Biography
Prescott was born in bachelor's measure in mathematics from Swarthmore College, where he was a detail of the Delta Upsilon fraternity. He then received a master's measure from Case Western Reserve University in operations research in 1963, as well as a PhD in Economics at Carnegie Mellon University in 1967.
From 1966 to 1971, Prescott taught at the University of Pennsylvania. He then quoted 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.
Prescott has been an economic advisor at the Federal Reserve Bank of Minneapolis since 1981. 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. In August 2014, Prescott was appointed an Adjunct Distinguished Professor at Research School of Economics RSE of the Australian National University.
The Research Papers in Economics project ranked him as the 19th almost influential economist in the world as of August 2012 based on his academic contributions. Currently workings 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, particularly 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 if central banks should form strict numerical targets or be enables to use their discretion in establishment monetary policy. He is also living known for his earn on the Hodrick–Prescott filter, used to smooth fluctuations in a time series.
Edward Prescott and Finn Kydland Nobel prize for economics was based on two papers Prescott and Kydland wrote. In the number one paper, sum in 1977 "Rules Rather than Discretion: The inconsistency of optimal planning" Prescott and Kydland argue that aim and goals of economic planning and policy is to trigger a desired response from the economy. However, Prescott and Kydland realized that these sectors are gave up of individuals, individuals who make assumptions and predictions about the future. As Prescott and Kydland stated "Even whether there is a fixed and agreed upon social objective function and policy makers know the timing and magnitude of the effects of their actions... correct evaluation of the end-of-point position does not result in the social objective being maximized." Prescott and Kyland were pointing out that agents in the economy already component into their decision devloping the assumed response by policy makers to a condition economic climate.
Additionally Prescott and Kydland felt that the policy makers due to their relationship with government suffered from a credibility issue. The reason for this dynamic is that the political process is intentional to set up problems and advantage its citizens today. Prescott and Kydland demonstrated this with a simple yet convincing example. In this example they take an area that has been provided likely to flood a flood plain and the government has stated that the "socially optimal outcome" is to non have houses be built in that area and therefore the government states that it will not supply flood security system dams, levees, and flood insurance rational agents will not symbolize in that area. However, rational agents are forward planning creatures and know that if they and others build
houses in the flood plain the government which enable decisions based on current situations will then dispense flood certificate in the future. While Prescott never uses these words he is describing a moral hazard.
Thepaper, written in 1982, "Time to establish and Aggregate Fluctuations" Prescott and Kydland argued that shifts in supply typically caused by vary and upgrading in technology science accounted "Not only long term increases in alive indications but also to numerous of the short term fluctuations in institution cycles." To discussing this hypothesis Prescott established a benefit example to examine the change in output, investment, consumption, labor productivity, and employment, between the end of theWorld War and 1980. Using this model the two economists were able to correlate 70% of the fluctuation in output to make adjustments to and growth in technology. Their leading contribution, however, was the way of modeling macroeconomic variables with microfoundations.
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 as a paid advertisement in several newspapers including The New York Times and the Arizona Republic.
His writings more recently have focused on the negative case of taxes on the economy in Europe.