The 2004 Nobel Prize in Economics is awarded to Finn Kydland and Edward Prescott for their contributions to dynamic macroeconomics. They analysed driving forces behind business cycles, and they have highlighted the “time consistency problem” in which policymakers, while seeking to reduce inflation and unemployment, often make matters worse by revising the original policy as the market shifts to meet it.
Prescott majors in physics in college at Swarthmore College, near Philadelphia. He drops out of the physics honors program after his third year because he does not like the day-long laboratories; he likes to create things, and finds it difficult to be careful and meticulous. He switches to a math major and gains his Bachelor in 1962.
He joins the Federal Reserve Bank of Minneapolis in the Fall of 1981, where he still works in the Research department, which is a major center in macroeconomics research.
Prescott takes a sabbatical at the Norwegian School of Business and Economics in Bergen, where Finn Kydland is now a faculty member. For both it is an adventure since they don't speak Norwegian. There the duo writes “Rules Versus Discretion: The Time Inconsistency of Optimal Plans”, one of the two papers for which they are later awarded the Nobel Prize.
In the fall of 1980, he leaves Carnegie Mellon to accept an offer from the University of Minnesota.
After one year as a faculty member at Chicago, he has to leave because of a family health problem. He returns to Minnesota in 1999.
In early 2003, he decides to leave Minnesota with his wife. The couple considers three places, and finally his wife picks Arizona State University in Tempe, Arizona. There he remains as professor at the WP Carey School of Business.
In 1998 he accepts an offer from the University of Chicago, where his oldest son had been a student before. He loves Chicago, which he calls “a class by itself when it comes to economics.”
Edward Prescott and Janet Simpson are married June 5, 1965. They have three children and six grandchildren.
In 1978-79 he visits the University of Chicago.
Prescott enrolls in graduate school in operations research at the Case Institute of Technology, which merged with Western University in 1967 to become Case Western. He completes his MA in 15 months.
Prescott teaches at the University of Pennsylvania.
After earning his master's degree, he chooses to go to Graduate School of Industrial Administration (GSIA) at Carnegie Tech (now Carnegie Mellon University) in Pittsburgh, Pennsylvania, with its multi-disciplinary program. He receives his PhD in 1967.
The following year he visits the Northwestern University economics department.
Being worried that he might not be granted tenure, he accepts an offer to return to Carnegie Mellon.
In his youth, he dreams of being a rocket scientist. The high school in Glenn Falls has an exceptional science program. For instance, there is a course in plane geometry where Prescott discovers a new "language" and learns the concept of a proof. Through discussions with his father, Prescott learns a lot about the way businesses operate.
Edward C. Prescott is born in Glens Falls, New York, 26 December 1940.