Background
PRESCOTT, Edward C. was born in 1940 in Glen Falls, New York, United States of America.
PRESCOTT, Edward C. was born in 1940 in Glen Falls, New York, United States of America.
Edward Prescott received his Ph.D. from Carnegie-Mellon University in 1967.
From 1966 to 1971, Prescott taught at the University of Pennsylvania. He then returned to Carnegie Mellon until 1980, when he moved to the University of Minnesota, where he taught until 2003. In 1978, he was a visiting professor at the University of Chicago, where he was named a Ford Foundation Research Professor. In the following year, he visited Northwestern University and stayed there until 1982. Since 2003, he has been teaching at Arizona State University. In 2004, he held the Maxwell and Mary Pellish Chair in Economics at the University of California, Santa Barbara. In 2006, he held the Shinsei Bank Visiting Professorship at New York University.
The Research Papers in Economics project ranked him as the 18th most influential economist in the world as of August 2012 based on his academic contributions. Currently working as an economist at the Federal Reserve Bank of Minneapolis and as a professor at Arizona State University's W.P. Carey School of Business, he is a major figure in macroeconomics, especially the theories of business cycles and general equilibrium. In his "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," published in 1977 with Finn E. Kydland, he analyzed whether central banks should have strict numerical targets or be allowed to use their discretion in setting monetary policy. He is also well known for his work on the Hodrick-Prescott Filter, used to smooth fluctuations in a time series. Prescott has also expressed skepticism towards fractional reserve banking.
Time to Build and Aggregate Fluctuations
In January 2009 Prescott, along with more than 250 other economists and professors, signed an open letter to President Barack Obama opposing the passage of the American Recovery and Reinvestment Act. The letter was sponsored by libertarian think tank, the Cato Institute, and was printed in several newspapers including the New York Times and the Arizona Republic.
His writings more recently have focused on the negative effect of taxes on the economy in Europe.
My most important contribution is probably Article No. 9 above, jointly authored by Finn E. Kydland. There we establish that the equilibrium stochastic growth model accounts remarkably well for business-cycle fluctuations.
Indeed, given the nature and magnitude of the technological change shocks and given people’s willingness and ability to substitute intertemporally, there would be a puzzle if industrial market economies did not display the business-cycle phenomena. A second contribution was the finding that optimal dynamic taxation plans are time inconsistent. This leads one to the conclusion that the role of the economist is to evaluate policy rules with respect to their operating characteristics, rather than evaluating alternative policy actions.
This research was also joint with Finn
Kydland. Methodologically, I have contributed to competitive theory uncertainty. In No. 1 above, the competitive equilibrium is a stationary stochastic process.
In No. 4 above the competitive equilibrium is an invariant distribution of market types with each market being subject to a stationary Markov process. Both papers were written jointly with Robert E. Lucas, Junior, who deserves principal credit for formulating the problems and recognising their value in substantive economic analyses. Another contribution was the extension of competitive theory to large private-information contracting economies.
Unlike earlier extensions, it was not just a matter of redefining the commodity point. It also required the introduction of lotteries to convexify
the consumption possibility sets. This work was done jointly with Robert M. Townsend.
Other research has explored issues in industrial organisation. In No. 8 above, a firm is viewed as an arrangement for producing and using information. In No. 10 above, ‘coalitions’ are shown to be needed for efficient evaluation and funding of investment projects.