March, 2010

Nobelity and Novelty

Finn Kydland and Edward Prescott's Contributions Viewed from Vienna
  • J. Robert Subrick

    Associate Professor of Economics, James Madison University
  • Andrew T. Young

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The awarding of the Nobel Prize in Economics in 2004 to Finn Kydland and Edward Prescott represents an opportunity to evaluate their contributions in light of Austrian economics. We lay out the basics of their contributions—the general equilibrium approach to economic fluctuations and the game theoretic approach to policy—and argue that they have tenets similar to those of Austrianism. We argue that their methodology parallels Austrian methodology in several significant ways that have gone unnoticed. We conclude that Kydland and Prescott’s Nobel Prize suggests Austrian approaches can have a more prominent impact than they have had in the past.

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