The Economics community at Minnesota has played an active role in modern economic thought and policy implementation for over 50 years. It was the home of Walter Heller, the Senior Economic Advisor to the Kennedy and Johnson administrations, and with Leonid Hurwicz's research in the 1960's and 1970's was the founding place for the modern study of Mechanism Design and modern Implementation theory as well as a center for the development of modern general equilibrium and, with John Chipman, trade theory.

The mid 1970's saw the birth of the strong connection between the Economics Department at the University and the Research Department at the Federal Reserve Bank of Minneapolis, a relationship that flourishes still today. With this development came the role of that group in the foundation of the Rational Expectations School of Macroeconomics, an approach to Macroeconomic modeling that has become the standard for all Macroeconomists.

In the 1980's and since, Minnesota has been at the leading edge of modern thinking about Macroeconomics. It is the center for modern research on applications of Dynamic General Equilibrium Theory, including the development of the Real Business Cycle model. It was the birthplace for the notion of Time Consistency in policy making and is still a leading institution in that field.