Nobel Prize winner stresses uncertainty in USU Presidential Lecture

Nobel Laureate Lars Hansen presents the Presidential Lecture titled "Consequences of Uncertainty" at Utah State University's Performance Hall on Friday, March 7, 2014.

LOGAN – Discussing the contributions to probability models and economic uncertainty were easy for Dr. Lars Hansen at Utah State University’s Presidential Lecture on Friday. Discussing his parents wasn’t. The Nobel Prize winner in Economic Sciences spoke for approximately 45 minutes about his experience receiving the Nobel Prize and about the topic of his lecture: “Consequences of Uncertainty.” But he choked up and abruptly ended his speech after a picture of a couple flashed on the large screen in front of the packed USU Performance Hall.

“Part of the reason I’m here is because of two people,” Hansen said under the picture of his parents. “It’s hard for me to talk about them so I’ll end here. Thank you.”

Hansen’s father was a provost at USU for approximately 20 years and Hansen explained that his family has deep roots in the Cache Valley. Fifteen of his 16 great grandparents lived here. Hansen’s lineage traces back to Sweden where he received his Nobel Prize, and the Swede’s loved the fact that he had origins in their country.

“I’m not sure if the whole thing has sunk in. I think of myself five months ago and I think of myself now. I’m the same person but somehow people treat me differently.”

“Utah State was certainly very, very good to me,” Hansen told members of the press after his lecture. “For me it was an important transition between this erratic high school student to getting me ready for an elite PhD program. Some key faculty members were here that were critical to that part of my academic development. Those were very important years to me.”

Hansen stressed the role public schools played in his education and development, something his father had a lifetime commitment to.

“It’s more important about what you do after you get in college than where you go to college. There are a lot of good universities and colleges out there. You can design some really great curriculum for yourself by just being challenged in the right way. If I can help convey that message then I’ll feel really good.”

Hansen said that he hopes to be able to use his new found notoriety to be an advocate for fields of research that still fascinate him. He said he also wants to continue his research and support young scholars. But with increased notoriety comes opportunities to influence government policy.

“I think right now there are opportunities for me to cultivate (opportunities to be a policy analyst) if I wanted to go that direction. It’s not something that I’ve pursued yet.”

“In truth, there are career choices,” he continued. “If you really want to remain an academic researcher it’s really hard to devote huge amounts of time to being a policy economist as well. So I guess I’ll have to set priorities. I remain fascinated by research.”

Hansen said that the financial crisis that began in 2008 led to calls for better oversight because of what he termed “systemic risk.” He said it was a series of complex problems with people giving complex solutions. But he claims that complex solutions should be saved until we can come up with better, more simple solutions.

“I think for the longterm health of the economy, it is better to acknowledge the uncertainty and make the adjustment accordingly,” Hansen said.

He followed that by saying that this uncertainty with a limited amount of knowledge should play a larger role in policy discussions than it does today. He offered additional advice on American economic policy moving forward.

“Policy uncertainty has contributed to some of the sluggishness and I think having sensible solutions to long term fiscal problems and putting in place a much more transparent financial oversight would all be very productive steps.”

His next step in his career is to try to create models and probability with less information.

“What is a good way to develop policies in environments where you have limited knowledge? This has to do with financial oversight. More generally, how do you operationalize this notion of systemic risk and how can we build better models? Right now we don’t have great models that guide us for national oversight in very complicated ways, but what are the modeling improvements we can make in the next five years or 10 years and the like?”

Hansen said he would also like to spend more time studying climate uncertainty and its effects on economic policy.

“There (are) lots of discussions these days about the impact of climate. There seems to be lots of consensus that there is an impact. But exactly the nature of the impact, the timing of the impact, there is a lot of uncertainty associated with it.

“This leads to interesting policy questions. Do you act now because there might be big consequences and it’s cheaper to act now? Or do you wait to get more information so you’re more confident about what’s going to happen and then act then but it may be more costly? There are a lot of fascinating questions about the timing and how it interplays with your knowledge and uncertainty.”

After graduating from USU in 1974 with a bachelor’s degree in both mathematics and political science and a minor in economics, Hansen went on to earn a doctorate in economics from the University of Minnesota.

Hansen then joined the University of Chicago in 1981 and he is now the David Rockefeller Distinguished Professor of Economics and Statistics and is the inaugural research director for the Becker Friedman Institute.

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