Lars Peter Hansen

Lars Peter Hansen
Born	Lars Peter Hansen 26 10, 1952
Birthplace	Urbana, Illinois, United States
Nationality	American
Occupation	Economist, academic
Title	David Rockefeller Distinguished Service Professor in Economics, Statistics, and the Booth School of Business
Employer	University of Chicago
Known for	Generalized method of moments, macroeconomic dynamics, asset pricing
Education	Ph.D. in Economics, University of Minnesota
Awards	Nobel Memorial Prize in Economic Sciences (2013), BBVA Foundation Frontiers of Knowledge Award (2010), Erwin Plein Nemmers Prize in Economics (2006)
Website	[http://larspeterhansen.org/ Official site]

Lars Peter Hansen (born 26 October 1952) is an American economist and the David Rockefeller Distinguished Service Professor in Economics, Statistics, and the Booth School of Business at the University of Chicago. A central figure in the Chicago School of Economics, Hansen received the Nobel Memorial Prize in Economic Sciences in 2013 for his development of the generalized method of moments (GMM), a statistical method that has become one of the most commonly used tools in empirical economics and finance. His career has spanned more than four decades of research at the intersection of macroeconomics, financial economics, and statistics, with sustained attention to how economic agents make decisions under conditions of uncertainty. Hansen's scholarly contributions have shaped how economists model and test theories of asset pricing, consumption, and investment, and his methods have found application across a wide range of economic and financial research. Beyond his methodological innovations, Hansen has pursued collaborative research examining how economic actors cope with changing and uncertain environments, the pricing of macroeconomic risk over different investment horizons, and the implications of long-term uncertainty for economic policy.

Early Life

Lars Peter Hansen was born on 26 October 1952 in Urbana, Illinois, a university town in east-central Illinois that is home to the University of Illinois at Urbana–Champaign. Growing up in an academic environment, Hansen was exposed early to intellectual inquiry. His father, Roger Gaurth Hansen, was a biochemist who served on the faculty at Utah State University, and the family eventually relocated to Logan, Utah.

Hansen's upbringing in a household connected to scientific research helped shape his analytical disposition and his eventual gravitation toward the quantitative dimensions of economics. He grew up during a period of significant transformation in the discipline of economics, as mathematical and statistical methods were becoming increasingly central to economic research. These early influences would prove formative in directing Hansen toward a career that bridged economics and statistics.

Hansen attended Utah State University in Logan, where he completed his undergraduate education. Utah State University later recognized Hansen as one of its distinguished alumni following his receipt of the Nobel Prize.

Education

Hansen earned his Bachelor of Science degree in mathematics from Utah State University. His strong foundation in mathematics prepared him for graduate-level work in economics, a field that was at the time undergoing a quantitative revolution emphasizing formal modeling and econometric analysis.

For his doctoral studies, Hansen enrolled at the University of Minnesota, one of the leading centers for training in econometrics and macroeconomics during the 1970s. At Minnesota, Hansen studied under Christopher A. Sims, himself a future Nobel laureate (2011), who served as Hansen's doctoral advisor. The intellectual environment at Minnesota, which emphasized rigorous time-series econometrics and dynamic economic modeling, had a profound influence on Hansen's research trajectory. The training he received there in the intersection of economic theory and statistical methodology laid the groundwork for his subsequent development of the generalized method of moments. Hansen completed his Ph.D. in economics at the University of Minnesota.

Career

Early Academic Career

After completing his doctoral studies, Hansen joined the faculty at Carnegie Mellon University, where he began his academic career as an assistant professor of economics. His time at Carnegie Mellon provided an initial platform for developing the research agenda that would define his career. The university's Tepper School of Business was known for its interdisciplinary approach to economics and finance, and Hansen's work during this period began to crystallize around the application of statistical methods to economic models.

In 1981, Hansen moved to the University of Chicago, joining the Department of Economics. The University of Chicago, long associated with the Chicago School of Economics, offered an intellectual environment well suited to Hansen's interests in the rigorous empirical testing of economic theory. He would remain at Chicago for the entirety of his subsequent career, eventually rising to hold the David Rockefeller Distinguished Service Professor chair in Economics, Statistics, and the Booth School of Business—one of the university's most distinguished named professorships.

Generalized Method of Moments

Hansen's most celebrated contribution to economics is the development of the generalized method of moments (GMM), which he introduced in a landmark 1982 paper published in Econometrica. The GMM is a flexible and powerful statistical estimation technique that allows researchers to estimate parameters of economic models without requiring the full specification of the data-generating process. Rather than relying on strong distributional assumptions—such as the assumption that data follow a normal distribution—GMM exploits a set of moment conditions derived from economic theory to estimate model parameters.

The significance of GMM lies in its generality and robustness. Prior to Hansen's work, econometricians often relied on estimation methods such as maximum likelihood estimation, which required strong assumptions about the probability distribution of the data. Hansen's GMM approach relaxed these assumptions, making it applicable to a far wider range of economic models. The method provides a unified framework that encompasses many previously known estimators—including ordinary least squares and instrumental variable estimation—as special cases.

GMM proved especially valuable in the empirical analysis of financial and macroeconomic models. In particular, Hansen and his collaborators applied the method to test asset pricing models, including the consumption-based capital asset pricing model. These applications demonstrated that GMM could be used to investigate fundamental questions about the relationship between financial markets and the broader economy, including why the returns on different assets vary as they do—a question central to financial economics.

The 1982 paper introducing GMM became one of the most cited papers in the history of economics and econometrics. The method has been adopted across virtually every subfield of economics, as well as in finance, political science, and other social sciences. Its influence on empirical practice has been described as transformative, fundamentally changing the toolkit available to applied researchers.

Macroeconomics and Financial Economics

Beyond his methodological contributions, Hansen has made substantial contributions to substantive economic research, particularly at the intersection of macroeconomics and financial economics. Much of his work has focused on understanding the dynamic relationships between financial markets, macroeconomic fluctuations, and economic policy.

A recurring theme in Hansen's research has been the role of uncertainty in economic decision-making. His work has examined how economic agents—whether individual consumers, firms, or policymakers—cope with environments where the underlying economic model itself may be uncertain. This line of research goes beyond traditional risk analysis (which assumes agents know the probability distribution of outcomes) to consider situations of ambiguity or model uncertainty, where agents are unsure about the correct model describing the economy.

Hansen has explored these issues through both theoretical modeling and empirical analysis. His collaborative research has developed and applied methods for pricing the exposure to macroeconomic shocks over alternative investment horizons, investigating the implications of long-term uncertainty for asset prices and economic behavior. This research has addressed questions of direct relevance to financial regulation and monetary policy, including how uncertainty about future economic conditions affects investment decisions and asset valuations.

Macro Finance Research Program

Hansen has served as the Director of the Macro Finance Research Program (MFR) at the Becker Friedman Institute for Economics at the University of Chicago. The MFR program brings together researchers from macroeconomics, finance, and related fields to study the connections between the financial sector and the broader economy.

The program reflects Hansen's long-standing interest in bridging the traditional divide between macroeconomics and finance—two fields that, for much of the twentieth century, developed largely in isolation from each other. Hansen's research agenda has argued for the importance of integrating financial market analysis into macroeconomic models, a perspective that gained additional urgency following the financial crisis of 2007–2008.

Views on Economic Policy and Methodology

Hansen has articulated distinctive views on the relationship between economic theory, data, and policy. In a 2019 essay for Chicago Booth Review, he argued that "purely evidence-based policy doesn't exist," contending that data are indispensable to understanding economic outcomes but require theoretical frameworks to be made useful for policy purposes. This perspective reflects Hansen's broader philosophical commitment to the complementary roles of theory and empirical evidence in economics.

Recent Research and Public Engagement

In more recent years, Hansen has directed attention to questions of climate economics and environmental policy. A 2025 paper co-authored with José A. Scheinkman and published in the American Economic Association Papers and Proceedings examined the relationship between emission prices, biomass, and biodiversity in tropical forests, reflecting Hansen's application of economic modeling to pressing environmental challenges.

Hansen has also maintained an active public presence, speaking on issues of global economic uncertainty and the role of technology in addressing collective challenges. In an August 2025 interview with CNBC, Hansen discussed global macro uncertainties and the potential for technology to facilitate international political cooperation, suggesting that technological advancement holds greater promise for addressing problems such as climate change than reliance on global political agreements alone.

In October 2024, Hansen delivered the Presidential Lecture at Purdue University, continuing his engagement with academic audiences beyond the University of Chicago.

Doctoral Students

Throughout his career at the University of Chicago, Hansen has supervised numerous doctoral students who have gone on to prominent careers in economics and finance. His record of doctoral advising reflects his influence not only through published research but also through the training of the next generation of economists.

Personal Life

Hansen is based in Chicago, Illinois, where he has lived and worked since joining the University of Chicago in 1981. He has been a member of the university community for more than four decades. In a 2014 interview with The University of Chicago Magazine, Hansen reflected on the demands of his career, particularly following his receipt of the Nobel Prize, noting that the increased public attention required balancing new responsibilities with ongoing research commitments.

Hansen is a founding member of the Society for Financial Econometrics (SoFiE), an international organization dedicated to advancing econometric methods in finance.

Recognition

Hansen has received numerous awards and honors over the course of his career. The most prominent of these is the Nobel Memorial Prize in Economic Sciences, which he received in 2013, shared with Eugene Fama and Robert J. Shiller, "for their empirical analysis of asset prices." The Royal Swedish Academy of Sciences, in its citation, noted Hansen's development of a statistical method—GMM—that was central to testing theories of asset pricing.

In 2010, Hansen received the BBVA Foundation Frontiers of Knowledge Award in the category of Economy, Finance and Management, one of the most prestigious international awards in economics.

In 2006, Hansen was awarded the Erwin Plein Nemmers Prize in Economics from Northwestern University, a biennial prize given for outstanding contributions to economics.

Hansen is a member of the National Academy of Sciences, one of the highest honors in American science.

In 2016, Hansen received an honorary degree from Colby College in recognition of his contributions to economics.

Hansen has also been recognized for his broader contributions to economic discourse. In a 2005 interview with the Federal Reserve Bank of Minneapolis, published in The Region, Hansen discussed his research agenda and intellectual development at length, providing insight into the motivations behind his major contributions.

Legacy

Hansen's development of the generalized method of moments represents one of the most significant methodological contributions to economics in the late twentieth century. The GMM framework provided researchers with a flexible tool for estimating and testing economic models using observed data, and it has become a standard component of the graduate economics curriculum worldwide. The method's influence extends beyond economics to finance, political science, and other disciplines where researchers seek to estimate structural models from data.

Hansen's substantive research on the connections between macroeconomics and finance helped establish macro-finance as a recognized subfield. His work on uncertainty, ambiguity, and model misspecification has pushed the discipline toward more realistic representations of the challenges faced by economic actors, moving beyond the assumption that agents possess full knowledge of their economic environment. This line of research has had direct implications for understanding financial crises, asset price dynamics, and the design of economic policy under uncertainty.

Through his role as director of the Macro Finance Research Program at the Becker Friedman Institute and through decades of doctoral supervision at the University of Chicago, Hansen has shaped the intellectual direction of an entire generation of economists working at the intersection of macroeconomics and finance. His former students hold positions at leading universities and research institutions around the world.

Hansen's more recent engagement with questions of climate economics and environmental policy reflects the breadth of his interests and the applicability of his methods to emerging challenges. His emphasis on the complementary roles of theoretical models and empirical data in informing policy—including his insistence that economic evidence cannot be interpreted without theoretical structure—continues to influence debates about the foundations of economic policy analysis.