Edward Prescott, born in 1940, Nobel Prize-winning economist noted for his contributions to macroeconomics, notably his theories regarding the business cycle and how fluctuations in short-term economic policies can negatively impact long-term goals.

Prescott was born in Glens Falls, New York. He obtained a bachelor’s degree from Swarthmore College in Pennsylvania and a master’s degree from Case Institute of Technology (present-day Case Western Reserve University) in Cleveland, Ohio. In 1967 he earned his Ph.D. in economics from Carnegie Mellon University in Pittsburgh, Pennsylvania.

At Carnegie Mellon, Prescott began collaborating with Norwegian economist Finn Kydland, with whom he later shared the 2004 Nobel Prize in economics. Prescott acted as Kydland’s thesis advisor, and the two men coauthored several articles in the 1970s and 1980s, which resulted in their Nobel award. Prescott taught economics at the University of Minnesota in Minneapolis from 1980 to 2003, while also holding a staff position at the Federal Reserve Bank of Minneapolis. In 2003 he moved to Arizona to accept a position as chair of economics at Arizona State University‘s W. P. Carey School of Business in Tempe. At the same time he retained his position at the Federal Reserve.

The Royal Swedish Academy of Sciences, which selects the Nobel winners in economics, recognized Prescott and Kydland for the time consistency theory of economic policy and for explaining driving forces behind business cycles. Despite this recognition, however, their writings on the business cycle remain controversial among many economists. In a 1982 paper the two men challenged the theories of British economist John Maynard Keynes who held that business cycles are due to changes in demand, such as those resulting from unemployment or a lowering of wages. Instead, Prescott and Kydland put forward the theory that demand is constant and that the business cycle is due to changes that affect supply, such as a sharp decrease in the oil supply, leading to recession, or a technological innovation that boosts productivity, leading to growth. Many economists dispute their assumption that demand is constant.

The time consistency theory, which was outlined in a 1977 paper, focused on government economic policies. Prescott and Kydland argued that government institutions, ranging from patent offices to central banks, need to be consistent in their policies over time so that long-term goals, such as controlling inflation, can be achieved. If rules are announced but then changed to accommodate a short-term need, then the likelihood of meeting the long-term goal is compromised. The two men supported their theory with mathematical models.

Prescott is the author or coauthor of numerous articles for academic journals. His book, Barriers to Riches (2000), cowritten with economist Stephen Parente, examined the role of protectionism and technology in explaining why some countries are richer than others.