Results for “best book”

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Edmund Phelps.  Here is the announcement from Sweden. 

Here is his autobiography.  He was born in Chicago in 1933 and now teaches at Columbia.  Here is his CV, and here is another version.  Here are recent papers.  His Wikipedia entry is a short stub, but watch it grow.

Here is his summary of his research.  Here is another good summary of his work.  This summary, from Sweden, is the best and most comprehensive, albeit more technical.

His main contribution is a better understanding of the Phillips curve and the dynamics of short-run unemployment and the concept of the natural rate of unemployment.  He gave the Phillips curve microfoundations and developed the "expectations-augmented Phillips curve."  As the name suggests, the level of inflationary expectations matter for how money will influence output.

Here is his memoir on developing the idea of the natural rate of unemployment.  His most influential 1960s work suggested that economies possess a natural rate of unemployment, monetary policy can reduce unemployment only temporarily (NB: in his view this is a conclusion, and should not be an axiom in economic models), monetary policy can reduce unemployment temporarily, and Keynesian economics should not treat the rate of unemployment as arbitrarily at the whim of monetary and fiscal policy.  He was also concerned with how the natural rate of employment can change over time; here is his 1997 paper on that topic.

The evolution of Phelps’s thought on how money can matter is complex.  His later work stresses monetary non-neutrality, mostly through non-rational expectations and non-synchronized wage and price setting.  His work in the 1980s focused on what the concept of rational expectations means in such complex environments.   

Do not assume that early Phelps and late Phelps are saying the same things or arguing against the same opponents.  Sometimes it is argued that he redefined macroeconomics twice.  After criticizing Keynesianism, he later turned against the "rational expectations"  point of view.  He is a complex thinker, although it can be hard to divine his "bottom line."  He fails to fit inside the "macroeconomics boxes" that have developed since the early 1980s, namely real business cycle theory vs. neo-Keynesianism.

Phelps’s work was considered revolutionary in the 1960s, though the subsequent work and influence of Milton Friedman have brought related ideas into the mainstream some time ago.

He also has done work on economic justice and how a Rawlsian maximin analysis might modify the idea of a zero rate of marginal taxation on top earners, as had been suggested by James Mirrlees.  Phelps believes that considerations of justice and distribution are important, and neglected, in economic thinking.  Once he had a piece in the Journal of Philosophy on ideas of justice in public finance.

He also wrote some well-known papers on what intergenerational justice means, the optimal accumulation of capital, and whether those allocations will prove sustainable and consistent over time.  He asks what kind of principles should govern how much capital we should leave for the next generation.  His 1961 work on capital theory formulated the notion of a "golden rule" of capital accumulation.  It asked what savings rate would maximize per capita income on an ongoing basis.  The concepts behind this work remain important for work on capital accumulation and also the sustainability of natural resource use and environmental policy.  Phelps also generated the counterintuitive result that the savings rate can be too high, and that all generations could be better off with a lower savings rate.  He does not, however, seem to think that this latter idea is policy-relevant.  The best summary of this work on capital theory is here, scroll through a bit.

Lately he has been working on the possibility of subsidies for hiring low-wage labor and Eastern European transitions.  Here is his book on wage subsidies.  Here is a more popular Phelps piece on wage subsidies.  He has also done work on the structural dynamics of economies and the underlying factors behind economic innovation.  Here is an early Phelps paper on technological diffusion; surprisingly it is his most frequently cited work according to scholar.google.com.  He looked to education and population size as key factors driving the rate of economic growth; this piece is a precursor of later work on endogenous growth theory.

Phelps also wrote a 1972 paper on statistical discrimination, one of the earliest formal economic treatments of that topic.

Here is Phelps on Project Syndicate, the link offers numerous essays on current events.  The European malaise stems from lack of dynamism.  He opposed the Bush tax cuts.  Here is Phelps on the rise of the West and the need for humane capitalism.  He has a broadly classical liberal slant but has adopted the modern liberal idea that distribution requires government intervention into labor markets and other parts of a modern economy.  He has a strong concern with the moral foundations of a free society.

Here are his cites on scholar.google.com.  4600 is a relatively low number for a Nobel Laureate.  Vernon Smith for instance has over 40,000.  In part this relatively small number reflects the older nature of Phelps’s major contributions, and that often his ideas have been absorbed but without citation.  Furthermore Phelps does not always write within the context of the most contemporary debates.

Over the last twenty years Phelps has spent a great deal of time in Europe.  In general his European influence and reputation is stronger than in the United States.

My take: It is hard to argue with this pick.  It is a good selection.  His 1960s macro work was true, important, and extremely influential.  The capital theory work endures and provides a foundation for subsequent theory.  The overall scope is impressive, and Phelps’s concerns never strayed far from the real world.

But Phelps is not an economist who has influenced my own thinking much if at all.  His major contributions were absorbed, and were standard fare, by the time I was a young’un.  For instance I drunk the same macro milk through the writings of Milton Friedman.  I find him to be a murky writer, and often he is frustrating to read and hard to pin down.  His advocates would characterize him as a "rich" thinker.

What this Prize means: The big questions still matter.  Unemployment, economic growth, labor markets, capital accumulation, fairness, discrimination, and justice across the generations are indeed worthy of economic attention.  Phelps contributed to all of those areas.   Normative questions matter.  Relevance and breadth triumph over narrow technical skill.

Addendum: The U.S. has now won six Nobel Prizes in a row, but I bet we don’t get the Peace Prize this year.

Corruption aside, which is certainly not the case in Sweden, a Nobel committee can:

a) promote a political agenda,

b) further its own reputation, the reputation of the associated prizes, and the reputation of the science under consideration, or

c) criticism minimization, which is close to b) but looks at the left-hand tail of the opinion distribution rather than the mean.

I favor a mix of b) and c), at least for the economics prize; for more detail see my book What Price Fame?

Factor c) decreases the chance of Paul Krugman and also, I am sorry to say, Gordon Tullock, who is more than willing to say what he thinks.  b) decreases the chance of Oliver Hart and many other theorists.  Wilson and Milgrom, whose work has been used to design auctions, stand a better chance.  The work of Hart and Tirole is of very high quality but I am not sure it would add luster to the prize.  How many people can understand it, and has it influenced policy?  And has the work of Paul Romer, and associated ideas of increasing returns, stood the test of time?  If we remove Africa from the data set, the world appears to exhibit growth convergence over time.

I’ve already picked Fama and Thaler as my prediction for this year.  I also think Oliver Williamson is more likely to get it than most top economists think.  Bhagwati fits the bill, but it brings up the awkward question of whether he should be bundled with Krugman (trade theory) or Tullock (rent-seeking).  Keep in mind that the Nobel Committee members are not Harvard-MIT insiders, and they have more of an outsider’s perspective on what is likely to endure.

Greg Mankiw considers what a prize committee should maximize.  Does the prize encourage swinging for "home runs" when more people should be hitting for "singles"?  I don’t think Nobel Prize prospects spur many great contributions to economics in the first place; the best scientists have strong internal and external motivations in any case.  Nobel Prizes do motivate lobbying trips to Sweden; one Harvard economist in particular is well-known for these "vacations." 

I see the welfare-maximizing use of the Nobel Prize as generating more publicity for economics, attracting more people to study the science, and giving the science greater credibility in the eyes of politicians, the public, and media.  That means the committee should give prizes to economists who are articulate, intelligible, scholarly, and work on topics of real world interest.  So far they have done a great job; let’s hope for another first-rate pick.

The Bartels result may be just showing that in an economy when
average incomes are are rising rapidly, the low income groups benefit
more than the higher income groups.  Since WWII, with the exception of
Eisenhower, no Republican was president when the average income was
rising rapidly.

Here is the link for a relevant graph.  Here is a graph of the Bartels result.  And here is Greg Mankiw on inequality and unions, in case you missed it, perhaps Greg’s best post so far.

Andrew Samwick asked a very good question last week: if Paul Krugman says that rising wages at the top are due to nasty Republican policies and not due to rising returns to education/skill how does he explain his own high income?  Unfortunately Mark Thoma interpreted Samwick to be saying that Krugman was hypocritical.  That, however, was not the point at all.

The point is that Krugman is a very good example of someone in the top 1% of income – someone whose earnings have increased tremendously in the 1980s and 1990s thus generating much income inequality.  Krugman wants to say that earnings in the top 1% have gone up because of a reduction in the minimum wage or fewer labor unions.  Huh?  Remember, it’s not just inequality that has increased it’s absolute earnings at the top – where are these earnings coming from?

The idea that reductions in the bottom generate big earnings at the top reminds me of the theory, once popular among theorists of development, that the way to get rich is to steal from poor people.  At best what you can get from lower labor earnings at the bottom is a slightly higher return to capital in general – not a big return to a few people at the top.

Krugman says it’s Republican policies that are generating inequality  Or does he?  Let’s go to the tape.  Here’s what Krugman had to say when it was revealed that Enron paid him $50,000 for a speaking engagement.

My critics seem to think that there was something odd about Enron’s
willingness to pay a mere college professor that much money. But such sums
are not unusual for academic economists whose expertise is relevant to
current events…

Remember that this was 1999: Asia was in crisis, the world was a mess.
And justifiably or not, I was regarded as an authority on that mess. I
invented currency crises as an academic field, way back in 1979; anyone
who wants a sense of my academic credentials should look at the Handbook
of International Economics, vol. 3, and check the index….

And I wasn’t an ivory-tower academic. In 1994 I had published an article… in August 1998 I had advocated temporary
capital controls …in 1998 I had taken on the Japanese
situation, with a series of papers…

I mention all this not as a matter of self-puffery, but to point out
that I was not an unknown college professor. On the contrary, I was a hot
property, very much in demand as a speaker to business audiences: I was
routinely offered as much as $50,000 to speak to investment banks and consulting
firms. They thought I might tell them something useful. For what it’s worth,
Citibank officials said – you can check it out with a Nexis search – that
a heads-up I gave them in 1996 about the risks of an Asian currency crisis
saved them hundreds of millions of dollars.

Now all this is amusing but that’s not my point (really, it’s just a side-benefit.)  My point is that Krugman’s earlier explanation for his high income was all about the rising return to education ("Look at all my papers!")  I would supplement this basic story with a greater winner-take-all market, more economies of scope etc.  (See also Tyler’s comments.)   

I think Krugman’s earlier explanation for his own income is mostly correct.  Where Krugman and I apparently disagree is that I think that the very same explanation Krugman gives for his income also explains why other people in the top 1% are earning more.  Krugman, however, no longer wants to talk about education and skill he wants to talk about nasty Republicans.

So let me rephrase Samwick’s question.  Paul, If you’re not so smart, why are you so rich?