Lars Peter Hansen was just about to head out the door of his Chicago residence to exercise at 5:45 a.m. Monday, when he got a surprising phone call.
It was an official from The Royal Swedish Academy of Sciences informing him that he had been one of three recipients to win the 2013 Nobel Prize in economics.
“It took a bit to sink in, but by the time they passed the phone on to somebody who was on the selection committee, then I became convinced it was the real thing,” the Utah State University alumnus said in an interview from his University of Chicago office Thursday. “It was a very nice surprise.”
He shares the prize with two other professors — Eugene Fama, also of the University of Chicago, and Robert Shiller, of Yale University. Hansen and the other professors’ findings show that stock and bond prices moved unpredictably in the short term but with great predictability in the long-term — three to five years.
The 60-year-old Windy City professor has been busy “taking a deep breath” from the announcement of his accolade over the last few days — and the news has gained him praise from USU officials and Cache Valley residents since then.
Douglas Anderson, the dean of the Jon M. Huntsman School of Business, was a classmate of Hansen’s.
“Lars was a year behind me, but miles ahead of me in terms of understanding economics,” Anderson said.
Hansen is a 1974 graduate of USU, where he earned a bachelor’s degrees in mathematics and political science and minored in economics. He attended Logan High before going to USU.
After graduating from USU, Hansen went on to attend the University of Minnesota in Minneapolis, where he earned his doctorate in economics. He joined Chicago faculty in 1981.
His roots in Cache Valley are deep, even though he was born in Illinois and moved to Utah from Michigan at the age of 16. Hansen’s parents — including the late USU provost R. Gaurth Hansen — were both born and raised in Smithfield. He currently has an uncle who lives in the valley.
Hansen has vivid memories of moving to Utah.
“It was an adjustment for me,” Hansen said. “That’s also an awkward age to move, at 16, so it was a transition, but I grew to like it very much. ... My grandparents lived in Smithfield and another lived in Logan, so I got to know my grandparents very well, and that was nice for me.”
When Hansen graduated from Logan High School, he was told by a counselor that, based on his recent academic performance, he could expect to be a C+ student and, if he studied hard, a B+ student, according to a Huntsman School Alumni Magazine article.
“I had to pick it up a notch in college,” Hansen said Thursday. “I knew I had to turn things around if I really wanted any kind of professional career related to economic research.”
Even when he got to USU, Hansen did a lot of “major shifting.”
“At first I thought I wanted to be a chemist — my father was a biochemist before he became a provost — I thought I wanted to do political science, mathematics, but by junior year I thought economics was the place to go,” he said.
Hansen said he formed some very close friendships at USU, which included Anderson.
Anderson reflected on a conversation he had with Hansen back then, as they were walking across the quad.
“(I asked him) what his plans for graduate school were. He said he hadn’t really worked that out, and I said, ‘Have you thought about economics courses? It’s basically applied math anyway.’ He did,” Anderson said. “It was clear that Lars had a great background and great preparation for understanding economics. He was very interested in the way the world works.”
Hansen credits Bartell Jensen as a mentor. Jensen was a professor of economics and later went on to be a USU vice president before retiring.
Jensen “knew I was in a special situation,” Hansen said, so he mapped out a curriculum that would allow him to take some graduate-level courses his senior year.
“Senior year Ph.D. program was really good prep for me going to graduate school,” Hansen said.
Jensen said of Hansen: “It was clear he was ready for graduate courses. With minds like Lars, you can’t feed them fast enough.”
Hansen not only had major shifting and then upper-level courses to deal with — but he was also the son of a sitting USU provost. His family was close friends with then-USU president Glen Taggart — a friendship that had its roots when the two families were in Michigan; Taggart brought Hansen’s father with him to USU.
“That was a bit unusual, when you’re walking across campus, and the president of the university says ‘hello’ to you,” Hansen said. “It was special.”
Because of his father’s senior position at the university, Hansen said he tried to remain anonymous, but that was met with “limited success.”
“There were two reactions from the faculty: There would be some who would know who I was and start saying wonderful things about my father — which I felt might be superficial — and others would complain about the university,” Hansen said. “But the ones I really appreciated were the ones who wanted to get to know me for who I was, and there were some very genuine people there. I was not looking for favors or any special treatment.”
His senior year at USU, he taught a mathematics course.
“If I hadn’t taken on that job, I might have tried to get a third degree in mathematics,” Hansen said. “Two degrees was enough.”
Hansen said he isn’t sure how the Nobel Prize win will change his life.
“The other two that won the prize are more famous outside of academic circles than I am, so they will attract the immediate attention — which is fine with me,” Hansen said. “It’s really neat that I can share this with a colleague.”
He continued, “But what’s going to happen going forward? There are research areas that I care very much about, and I’ve been very proud of the many graduate students I’ve had,” Hansen said. “Anything that I can do to encourage young scholars in the field that I work in will make me very happy and pleased. With research ambitions, I feel like I have several good years left in me, so I will be pursuing those.”
The Chicago professor also talked about his work that led to the Nobel prize win.
“There are a variety of models of the macro-economy that people build, and how they interact with financial markets,” Hansen said. “I’ve been very keen to study what the strengths and weaknesses are of those models using statistical methods, and then how can we improve them. These are models where you have to confront things like uncertainty, investor’s belief and risk aversion and how that all plays out with financial markets. We don’t have it sorted out yet, but we’ve made progress on it in the last couple of decades.”
The three economists will share the $1.2 million prize, the last of this year's Nobel awards to be announced, according to the academy.
All awards will be presented to the winners amid royal pageantry Dec. 10, the anniversary of Alfred Nobel's death in 1896. Hansen’s family, including a brother now living in Orem, will be joining him.