Business professor and alumnus win Nobel Prize

When Carnegie Mellon professor Finn Kydland received the announcement of his being awarded the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel, he was taken a bit off guard.
Kydland, also a PhD alumnus of Carnegie Mellon?s business school, was at the Norwegian School of Economics and Business Administration in Bergen when he was notified of the distinguished award.
?I was a little perturbed when they interrupted my lecture until I got to the secretary?s office and found out what the phone call was about,? he said in an interview with the Pittsburgh Post-Gazette. ?[But] it is wonderful to get this recognition.?
The Royal Swedish Academy of Sciences in Stockholm announced the winners of the distinguished award last Monday. Kydland shares the award with long time colleague Edward Prescott of Arizona State University. Prescott, who is also a PhD alumnus and former faculty member of the Tepper business school, acted as Kydland?s doctoral mentor during his tenure at Carnegie Mellon.
The two will split the approximately $1.36 million in prize money, and they will each be awarded a gold medal and a diploma at the formal ceremony in Stockholm in December.
?I am delighted to congratulate Finn and our alumnus and former faculty member Ed Prescott on behalf of the university. They continue a long tradition of path-breaking research in economics at Carnegie Mellon,? said Carnegie Mellon president Jared L. Cohon in an official press release.
The Nobel Committee awarded Kydland and Prescott based on two papers they wrote between 1977 and 1982. The Committee cited two particular research discoveries that Kydland and Prescott made within these papers: Time consistency of government policy, which urges governments to adhere to long-term goals rather than shift policies according to changing circumstances; and the concept of Real Business Cycles, which revolutionized the way economists look at economic booms and busts.
?I was a new assistant professor at Queens University when I first saw Finn give this paper. The audience was stunned into silence that took several hours in the faculty club bar to overcome. The paper was so different from any macroeconomics we had ever seen that we simply didn?t know what to make of it,? said David Backus, a professor of economics and finance at New York University.
According to the Post-Gazette, Kydland is currently on a teaching leave of absence and is holding the endowed chair in economics at the University of California Santa Barbara.
?Finn is a dedicated and uncompromising teacher who works very hard at bringing frontier research into the classroom long before it reaches standard textbooks,? said Stanley Zin, an economics professor in the Tepper School of Business.
?As an economist, Finn is gifted with an incredibly focused mind. He is rarely distracted by fashionable approaches to economic problems and is completely dedicated to working out solutions from basic underlying fundamental principles,? Zin said.
Kydland?s and Prescott?s awards are not the first among business school faculty. Other Carnegie Mellon business school faculty Nobel laureates include: Herbert Simon (1978), Franco Modigliani (1985), Merton Miller (1990), and Robert Lucas (1995). Altogether, Kydland and Prescott become the 11th and 12th Carnegie Mellon faculty members or alumni to be named Nobel laureates in economics, physics, or chemistry.
?This is an amazing moment in the school?s history. Moreover, this particular award was won the Carnegie way: [through] a combination of innovative ideas, innovative use of computer technology, and a lot of hard work,? said Zin.