The Unassuming Economist

From a VoxEU post by Douglas Irwin:

“Ronald Findlay, who passed away in October 2021, was one of the great trade theorists of his generation. As this column by one of his former students explains, he will be remembered for his brilliant intellect, his encyclopaedic knowledge of theory and history, and most of all for his modesty, warmth and supportive friendship.

Ronald Findlay, one of the great trade theorists of his generation, passed away in October 2021 at the age of 86. A professor of economics at Columbia University from 1969 to 2013, he anchored the international economics group there for more than four decades. He will be remembered by colleagues and students for his brilliant intellect, his encyclopaedic knowledge of theory and history, and most of all for his modesty, warmth and supportive friendship. 

Findlay was born and raised in Burma but was forced to flee the country on foot during the Second World War.¹ After the war, he returned and later received an excellent education at the University of Rangoon. A precocious student, Findlay was appointed as a teaching tutor at the age of 19, and he was giving economic advice to the Burmese government in his very early 20s.²

In 1957, Findlay went to graduate school at MIT where Robert Solow was his dissertation adviser. He was also deeply influenced by Charles Kindleberger and “the master” Paul Samuelson. As a graduate student, Findlay published several papers, including his 1959 classic with Harry Grubert, “Factor Intensities, Technological Progress, and the Terms of Trade”. This paper examined the impact of Hicks-neutral and factor-biased technological change on production and factor allocation in a simple two-good, two-factor model. This influential analysis illuminated some important features of that workhorse model, and it continued to be influential when the issue of factor-biased technical change returned to prominence in the 1980s and 1990s. 

Findlay completed his PhD in just three years and returned to Burma to teach at Rangoon.³ One early paper stepped into the minefield of the Cambridge versus Cambridge capital theory and sought to formalise Joan Robinson’s model of accumulation, something that had to be done “due to the obscurity of Mrs. Robinson’s literary presentation of what are fairly intricate quantitative relationships” (Findlay 1963). The paper not only elicited a reply from the formidable Cambridge economist, she even made a special trip to Burma (detouring from India) just to “have it out with this young Findlay guy”, as he later put it. 

This paper and other early work displayed what was a trademark Findlay approach: to provide a formal model of what was implicit in the non-mathematical writings of economists such as Arthur Lewis and Ragnar Nurkse. The goal was to provide a check on the underlying logical structure of non-traditional approaches and see under what conditions the claims for them might hold. For example, Findlay (1959) showed that a policy of “balanced growth”, as advocated by Lewis and Nurkse, would not solve the problem of increasing the returns to investment and could be counterproductive compared with international specialisation along lines of comparative advantage. 

Continue reading here.

From a VoxEU post by Avinash Persaud:

“John Williamson, one of the icons of international economics, passed away in April 2021. This column outlines some of his many and varied contributions to economic analysis and economic policymaking. In his work on exchange rates, the international monetary system and the challenges of economic crises, transition and development, he was the consummate problem-solver and understood any problem in the round of politics, economics and institutions. 

One of the icons of international economics, John Williamson, passed away in April of this year. I had the honour of being invited by the family to say a few words about John as a colleague at his Memorial on Sunday, 7 November 2021 at “Hemlock Grove”, Woodend, Audubon Naturalist Society, where John volunteered (he was a very keen birdwatcher). The following is what I said. 

In an age in which fundamentalism no longer slips between the shadows, but openly stalks the pastures of thought, and even the ramparts of Capitol Hill, John Williamson could be counted on to be the grown-up in the room.

He was seldom ‘black or white’ in his thinking. He revelled in the grey. In the nuance. He was neither ‘Dirigiste’ nor ‘Laissez-Faire’; neither fixed nor floating; neither full nor anti capital mobility. He made the case for the intermediate, to paraphrase one of his papers (Williamson 2007). His was a Golden Mean; between two vices or two corners if you may.¹

He did not set out to arrive at balance, for the sake of balance. He was more considered than that. He got there in active pursuit of the right solution to the right problem given the time and place. He was the consummate problem-solver and understood the problem in the round of politics, economics, and institutions.²

Which is why he cared so much about refining an idea, always trying to make it better, more suited to time and place. And which is why too, his contributions seem so varied. They are spread across the critical problems of the day, which did not always arrive in logical order.

When in the 1970s, Bretton Woods collapsed into the ‘Non-System’, as he called it, he wrote about the reform of the international monetary system and later its failure (Williamson 1977). And played more than a bit part too in the development of ideas at the time.³ He was a lanyard-carrying member of the Second Row Club – that group of senior officials who sat behind their ministers trying their best to advise and nudge them to greater ambition during the day, and drowning disappointments with laughter and drink in the evenings.⁴

When the newly floating exchange rates were stretching their muscles and exploring their limits in the 1980s and 1990s, he wrote about and developed new exchange rate arrangements (Miller and Williamson 1987). For instance, he and Fred Bergsten played a significant role in the ‘reference rate’ design of the Louvre Accord of February 1987 that tried to stabilise the dollar – an effort thwarted by the October 1987 stock market crash. 

When Asia arrived, the Berlin Wall tumbled, and Latin America found its footing, he wrote about transition, development, and, of course, the Washington consensus around such matters (Williamson 1990). And when commercial debt to middle-income countries emerged as an intractable problem, he wrote in praise of new instruments that could better share the risks between borrower and creditors, like GDP-linked bonds (Williamson 2017, Benford et al. 2018).

So far, I may have given the impression that his work was largely responsive, but in truth it was just as anticipatory. My recent proposal here on Vox for the regular issuance of $500 billion of Special Drawing Rights (SDRs) in order to support the huge investment required to halt climate change (Persaud 2021), in its design, owes a debt to John Williamson’s earlier Vox column on the desirability of regular issuance of SDRs (Williamson 2009).”

Continue reading here.

From VoxEU post by Gérard Roland:

“The great Hungarian economist János Kornai, who passed away in October 2021, was a pioneering analyst of shortages, socialist economies and the economics of transition to a market economy. This column outlines what made him one of the most important intellectuals of the twentieth century.

The famous Hungarian economist János Kornai has left us. He was one of the most important intellectuals of the twentieth century. He suffered personally from both Nazism and communism, the two totalitarian regimes of the twentieth century. As a young Jew growing up in Budapest, he lost his father and a brother to the Nazis. Like many young Jews in Central Europe who survived the holocaust, he was for a couple of years an enthusiastic supporter of communism, the arch-enemy of Nazism. He became disillusioned after a few years, especially when learning about the Stalinist purges in Hungary in the early 1950s. He had been a journalist at that time.

His doctoral dissertation in economics, Overcentralization in Economic Administration, was full of facts about the flaws of central planning and represented a great breath of fresh air in the intellectual atmosphere of the times. He defended that dissertation just before the Soviet repression of the Hungarian revolution of 1956. His defence was attended by a big crowd and was one of the important intellectual events of that year. Given the visibility of his doctoral thesis, when the repression came, he lost his job at the Institute of Economics (later a hotbed of thinking about reforms), was interrogated, and eventually got marginal jobs, first at the Light Industry Planning Bureau and later at the Textile Industry Research Institute. 

Instead of becoming discouraged or cynical, he used the free time he had in these obscure jobs to study economics seriously and to get better acquainted with economic research that was being practiced in the West, on the other side of the Iron Curtain. His work on two-level planning with Tamás Lipták was published in Econometrica and became an important paper in the literature on the economics of planning. This earned him the recognition of top economists of the time: Kenneth Arrow, Leonid Hurwicz, Tjalling Koopmans, Edmond Malinvaud and others. The Hungarian authorities, who were more liberal than other communist regimes, even allowed him to travel to conferences in the West, albeit under heavy supervision of the secret police. 

Instead of ‘just’ becoming Central and Eastern Europe’s top economist (together with the more senior Leonid Kantorovich, the inventor of linear programming, who received the Nobel prize in 1975), he wrote in 1971 a book with the provocative title Anti-Equilibrium that represented a thorough criticism of the relevance of general equilibrium theory, the crown jewel of economic theory. That book also proposed to add considerations related to the informational sphere of the economy, developing themes such as informational asymmetry, bargaining, conventions, routines, aspirations – topics that would be developed later by other economists.”

Continue reading here.

From a VoxEU post by Jörn-Steffen Pischke:

“The 2021 Nobel Prize in Economic Sciences has been awarded to David Card of the University of California, Berkeley, “for his empirical contributions to labour economics”, and to Joshua Angrist of MIT and Guido Imbens of Stanford University “for their methodological contributions to the analysis of causal relationships”. This column explains how the use of natural experiments in empirical economics has ushered in much progress in the analysis of causal relationships. The ensuing ‘credibility revolution’ over the past three decades has been transformational for the study of key policy challenges, including education, immigration and the minimum wage.

I once, naively, asked the late Alan Krueger about the pioneers of natural experiments in economics. His somewhat sheepish answer was that that’s like asking about the pioneers of rock music. It didn’t take much research on my part to reveal the numerous protagonists of a movement in labour economics in the 1980s and 1990s that transformed the way empirical work is done in the field and in many areas of economics beyond. Yet, like rock music, natural experiments have their Fab Four, and they are the 2021 Nobel laureates David Card, Joshua Angrist and Guido Imbens, plus the late Alan Krueger. I hope many will agree with me that this prize honours Krueger as well.

The important questions in economics are causal questions. How does immigration affect the labour market prospects of natives? What is the payoff to an additional year spent in school or to attending university? What are the effects of minimum wages on the employment prospects of low-skilled workers? But these questions are difficult to answer because we lack the right counterfactuals.”

Continue reading here.

From Conversable Economist:

“Paul Volcker, who was chair of the Federal Reserve from August 1979 to August 1987.has died. He is generally credited, or in some cases blamed, for the set of monetary policies which both ended the inflationary period of the 1970s but also brought on the very deep double-dip recessions of 1980 and 1981-2. The New York Times obituary is here.

For an overview of those times and how Volcker perceived the choices he was facing, a useful starting point is “An Interview with Paul Volcker,” conducted by Martin Feldstein, which appeared in the Fall 2013 issue of the Journal of Economic Perspectives. Here’s a flavor:

It made a profound impression on me, if nobody else, that Arthur Burns titled his valedictory speech “The Anguish of Central Banking” (Burns 1979). That was a long lament about how, in the economic and political setting of the times, the Federal Reserve, and by extension presumably any central bank, could not exercise enough eserve, and by extension presumably any central bank, could not exercise enough restraint to keep inflation under control. It was a pretty sad story. If you were going to follow that line, you were going to give up, I  guess. I didn’t think you could give up.  If I was in that job, that was the challenge as the Chairman of the Federal Reserve. You inherit a certain challenge …

The favorite word at the time, which was very popular within the Federal Reserve, but I think popular in the academic community generally, was “gradualism.” I don’t quite remember them saying, “Don’t bring it down at all.”But instead, it was “Take it easy. It will be a job of, I don’t know, years, decades, whatever, and you can do it without hurting the economy.” I never thought that was realistic. The inflationary process itself brought so many dislocations, and stresses and strains that you were going to have a recession sooner or later.”

Continue reading here.