DOCSLIB.ORG

The Origins of the Phillips Curve

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
The Origins of the Phillips Curve Working Paper No. 99-02 The origins of the Phillips Curve William F. Mitchell February 1999 Centre of Full Employment and Equity The University of Newcastle, Callaghan NSW 2308, Australia Home Page: http://e1.newcastle.edu.au/coffee Email: [email protected] 1. Introduction The Phillips curve in its various guises promotes a relationship between these macroeconomic aggregates and raises the question of the existence and nature of a trade-off between nominal and real economic outcomes. It has sometimes been cast as an empirical correlation upon which a theoretical edifice was built (Lipsey, 1978; Sawyer, 1983).1 Sawyer (1989: 100) says, “it could be said that the discussion of inflation has been dominated by the notion of the Phillips curve, even if there were several notions of Phillips curve which were sometimes loosely related to the original concept of Phillips.” Tobin (1972: 4) considers Phillips 1958 article to be “probably the most influential macro-economic paper of the last quarter century”. Richard Lipsey (1978: 51) recalls that it was Samuelson who “coined the phrase ‘the Phillips curve’ to describe the relationship between price inflation and the unemployment rate in his “extremely influential text”. The Phillips is, of-course, A.W. Phillips who in his 1958 Economica publication established a relationship between nominal wages growth and the unemployment rate. Paul Samuelson and Robert Solow (1960) were the first to explicitly build on Phillips’s 1958 work and discuss the relationship in terms of a trade-off between price inflation and the unemployment rate. There has been an industry within economic modelling and policy analysis built on these beginnings. What is curious is why it was this paper that spawned such activity given the well-established theoretical and empirical modelling of this relationship prior to Phillips’s 1958 publication (Sawyer, 1989; Leeson, 1998). At the outset, we should be cautious with the terminology. It is typical to refer to the Phillips curve in terms of a trade-off between inflation and unemployment (for example, Gordon, 1984). In terms of modelling the reference is highly misleading. There is not a structural relationship specified in terms of a trade-off between the change in the price level and the unemployment (rate) level in any reasonable macroeconomic model. In fact, as Klein (1985: 151) says “it is the parametric relationship between two reduced form expressions – one for the rate of change of price and one for unemployment, each of which are endogenous variables in a complete system.” If the arguments in the structural relations are the same – specified in terms of initial conditions and exogenous history – then there is an implicit relationship between the two endogenous variables. Klein (1985: 151) concludes, “this is the trade-off relation between price change and unemployment.”2 In this sense, the trade-off summarises the interaction of several factors within 2 the system. This also makes it difficult attempt to explain the Phillips curve as an optimising function. We will return to this issue presently. The usual understanding of the relationship between inflation and unemployment, as presented in the textbooks (for example, Gordon, 1984; McTaggart, Findlay, and Parkin, 1996), ignores the long history of discussion of the relationship. The influential textbooks of the 1960s, like Samuelson’s 1964 sixth edition of Economics: An Introductory Analysis, and Richard Lipsey’s 1963 An Introduction to Positive Economic Science, established the Phillips curve as the centrepiece of macroeconomic policy analysis. But in doing so they stylised the relationship and blurred its history.3 In their zeal to pronounce that the neoclassical synthesis represented an end to ideological division in economics, the textbooks not only obscured critical developments in inflation-unemployment analysis but also left the door open for the subsequent monetarist takeover. Economies and economics to this day are still suffering from the policy reversals that accompanied monetarism in the 1970s. In this paper, three interrelated issues are discussed. First, was the Phillips curve pre-Keynesian? What relevance is the literature on the relationship between inflation and unemployment, which was, published prior to Phillips (1958)? Second, we examine that the work prior to Phillips (1958) linking wage and price adjustment, which certainly considered inflationary expectations to be important. Further, in this period there was significant research published which considered that the relationship between the change in money wages (prices) and the unemployment rate was not stable over a long time period The stability properties that Phillips (1958) claimed became the foundation of macroeconomic policy in the 1960s. The two strands of research lead naturally to a consideration of the Friedman-Phelps expectations-augmented Phillips curve, which played on the lack of an expectations term and the assumed stability of Phillips’ own model. Third, is it valid to see the expectations-augmented Phillips curve, as represented in the textbooks, as a development of the work of Phillips (1958)? What was the basis of the Monetarist resurgence in the late 1960s? The textbook history of the Phillips curve usually develops five sequential versions of the relationship (Humphrey, 1985). The lack of context and history in the textbook treatment leaves it open for one to interpret the sequence as representing a paradigm with increasing theoretical and empirical content. This chapter argues that there is no such sequence. The expectations-augmented Phillips curve, in fact, represented a paradigmatic change to pre- Keynesian thinking. It also did not fully embrace the richness of pre-Keynesian discussion on the relationship between price changes and the unemployment rate. Sawyer (1989: 105) says, “there 3 are several distinct (and sometimes contradictory) meanings which have been attached to the term Phillips curve.” The five models usually included in the textbook sequence are (for example, Frisch, 1983; Gordon, 1984; Wells, 1995; McTaggart, Findlay, and Parkin, 1986): 1. A model of the relationship between the change in nominal wages and the unemployment rate where excess demand in the labour market drives the price variable changes (Phillips, 1958). 2. With fixed markups over costs, the change in prices can replace the change in wages. This was the model first published by Solow and Samuelson (1960) and provided the policy menu trade-off between inflation and unemployment. 3. A range of shift-variables can be added to either model. Various variables were added to the models including trade union bargaining power and strike activity, past price inflation, unemployment dispersion, and demographic factors (for example, Hines, 1964). 4. The biggest development was seen to be the expectations-augmented Phillips curve of Friedman (1968) and Phelps (1967, 1968). This model had major policy implications and spearheaded the resurgence of pre-Keynesian macroeconomic thinking in the form of Monetarism. The concept of the natural rate of unemployment (NRU) became central to the idea that the trade-off between inflation and unemployment captured in the Phillips curve was in fact a trade-off between unemployment and unexpected inflation. Once expectations are realised as workers gain more information the trade-off vanishes. At this point there is only one unemployment rate consistent with stable inflation – the NRU. 5. The expectations-augmented Phillips curve led to the New Classical representation, which presumes that the labour market is continuously in equilibrium. The discrepancies between the actual unemployment rate and the NRU are exclusively due to misperceptions of the actual inflation rate. When expectations are realised the economy is always at the NRU and any unemployment is chosen. Combined with the assumption that expectations are formed in a rational manner (Muth, 1961), then misperceptions are only random variables. Thus, tradeoffs that are observed arise because of random shocks to the system, which are beyond the scope of policy (for example, Lucas, 1972; Sargent, 1973) 4 It is possible to conceive of a further development in the form of New Keynesian Macroeconomics, which emphasise “microfoundations of imperfectly competitive labour markets and product markets” (Carlin and Soskice, 1990: vi) and introduces hysteresis and feedback effects. However, in terms of the popular textbooks, this development, while welcome, has not yet become standard faire. In terms of what we might call the “textbook treatment of inflation and unemployment” - Models 4 and 5 outlined above represent a major theoretical break from the previous three versions of the Phillips curve. The former conceptions are based on a disequilibrium notion of the relationship between inflation and unemployment in that they model the adjustment of prices and wages to some labour market imbalance between supply and demand. The causality is strictly from the labour market disequilibrium to the price adjustment function. There is no presumption that full employment is inevitable or a tendency of a capitalist monetary economy. The Friedman-Phelps story and the later developments under the rubric of rational expectations and the New Classical School represent a major break from the previous depiction of the relationship because it is based on a market clearing relation. The causality is reversed. Unemployment is considered to be voluntary and the outcome of optimising
Load more

Recommended publications
  • Karl Brunner and UK Monetary Debate
    Finance and Economics Discussion Series Divisions of Research & Statistics and Monetary Affairs Federal Reserve Board, Washington, D.C. Karl Brunner and U.K. Monetary Debate Edward Nelson 2019-004 Please cite this paper as: Nelson, Edward (2019). \Karl Brunner and U.K. Monetary Debate," Finance and Economics Discussion Series 2019-004. Washington: Board of Governors of the Federal Reserve System, https://doi.org/10.17016/FEDS.2019.004. NOTE: Staff working papers in the Finance and Economics Discussion Series (FEDS) are preliminary materials circulated to stimulate discussion and critical comment. The analysis and conclusions set forth are those of the authors and do not indicate concurrence by other members of the research staff or the Board of Governors. References in publications to the Finance and Economics Discussion Series (other than acknowledgement) should be cleared with the author(s) to protect the tentative character of these papers. Karl Brunner and U.K. Monetary Debate Edward Nelson* Federal Reserve Board November 19, 2018 Abstract Although he was based in the United States, leading monetarist Karl Brunner participated in debates in the United Kingdom on monetary analysis and policy from the 1960s to the 1980s. During the 1960s, his participation in the debates was limited to research papers, but in the 1970s, as monetarism attracted national attention, Brunner made contributions to U.K. media discussions. In the pre-1979 period, he was highly critical of the U.K. authorities’ nonmonetary approach to the analysis and control of inflation—an approach supported by leading U.K. Keynesians. In the early 1980s, Brunner had direct interaction with Prime Minister Margaret Thatcher on issues relating to monetary control and monetary strategy.
    [Show full text]
  • Book Review: “Roy Harrod” by Esteban Pérez
    BOOK REVIEW: “ROY HARROD” BY ESTEBAN PÉREZ CALDENTEY REVIEWED BY KEVIN D. HOOVER* * Economics, Duke University. Contact: [email protected] This “preprint” is the accepted typescript of a book review that is forthcoming in revised form, after minor editorial changes, in the Journal of the History of Economic Thought (ISSN: 1053-8372), issue TBA. Copyright to the journal’s articles is held by the History of Economics Society (HES), whose exclusive licensee and publisher for the journal is Cambridge University Press (https://www.cambridge.org/core/journals/journal-of-the- history-of-economic-thought). This preprint may be used only for private research and study and is not to be distributed further. The preprint may be cited as follows: Hoover, Kevin D. Review of “Roy Harrod” by Esteban Pérez Caldentey. Journal of the History of Economic Thought (forthcoming). Preprint at SocArXiv, osf.io/preprints/socarxiv Review of Esteban Pérez Caldentey’s Roy Harrod (Palgrave Macmillan 2019; pp. xix + 455) ISBN: 978-1-4039-9633-6 Kevin D. Hoover Duke University* In the final chapter of his Roy Harrod, Esteban Pérez Caldentey provides a table comparing Harrod’s JSTOR-citation count with those of some of his famous contemporaries –Keynes, Hayek, Hicks, Robinson inter alia. Harrod is in the middle to low side for the group of eleven economists in the table. Still, most of us would envy Harrod’s overall score. Harrod’s citations peak in the 1960s. And while citations to Harrod continue, a quick look at JSTOR shows that 63 percent of his citations are either to the Harrod-Domar model, a construction that, as Pérez Caldentey rightly notes, is not really Harrod’s, or to Harrod-neutral technical progress, which is not essentially important in Harrod’s own works and is mainly a convenient name for something that would have found a name, even if Harrod had never had considered the concept.
    [Show full text]
  • The Institutionalist Reaction to Keynesian Economics
    Journal of the History of Economic Thought, Volume 30, Number 1, March 2008 THE INSTITUTIONALIST REACTION TO KEYNESIAN ECONOMICS BY MALCOLM RUTHERFORD AND C. TYLER DESROCHES I. INTRODUCTION It is a common argument that one of the factors contributing to the decline of institutionalism as a movement within American economics was the arrival of Keynesian ideas and policies. In the past, this was frequently presented as a matter of Keynesian economics being ‘‘welcomed with open arms by a younger generation of American economists desperate to understand the Great Depression, an event which inherited wisdom was utterly unable to explain, and for which it was equally unable to prescribe a cure’’ (Laidler 1999, p. 211).1 As work by William Barber (1985) and David Laidler (1999) has made clear, there is something very wrong with this story. In the 1920s there was, as Laidler puts it, ‘‘a vigorous, diverse, and dis- tinctly American literature dealing with monetary economics and the business cycle,’’ a literature that had a central concern with the operation of the monetary system, gave great attention to the accelerator relationship, and contained ‘‘widespread faith in the stabilizing powers of counter-cyclical public-works expenditures’’ (Laidler 1999, pp. 211-12). Contributions by institutionalists such as Wesley C. Mitchell, J. M. Clark, and others were an important part of this literature. The experience of the Great Depression led some institutionalists to place a greater emphasis on expenditure policies. As early as 1933, Mordecai Ezekiel was estimating that about twelve million people out of the forty million previously employed in the University of Victoria and Erasmus University.
    [Show full text]
  • AN INVESTIGATION INTO the FORMATION of CONSENSUS AROUND NEOCLASSICAL ECONOMICS in the 1950S
    THE ECLIPSE OF INSTITUTIONALISM? AN INVESTIGATION INTO THE FORMATION OF CONSENSUS AROUND NEOCLASSICAL ECONOMICS IN THE 1950s A Dissertation Submitted to the Temple University Graduate Board In Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy By Julie Ragatz May, 2019 Committee Members: Dr. Miriam Solomon, Department of Philosophy Dr. David Wolfsdorf, Department of Philosophy Dr. Dimitrios Diamantaras, Department of Economics Dr. Matthew Lund, Department of Philosophy, Rowan University, External Reader © Copyright 2019 by Julie Ragatz Norton All Rights Reserved ii ABSTRACT The Eclipse of Institutionalism? An Investigation into the Formation of Consensus Around Neoclassical Economics in the 1950s Julie Ragatz Norton Temple University, 2019 Doctoral Advisory Committee Chair: Dr. Miriam Solomon As the discipline of economics professionalized during the interwar period, two schools of thought emerged: institutionalism and neoclassical economics. By 1954, after the publication of Arrow and Debreu’s landmark article on general equilibrium theory, consensus formed around neoclassical economics. This outcome was significantly influenced by trends in the philosophy of science, notably the transformation from the logical empiricism of the Vienna Circle to an ‘Americanized’ version of logical empiricism that was dominant through the 1950s. This version of logical empiricism provided a powerful ally to neoclassical economics by affirming its philosophical and methodological commitments as examples of “good science”. This dissertation explores this process of consensus formation by considering whether consensus would be judged normatively appropriate from the perspective of three distinct approaches to the philosophy of science; Carl Hempel’s logical empiricism, Thomas Kuhn’s account of theory change and Helen Longino’s critical contextual empiricism.
    [Show full text]
  • Civil Law, Quadruple Entry System and the Presentation Format Of
    Civil Law, Quadruple Entry System and the Presentation Format of National Accounts Kazusuke Tsujimura Masako Tsujimura July 20, 2008 ver.4.1 September 11, 2007 ver.1.1 K.E.O. DISCUSSION PAPER No. 109 Abstract One of the advantages of Roman law is simplicity. The quadruple entry system based on it gives a rigorous accounting framework to the system of national accounts when it is combined with historical cost accounting. Such a system retains all the desirable features of modern accounting: intra-sector, inter-sector and intertemporal consistency. The remarkable peculiarity of the system of national accounts is that it is the only statistics that depicts the interrelations between financial and real economy. The proposed scheme of this paper presents flows and stocks in an integrated framework, which makes it possible to clarify the relationship between savings and wealth and, therefore the relationship between income and wealth. This will enhance understanding of the interactivity between financial and real phenomena such as financial bubbles, crashes and depressions well within the domain of the system. Key Words System of national accounts; Historical cost accounting; Concept of income; Capital gain/loss JEL Classification Numbers A12; C82; E01 Acknowledgement The authors wish to thank Emeritus Professor Yoshimasa Kurabayashi of Hitotsubashi University, a former director of the United Nations Statistical Office, for his detailed and valuable comments to the earlier version of the paper. 1. Introduction The system of social accounting1 inclusive of the system of national accounts (SNA) has developed based on various fields of studies including economics, law and accounting. From the viewpoint of jurisprudence, the social accounting system stems from the civil code of Roman law, especially the Corpus Juris Civilis of Emperor Justinian2.
    [Show full text]
  • The Transformation of Economic Analysis at the Federal Reserve During the 1960S
    The Transformation of Economic Analysis at the Federal Reserve during the 1960s by Juan Acosta and Beatrice Cherrier CHOPE Working Paper No. 2019-04 January 2019 The transformation of economic analysis at the Federal Reserve during the 1960s Juan Acosta (Université de Lille) and Beatrice Cherrier (CNRS-THEMA, University of Cergy Pontoise) November 2018 Abstract: In this paper, we build on data on Fed officials, oral history repositories, and hitherto under-researched archival sources to unpack the torturous path toward crafting an institutional and intellectual space for postwar economic analysis within the Federal Reserve. We show that growing attention to new macroeconomic research was a reaction to both mounting external criticisms against the Fed’s decision- making process and a process internal to the discipline whereby institutionalism was displaced by neoclassical theory and econometrics. We argue that the rise of the number of PhD economists working at the Fed is a symptom rather than a cause of this transformation. Key to our story are a handful of economists from the Board of Governors’ Division of Research and Statistics (DRS) who paradoxically did not always held a PhD but envisioned their role as going beyond mere data accumulation and got involved in large-scale macroeconometric model building. We conclude that the divide between PhD and non-PhD economists may not be fully relevant to understand both the shift in the type of economics practiced at the Fed and the uses of this knowledge in the decision making-process. Equally important was the rift between different styles of economic analysis. 1 I.
    [Show full text]
  • From the Progressives to the Institutionalists: What the First World War Did and Did Not Do to American Economics
    From The Progressives to The Institutionalists: What the First World War Did and Did Not Do to American Economics Thomas C. Leonard Review essay on Rutherford, Malcolm (2011) The Institutionalist Movement in American Economics, 1918-1947: Science and Social Control, Cambridge University Press, Cambridge, UK, 410 pp. ISBN: 9781107006997. $95. 1. Introduction Let me begin by recognizing Malcolm Rutherford’s achievement here. In 1998, Geoffrey Hodgson, writing in the Journal of Economic Literature, could say that we lacked an adequate history of Institutionalist Economics. No longer. Thanks to Rutherford’s long labors in the archives, begun before the 21st century was, we now have a splendid history of Institutionalist Economics, and more generally, of the Institutionalist movement, and of American economics between the wars. This is a meticulous, carefully crafted, brick by brick reconstruction of an important but misunderstood era in economic and social thought. At its very best moments, you feel like you are peering into a lost world. Rutherford has produced the new standard against which future contributions will be measured, and also to which historians of American economics will be obliged to respond. Our charge in this symposium is to respond. 2. What the book does The structure of the book is straightforward: we are introduced to the founding group and its students, and we are given compelling portraits of some neglected but important figures, Walton Hamilton and Morris Copeland, who stand in for the first and second generations, respectively. Next we proceed to the core of the book, the professional milieu of the Institutionalist economists, the “personal, institutional, and programmatic bases” of the movement in the Institutionalist academic strongholds – Chicago, Wisconsin, Columbia, Amherst, Brookings, and the National Bureau.
    [Show full text]
  • The Chancellor Must End Austerity Now – It Is Punishing an Entire Generation
    Stiglitz, J., Ha-Joon, C., Graeber, D., Pettigor, A., Dorling, D., Sassen, S. et al. (2017) The chancellor must end austerity now – it is punishing an entire generation, letter, The Guardian, November 19th, https://www.theguardian.com/society/2017/nov/19/the-chancellor-must-end-austerity- now-it-is-punishing-an-entire-generation The chancellor must end austerity now – it is punishing an entire generation Alongside the human costs, cuts have hurt our economy, and we’ve now reached a dangerous tipping point, say Joseph Stiglitz, Ha-Joon Chang and 111 others Public sector workers protest against cuts. Photograph: Oli Scarff/Getty Images Letters, Sunday 19 November 2017 19.11 GMT Seven years of austerity has destroyed lives. An estimated 30,000 excess deaths can be linked to cuts in NHS spending and the social care crisis in 2015 alone. The number of food parcels given to impoverished Britons has grown from tens of thousands in 2010 to over a million. Children are suffering from real-terms spending cuts in up to 88% of schools. The public sector pay cap has meant that millions of workers are struggling to make ends meet. 1 Alongside the mounting human costs, austerity has hurt our economy. The UK has experienced its weakest recovery on record and suffers from poor levels of investment, leading to low productivity and falling wages. This government has missed every one of its own debt reduction targets because austerity simply doesn’t work. The case for cuts has been grounded in ideology and untruths. We’ve been told public debt is the outcome of overspending on public services rather than bailing out the banks.
    [Show full text]
  • Microfoundations?
    MICROFOUNDATIONS? J.E King* Department of Economics and Finance La Trobe University Victoria 3086 Australia [email protected] September 2008 *Discussions with Peter Kriesler first set me thinking about this question; I am also grateful to Sheila Dow, Mike Howard, Tee-Hee Jo, Fred Lee, Ian MacDonald, Kurt Rothschild, Michael Schneider and Tony Thirlwall for comments on an earlier draft of this paper. None of them is implicated in errors of fact or judgement. 1 Abstract It is widely believed by both mainstream and heterodox economists that macroeconomic theory must be based on microfoundations (MIFs). I argue that this belief is unfounded and potentially dangerous. I first trace the origins of MIFs, which began in the late 1960s as a project and only later hardened into a dogma. Since the case for MIFs is derived from methodological individualism, which itself an offshoot of the doctrine of reductionism, I then consider some of the relevant literature from the philosophy of science on the case for and against reducing one body of knowledge to another, and briefly discuss the controversies over MIFs that have taken place in sociology, political science and history. Next I assess a number of arguments for the need to provide macrofoundations for microeconomics. While rejecting this metaphor, I suggest that social and philosophical foundations (SPIFs) are needed, for both microeconomics and macroeconomics. I conclude by rebutting the objection that ‘it’s only a word’, suggesting instead that foundational metaphors in economics are positively misleading and are therefore best avoided. Convergence with the mainstream on this issue has gone too far, and should be reversed.
    [Show full text]
  • Paul Samuelson's Ways to Macroeconomic Dynamics
    A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Boianovsky, Mauro Working Paper Paul Samuelson's ways to macroeconomic dynamics CHOPE Working Paper, No. 2019-08 Provided in Cooperation with: Center for the History of Political Economy at Duke University Suggested Citation: Boianovsky, Mauro (2019) : Paul Samuelson's ways to macroeconomic dynamics, CHOPE Working Paper, No. 2019-08, Duke University, Center for the History of Political Economy (CHOPE), Durham, NC This Version is available at: http://hdl.handle.net/10419/196831 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu Paul Samuelson’s Ways to Macroeconomic Dynamics by Mauro Boianovsky CHOPE Working Paper No. 2019-08 May 2019 Electronic copy available at: https://ssrn.com/abstract=3386201 1 Paul Samuelson’s ways to macroeconomic dynamics Mauro Boianovsky (Universidade de Brasilia) [email protected] First preliminary draft.
    [Show full text]
  • Roy F. Harrod and the Interwar Years1
    Roy F. Harrod and the Interwar Years1 E. Roy Weintraub They are the saints living among us, these constructors of the historical record: William Barber on Irving Fisher, Donald Moggridge on John Maynard Keynes, Werner Stark on Jeremy Bentham, John Whitaker on Alfred Marshall, Donald Winch on James Mill. To this list we now need to add Daniele Besomi on Sir Roy Harrod. In a review of Michael Bernstein’s A Perilous Progress, Robert Nelson (2003, 376) notes that “Economists first clearly demonstrated their public importance by coming to Washington in large numbers in order to help in overseeing the vast output of armaments and other supplies that was the greatest U.S. contribution to the Allied victory in World War II. … [so we can see the] golden age of economics as occurring from 1950 to 1970. With the creation of the Council of Economic Advisors (CEA) in 1946, economists became the only professional body with a legal guarantee of access to the president’s ear.” Economists became differently important in the post World War II era. The economists who defined that period, individuals in their middle adulthood, were students and young adults in the 1930s, and so they, with all the natural structuring of autobiographical memories (Weintraub 2005), recalled the 1930s to be the years of high theory, the most important period in the history of economics. Whether or not that makes historical sense today, the role that that decade has 1 come to play in the collective imagination of modern historians of economics cannot be underestimated. We have a number of entry points as historians to those years.
    [Show full text]
  • Institutional Economics
    INSTITUTIONAL ECONOMICS AT COLUMBIA UNIVERSITY Malcolm Rutherford University of Victoria (This Draft: March 2001) This paper draws on archival work using the James Bonbright Papers, J. M. Clark Papers, Joseph Dorfman Papers, Carter Goodrich Papers, Robert Hale Papers, and Wesley Mitchell Papers, all at the Rare Book and Manuscript Library, Columbia University, the Arthur F. Burns Papers at the Eisenhower Library, Abilene, Kansas, and the John R. Commons Papers at the State Historical Society of Wisconsin. My thanks to Lowell Harriss, Aaron Warner, Eli Ginzberg, Donald Dewey, Mark Perlman, Daniel Fusfeld, Mark Blaug, and Walter Neale for sharing their recollections of Columbia. Thanks also to my research assistant Cristobal Young. Any errors are my responsibility. This research has been supported by a Social Science and Humanities Research Council of Canada research grant (project # 410-99-0465). 1 1. Introduction In a number of recent papers I have attempted to outline the nature of the institutionalist movement in American economics in the interwar period (Rutherford 2000a, 2000b, 2000c). At that time institutionalism was a very significant part of American economics. In terms of research output and the production of graduate students, the main centers for institutionalism were the university of Chicago (until 1926 and the departure of J. M. Clark), the University of Wisconsin, the Robert Brookings Graduate School (which existed only briefly between 1923 and 1928), and, after the arrival of Wesley Mitchell in 1913, and J. M. Clark in 1926, Columbia University. Columbia University became the academic home of a large concentration of economists of institutionalist leaning, and other Schools and Departments in the University, particularly Business, Law, Sociology, and Philosophy, also contained many people of similar or related persuasion.
    [Show full text]