Rational expectations triumph in Nobel stakes

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The Independent Online

Two American economists who conducted ground-breaking research on the impact of rising interest rates and tax cuts have won the Nobel Prize in Economics. The Royal Swedish Academy of Sciences made the award to Thomas Sargent of New York University, and Christopher Sims of Princeton University, for their "empirical research on cause and effect in the macroeconomy".

The pair, both 68, made their name through an analysis of how government economic polices affect growth and inflation. Professor Sargent, who is associated with the "rational expectations" school of economic analysis, opposed the 2008 fiscal stimulus in the US on the grounds that people can "see through" temporary income increases.