The Nobel Prize for Economics to Dr. Christopher Sims
Why would a decision sciences company be excited about this year Economics Nobel Prize to Dr. Sims?
One look at his body of work and it becomes obvious – his two major contributions have been the application of Vector Auto Regression and Impulse Response Functions to macroeconomic modeling, which he presented in his seminal paper, ‘Macroeconomics and Reality’ (http://www.ekonometria.wne.uw.edu.pl/uploads/Main/macroeconomics_and_reality.pdf)
The essence of his contribution has been to evolve methods to model macroeconomic data without having to impose too many incredible restrictions. This in turn, helped bring a lot more mathematical rigor to macroeconomics – as someone remarked, he found the ‘traditional Keynesian methods just not good enough and worked hard to improve them’.
And so here is why Mu Sigma tips its hat to him: not just because he is one of the most important figures in econometrics in recent times, but also because his work is an excellent demonstration of the art of problem solving.