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Lars Peter Hansenis an American economist who, with Eugene F. Fama and Robert J. Shiller, was awarded the 2013 Nobel Prize for Economics. Hansenâs work had a significant impact across a wide range of fields within economics, including econometrics, macroeconomics, labour economics, and finance. The Royal Swedish Academy of Sciences, which confers the economics prize, recognized his innovative contributions to econometric modeling, which had been widely applied to study the behaviour of asset markets and macroeconomic fluctuations, including the U.S. financial crisis of 2007â08.
Hansen earned a bachelorâs degree from Utah State University in 1974, double majoring in mathematics and political science, and a Ph.D. in economics from the University of Minnesota in 1978. He served as an assistant professor at Carnegie Mellon University (1978â81) before joining the economics faculty of the University of Chicago, where he was appointed full professor in 1984 and David Rockefeller Distinguished Service Professor in 2010.
Hansenâs major contribution to economics was the development of the GMM (Generalized Method of Moments) technique, a very flexible econometric method that allows complex economic models to be tested against empirical data with a minimum of assumptions. The use of the GMM technique led to the development of better models in macroeconomics, labour economics, and finance, including some that incorporated more realistic assumptions about economic agentsâ beliefs and their learning abilities.
In his joint work with Thomas J. Sargent, which in 2008 led to their coauthored book Robustness, Hansen laid the foundations of a new theory that better explained how people make decisions when their own beliefs are changing over time. Hansen later built upon this joint work to help explain some of the macroeconomic and financial fluctuations that occurred during the financial crisis of 2007â08.
