Norwegian, American win Nobel economics award
Last Updated Mon, 11 Oct 2004 11:51:47 EDT

Finn E. Kydland, left, and Edward C. Precott. (AP Photo/Royal Swedish Academy of Sciences, HO)

STOCKHOLM, SWEDEN - A Norwegian and an American won the 2004 Nobel Memorial Prize in economics on Monday for their work illustrating how the world's money supply affects international trade.

Finn E. Kydland, 60, teaches at Carnegie Mellon University in Pittsburgh and the University of California at Santa Barbara.
Finn E. Kydland, left, and Edward C. Precott. (AP Photo/Royal Swedish Academy of Sciences, HO)

Edward C. Prescott, 63 teaches at Arizona State University in Tempe, Ariz. and advises the Federal Reserve Bank of Minneapolis.

They will share a $1.3 million US prize for their work in determining the consistency of economic policy and the driving force behind business cycles worldwide.

The pair were able to show "how such effects of expectations about future economic policy can give rise to a time consistency problem," the Royal Swedish Academy of Sciences said in its citation. "If economic policymakers lack the ability to commit in advance to a specific decision rule, they will often not implement the most desirable policy later on."

"It is fantastic, mainly because this is the greatest honor I can get as an economist," Kyland said. "What is most important, is that other economists have built on my work."

Kyland is the third Norwegian to win the economics prize, while Prescott is the fifth American to win it since 2000.

The Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel is the only award named after Nobel, but not established in his will. Nobel, a Swedish industrialist, invented dynamite.

Nobel awards in medicine, physics, chemistry, literature and peace prizes were first awarded in 1901.
The Swedish central bank set up the economics prize in 1968.