Together we have learned about how to use statistics and economics to describe and interpret data, big and little.
We use mathematics to assure ourselves that our models are internally consistent.
We use statistics to investigate whether our models are consistent with data.
We want to use these tools to improve the lives of our families and communities.
Speech on behalf of the faculty members by Professor Thomas Sargent, 2011 Nobel Prize Laureate in Economics and Honorary Director of Sargent Institute of Quantitative Finance and Economics at PHBS Here is a list of economics lessons I try to remember.
1. Because market prices aggregate other peoples’ information, it is difficult to forecast stock prices and interest rates and exchange rates.
2. Many things that are desirable are not feasible.
3. Individuals and communities face trade-offs, some of them being between equality and efficiency.
4. Other people have more information about their abilities, their efforts, and their preferences than you do.
5. Everyone responds to incentives, including people you want to help. That is why social safety nets sometimes don’t work as intended.
6. In a social equilibrium, people are satisfied with their choices. That is why it can be challenging to improve arrangements and outcomes.
7. It is feasible for one generation to shift costs to subsequent ones. That is what national government debts and the U.S. social security system do (but not the social security system of Singapore).
8. When a government spends, its citizens eventually pay, either today or tomorrow, either through explicit taxes or implicit ones like inflation.
9. Most people want other people to pay for public goods and government transfers (especially transfers to themselves).
10. In the future, you too will respond to incentives. There are some promises that you’d like to make but should not. No one will believe those promises because they know that later it will not be in your interest to keep those promises. A lesson here is this: before you make a promise, think about whether you will want to keep it if and when your circumstances change. This is how you can earn a good reputation.
