The Institute Blog


Coyle's "Wordly Philosophers 2.0": Suggested Readings

Diane Coyle has a list of twelve economists who she argues "clearly shaped the character of economics in a meaningful and lasting way – going up to the early 1980s." As such, they would form the basis of the 12 chapters of the follow up to Heilbroner's The Worldly Philosophers. Below is the, with link to some autobiographical reflexions by those economists, and pieces where historians examine their wordviews. In some cases, dozens of references could be mentioned, so I restricted myself to the one or two first references that came to my mind (aka, written by those researchers I closely work with. Aka, a small sample of what historians of economics produce). Other candidates haven’t been investigated so far, so if there’s any master student thinking of a history of economics PhD reading this, this is something to think about. 

 

johnfnash02       samuelson  

 

John Nash : by Sylvie Nasar, obviously.   

Ronald Coase : an obituary and that paper by Steven Medema. An obituary by Alain Marciano.

Paul Samuelson : by himself, in Szenberg's Eminent Economists. Two "Samuelson Begins" papers by Roger Backhouse, the first on why Samuelson left Harvard for MIT, and the second on how Foundations (really) came to be.

 

 arrow     Milton-Friedman-6    Becker    

 

Ken Arrow : his interview with Jerry Kelly. A worldview especially difficult to grasp. Düppe and Weintraub come closest in the first chapter of their book

 Milton Friedman : by himself (and Rose). I'm still recoving from the overdose I experienced will working on the lucky consistency of Friedman' science and politics a few years ago, so not much to propose. My last reading of the subject was Angus Burgin's invention of Milton Friedman.

Gary Becker : (same as Coase. Passed away recently, hence many reflections on his worldview) an obituary by Jean-Baptiste Fleury. Becker begins, by Pedro Texeira. And even Becker by Michel Foucault via Kieran Healy.

 

   Black   Robert-Lucas-Jr  Romer,-Paul_pic 

 

Fischer Black : Perry Mehrling's book, what else?

Robert Lucas : by himself. By Judy Klein.

 Paul Romer : only interviews … any suggestion ? edit: @iarroyo48 just reminded me of Warsh's Sunday piece on endogenous growth theory

 

 stiglitz    heckman    kahneman_postcard   

 

Joseph Stiglitz : only his long Nobel bio …

James Heckman : again, no reference except a short Nobel bio.

Daniel Kahneman : Nobel autobiography ; When Kahneman meets Tversky by Floris Heukelom.

 

 Coyle allows one suggested addition to her list. Mine would  definitely be Peter Diamond. His work radically transformed at least two fields : labor economics (search theory) and public economics (optimal taxation). He embodied a new kind of economists, the "applied theorist," as he called himself. And because any addition comes with a subtraction, I would drop Nash, whose contribution to game theory was immensely influential, but very focused. Other candidates in Coyle's list had a vision of how economics should be done, if not a philosophical one. Not Nash.

History of Postwar Economics: suggested readings (in progress)

Diane Coyle is asking why most history of economics' narratives end up with Keynes. My response is : 

1. No, it's not. There has been a surge in history of postwar economics research in the past 15 years. The transformation of economics in the Cold War era in now well-understood, and less is know about the 1965-1985 era (a flaw many researchers, including me, are trying to correct).

2. Because this scholarship is fairly recent, there is no textbook that offers a systematic account of the transformation of economics since Keynes. Yet. 

3. In the meantime, here's my own Reader  (to be udpated in the next days). Needless to say, this list is totally biased by my own historiographic preferences, research interests, and personnal affinities. If you feel I should have mentionned such and such brilliant piece of history, or if you need references on another topic, keep calm and comment.  

General Readings

-Short version: Roger Backhouse's Palgrave entry on American economics since 1945. Short and comprehensive.

-Long version: Roger Backhouse's textbook (economics though from Aristotle to now)

-If you are looking for an international perspective: Marion Fourcade's comparative analysis of the development of economics in the US, Great-Britain, and France. One chapter per country, waving together technical, theoretical and institutional developments. 

-An if you need a transition from interwar pluralism to postwar neoclassicism, here is the introduction of the volume whereby historians of economics crossed over. By Mary Morgan and Malcom Rutherford. 

General tip: when interested in a subject, look for "history of ..." in the Palgrave Dictionary. Many short and informative entries. Then, go to the History of Political Economy webpage, and seach for a special issue on the topic you're interested in (IS-LM, economics and the social sciences, econometrics, etc.. List of past conferences here, special issue published the following year. JHET and EJHET also have special issues on various topics. EJHET is an especially relevant source for any query on European economic thinking. 

History of General Equilibrium 

short version: Arrow and Debreu dehomogenized (final paper [gated], free draft) by Till Duppe

long version: Weintraub and Duppe's definite history of Arrow-Debreu-McKenzie, its spread and differentiated canonization. 

Another account which emphasized the physical science roots of GE is Ingrao and Israel's Invisible Hand. On the relationships of physics to economics, the classics is Phil Mirowski's More Heat than Light. 

History of Game Theory

Robert Leonard's account of Von Neumann and Morgenstern's intellectual journey, from Vienna chessboards to the Theory of Games (1944) and beyond (short version, long version). 

Nicola Giocoli's broader and more analytical treatment. He interprets the rise of game theory as a change in the self-image of economics, from a "system of force" to a "system of relation" science.

And a more history of science perspective in which game theory is historicized as an interdisciplinary endeavour involving economists, biologists, mathematicians and war scientists. By Paul Erickson

Interestingly, these three books reflect three different trends in the historiography of postwar economics. Giocoli's review of Leonard's book makes it very clear. 

History of Behavioral Economics

Fellow blogger Floris Heukelom has just published a sweeping histoy of the BE based on his dissertation. It ranges from Smith and Ricardo's days to Kahneman and Tversky's collaboration and ends up with the institutionalization of BE in the 1980s to 2000s. 

Here's a helpful review of the book by Erik Angner, who has penned a famous BE handbook entry with Georges Loewenstein.  

History of Experimental Economics

Don't know many references yet, but the Palgrave entry written by Francesco Guala is a good introduction, and I'm currently reading the dissertation Andrej Svorencik will defend tomorrow on "the experimental turn." I'll hopefully post a full review next week.  

History of Macroeconomics

Fellow blogger Pedro Duarte has recently edited a book on microfoundations, which I have discussed here (with a few additional references). On new-classical economics, go to Kevin Hoover's webpage and help yourself. He has co-organized a witness seminar with Warren Young, whose transcript is here. Young has also written on the making of Kydland and Prescott.   Backhouse and Boianovski have just published a book on disequilibrium economics (see also Rubin's work on Patinkin). 

History of Econometrics

Mary Morgan's seminal history of econometrics stopped with Haavelmo, but subequent developments are covered in two books by Duo Qin. The first one deals with the 1930-1960 period.The new volume covers advances in econometrics from 1970 onward. Olav Bjerkholt has recently put a stream of papers on the history of the Cowles on SSRN. My favorite history of economics (up to Sims) is Epstein's, but it has been out of stock for a while. Oeconomia has just published a special issue on the topic. 

Economics at MIT

The lastest development in the history of postwar economics. A first collection of essays, edited by Roy Weintraub, is just out. 

Economics at Carnegie

One of the trending topics in history of economics. I've already listed most recent contributions, from Simon to Modigliani and Muth, Lucas, Cyert and March, at the beginning of this post.

Economics at Chicago

Has always concentrated a lot of attention, with a consequence that there's already a vast litterature on the subject. Check the companion book, edited by Ross Emmett. Steve Medema has written a lot on Chicago price Theory, and together With Dan Hammond (one of Friedman's specialist) has edited a reader on the subject. There have been recents attempts to rebuild the history of Chicago Economics, and to balance the hitherto strong focus on Friedman/Stigler. The resulting articles were collected by Phil Mirowksi, Rob Van Horn and Tom Stapleford in 2011. 

Finance

The irresitible rise of finance theory has been famously told by Justin Fox and many others, and is at the background of Perry Mehrling's biography of Fisher Black. Its performative character has been analyzed by Donald MacKenzie, and Fabien Muniesa. For more specific topics, see the "Pioneers" collection of essays edited by Geoffrey Poitras and Franck Jovanovic

 

Greece Shows the Limits of Austerity in the Eurozone. What Now?

Mario Seccareccia, professor of economics at the University of Ottawa, has been outspoken in his warnings that austerity policies have the potential to smash economies and spread untold human misery. In his work supported by the Institute for New Economic Thinking and elsewhere, he has challenged deficit hawks and emphasized the need for strong government investment in things like jobs, education, health care, and infrastructure if economies are to prosper. In the following interview, he talks about why what happened to Greece was entirely predictable, why the Greeks were right to reject austerity in the recent election, and what challenges the country faces in forging a sustainable path forward with the left-wing Syriza party at the helm.

Lynn Parramore: You have long been warning of problems in the Eurozone.  What do the Greek elections mean to the debate about austerity and how it impacts economies?

Mario Seccareccia: I actually began warning about problems in the Eurozone even before they launched the Euro in 1999! A couple a years after the adoption, in 1992, of the Maastricht Treaty, which was the initial step in the creation the European Economic and Monetary Union or the Eurozone, I happened to be in Paris for the launch of a book that I had co-edited in French entitled Les Pièges de l’Austérité (The Austerity Traps) that had been published in November 1993.

During the discussions, a number of us were already raising very serious questions about a treaty which prevented national governments from doing what they needed to do to stabilize their economies — namely engage in needed deficit spending, regardless of the magnitude, during times of recession for the purpose of stabilizing income and employment. Some of us at the book launch warned of problems that could arise from a European supranational currency and a central bank which was not accountable to any national authority and which would push countries merely to become hostages to the whims of the financial markets. Along with many others, I’ve also raised concerns over what economists call “deflationary bias” in the structure of the Eurozone — that is, the tendency for policies to focus on lower inflation instead of more jobs and growth and to prevent greater public spending as a means to achieve growth.

I could see that Greece would be the country that would be hit first by these problems because it is financially the weakest link in the euro chain, and because of the high public debt ratio when it joined the Eurozone in 2002.  What is surprising is that it took until 2010 to reach such a crisis even though the warnings had been there for a long time.  Even at the start of the global financial crisis in 2008-2009, most European governments started stimulating their economies or bailing out their banks as we saw in Ireland and Spain. But no major cracks appeared until the end of 2009 when the financial markets got spooked because the Greek authorities were found hiding Greek sovereign debt with the aid of advisors of financial institutions.

From 2010 onwards, Greece achieved notoriety because financial markets recognized that the country might decide not to comply with the terms of loan agreements with banks. Eventually in 2012, European leaders held a summit at the French resort of Deauville and agreed that if the private holders of sovereign debt wanted bailouts, they would be held responsible for the losses. Because of these developments since 2010, deficit hawks everywhere vilified Greece for all the supposed terrible consequences of government over-indebtedness, even though the structure of the Eurozone made it impossible for Greece to manage its economy effectively.

Deficit hawks started preaching long-term austerity, and we’ve seen the awful consequences ever since. People have suffered terrible hardship and dislocation, with countries such as Greece and Spain reaching rates of unemployment worse that what happened in the United States in depth of the Great Depression. You’d be hard-pressed to find examples of such a severe collapse historically, with the possible exception of certain Latin American countries, such as Argentina in 2001. Those who predicted that that this austerity policy would eventually lead to an economic turnaround because of the belief in private sector rebound obviously got it wrong. After five years of negative economic growth, the Greek electorate — with incredible courage — told the so-called Troika that they had had enough, especially with these deep cuts in wages, employment, and pension transfers.

LP: How have the news media and the pundits gotten the story of Greece’s economy wrong?

MS: Ever since the end of 2009 when the story of Greece’s sovereign debt crisis began to unfold, austerity-pushing political leaders around the world have been saying that their country must not become the “next Greece.” Together with much of the international media, they have been perpetuating the view that government deficits are bad and that governments must seek balanced budgets, even if it means some necessary “temporary” hardship. Yet, the experience of the 1930s, which is being repeated with such vengeance in the Eurozone since 2010, is that pursuing austerity policies alone without some other outside stimulus, say, from increased net exports, can’t lead to balanced budgets. Instead, it leads to disaster. These policies destabilize the private sector to such an extent that they actually jeopardize chances of any future recovery. Many Greek citizens felt that they had reached this threshold and wanted a reversal of policy.

LP: Tsipras has promised to reverse some tax hikes and cuts to social services, but Greece is still in the Eurozone. Because, as you mention, it doesn’t have control of its own currency, the Greeks will have to negotiate with the so-called Troika of the European Union, IMF, and the European Central Bank. Do you think there is a possibility for meaningful changes given this challenge? And how might internal Greek political problems, especially with Tsipras' possible coalition partners, affect the situation?

MS: This is the “million euro” question: how can the Greek state invest in its economy while still remaining in the Eurozone?  Syriza faces a huge challenge politically since the pro-austerity parties in Greece, i.e. New Democracy, LAOS, PASOK, Democratic Left, KIDISO, and POTAMI, still constitute a fairly large block of the vote and the majority of the electorate would seemingly still prefer to remain in the Eurozone.  Since it doesn’t have a mandate to take Greece out of the Eurozone, what other options are available?

We have seen already how Germany has warned the new Greek government that it must live up to commitments to its creditors, and with Greece's current bailout program ending in February it will have little breathing room. There may well be a willingness to give the Greek government more time to make its debt payments, but the present Troika seems rather uninterested in outright debt cancellation, even if there may be some desire to negotiate some smaller changes, like the creation of a distinct Eurozone-wide public investment fund which might do things like build and repair roads or support clean energy projects and generate sufficient overall growth, especially in the rest of Eurozone, to perhaps spill over into Greece and turn around its current account balance and also raise government revenues.

All of this means negotiations with many partners that will take time for the present coalition government. On the other hand, the Greeks could get some short-term relief with the depreciating euro in terms of increased net exports for all countries of the Eurozone. Also in the short term, there is the European Central Bank’s commitment to do quantitative easing, or pumping new money into the economy. I have argued that quantitative easing doesn’t work to stimulate private sector spending, but it might help backstop what would have been an eventual financial collapse of a number of Eurozone countries. A lot depends on how big the European Central Bank is willing to go with its plans. If the action was bold enough, Greek banks could benefit indirectly and it could give the Greek government some breathing room and prevent a default, assuming its current creditors demand payment. In the medium term, Greece could create some form of parallel currency set at par with the euro, like Argentina did in the early 2000s. The government in Argentina used “patacones” to buy things and pay employees and they became quite acceptable because ultimately regular people could pay taxes with this currency. The Greeks could have a parallel national currency without altogether abandoning the euro.

So these various short-to-medium-term measures may well be available to prevent default, but, at the end, if the Greek government cannot renegotiate its crushing debt burden — without some form of debt forgiveness in however form it will be disguised — you could see a Greek default happen. If it reaches that point, I don’t think there’s anything in the Eurozone treaties that would prevent Greece from retaining the euro. In this case, it will have to learn from the experiences of dollarized countries such as Ecuador that have been surviving under very severe constraints on fiscal policy but without the oil revenues that until recent times have served well to replenish Ecuador’s coffers.

LP: Lots of countries, like Italy, Spain, Portugal, and maybe even France, are getting close to the distressed economic conditions of Greece. How will a Syriza government in Greece impact them? How do you think those governments will relate to Germany after the election?

MS: I believe that this will give a huge boost to those anti-austerity parties, especially in southern Europe, that are in a similar situation to Greece. That’s going to put further pressure on Germany to accommodate. But it will also boost the support of the nationalist right-wing anti-euro parties, as in France. If all these parties manage to achieve power, it may well be either that the Eurozone countries establish ways for countries to have more latitude in taking action to stabilize their economies.

If some of the right-wing parties come to power, such as the National Front in France, it will mean the end of the euro. The withdrawal of a core country such as France from the Eurozone could lead to currency realignments at the regional levels, without any chances for the survival of the entire Euro bloc.

LP: Do you think there are lessons in what has happened in the Eurozone for students of economics and the way the subject is taught?

MS: Yes, indeed. Ever since the establishment of the modern nation-state in the late eighteenth and nineteenth centuries, the creation of the euro was perhaps the first significant experiment in modern times in which there was an attempt to separate money from the state, that is, to denationalize currency, as some right-wing ideologues and founders of modern neoliberalism, such as Friedrich von Hayek, had defended. What the Eurozone crisis teaches is that this perception of how the monetary system works is quite wrong, because, in times of crisis, the democratic state must be able to spend money in order to meet its obligations to its citizens. The denationalization or “supra-nationalization” of money with the establishment that happened in the Eurozone took away from elected national governments the capacity to meaningfully manage their economies. Unless governments in the Eurozone are able to renegotiate a significant control and access money from their own central banks, the system will be continually plagued with crisis and will probably collapse in the longer term.

Yvo Desmedt: Much Ado About Cyber Security

Private data is leaked more and more in our society. Wikileaks, Facebook, and identity theft are just three examples. Network defenses are constantly under attack from cyber criminals, organized hacktivists, and even disgruntled ex-employees.

The stakes have never been higher for organizations, In a major breach last year, hackers who investigators say are linked to North Korea stole reams of data from Sony Pictures, including internal emails, and threatened attacks on theaters showing “The Interview,” the studio’s comedy about a plot to assassinate the country’s leader, Kim Jong Un. Other major corporations such as Target Corp., Neiman Marcus Inc., and Home Depot Inc., have been hacked, along with popular social media applications such as Snapchat.

There are also issues over digital privacy in education settings, as the number of cloud-based digital startups aiming to help school districts manage student data continues to grow. Such companies store sensitive information from students, including disciplinary records and family and health history, often in perpetuity. In August, a high-profile educational technology startup, InBloom, closed after protests from parents.

And those examples are child's play compared to what we now know about global government surveillance and spying in the wake of the Snowden revelations, which demonstrated that we now have nations monitoring other nations' activities and using the Internet as a form of warfare or terrorist threats. Cyber-threats to any nation can range from disruption of an agency's networks or information services to the public to cyber-warfare. Depending on the agency, type of cyber-attack, its scope, duration, and effectiveness, the consequences for the online and offline operation of local, federal, or state government components can range from annoying delays in communications to serious damage to infrastructure threatening life or property.

Can we do anything to protect ourselves, short of giving up on using our computers or smart phones? In the interview, Yvo Desmedt, the Jonsson Distinguished Professor in the Department of Computer Science at the University of Texas at Dallas, discusses the relentless hammering of new software vulnerabilities, the increasing sophistication of attackers, and misplaced optimism, which assumes that we have adequate means of establishing some form of "cyber security" to protect ourselves from this overweening surveillance on the part of both the private sector and the government.

Yes indeed, we can blog it!

Last year I pointed out here (and here) that macroeconomists were making themselves comfortable in the blogosphere to discuss theoretical, methodological, and, why not, historical issues of their field (see also a nice post by our fellow kid, Beatrice). Read more

David Wu: China's Regulation Problem

David Wu, a chartered accountant by training, is also a member of PwC China’s Management Board, and also holds the following leadership roles: China Government and Regulatory Affairs Leader, North China Markets Leader and Beijing Senior Partner. In most western democracies, this would be a standard regulatory position. In a country like China, it's a position considerably more challenging as figures like Wu have to navigate between the tensions inherent in a one-party state which is struggling to aspire toward a more predictable rule of law. Read more

Financial Deregulation: A Question of Efficiency or Distribution?

by Anton Korinek and Jonathan Kreamer Read more

Bernard Maris (1946-2015), Charlie Hebdo and Incommensurability

As you may remember, I had decided to cease contributing to this blog a few months ago.  Nevertheless, I thought I could use my completely illegitimate administrator rights to post one last piece dealing with the recent events in France. To be clear, what I am going to say is not very deep. The events are too recent and painful. They left me speechless for a couple of days and there's nothing really bright that can be said on such a dramatic occasion. Read more

Alan Taylor: Surprising New Findings Point to “Perfect Storm” Brewing in Your Financial Future

Featured: Huffington Post | Salon | AlterNet | Truth-Out | Naked Capitalism

Alan Taylor, a professor and Director of the Center for the Evolution of the Global Economy at the University of California, Davis, has conducted, along with Òscar Jordà and Moritz Schularick, ground-breaking research on the history and role of credit, partly funded by the Institute for New Economic Thinking. He finds that today’s advanced economies depend on private sector credit more than anything we have ever seen before. His work and that of his colleagues call into question the assumption that was commonplace before 2008, that private credit flows are primarily forces for stability and predictability in economies.

If current trends continue, Taylor warns, our economic future could be very different from our recent past, when financial crises were relatively rare. Crises could become more commonplace, which will impact every stage of our financial lives, from cradle to retirement. Do we just fasten our seatbelts for a bumpy ride, or is there a way to smooth the path ahead? Taylor discusses his findings and thoughts about how to safeguard the financial system in the interview that follows. Read more

Servaas Storm: Welcome to the European Hunger Games, Brought to You by Mainstream Economics

Featured: Huffington Post | Truth-Out | Naked Capitalism | AlterNet

As a virulent strain of austerity capitalism takes over Europe, leaving shattered lives in its shadow, researchers Servaas Storm and C.W.M. Naastepad, Senior Lecturers in Economics at Delft University of Technology in The Netherlands, consider how things got so bad, what role economists and misguided policy-makers have played, and which models and ideas are needed to change course. In the following interview, they discuss how most are getting the story about Europe wrong. They explain how their research shows that when countries try to compete with each other by lowering wages and slashing the social safety net, the costs are high both economically and socially, and why co-operative and regulated capitalism is a far better path. (For more, see “Europe’s Hunger Games: Income Distribution, Cost Competitiveness and Crisis,” published in the Cambridge Journal of Economics, and “Crisis and Recovery in the German Economy: The Real Lessons,” part of the Institute for New Economic Thinking’s project on the “Political Economy of Distribution”).  Read more

Bill Mitchell: Demystifying Modern Monetary Theory

In a challenge to conventional views on modern monetary and fiscal policy, Professor Bill Mitchell of Newcastle University in Australia has emerged as one of the foremost exponents of Modern Monetary Theory (MMT), a heterodox challenge to the prevailing paradigms which dominate how mainstream economics is taught and economic policy implemented.  In his works, and the interview below, Mitchell presents a coherent analysis of how money is created, how it functions in global exchange rate regimes, and how the mystification of the nature of money has constrained governments, and prevented states from acting in the public interest.
 
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The Future of Financial Reform: Conceiving the Financial System of the 21st Century

Mark Carney, Governor of the Bank of England (BoE) and Chairman of the Financial Stability Board (FSB), may well be the man of the hour. When he gives a speech entitled “The Future of Financial Reform” as he recently did at the Monetary Authority in Singapore, people listen. Read more

By the Way, Why Does the History of the JEL Codes Matter ?

Full paper is here. Comments are much welcome.And because it’s an epic story (and because I suck at writing abstracts), here is an audio trailer. I thank Paul for his beautiful Memphis accent. 

 

 

 

 

 

 

 

 

 

 

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Massimo Cingolani: Identifying Weaknesses in the Eurozone

The great achievement of the EU has been to reduce the probability of violent nationalist conflict among some of its members to a vanishing small probability while improving the economic lot of its members.  But in spite of the salesmanship surrounding the adoption of the single currency zone, much of this reduction in the propensity toward violence and economic growth took place before the adoption of the euro. It may be time to consider the notion that giving up the euro is a wiser alternative in the long run, unless someone can synthesize some kind of federal option, which hardly seems likely in the current political context. Read more