Theory[ edit ] Prior to the work of Sargent and Wallace, macroeconomic models were largely based on the adaptive expectations assumption.
Education[ edit ] Sargent graduated from Monrovia High School.
He held teaching positions at the University of Pennsylvania —71University of Minnesota —87University of Chicago —98Stanford University — and Princeton Universityand is currently a Professor of Economics at New York University since He is a Fellow of the Econometric Society since Prescott took it much farther.
Sargent could fundamentally contribute to the evolution of new classical macroeconomics. Sargent went on to refine or extend rational expectations reasoning by further: In particular, Hansen and Sargent adapt and extend methods from robust control theory.
His series of textbooks, co-authored with Lars Ljungqvistare seminal in the contemporary graduate economics curriculum. Sargent has pursued a research program with Ljungqvist  designed to understand determinants of differences in unemployment outcomes in Europe and the United States during the last 30 years.
The two key questions the program addresses are why, in the s and s, unemployment was systematically lower in Europe than in the United States and why, for two and a half decades afterunemployment has been systematically higher in Europe than in the United States.
In "Two Questions about European Unemployment," the answer is that "Europe has stronger employment protection despite also having had more generous government supplied unemployment compensation". Among his PhD advisees are men and women at the forefront of macroeconomic research[ who?
The award cited their "empirical research on cause and effect in the macroeconomy". For example, in his Berkeley graduation speech consumed words. Journal of Money, Credit and Banking.
Journal of Political Economy. Journal of Monetary Economics. Journal of Economic Dynamics and Control. Causes and Effects, ed. Journal of Economic Theory.Stanley Fischer's model of multi-period contracts () is a way to overcome the implications of the Policy ineffectiveness proposition (Sargent and.
The policy-ineffectiveness proposition is frequently misunderstood.
It is not a claim that no government policy affects the economy. Policies on government spending, for example, represent changes in the real claims the government makes on GDP and may affect output and employment.
The Sargent and Wallace () model of policy ineffectiveness has no basis in reality.
It is of no practical or theoretical value to policymakers and. The policy-ineffectiveness proposition is an example of the Lucas critique, which is discussed in Chapter 13 of the textbook. The point is that people’s expectations of economic variables are not independent of the actions of policymakers, since those actions will in general affect the variables.
The Sargent & Wallace model () produced the ‘Policy Ineffectiveness Proposition” which is viewed as a radical turning point for monetary theory and part of the ‘New Classical’ revolution that dominated policy during the ’s and ’s.
Rational Expectations - Policy Ineffectiveness Proposition. The Sargent-Wallace Model (JPE, ) “ad hoc” model consists of four equations.