The Nobel Foundation announced Monday that UC Santa Barbara economics professor Finn Kydland will share the 2004 Nobel Prize in Economics with a colleague at Arizona State University.

Kydland and Edward Prescott of ASU were awarded the honor for their research on business cycles and macroeconomic policy, and the two will share the $1.3 million prize equally. The announcement comes fresh off of the heels of last week’s awarding of the 2004 Nobel Prize in Physics, given to UCSB physics professor David Gross.

Kydland was in Norway giving a lecture at the Norwegian School of Economics and Business Administration when the announcement came and was not available for comment. In a press statement, he said he is delighted to be at UCSB and is glad everyone is excited about the news.

“I’m a little bit of a shy person in public, but I guess I’ll have to get used to this attention,” Kydland said in the release.

The research from Kydland and Prescott, published in 1977 and influential because of its mathematical models, found that economic decision-makers, no matter how benevolent, should commit to a specific long-term policy before implementing it and not make short-term changes in times of economic trouble.

The second part of the research by Kydland and Prescott, published in 1982, studied the driving forces behind business cycles. Economists in the 1950s and 1960s thought business cycles were dependant on consumer demand. In their research, the two Nobel Prize winners found that large changes in supply, dramatic events and technological innovation have more far-reaching effects on the economy.

UCSB professor of economics Henning Bohn hired Kydland in July, and Kydland is the Jeff Henley Chair in Economics at the university. He previously taught at Carnegie Mellon University, where he earned his Ph.D.

Bohn said Kydland remains very active and recently worked on welfare costs of inflation and economic policy. His article on international business cycles that was published 10 years ago is well-known by economists.

“People don’t even reference the article anymore, people just talk about the time consistency problem – everybody knows what that is,” he said.

In a press statement, UCSB Chancellor Henry Yang said the university is overjoyed by Kydland’s achievement.

“This is a wonderful and fitting recognition of the tremendous impact his research has had on macroeconomics, international economics and monetary economics,” Yang said in the statement.

Monday’s announcement brings the total number of Nobel laureates at UCSB to six, and it is the first Nobel Prize won by a professor at the university in the social sciences. Previous winners were professors in traditional sciences. Last Tuesday, physics Gross won the 2004 prize in physics. UCSB electrical and computer engineering professor Herbert Kroemer and physics professor Alan Heeger received the Nobel Prize in Chemistry in 2000. In 1998, physics professor Walter Kohn received the Nobel Prize in Chemistry and J. Robert Schrieffer was awarded the Nobel Prize in Physics in 1972.

Dean of Social Sciences Melvin Oliver said in a press statement that the award is recognition of both of Kydland and the university.

“His receipt of the Nobel Prize is a public acknowledgement of both his path-breaking work and the growing visibility and achievements of the social sciences at UC Santa Barbara,” Oliver said in the statement.

Staff writer Ben Krasnow contributed to this story.