Finn E. Kydland

Finn E. Kydland
Name	Finn E. Kydland
Caption	Kydland in 2011
Birth date	1 December 1943
Birth place	Ålgård, Rogaland, Norway
Nationality	Norwegian
Field	Macroeconomics
Institution	University of California, Santa Barbara, Carnegie Mellon University, Norwegian School of Economics
Alma mater	Norwegian School of Economics (Siviløkonom), Carnegie Mellon University (Ph.D.)
Doctoral advisor	Edward C. Prescott
Known for	Real business cycle theory, Time consistency
Prizes	Nobel Memorial Prize in Economic Sciences (2004)

Finn E. Kydland is a Norwegian economist renowned for his foundational contributions to macroeconomics, particularly in the analysis of business cycles and economic policy. His collaborative work with Edward C. Prescott on time consistency and real business cycle theory fundamentally reshaped academic and policy discourse. For these achievements, he was jointly awarded the Nobel Memorial Prize in Economic Sciences in 2004. Kydland holds positions at the University of California, Santa Barbara and the Norwegian School of Economics.

Early life and education

Finn Erling Kydland was born in Ålgård, Rogaland, and grew up on a family farm. He initially pursued a degree in business administration at the Norwegian School of Economics in Bergen, graduating with the Siviløkonom degree. His academic interests shifted toward economics during a year of study at the University of Oslo. Kydland then moved to the United States for graduate studies, earning his Ph.D. in 1973 from Carnegie Mellon University's Tepper School of Business, where he studied under the supervision of Edward C. Prescott.

Academic career

After completing his doctorate, Kydland held a professorship at the Norwegian School of Economics before returning to Carnegie Mellon University as a faculty member. In 2004, he joined the University of California, Santa Barbara, where he is the Jeff Henley Professor of Economics. He also maintains a part-time professorship at the Norwegian School of Economics and has held visiting positions at institutions like the University of Chicago and the Federal Reserve Bank of Dallas. His career is marked by long-term collaborations with scholars at the Federal Reserve Bank of Cleveland and the Hoover Institution.

Research and contributions

Kydland's research, often conducted with co-authors like Edward C. Prescott, is characterized by the application of dynamic general equilibrium models to central questions in macroeconomics. His work provided rigorous microeconomic foundations for analyzing aggregate fluctuations and the design of monetary policy and fiscal policy. These contributions moved the field away from earlier Keynesian economics frameworks and emphasized the role of technological change and policy rules over discretionary policy. His models have been widely adopted by institutions such as the International Monetary Fund and various central banks.

Time consistency in economic policy

In their seminal 1977 paper, "Rules Rather than Discretion: The Inconsistency of Optimal Plans," Kydland and Prescott introduced the concept of time consistency to economics. They demonstrated that even with the best intentions, policymakers lacking a pre-commitment to a policy rule face incentives to deviate from their announced plans, leading to suboptimal inflation outcomes. This work, published in the Journal of Political Economy, profoundly influenced the operational independence of institutions like the European Central Bank and the conduct of monetary policy globally, providing a theoretical case for inflation targeting.

Real business cycle theory

Kydland and Prescott's 1982 paper, "Time to Build and Aggregate Fluctuations," established the foundations of real business cycle theory. Published in Econometrica, it argued that business cycle fluctuations could be modeled as the efficient response of a competitive market economy to real economic shocks, primarily changes in the pace of technological progress. This theory shifted focus from monetary shocks to productivity shocks as a primary driver of cycles and revolutionized macroeconomic modeling by integrating growth theory with cycle analysis, influencing subsequent work in dynamic stochastic general equilibrium models.

Awards and honors

Kydland's most prominent honor is the Nobel Memorial Prize in Economic Sciences, which he shared with Edward C. Prescott in 2004. He is a Fellow of the Econometric Society and the European Economic Association. In Norway, he was knighted by King Harald V as a Commander of the Royal Norwegian Order of St. Olav. He has received honorary doctorates from institutions including the University of Rome Tor Vergata and the Norwegian University of Science and Technology. He is also an elected member of the National Academy of Sciences and the American Academy of Arts and Sciences.

Category:Norwegian economists Category:Nobel Memorial Prize in Economic Sciences laureates Category:1943 births Category:Living people