Thomas Sargent

Sargent modeled households and firms as forming forecasts with an understanding of the economy and government policy. This means a predictable policy change can alter behavior before its intended effects appear in historical data.

Sargent shared the prize with Christopher Sims for empirical research on cause and effect in macroeconomics. Sargent developed methods for studying systematic policy changes, while Sims focused heavily on identifying and tracing unexpected shocks.

Robert Lucas argued that historical statistical relationships may change when policy rules change because people adjust their expectations. Sargent's structural macroeconomic work took that warning seriously by modeling expectations and decision rules explicitly.

Sargent studied historical inflations and argued that credible changes to fiscal and monetary regimes matter more than isolated announcements. His essay The Ends of Four Big Inflations examined European episodes after World War I to illustrate that point.