting smoothly. The paperswere highly technical, cutting-edge research onfundamental problems in economics and testamentto their authors’ sustained drive, engagement andbrilliance. During these presentations, Sargentand Sims each, characteristically, offered insightfulcritiques of the other’s paper; such parries andcounterparries occurred throughout the conference.Indeed, this sharp, constructive interplay madeevident why the Nobel Committee awarded themuch-deserved 2011 prize to them jointly.

—Joe Mahon

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Thomas Sargent Christopher Sims

Giovanni Violante and Robert LucasMarc Giannoni, Sam Schulhofer-Wohl and Edward Prescott

Narayana KocherlakotaFabrizio PerriJames Bullard, Harald Uhlig and Michael Woodford

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The Region

Over a century ago Canada opted for safety and stability in its centralized banking system, instead of innovation

and efficiency—the hallmarks of the U.S. model, with its thousands of national and state banks.

Marco Del NegroLawrence Christiano and Ellen McGrattan

Harald Uhlig and Fabio Canova

Edward Prescott and Kei-Mu Yi

Victor Rios-Rull

Edward Prescott, Neil Wallace and Narayana Kocherlakota Richard Rogerson, James Schmitz and Lee Ohanian Lee Ohanian, Timothy Kehoe and Gary Hansen

Alessandra Fogli, Kjetil Storesletten, Jonathan Heathcote and Juan Pablo Nicolini

Robert Litterman

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Gary Stern, Victor Rios-Rull and Clarence Nelson

Andrea Raffo Lawrence Christiano

Ariel Zetlin-Jones, Narayana Kocherlakota and Larry Jones Patrick Kehoe James Lyon and Arthur Rolnick

Hitoshi Tsujiyama and Maria BelfioriChristopher Sims and Thomas Sargent

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