The Unassuming Economist

From Housing Wire:

“Frank Nothaft, chief economist at CoreLogic and before that, the top economist at Freddie Mac, has died. He was 66.

At CoreLogic, Nothaft headed the office of the economist, providing analysis, commentary and forecasting trends in global real estate, insurance and mortgage markets. Prior to joining CoreLogic in 2015, Nothaft had a nearly 30-year career at Freddie Mac, where he was most recently the chief economist.

“When I arrived at Freddie Mac in 2012 he was a long-established major name in mortgage research,” said Donald Layton, who was CEO of Freddie Mac from 2012 to 2018. “It was always a pleasure to work with him because he was truly a nice individual.”

Before joining Freddie Mac, Nothaft was an economist with the Board of Governors of the Federal Reserve System, where he served in the mortgage and consumer finance section and assisted Gov. Henry Wallich.

During his career, Nothaft often was called upon to provide expert commentary on national television and at industry trade conferences, explaining the workings of the housing market for both industry-focused and general audiences.

“Most people knew Frank as one of the nation’s premier housing economists,” said Robin Wachner, a CoreLogic spokesperson. “He was also an outstanding leader and one of those extraordinary people who was loved and admired by everyone who was lucky enough to know him.”

From 2010 to 2015, he was on the faculty at Georgetown University School of Continuing Studies, where he taught urban real estate economics. He was a past president of the American Real Estate and Urban Economics Association and served on the board of directors of the Financial Management Association.

Nothaft was well-liked by fellow economists studying the housing market, as well as his colleagues, who described him as straightforward and prizing accuracy. But he was also known for his quirky sense of style.”

From the Institute for New Economic Thinking (by Arjun Jayadev):

“Axel Leijonhufvud showed economists a promising path forward. They should have taken it. Leijonhufvud passed away on May 5, 2022

C an we theorize the economy as an entity that is growing, evolving, never in equilibrium? An economy passes through periods of intense instability and groping towards an uncertain future as a matter of course? How might one begin?

 “The pretense that we know the future probabilistically as a given set of probability distributions of every damn thing is, I think, a pretty dangerous delusion, but it’s also a comforting one to some people.”

The year was 1967. Young Axel Leijonhufvud sat in front of a pile of papers, full of unfinished notes, half-worked through arguments and intellectual dead-ends that he had been at for nearly four years. Two years into a tenure track position in the economics department at the University of California Los Angeles, he seemed unable to fashion a coherent dissertation from the morass of ideas in the sprawl. This year was his last chance to do so if he wanted to remain in academic employment.

The Swedish émigré had rather immodestly and perhaps unwisely decided that his doctoral work should be on some of the deepest problems of macroeconomics: why was it that the capitalist economy sometimes fails calamitously, and why was it that the Great Depression (still very much in the public memory in the 1960s) had been so very different from ordinary recessions? In trying to understand that defining period of the 1930s he had undertaken a wide range of reading of earlier economists, including a closer reading of the ur-text of the discipline –the General Theory of Employment, Interest and Money by John Maynard Keynes.”

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From Thomas J. Sargent:

“This paper recollects meetings with Robert E. Lucas, Jr. over many years. It describes how, through personal interactions and studying his work, Lucas taught me to think about economics.

Introduction

Starting in 1966, Robert E. Lucas, Jr. and other friends generously taught me about macroeconomics. This paper tells how in the early 1970s, together with Neil Wallace, I had hoped to construct, estimate, and optimally control a 1960s-style Keynesian macroeconomic model; how in 1973 Neil and I came to appreciate the way Lucas (1972a) affected our project; and how Chris Sims, Neil, Lars Hansen, and I struggled to respond constructively to Lucas’s insights by building, estimating, and evaluating rational expectations macro models. My story is full of starts and stops and accounts of once-promising dead ends. Let me summarize what might be worthwhile messages.

Recollecting parts of my intellectual journey with Bob starts in Section 2 with the story of our first meeting and my early exposure to the professional milieu around him at Carnegie, and how these interactions opened my bumpy road to rational expectations macroeconomics. In Section 3, I describe how in 1970, nine years after Muth (1961) had defined it, I was still unsure about how to define a rational expectation equilibrium, and how a conversation with Ed Prescott helped set me straight. In Section 4, I describe a large obsolescence shock, triggered by the neutrality paper (Lucas, 1972a), that hit me when I was 30 years old––actually, it was an aggregate obsolescence shock that hit the entire macro community. Section 5 provides a short story about my contribution to the creative process that led to the Lucas (1976) critique. I often encountered conflicts between evidence and theories, i.e., between empirical findings and simple models. Thus, in Section 6, I tell how in 1975, contrary to what I had gathered from talking to Neil Wallace, Lucas endorsed my estimation of an ad hoc demand function for money by saying that if theorizing to build deep foundations did not imply a demand function for money that looked much like Cagan’s, then it should be ignored. Section 7 is a story about how Bob’s idea about two factors underlying US business cycle facts, a nominal and a real one, inspired my paper on index models with Chris Sims, and why Bob didn’t publish his comment on our paper. In Section 8, I describe how Bob inspired me to apply recursive methods in a paper of mine on Tobin’s q in a general equilibrium.

The mid-1970s was the period when the Lucas critique and the theoretical and empirical work it elicited started reshaping econometric practice. After the dust had settled, macroeconometric practice was no longer what it had been before. Section 9 offers a look into this transformation process by showing that the exchange of ideas between adherents of the new approach and monetary policy was often very direct. In Sections 10–12, I describe how initially Bob urged me to pursue work that deployed the method of maximum likelihood to estimate and evaluate rational expectations macro models, how Bob later told me that this approach was rejecting too many good models, and how that led Bob largely to abandon econometrics for more forgiving calibrations in Prescott’s style. It was also thinking about the relationship between calibration and econometrics that led Lars Hansen and me to begin working on bringing concerns about robustness and model misspecification into macroeconomics. A message here is that hearing others and being open to new ideas can send you back to the drawing board and back to school. In Section 13, I tell how, late in our research careers, Bob and I revisited the idea that had originally attracted us to rational expectations––the hunch that it would be fruitful to put the model builder and the econometrician on the same footing, as John F. Muth (1961) had advocated. Section 14 denies that there has ever been a ‘rational expectations school’ that advocates and agreed upon set of policy prescriptions or a unique macroeconomic model. As an additional story, Section 15 illustrates Bob’s careful ways of thinking and writing. Section 16 contains some concluding remarks.

For me, research has always involved socializing and listening to and occasionally having the courage to talk back to larger-than-life personalities, wonderful people including Hyman Minsky, Oliver Williamson, Peter Diamond, Leonard Rapping, Neil Wallace, Chris Sims, Ed Prescott, and many others, who have strong and contending views. This adventure put a charge into learning macroeconomics.

Differences in preferences about how to do scientific economics are mainly about personalities and not about intelligence quotients. Personality differences surface in whether it is better to reason mainly in terms of English words or with mathematical expressions (see the story in Section 9 about Hyman Minsky, my mentor at Berkeley), or the primacy of theory versus econometric evidence (see Sections 10–12 for stories about interactions with Bob Lucas about econometrics and calibration; or the story in Section 15 about whether, without really thinking about it, I was behaving as a Bayesian or a frequentist). When differences in preferences do reflect differences in personalities, some disagreements across very smart researchers cannot be resolved from macro data that are too sparse along the dimensions that would be needed to resolve them.”

Link to Alvin Rabushka’s page.

From a Project Syndicate post by Robert Skidelsky:

“While systematic thinkers close a subject, leaving their followers with “normal” science to fill up the learned journals, fertile ones open their disciplines to critical scrutiny, for which they rarely get credit. Three recent biographies show how this has been the fate of three great economists who were marginalized by their profession.

Jeremy Adelman, Worldly Philosopher: The Odyssey of Albert O. Hirschman, Princeton University Press, 2013.
Charles Camic, Veblen: The Making of an Economist Who Unmade Economics, Harvard University Press, 2020.
Zachary D. Carter, The Price of Peace: Money, Democracy, and the Life of John Maynard Keynes, Random House, 2020

LONDON – There are two types of extraordinary economist. The first type includes pioneers of the field such as David Ricardo, William Stanley Jevons, and, in our own time, Robert Lucas. They all aimed to economize knowledge in order to explain the largest possible amount of behavior with the smallest possible number of variables.

The second category, which includes Thorstein Veblen, John Maynard Keynes, and Albert O. Hirschman, sought to broaden economic knowledge in order to understand motives and norms of behavior excluded by mainstream analysis but important in real life. The first type of economist is fiercely exclusive; the second has tried, largely in vain, to make economics more inclusive.

The first type of economist rather than the second has come to define the field, owing partly to the successful drive to professionalize the production of knowledge. Economics and other social sciences are heirs of the medieval guilds, each jealously preserving its chosen method of creating intellectual products. It also reflects the increasing difficulty in a secular age of developing moral content for the social sciences in general. We lack an agreed standpoint from outside “the science” by which to judge the value of human activity.”

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