Lars Peter Hansen

The University of Chicago


Primary Section: 54, Economic Sciences
Membership Type: Member (elected 1999)

Biosketch

Lars Peter Hansen is a leading expert in economic dynamics who works at the forefront of economic thinking and modeling, drawing approaches from macroeconomics, finance, and statistics. He is a recipient of the 2013 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.Hansen joined the faculty of the University of Chicago’s Department of Economics in 1981 and has served as department chairman and director of graduate studies. He is now David Rockefeller Distinguished Service Professor of Economics, Statistics, and the College. He is the Director of the Becker Friedman Institute and chairs the Academic Research Council for that institute.

Research Interests

In my research, I develop and apply methods for understanding the behavior of markets and the design and conduct of economic policy. This research takes a broad view of uncertainty and brings in and adapts tools from control theory, decision theory and asset pricing. I work on devising uncertainty quantification methods that recognize that individuals and businesses inside economic models confront uncertainty as do external researchers that build models.  For the purposes of policy evaluation, I place emphasis on the use of multiple so-called “stylized models” in the design of prudent policy making in dynamic settings. Each of the models imply narratives, which have different ramifications for the environment and the economy. I feature an uncertainty tradeoff between the best guesses and the potential adverse outcomes implied by the alternative models.  In some of my other research, I explore the consequences for financial markets and the resulting allocation of resources when investors are unsure about the future. My research assigns economic costs to dynamic exposure of economic variables of interest to alternative shocks. I also investigate what information about investor beliefs is revealed by forward-looking asset market data while capturing the interplay among investors’ beliefs, their aversion to uncertainty.

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