LPH: There were many professors there who influenced me in different ways. One taught me how to appreciate the value of mathematics and the beauty of it. That was professor Mike Windham, a very gifted teacher. There was another one, a European history teacher, Doug Alder, now at Southern Utah. He gave me this advice: He said, “Look at your talents, figure out what you’re really interested in and do that.” That had a big influence on me. Another professor, Bartell Jensen, designed an accelerated curriculum to get me ready for graduate school. I could list others, too. I think my worst quarter at Utah State was better than my best quarter at high school.
DN: In its press release announcing your Nobel Prize, the Royal Swedish Academy of Sciences wrote: “Lars Peter Hansen developed a statistical method that is particularly well suited to testing rational theories of asset pricing.” Could you expand on that, please?
LPH: I think of myself as bringing together aspects of statistics, macroeconomics and finance. My research is about using mathematical models of statistical methods to formally assess and investigate financial markets as linkages to the macroeconomy.
DN: If you walked into, say, a McDonald’s, how would you describe to the people there what your Nobel Prize is for?
LPH: In simplistic terms it’s about how to do something without doing everything.
DN: How do you see your research helping the world?
LPH: At the end of the day the purpose of building better models is to provide better advice for policy makers. If you look at the financial crisis that took place (in 2008), to me that exposed knowledge gaps in existing models. The challenge going forward is how to build better models so we can be in a better position to have those models be useful.
DN: So what does an economist do with the $400,000 that comes with the Nobel Prize?
LPH: Well of course a portion of that goes to our government. I don’t know if I call that a donation to charity or not (laughing). Part of the privilege that comes with winning the award is they allow you to invite friends and family to go to Stockholm with you. One of the nice memories of Stockholm is my wife, both of my brothers and my son were there, and quite a few people close to me went as well. So we were able to do that. We haven’t worked out the details for the rest. I suppose eventually we’ll think about the sensible thing to do.
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