Nobel Laureate Lars Peter Hansen

Embracing Uncertainty

Lars Peter Hansen is a leading expert in economic dynamics who has made fundamental advances in our understanding of how economic agents cope with changing and risky environments.

But Hansen wasn’t always academically inclined. Born in Urbana, Illinois, he attended high school in Utah, where he struggled in school and brought home report cards with double check marks for “does not respect authority.” It was only when he enrolled as an undergraduate at Utah State University that he discovered an affinity for scholarly work.

“I met some great teachers who took a genuine interest in me and encouraged my talents and my thinking,” he later recalled. “They had a big influence on me.”

Inspired by his professors, he combined his undergraduate studies in political science and mathematics with an accelerated curriculum in economics. Later, at the University of Minnesota, he supplemented his PhD in economics with math courses in analysis, probability theory, and statistics.

As a researcher, he has drawn on his background in math and statistics to add to our understanding of the macroeconomy. For example, he has contributed to the development of statistical methods designed to explore the interconnections between macroeconomic indicators and assets in financial markets—methods that are widely used in empirical research in financial economics today. It was those contributions that earned him the Nobel Prize in 2013.

Hansen’s most recent work focuses on uncertainty and its relationship to long-term risks in the macroeconomy. He is part of a team that has designed methods for modeling economic decision-making in environments in which uncertainty is hard to quantify. “While uncertainty is unavoidable and pervasive in our lives, in many discussions of economic analysis and policy, it unfortunately takes a back seat,” he said. “We should instead push uncertainty to the forefront of our thinking.”

Professor Hansen is the faculty director of the Macro Finance Research Program at the Becker Friedman Institute for Economics at the University of Chicago.