Sargent: Tension and tolerance. We took strong positions and had im-
mense disagreements. But the rules of engagement were civil and we always
built each other up to our students. Minnesota in those days had a remarkable
faculty. (It still does!) The mature department leaders Leo Hurwicz and John
Chipman set the tone: they advocated taking your time to learn carefully and
they encouraged students to learn math. Chris Sims and Neil Wallace were my
two best colleagues. Both were forever generous with ideas, always extremely
critical, but never destructive. The three of us had strong disagreements but
there was also immense respect. Our seminars were exciting. I interacted in-
tensively with both Neil and Chris through dissertations committees.
The best thing about Minnesota from the mid 70s to mid 80s was our ex-
traordinary students. These were mostly people who weren’t admitted into
top 5 schools. Students taking my macro and time series classes included
John Geweke, Gary Skoog, Salih Neftci, George Tauchen, Michael Salemi, Lars
Hansen, Rao Aiyagari, Danny Peled, Ben Bental, Bruce Smith, Michael Stutzer,
Charles Whiteman, Robert Litterman, Zvi Eckstein, Marty Eichenbaum, Yochanan
Shachmurove, Rusdu Saracoglu, Larry Christiano, Randall Wright, Richard
Rogerson, Gary Hansen, Selahattin Imrohoroglu, Ayse Imrohoroglu, Fabio Canova,
Beth Ingram, Bong Soo Lee, Albert Marcet, Rodolfo Manuelli, Hugo Hopen-
hayn, Lars Ljungqvist, Rosa Matzkin, Victor Rios Rull, Gerhard Glomm, Ann
Vilamil, Stacey Schreft, Andreas Hornstein, and a number of others. What a
group! A who’s-who of modern macro and macroeconometrics. Even a gover-
nor of a central bank (Rusdu Saracoglu)! If these weren’t enough, after I vis-
ited Cambridge, Massachusetts in 1981-82, Patrick Kehoe, Danny Quah, Paul
Richardson, and Richard Clarida each came to Minneapolis for much of the
summer of 1982, and Danny and Pat stayed longer as RAs. It was a thrill
teaching classes to such students. Often I knew less than the students I was
‘teaching’. Our philosophy at Minnesota was that we teachers were just more
experienced students.
One of the best things I did at Minnesota was to campaign for us to make
an offer to Ed Prescott. He came in the early 1980s and made Minnesota even
better.
Evans and Honkapohja: You make 1970s-1980s Minnesota sound like
a love-in among Sims and Wallace and you. How do you square that attitude
with the dismal view of your work expressed in Neil Wallace’s JME review of
your Princeton book on the history of small change with François Velde? Do
friends write about each other that way?
Sargent: Friends do talk to each other that way. Neil thinks that cash-
in-advance models are useless and gets ill every time he sees a cash-in-advance
constraint. For Neil, what could be worse than a model with a cash-in-advance
constraint? A model with two cash-in-advance constraints. But that is what
Velde and I have! The occasionally positive multiplier on that second cash-in-
advance constraint is Velde and my tool for understanding recurrent shortages
of small change and upward drifting prices of large denomination coins in terms
of small denomination ones.
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