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More than 30 years ago, Edward C. Prescott advised Finn E. Kydland on his doctorate at Carnegie Mellon University -- forming a partnership that eventually would turn the world of economics on its head.

On Monday, Prescott and Kydland, now an economics professor at Carnegie Mellon, won the 2004 Nobel Prize in economics. They become the fifth and sixth current or former faculty members from CMU's Tepper School of Business to win the coveted award.

"For a small school of our size, it's an unparalleled intellectual achievement," said Ilker Baybars, deputy dean of the Tepper School. "It's immense visibility not only for Carnegie Mellon but for our hometown because the news is all over the world, and Western Pennsylvania these days needs some good news."

Yesterday's announcement means Pittsburgh institutions have won a Nobel trifecta. Wangari Maathai, a University of Pittsburgh alumna and environmentalist from Kenya, won the Nobel Peace Prize on Friday.

"All economists worldwide know about this award," Baybars said. "It helps us in the recruitment of faculty and attracting outstanding Ph.D. students, and student recruitment is very important because schools are only as good as their students are."

Both Kydland, 60, of Fox Chapel, and Prescott, 63, an economics professor at Arizona State University, received their doctorates from what is now the Tepper School. They will share the $1.36 million prize, and each will receive a gold medal and diploma on Dec. 10 in Stockholm.

Kydland, a Norwegian native, is on a leave of absence from the University of California at Santa Barbara, where he is a visiting professor, and is currently in Norway.

Kydland called the award "fantastic" during an interview with Norwegian public radio station NRK, saying it's "the ultimate recognition" for an economist.

He was teaching at the Norwegian School of Economics and Business Administration when an assistant interrupted a lecture to inform him he had won the prize, said Torsten Persson, chairman of the prize committee, at a news conference.

"I didn't want to end the lecture," Kydland told NRK. "The students clapped when I told them why we had to cancel."

Prescott taught at Carnegie Mellon between 1971 and 1975 and chaired Kydland's dissertation committee.

"Finn doesn't make a mistake," Prescott said. "I make mistakes. Finn is steady. He can go 20 hours a day. I go in fits and starts."

In announcing the award, the Nobel Committee of the Swedish Royal Academy of Sciences in Stockholm cited their research on the consistency of government economic policy and the driving forces behind business cycles.

One of their papers explained the problems created when policy-makers abandon long-term goals for short-term benefits. They showed that the economy operates best when consumers and businesses know what to expect from government.

"It was such a different way to think, people thought it had to be wrong," Prescott recalled. "But then when they thought about it awhile, they said, 'That's obvious.' "

The second paper provided a model that policy makers can use to simulate how a policy change in one area will affect another.

Prescott and Kydland contended that fluctuations on the supply side, such as technological advances, could change business cycles, and that the government should not necessarily tamper with the economy. Their approach upset the widely accepted view that policy-makers should intervene to smooth over business cycles.

"Prescott and Kydland were standing that model on its head," said Stanley Zin, the Richard M. Cyert and Morris DeGroot Professor of Economics and Statistics at Carnegie Mellon.

On campus, Kydland is known as a quiet, unassuming man dedicated to his research.

"He's extremely concentrated," said Esten Henriksen, 30, a doctoral student from Oslo. "You won't be able to make him talk about anything else except research in his office."

Off campus, he streaks around in black leather on his yellow Italian Ducati -- the Ferrari of motorcycles. He regularly visits Moondog's in Blawnox to listen to the blues -- especially Glenn Pavone and the Cyclones, his favorite local band.

"I have known Finn at a party to pick up a drum and play along if people are singing," said Zin, his friend and colleague.

After work on Fridays, Kydland leads a group of four to 40 faculty and students to Silky's Sports Bar and Grill and the Squirrel Hill Cafe, both in Squirrel Hill. There he drinks Yuenglings or Penn Pilsners and discusses the events of the week, including office and professional politics, and sports.

Kydland is a Steelers fan whose favorite player is Jan Stenerud, the last Norwegian player in the National Football League. And as a doctoral student living in Squirrel Hill, he enjoyed attending Pirates games at Forbes Field.

He still plays soccer, skis and holds the unofficial business school record for running the marathon -- just over three hours.

Back in workshops and seminars, though, Kydland will stop colleagues cold by asking what they call "the question question."

"Finn will stop us by saying, 'That's all very interesting, but what is the question you're trying to answer with all this?' " Zin said. " 'Be focused. Just don't wander off because it's fun.' "

Meet the winners

Finn E. Kydland

Age: 60

Residence: Fox Chapel

Position: Professor of Economics at Tepper School of Business, Carnegie Mellon University

Career: Teacher at CMU since 1978, except for a brief period in the mid-'90s when he worked at the University of Texas at Austin. Research associate at the Federal Reserve Banks of Dallas and Cleveland; senior research fellow at the University of Texas; former research associate at the Federal Reserve Bank of St. Louis.

Education: Bachelor's degree from the Norwegian School of Economics and Business Administration and a doctorate in economics from Carnegie Mellon.

Awards/Honors: Co-winner of the 2004 Nobel Prize in Economics; keynote speaker at conferences in Cardiff, Wales, and Nafplio, Greece; J. Fish and Lillian F. Smith Chair Lectures, Brigham Young University; fellow, Econometric Society.

Edward C. Prescott

Age: 63

Residence: Paradise Valley, Ariz., and Minneapolis

Position: Professor of economics at Arizona State University in Tempe

Career: Senior monetary adviser to the Federal Reserve Bank of Minneapolis; taught at the University of Minnesota for more than 20 years and also at the University of Chicago, Northwestern University, Carnegie Mellon University and the University of Pennsylvania.

Education: Bachelor's degree in mathematics from Swarthmore College; master's degree in operations research from Case Western Reserve University; and a doctorate in economics from Carnegie Mellon University

Awards/Honors: Co-winner of the 2004 Nobel Prize in Economics; W.P. Carey Chair at Arizona State University; McKnight Presidential Chair in Economics at the University of Minnesota; Erwin Plein Nemmers Prize in Economics at Northwestern University; fellow, Econometric Society

Bloomberg News contributed to this report.

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