“… really want to take Economics seriously”
Transcript of the telephone interview with with Lars Peter Hansen recorded immediately following the announcement of the 2013 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, 14 October 2013. The interviewer is Nobelprize.org’s Adam Smith.
[AS] Oh good morning, I’m sorry to call so early. Is it possible to speak to Lars Peter Hansen please?
[LPH] This is he.
[AS] Oh hello. My name is Adam Smith and I’m calling from Nobelprize.org, the official website of the Nobel Prize, in Stockholm, Sweden.
[AS] We have a tradition of interviewing new Laureates on the day of the announcement just for two or three minutes, would you be happy to speak?
[LPH] I would be.
[AS] Thank you. Well first of all, many congratulations on the Economics Prize.
[LPH] Thank you.
[AS] How did you hear the news?
[LPH] I just got call a phonecall ten or fifteen minutes ago.
[AS] Were you sleeping when it came?
[LPH] No, I’m an early riser so I’d already taken my dog out and was eating breakfast and was about to head out to exercise.
[AS] And what was your first thought on hearing it?
[LPH] Very surprised … I was, of course, very pleasantly surprised. But I was very surprised.
[AS] And the prize links you with Eugene Fama and Robert Shiller.
[AS] That must be nice.
[LPH] Sure, yeah. I have great respect for both scholars and I’ve certainly been influenced by their work as well.
[AS] And …
[LPH] But they’re quite old, I guess I’m the youngster in this crew.
[AS] [Laughs] And your work really deals with the question of uncertainty and how you deal with uncertainty and risk …
[AS] Yes, and for those who are not in the finance community and haven’t really encountered this before, how would describe what you do?
[LPH] I think there’s two aspects to it. One is , I have done work on, what’s called [inaudible] econometrics, which is statistics in economics and I did work, that I think of in a very simple way as trying to show how you can do [inaudible] without having to do everything. It’s kind of a funny way to put it, but if you want to study a dynamic economic system, what you’d like to be able to do is focus on the linkages, say, between asset markets and the macro economy without having to model everything at the same time. So my econometric work was kind of devoted towards that and that opened the way to think about studying and testing a variety of different asset pricing models and models that link the macro economy and security markets. So for me it’s in … and what certainly comes into play is that you need ways to certainly address the fact that investors, they respond to information and struggle with what the right view of the world is, and you need to have ways to capture those struggles and how they reflect in asset markets.
[AS] And how well do you think we can do that now?
[LPH] We’re making a little bit of progress, I think there’s a lot more to be done. I think the challenges have been, the modelling challenges have been made clear, and have opened the door for a lot of exciting future work.
[AS] Thank you. And you work at Chicago, and there have been so many economics prizes for the University of Chicago. What is it about the place that is so productive?
[LPH] Yeah, it’s interesting. I’ve been here for quite a while, so I’ve actually watched many of colleagues in the past get Nobel Prizes. And I’m very close to some of those. Its a few things, certainly having such distinguished faculty set great examples for me. A lot of my colleagues have been people with broad interests in economics, not just narrowly focused interests. And really convinced that economics is there to explain stuff, to understand the real world better, not just some intellectual game, and completely committed to that kind of mentality. And people here just don’t slow down. I’ve got senior colleagues like Jim Heckman, Gary Becker and Bob Lucas, they remain incredibly active and they remain incredibly energetic and for me have been remarkable role models. So I think it’s kind of the breadth and the fact that you really want to take economics seriously and it’s there to do something meaningful.
[AS] Thank you very much indeed. We would, if we may, like to speak to you at a greater length, in a couple of weeks time perhaps. But for now we should leave you to get on with what’s looking like it’s going to be a pretty busy day for you [Laughs].
[LPH] It will be, I don’t quite know what’s ahead for me, but I’m sure you’re right.
[AS] I guess the world’s press are going to descend on you. What do you feel about that? How do you feel about publicity?
[LPH] I haven’t really processed that part yet. So I guess I’m going to have to wing it.
[AS] [Laughs] Best of luck with it all and, once again, many congratulations.
[AS] Thank you.
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