We want to demonstrate our commitment to your privacy. In support of the changes to the EU data protection law, we’ve updated our privacy notice effective May 25, 2018.
Headshot of Lars Peter Hansen outside

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.

Lars Peter Hansen speaks at a podium at the University of Chicago Becker Friedman Institute for Research in Economics

“Thinking about uncertainty in broader terms opens the door to a more sensible approach to thinking about economic policy design, and it allows the public to accept the fact that a discipline like economics doesn’t have answers to everything.”
—Lars Peter Hansen

Nobel Prize–Winning Impact

Lars Peter Hansen’s Nobel Prize–winning work has played an important role in shaping the modern understanding of asset pricing and the way that economists model complex financial markets. In addition, his work on improving models that measure risk and uncertainty has had important implications for financial markets, fiscal policy, and the macroeconomy. For example:

  • He developed the generalized method of moments (GMM), an econometric model that makes it possible to study one aspect of a complex model without specifying every aspect. The method fundamentally transformed empirical research in the field.
  • In his paper “Pricing Uncertainty Induced by Climate Change,” Hansen and his coauthors use decision theory and tools from asset pricing to answer how we can assess both climate and emissions impacts, as well as uncertainty in the broadest sense in social decision-making.
Lars Peter Hansen presents a graph on a projector screen

Milestones

Milestones
Chicago Booth Harper Center

1974

Graduated from Utah State University with a BS in mathematics and political science

1974
Chicago Booth Harper Center

1978

Earned PhD in economics from the University of Minnesota

1978
Chicago Booth Harper Center

1981

Joined the UChicago faculty

1981
Chicago Booth Harper Center

1982-84

Held a Sloan Foundation Fellowship

1982-84
Chicago Booth Harper Center

1993

Became a member of the American Academy of Arts and Sciences

1993
Chicago Booth Harper Center

1999

Became a fellow of the National Academy of Sciences

1999
Chicago Booth Harper Center

2007-08

Served as president of the Econometric Society

2007-08
Chicago Booth Harper Center

2009

Was appointed as inaugural director of the Milton Friedman Institute, which later became the Becker Friedman Institute for Economics

2009
Chicago Booth Harper Center

2010

Won the BBVA Foundation Frontiers of Knowledge Award in Economics, Finance, and Management

2010
Chicago Booth Harper Center

2013

Won the Nobel Prize in Economic Sciences alongside Eugene F. Fama of Chicago Booth and Robert J. Shiller of Yale University

2013
Chicago Booth Harper Center

2016

Was awarded the Erwin Plein Nemmers Prize in Economics from Northwestern University

2016
Chicago Booth Harper Center

2017

Joined the Booth faculty, with a co-appointment with the Kenneth C. Griffin Department of Economics at the University of Chicago

2017

Engage with Lars Peter Hansen Online

To learn more about Professor Hansen and engage with him on social media, visit his website and follow him on Twitter.

Featured Insights