Edward C. Prescott, 81, Dies; Won Nobel for Studying Business Cycles

Edward C. Prescott, whose work explaining the economic shocks of the 1970s catalyzed new ways of thinking about fiscal and monetary policy, a breakthrough that earned him a Nobel economics prize, died on Nov. 6 at a care facility in Paradise Valley, Ariz. He was 81.

His son, Ned Prescott, said the cause was cancer.

Dr. Prescott was a leading member of the generation of economic thinkers who in the 1970s confronted the collapse of Keynesian models, which had dominated policymaking since the 1930s but proved unable to account for the decade’s high inflation and low growth.

Keynesian economics is largely focused on demand, changes in which, it posits, cause the business cycle to fluctuate. But Dr. Prescott, working with his frequent collaborator Finn Kydland, asked whether the supply side — like energy costs, and especially technological progress — could be just as important, if not more so.

In fact, their work, especially in a seminal 1982 paper, demonstrated that supply-side shifts explained the vast majority of changes in the business cycle since the end of World War II. Their research helped ignite decades of policies, beginning under President Ronald Reagan, that aimed to reduce taxes and regulation in order to maximize supply-side efficiency.

Article source: https://www.nytimes.com/2022/11/23/business/edward-c-prescott-dead.html