TLW's Economistscope (tm)
By T.L. Winslow (TLW), the Historyscoper™
© Copyright by T.L. Winslow. All Rights Reserved.
Original Pub. Date: June 25, 2013. Last Update: June 25, 2015.
Westerners are not only known as history ignoramuses, but double dumbass history ignoramuses when it comes to the history of economic thought. Since I'm the one-and-only Historyscoper (tm), let me quickly bring you up to speed before you dive into my Master Historyscope.
Economics (Gk. "oikos" + "nomos" = house + rules) is a sprawling field that involves all monetary interactions of society, incl. what they did, what they are doing, what they should do, and what they shouldn't. It is subdivided into Macroeconomics and Microeconomics. Since 1910 the subfield of Econometrics has been gaining steam, esp. after the advent of computers. In short, economics deals with the entire range of human activity that involves money, making it one of the most ambitious intellectual fields, so ambitious that even mastering its history is a great challenge and adventure, yes, you've made the economic decision to come here, and hopefully will make the economic decision to spend mucho time here, no credit check required, you can use your existing number and it's going to cost you less, call 1-800-Economistscope, connect to life.
To give equal time to the Bible, 1 Timothy 6:10 contains the soundbyte: "For the love of money is the root of all evil." Also the soundbyte: "You cannot serve God and Mammon." (Matthew 6:24) It's not necessarily evil just to study money? The Bible actually has many passages about money and wealth, with the message that it's not a worthy goal in itself because you can't take it with you.
About 700 B.C.E. Greek (Boeotian) poet Hesiod writes Works and Days, describing Greek agriculture as based on the scarcity of resources requiring the depositing and lending of grain, providing "directions for the whole business of family economy in the country" (John Claudius Loudon); "Through work men grow rich in flocks and substance."
About 360 B.C.E. Greek soldier-historian Xenophon (Gr. "foreign voice") of Athens (-431 to -354) writes Oeconomicus, about household mgt. and agriculture, becoming the first Greek text on economics.
About 360 B.C.E. Greek brain man Plato (-428 to -347) writes The Republic, which postulates an ideal state with philosopher kings "who love the sight of truth" (475c), at the top of a class society of alpha (rulers) (reason), beta (warriors) (spirit), delta (workers) (appetite) people; "Until philosophers rule as kings or those who are now called kings and leading men genuinely and adequately philosophize, that is, until political power and philosophy entirely concide, while the many natures who at present pursue either one exclusively are forcibly prevented from doing so, cities will have no rest from evils... nor, I think, will the human race" (473c-d); contains references to specialization of labor and production; he becomes the first known advocate of the Credit Theory of Money, which claims that money originated as a unit of account for debt, and that money creation involves the simultaneous creation of money and debt, meaning that they're really the same thing.
About 330 B.C.E. Greek brain man Aristotle (-384 to -322) (Plato's student) writes Politics, a critique of Plato's advocacy of rule by philosopher-kings, analyzing monarchy, aristocracy, constitutional govt., tyranny, oligarchy, and democracy; disses Plato's common ownership of property because of the "wickedness of human nature", with the soundbyte: "It is clearly better that property should be private, but the use of it common, and the special business of the legislator is to create in men this benevolent disposition"; dumps Plato's credit theory of money for Metallism, the theory that money derives its value from the purchasing power of the commodity upon which it is based, is only a medium of exchange, an "instrument", and on its own "it is worthless... not useful as a means to any of the necessities of life", but warns about obsession with money accumulation, praising "wealth-getting" for one's household as "necessary and honorable", while dissing the massing of money via retail trade as "justly censured, for it is dishonorable", also dissing usury and monopolies.
In 27 B.C.E. the Roman Empire was founded on the ruins of the Roman Republic, enjoying military successes that brought great wealth and powah, giving Romans a standard of living that was only achieved again in 17th-18th cent. Europe. Too bad, famine, civil war, and barbarian invasions weakens it until it becomes kaput in 476 C.E., throwing Europe into Da Dark Ages, he said it was guaranteed acceptance, no medical exam, can't be turned down because of your health.
In 750 B.C.E. the Islamic Golden Age begins, starting out living off the loot and protection money (jizya) of conquered infidels, until the Mongols bloodly end it with the conquest of Baghdad in 1258.
In 1265 Italian Roman Catholic theologian Thomas Aquinas (1225-74) pub. Summa Theologica (Summa Totius Theologiae Tripartita) (3 parts) ("On God", "On Man's Moral Life", "On Christ") (1265-73) ("Credo ut intelligam"); synthesizes the works of Aristotle and his followers Averroes, Avicenna et al. with those of Church Fathers St. Augustine et al., and even absorbs the teachings of Jewish thinkers Moses Maimonides, Avicebron et al.; contains the pure ambrosia of Roman Catholic Systematic Theology, which ends up capturing the Church's heart to modern times; discusses the concept of a just price; too bad, the 3rd part is left unfinished?; "If therefore angels are not composed of matter and form, as was said above, it follows that it would be impossible to have two angels of the same species... The motion of an angel can be continuous or discontinuous as it wishes... And thus an angel can be at one instant in one place, and at another instant in another place, not existing at any intermediate time."
In 1295 Duns, Scotland-born brain man John Duns Scotus (1266-1308) pub. Sententiae, in which he tries to refine Aquinas' just price, defending the role of merchants in transporting and facilitating goods, but since he was a dunce we'll move on.
In 1299 the Farolfi Ledger of Giovanno Farolfi & Co. of Florence becomes the first known double-entry bookkeeping ledger, allowing modern banking and capitalism to bloom in 14th cent. Italy.
On Mar. 19, 1406 Tunis-born Muslim Arab historian Abd al-Rahman (Abdul-Rahman) Ibn Khaldun (Khaldoun) (b. 1332) dies in Cairo, leaving The Muqaddimah (1377) (Intro. or Prolegomena to History), about the necessary preconditions of a just govt., an introduction to his planned magnus opus on world history "Kitab al-Ibar", becoming the first book on the philosophy of history, discussing historiography as a science and pioneering cultural history, warning against systematic bias, becoming the earliest known work to critically examine military history, pioneering several concepts incl. the labor theory of value and the division of labor (asabiyya), supply-side economics and the Laffer Curve, claiming that humans developed from "the world of the monkeys" after Creation "started out from the minerals and progressed in an ingenious, gradual manner to plants and animals", exposing alchemy as a fraud, pioneering climate theory; calls Aristotle the "First Teacher"; too bad, he accepts slavery as okay with Islam, with the soundbyte: "The Negro nations are, as a rule, submissive to slavery, because (they) have little that is (essentially) human and possess attributes that are quite similar to those of dumb animals." According to Austrian economist Joseph Alois Schumpeter (1883-1950) in History of Economic Analysis (1954), the Great (Schumpeterian) Gap sees economic thought die out from the end of Greco-Roman civilization about 700 C.E. until Thomas Aquinas about 1250 C.E. In 1964 Joseph John Spengler (1902-91) pub. Economic Thought of Islam: Ibn Khaldun, resurrecting the memory of Arab Muslim brain man Ibn Khaldun of Tunisia (1332-1406), who about 1400 wrote about the law of supply and demand, and introduced the Khaldun-Laffer Curve, which shows that tax revenue increases as tax rates increase, then decreases as it burdens the producers, making him vie with Adam Smith as the Father of Economics, if you're an Islamophile, although why the Muslim World dropped out of the economic thought biz and let the West pass them standing still needs to be er, scoped.
In 1382 French philosopher Nicole Oresme (Nicolas d'Oresme) (1320-82) died, leaving Treatise on the Origin, Nature, Law, and Alterations of Money.
In the 16th cent. the Jesuit School of Salamanca in Spain develops economic theory to a high level, only to be forgotten until the 20th cent., when their similarity to the Austrian School of Economics turns on Joseph Alois Schumpeter in his "History of Economic Analysis" (1954).
The original I Have a Dream? In 1516 English humanist statesman Sir Thomas More (1478-1535) pub. Utopia (Gr. "no place" - pun on "good place"); Amerigo Vespucci crewmember Ralph Hythlodaye tells about his visit to an island where land is owned in common by the snobs (with plenty of slaves for the menial work), everybody has a job, and there is universal education and religious toleration, contrasting this perfect society with the hellhole of England; it eventually spawns the English Poor Laws, and becomes the father of Communism?; influences Nostradamus?; since More wears an itchy-scratchy goat hair shirt for most of his life, judge it by the source?
In 1517 Polish Renaissance mathematician-astronomer Nicolaus Copernicus (1473-1543) turns economist and pub. the first known argument for the Quantity Theory of Money. In 1519 he pub. the first known version of Gresham's Law, that bad money drives out good, which is 1858 is named after English financier Sir Thomas Gresham (1519-79) by Scottish economist Henry Dunning Macleod (1821-1902).
In 1568 French political philosopher Jean Bodin (1530-96) pub. Reply to Malestroit, the first known analysis of the phenomenon of economic inflation, claiming that it is being caused by importation of silver and gold from South Am., making him an early proponent of the Quantity Theory of Money.
In 1598 French mercantilist economist Barthelemy (Barthélemy) de Laffemas (1545-1612) pub. Treasures and Riches to Put the State in Splendor, denouncing those who pooh-pooh the purchase of French silks because the industry gives the poor a livelihood, becoming the first pub. of Underconsumption Theory, which is later taken up and refined by John Maynard Keynes.
In 1605 Flemish Jesuit theologian Leonardus Lessius (1554-1623) pub. On Justice and Law (De Iustitia et Iure), which becomes big hit, going through 20 eds. by the end of the cent., becoming the first deep moral theological study of economics since St. Thomas Aquinas, claiming that his just price approach is no longer workable, and giving ethical solutions to moral dilemmas faced in business and finance; "By its nature, money is indeed fruitless. Nevertheless, through the industry of greedy individuals it surpasses all living things in productivity"; compares avarice to the fruitfulness of the hare, with the soundbyte: "At one and the same moment it [money] is lent out for usurious profit, bears fuit, and is impregnated once again"; first statement of how the price of an insurance contract depends on the risk of the event insured against?
In 1615 French economist Antoine de Montchretien (1576-1621) pub. Traite de l'Economie Politique, with the first use of the term "political economy" in its title, dissing Aristotle for claiming that politics is independent of economics and other social activities, and arguing that wealth acquisition promotes political stability, becoming the official beginning of Mercantilism, the doctrine that govt. control of foreign trade to maintain a positive balance of trade is important to ensure military security.
In 1622 English merchant and mercantilist economist Edward Misselden (1608-54) pub. Free Trade, or the Means to Make Trade Flourish, which argues against regulated companies and joint-stock associations, bringing the reply The Maintenance of Free Trade, According to the Three Essential Parts of Traffic, Namely Commodities, Moneys, and Exchange of Moneys, by Bills of Exchanges for Other Countries, by rival Gerard Malynes, which argues against free exchange as under the control of bankers, causing him next year to pub. The Circle of Commerce, or the Balance of Trade, in Defense of Free Trade, Opposed to Malynes' "Little Fish and His Great Whale", and Poised Against them in the Scale, arguing that internat. money exchange and fluctuations in the exchange rate depend upon internat. trade and not bankers, and that the state should regulate trade to insure export surpluses, claiming that it's not necessarily bad to export gold because the commodities purchased can be reexported at a profit; Malynes replies with The Center of the Circle of Commerce (1623).
In 1641 English merchant-economist Thomas Mun (1571-1641) dies, leaving England's Treasure by Foreign Trade (pub. in 1664), containing several arguments for mercantilism, becoming the first to pub. a theory of the balance of trade.
In Aug. 1661 French king Louis XIV is lavishly entertained at the magnificent cheateau of Vaux-le-Victomte by his super-rich rival and supt. of finance (since 1653) (who had lent large sums to the treasury during the War of the Fronde) Nicolas Fouquet, Marquis de Belle-Isle, Vicomte de Melun et Vaux (1615-80), during which Moliere's "Les Facheux" debuts, after which Louis decides it's time to get rid of this wannabe Richelieu who can afford to buy anything, first getting him to sell his office of procureur gen., along with its protective privileges, then getting him arrested three weeks after the banquet by d'Artagnan of musketeer fame, then putting him through a 3-year stooge trial, where Louis' up-and-coming adviser Jean-Baptiste Colbert (1619-83) claims a royal revenue deficit of 22M francs, suppressing papers proving his innocence, and despite public sympathy he is convicted of embezzlement for borrowing Louis XIV's Hope Diamond for a state ball, and sentenced to life banishment, then life in Pignerol Prison, leaving the soundbytes: "The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the least possible amount of hissing", and "It is simply and solely the abundance of money within a state which makes the difference in its grandeur and power" - this better work or i'm fouquet?
In 1662 Romsey, England-born political economist-scientist Sir William Petty (1623-87) pub. A Treatise of Taxes and Contributions, founding statistical mathematics, followed by Verbum Sapienti (1691), and Quantulumcunque Concerning Money (1695), which apply the rational scientific tradition of Francis Bacon to economics, requiring that it only use measurable phenomena and seek quantitative precision, coining the term "political arithmetic", and becoming the first scientific economist.
In 1668 English merchant-politician Sir Josiah Child (1630-99) (gov. of the East India Co. in 1677) pub. Brief Observations Concerning Trade and the Interest of Money, which advocates free trade as long as the govt. keeps the interest rate low, with the reservation that the mother country has the sole right of trade with her colonies.
In 1684 Austrian civil servant Philipp von Hornigk (Hörnigk) (Hornick) (Horneck) (1640-1714) pub. Austria Over All, If She Only Will (Osterreich Uber Alles, Wann es Nur Will), laying out the policy of mercantilism, stressing nationalism and self-sufficiency.
In 1689 Somerset-born English philosopher John Locke (1632-1704) anon. pub. Second Treatise on Civil Government, which defines property as a person's life, liberty, and wealth; "God hath given the world to men in common... Yet every man has a property in his own person. The labour of his body and the work of his hands we may say are properly his. Whatsoever, then, he removes out of the state that nature hath provided and left it in, he hath mixed his labour with, and joined to it something that is his own, and thereby makes it his property." In 1691 he pub. Some Considerations on the Consequences of the Lowering of Interest and the Raising of the Value of Money, which claims that the "price of any commodity rises or falls, by the proportion of the number of buyers and sellers... [which] holds universally in all things that are to be bought and sold."
In 1691 English Treasury official Sir Dudley North (1641-91) anon. pub. Discourses upon Trade, disputing the claim that a nation needs a favorable balance of trade, arguing that trade benefits both sides, promotes the division of labor and specialization, and increases wealth for all; also claims that prices determine themselves and that govt. interference is bad.
In 1694 British Tory MP Charles Davenant (1656-1714) pub. An Essay on the Ways and Means of Supplying the War, which attacks long-term borrowing as detrimental to trade, and disses land taxation as inequitable, i.e., a threat to the gentry. In 1696 he pub. An Essay on the East India Trade, which claims that England is a net exporter of goods imported from India, hence imports shouldn't be restricted, else the hated Dutch would fill the gap, becoming the first to understand the basic concepts of consumer demand and perfect competition; he also pub. Discourses on the Public Revenues and on the Trade of England, Part 1, which argues against long-term borrowing as a way to fund govt. expenditures; "High taxation for debt service was a burden on trade, industry, and land."
In 1695 after French economist Pierre Le Pesant, Sieur de Boisguillebert (Boisguilbert) (1646-1714) pub. a plea for change titled Le Detail de la France; la Cause de la Diminution de ses Biens et la Facilite du Remede, containing the first notion of an economical market and becoming the first economist to question the economic policy of mercantilism and value the wealth of a country by its production and exchange of goods instead of the amount of money it has, new (since 1695) Cambrai archbishop Francois de Salignac de la Mothe Fenelon (1651-1715) writes a letter to Louis XIV's pillow mate Francois d'Aubigne (d'Aubigné), Marquise de Maintenon (1635-1703) arguing for an end to Colbert's mercantilist (I win, you lose) system along with Louis' wars and protectionism in favor of win-win free enterprise, free trade, and progressive taxation; Louis bites a little and introduces the capitation, the first graduated tax.
In 1707 English Anglican bishop William Fleetwood (1656-1723) pub. Chronicum Preciosum: Or, An Account of English Money, the Price of Corn and Other Commodities, for the Last 600 Years (London), containing the first calculation of a cost-of-living index, finding that £5 in 1440 would buy the same as £28-£30 then; cited by Adam Smith in "The Wealth of Nations" (1776).
On Sept. 14, 1712 Scottish gambling head-calculating economist John Law (1671-1729), who fled to Amsterdam in 1694 after killing a man in a duel in London, studied banking, and tried unsuccessfully in 1700 to interest the Scottish Parliament in a nat. bank founds the Compagnie de la Louisiane ou d'Occident in France, which obtains exclusive rights to trade in French territory around the Mississippi River for 25 years, with large land grants. In May 1716 he founds the Banque Generale Privee (Gen. Private Bank), the first bank in France, with royal banking decrees that the bank's notes can be used to pay taxes; in 1715 he moves to Paris and secures the patronage of the duke of Orleans. In 1717 his Mississippi Co. receives a monopoly of trade with Louisiana. In 1719 his Banque General absorbs the rival East India and China Co., becoming the Banque Royale, with its notes guaranteed by the king, and a charter to manage the mint for nine years, and farm the nat. revenues while acting as receiver of the govt. debt, with Law becoming councillor of state and comptroller gen.; meanwhile his Mississippi scheme attracts speculators, who drive the shares sky high while his bank floods the country with paper money. The original supply side economics? In 1720 after a royal decree halves the value of his Banque Royale's notes, causing coined money to disappear from circulation and prices to skyrocket, John Law's Mississippi Co. fails, becoming known as the Mississippi Bubble, and many people in France are hurt, causing Law to be dismissed by regent Philippe d'Orleans, leave France secretly, and settle in Venice, where he dies penniless in 1729; meanwhile he pub. a book exposing his fallacious theories of finance, which consider money the cause of public wealth rather than its result, and believe in the power of running the printing presses to produce paper money. In 1721 France declares bankruptcy over the failure of John Law's Mississippi Co. Too bad, in 1705 he pub. Money and Trade Considered, with a Proposal for Supplying the Nation with Money, which proposes the Real Bills Doctrine, that a bank should issue notes only in the discount of "good bills" at not more than 60-day due dates to prevent collapse, which is "thoroughly discredited" in 1945.
In 1715 Dutch-born British political economist Bernard de Mandeville (1670-1733) pub. The Fable of the Bees; or, Private Vices, Publick Benefits, incl. the poem The Grumbling Hive; or, Knaves turn'd Honest, first pub. in 1705; a hive of greedy self-centered bees thrive until they begin seeking individual honesty and virtue, proving that without private vices there can be no public benefit; also incl. An Enquiry into the Origin of Moral Virtue; popular exposition of Underconsumption Theory, which claims that prosperity is increased by spending rather than saving; too bad, its attack on Christian virtues incl. temperance causes it to be convicted as a nuisance in 1723, and underconsumption theory to be ignored until Thomas Malthus' Principles of Political Economy (1820); repub. in 1723 with An Essay on Charity and Charity Schools and A Search into the Nature of Society; claims that charity schools don't reform the poor since it only makes them want material things and become as corrupt as the educated and wealthy.
About 1730 Irish-born economist (in France) Richard Cantillon (1680-1734) writes Essay on the Nature of Trade in General (Essai sur la Nature du Commerce en General), the first complete treatise on economics, which is pub. in 1755, arguing that laissez-faire will lead to order and stable prices, but dissing mercantilists for tracing wealth to trade, attributing it to labor.
In 1750 French economist Anne-Robert-Jacques Turgot, Baron de Laune (1727-81) pub. A Philosophical Review of the Successive Advances of the Human Mind on Universal History: Reflections on the Formation and the Distribution of Wealth, the first pub. of the idea of progress, which incl. the arts, sciences, and culture. In 1769-70 he pub. Reflexions sur la Formation et la Distribution des Richesses, which backs Francois Quesnay's Physiocrat theory of land as the only source of wealth, dividing society into the agricultural (productive) classes, salaried (sterile) classes (artisans and merchants), and landowning (proprietary) classes, claiming that only the net product of the land should be taxed, and dissing all govt. regulation of commerce and industry.
In 1751 French economist Jacques Claude Marie Vincent de Gournay (1712-59) is appointed intendant du commerce, coining the terms "bureaucratie" (bureaucracy) (Fr. "government by desks") and "laissez-faire" (Fr. "let it be").
In 1751 the Toulouse School of Economics is founded by the U. of Toulouse in France, becoming one of the top in Europe.
In 1758 French economist Francois Quesnay (1694-1774) pub. Tableau Economique, which claims that only agriculture can yield products of greater value than the resources used for production, and attempts to show how the wealth circulates throughout the economy in a zig-zag (circular) flow between economic sectors, founding the Physiocrat (Gk. "govt. of Nature") School of Economics; first description of the multiplier in economics. The term physiocrat is coined in 1767 by French economist Pierre Samuel du Pont de Nemours (1739-1817) in his book La Physiocracie. Quesnay pioneers the analysis of tax incidence, the tracing of whom a tax ultimately falls on.
In 1761 English mathematician and Presbyterian minister Thomas Bayes (1701-61) dies, leaving "An Essay Towards Solving a Problem in the Doctrine of Chances", containing Bayes' Theorem, which is read to the Royal Society by Richard Price in 1763; the theorem "is to the theory of probability what Pythagoras' theorem is to geometry" (Sir Harold Jeffreys). It is later generalized and widely adopted by economists.
In 1763 the term "mercantilism" is finally coined by French Physiocrat economist Victor de Riqueti, Marquis de Mirabeau (1715-89).
In 1767 Scottish mercantilist economist Sir James Denham Steuart, 3rd Baronet of Goodtrees and 7th Baronet of Coltness (1713-80) pub. An Inquiry into the Principles of Political Economy, becoming the first book in English with the term "political economy" in the title, and the first complete economics treatise.
Once again Chen I take your yen? Fledgling capitalist U.S.A. has a bible written by a stingy Scot? On Mar. 9, 1776 Scottish U. of Glasgow economist and Calvinist minister Adam Smith (1723-90) ("Father of Economics") pub. his epic 1K-page capitalist Bible Inquiry into the Nature and Causes of the Wealth of Nations, which advances the theory of laissez-faire economics, a "system of natural liberty", and the concept of the "invisible hand", becoming a bestseller, selling out in a few weeks; "Consumption is the sole end and purpose of all production, and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer"; "The real price of everything is the toil and trouble of acquiring it"; "The propensity to truck, barter, and exchange... is common to all men, and to be found in no other race of animals"; "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest"; "Every individual endeavors to employ his capital so that its produce may be of greatest value. He generally neither intends to promote the public interest, nor knows how much he is promoting it. He intends only his own security, only his own gain. And he is in this led by an invisible hand to promote an end which was no part of his intention. By pursuing his own interest he frequently promotes that of society more effectually than when he really intends to promote it"; "To found a great empire for the sole purpose of raising up a people of customers may at first sight appear unfit for a nation of shopkeepers, but extremely fit for a nation whose Government is influenced by shopkeepers"; "The discovery of America, and that of a passage to the East Indies by the Cape of Good Hope, are the two greatest and most important events recorded in the history of mankind"; "The first duty of the sovereign, that of protecting the society from the violence and invasion of other independent societies, can be performed only by means of a military force"; discusses the excess burden of taxation AKA deadweight loss or distortionary cost - or, there's a certain chick I've been sweet on since I met her, and she works cheap?
In 1782 German economist August Friedrich Wilhelm Crome (1753-1833) pub. Producten-Karte von Europa, containing the first known example of a cartogram, a geographic distribution of 56 European commodities.
In 1789 London-born radical reformer Jeremy Bentham (1748-1832) pub. An Introduction to the Principles of Morals and Legislation, about how an action is moral to the degree that it is useful, meaning its capacity for giving pleasure or preventing pain, ergo the purpose of all conduct and legislation should be "the greatest happiness of the greatest number" (borrowed from Joseph Priestley and Francis Hutcheson), founding the theory of Utilitarianism - now that America is lost, it's time for Brits to begin moralizing?
On Dec. 5, 1791 U.S. treasury secy. #1 (1789-95) Alexander Hamilton (1755-1804) presents his magnum opus Report on the Subject of Manufactures to Congress, proposing that the U.S. govt. vigorously encourage the growth of manufacturing in order to end all dependence on the Continent, incl. promotion of science, technology, and agriculture, along with immigration and moderate tariffs to subsidize manufacturing. U.S. Sen. Henry Clay (1777-1852) uses it to found the American (Nat.) System, consisting of high tarrifs, govt. investment in infrastructure, and a nat. bank that promotes productive enterprises rather than speculation.
In 1793 Wisbech, Cambridgeshire-born English writer William Godwin (1756-1836), husband of Mary Wollstonecraft and father of Mary Shelley pub. Enquiry Concerning the Principles of Political Justice, and Its Influence on General Virtue and Happiness, an anarchist treatise which becomes a bestseller (4K copies), claiming the perfectibility of humanity, helping to found the English Romantic movement; political justice is defined as "the adoption of any principle of morality and truth into the practice of a community"; "Speaking of property, he stated that the rights of every one 'to every substance capable of contributing to the benefit of a human being' must be regulated by justice alone: the substance must go 'to him who most wants it'. His conclusion was communism." (Peter Kropotkin)
In June 1798 Surrey, England-born economist Rev. Thomas Robert Malthus (1766-1834) pub. An Essay on the Principles of Population under the alias Joseph Johnson (2nd ed. 1803; 6th ed. 1826), a response to William Godwin's view of the "perfectibility of society" in "Political Justice" (1793) which claims that the pop. can double in 25 years, causing the food supply to run out in two generations; proposes Malthus' Iron Law of Pop. (Wages), that "Food is necessary to the existence of man", "The passion between the sexes is necessary and will remain nearly in its present stage", thus the "power of population is infinitely greater than the power in the Earth to produce subsistence for man"; "The mighty law of self-preservation expels all the softer and more exalted emotions of the soul... In so short a period as withing fifty years, violence, oppression, falsehood, misery, every hateful vice, and every form of distress, which degrade and sadden the present state of society, seem to have been generated by the most imperious circumstances, by laws inherent in the nature of man, and absolutely independent of its human regulations"; as a corollary, a rising pop. causes a rising labor supply, leading to lower wages, causing passage of the British Census Act of 1800; despite its uncorked exponential scientific assumptions, it gets used to justify war as a way to keep the non-white (or less-white) pop. down for the common good of whites (or more-whites) everywhere. In 1820 he pub. Principles of Political Economy, which claims that a "general glut" of goods can cause a lack of "effectual demand" that stagnates the economy and creates a deflationary spiral, invalidating Say's Law.
In 1800 Irish Old Whig MP Edmund Burke (1729-97) posth. pub. Thoughts and Details on Scarcity, Originally Presented to the Right Hon. William Pitt, in the month of November, 1795, written in opposition to a proposed bill to provide a min. wage for agricultural workers, claiming that private charity rather than the state should alleviate the suffering of the poor, and that laws of commerce were the laws of God, with the exceptions being "That the State ought to confine itself to what regards the State, or the creatures of the State, namely, the exterior establishment of its religion; its magistracy; its revenue; its military force by sea and land; the corporations that owe their existence to its fiat; in a word, to every thing that is truly and properly public, to the public peace, to the public safety, to the public order, to the public prosperity."
About 1800 German-born English astronomer Sir Frederick William Herschel (1738-1822) discovers a connection between 11-year sunspot cycles and wheat prices, becoming the first theory of economic cycles.
In 1802 London-born English banker-economist Henry Thornton (1760-1815) pub. An Enquiry into the Nature and Effects of the Paper Credit of Great Britain, an analysis of the 1797 British banking currency crisis, denying that the increase in paper credit caused it, opposing the Real Bills Doctrine, making him into the "Father of the Modern Central Bank", with fans incl. Knut Wicksell, Friedrich von Hayek, and John Maynard Keynes.
In 1803 French economist Jean-Baptiste Say (1767-1832) pub. A Treatise on Political Economy (Traite d'Economie Politique), proposing Say's Law of Markets, that there can never be a gen. deficiency of demand or gen. glut of commodities in the whole economy, with the soundbytes "Products are exchanged for products", and "A glut can take place only when there are too many means of production applied to one kind of product and not enough to another"; makes converts to economic liberalism but pisses off Napoleon, who forces his retirement from the Committee of Finance.
In 1805 English Ricardian socialist physician Charles Hall (1740-1825) pub. The Effects of Civilization on the People in European States, based on his observation of food shortages in England in 1795-1801, which disses capitalism for letting the wealthy control the labor of others to determine what is produced, making it unable to provide for the poor, advocating the sure cures of progressive taxation and a luxury tax, making Karl Marx and Henry George into fans; "Wealth consists not in things but in power over the labour of others."
In 1808 French philosopher Francois Marie Charles Fourier (1772-1837) pub. Theorie des Quartre Movements et des Destinees Generales, which introduces socialistic Fourierism, the theory that universal harmony trumps throwing rice away because of low prices, therefore people should be forced into phalanxes of 1.6K people so that nobody goes without?
In 1815 Shropshire-born English banker-economist Thomas Attwood (1783-1856) et al. found the Birmingham School of Economics to advocate underconsumptionist theory and an expansionary monetary policy to achieve full employment, opposing the gold standard and pushing an income-expenditure model with a multiplier effect, becoming the first Keynesians; they are dismissed as "currency cranks" and "crude inflationists".
In 1817 London-born David Ricardo (1772-1823) pub. On the Principles of Political Economy and Taxation, which explains the Law of Comparative Advantage, which makes it advantageous for England to trade cloth with Portugal in return for wine even though Portugal can produce both more cheaply; also the Law of Differential Rent, how wages seek the minimum subsistence level; also shows how the social classes have conflicting interests.
In reaction to David Ricardo, the English Historical School is founded by Herbert Spencer, criticizing the deductive approach and preferring the inductive approach of Francis Bacon merged with historical fact; members incl. Walter Bagehot, William Cunningham, Richard Jones, Thorold Rogers, Arnold Toynbee, and William Whewell.
In 1819 French thinker Henri de Saint-Simon (Claude Henri de Rouvroy, Comte de Saint-Simon) (1760-1825) (aristocrat who joined the French Rev., got rich, then was stolen blind by his partner, causing him to go into prophet mode) pub. L'Industrie, ou Discussions Politiques, Morales et Philosophiques (4 vols.) (1817-18), which proposes a new technocratic socialist society ruled by men of science and industrialists, causing a sensation and gaining him converts. In Nov. 1819 he begins pub. the socialist mag. L'Organisateur, which ends pub. abruptly in Feb. 1820 after the assassination of Charles Ferdinand, Duke of Berry is blamed on it. In 1825 he pub. Le Nouveau Christianisme (The New Christianity), which spawns the Saint-Simonian sect of Christian communists, with artists taking the place of clergymen, which is suppressed by the authorities.
In 1819 after initially supporting Adam Smith, then fleeing to England in 1793-4 to escape the French Rev., disliking the weather and returning to Geneva, where he ditched the family name Simonde and claimed descent from the House of Sismondi in Pisa, Swiss economist Jean Charles Leonard de Sismondi (1773-1842) pub. Nouveaux Principes d'Economie Politique, ou de la Richesse dans ses Rapports avec la Population, breaking ranks with Smith, who he says is too interested in the means of increasing wealth and too little interested in the use of wealth for increasing happiness, challenging the idea of economic equilibrium and predicting periodic economic crises, with the soundbyte "Let us beware of this dangerous theory of equilibrium which is supposed to be automatically established. A certain kind of equilibrium, it is true, is reestablished in the long run, but it is after a frightful amount of suffering"; he also breaks with laissez-faire, exposing the dangers of aggregate demand creating overproduction and overconsumption, and advocating that the state "regulate the progress of wealth"; calls for state action to help the poor and downtrodden so that everybody can be poor and downtrodden?; "(He) dissected with great acuteness the contradictions of modern production" (Karl Marx).
In 1822 Dublin, Ireland-born Am. publisher-economist Mathew Carey (1760-1839) of Philly pub. Essays on Political Economy; or, The Most Certain Means of Promoting the Wealth, Power, Resources, and Happiness of Nations, Applied Particularly to the United States, becoming one of the first treatises favoring Alexander Hamilton's protectionist economic policy. In 1837-40 his son Henry Charles Carey (1793-1879) pub. Principles of Political Economy (4 vols.), which backs Henry Clay's Am. System of protectionism and govt.-backed developmental capitalism, and becomes a std. U.S. textbook until 1973. In 1851 he pub. The Harmony of Interests: Agricultural, Manufacturing, and Commercial, which promotes the Am. System over the "British" laissez-faire system.
In 1825 Scottish economist John Ramsay McCulloch (1789-1864), successor to David Ricardo pub. Principles of Political Economy: With a Sketch of the Rise and Progress of the Science (Edinburgh), becoming the first successful serious textbook on economics; "Suppose that a cask of new wine, which cost £50, is put into a cellar, and that, at the end of twelve months, it is worth £55, the question is: Should the £5 of additional value, given to the wine, be considered as a compensation for the time the £50 worth of capital has been locked up, or should it be considered as the value of additional labour actually laid out in the wine?"; "Time cannot of itself produce effect; it merely affords space for really efficient causes to operate, and it is therefore clear it can have nothing to do with value."
In 1826 German economist Johann Heinrich von Thunen (Thünen) (1783-1850) pub. The Isolated State, founding Economic Geography.
In 1833 English economist William Forster Lloyd (1795-1852) pub. Two Lectures on the Checks to Population, which introduces the Tragedy of the Commons, its overuse by its commoners. In 1837 he pub. Lectures on Population, Value, Poor-Law and Rent, becoming the first statement of the concept of diminishing marginal utility AKA Gossen's First Law.
In 1838 French mathematician Antoine Augustin Cournot (1801-77) pub. Researches into the Mathematical Principles of the Theory of Wealth, which founds modern economic analysis, introducing functions and probability into economics, deriving the first equation for supply and demand as a function of price and becoming the first to graph supply-demand curves, and proposing the Cournot Duopoly (Competition) Model, where firms are free to set the amount of output they produce, proposing the concepts of Nash Equilibrium, Monetary Policy Reaction Function, and Best Response Dynamics.
In 1838 after reading Thomas Malthus' "An Essay on the Principle of Population" (1798), French mathematician Pierre Francois Verhulst (1804-49) pub. the Logistic Equation to model pop. growth; in 1925 Alfred J. Lotka names it the Law of Pop. Growth.
In 1840 French socialist economist (founder of anarchism) Pierre-Joseph Proudhon (1809-65) pub. Qu'est-ce que la Propriete? ou Recherche sur le Principe du Droit et du Gouvernment (What is Property? or, An Inquiry into the Principle of Right and of Government), containing the soundbyte "La propriete, c'est le vol" (Property is theft). In 1847 he pub. The System of Economic Contradictions, or The Philosophy of Poverty, which pisses-off Karl Marx, who in 1847 pub. The Poverty of Philosophy, accusing him of wanting to rise above the bourgeoise, leading to a permanent split between the Anarchist and Marxist wings of the Internat. Working Men's Assoc. In 1851 he pub. Confessions of a Revolutionary, containing the soundbyte "Anarchy is order without power."
In 1841 after emigrating to Penn. in 1825 and discovering coal on his land before returning to Germany in 1833, bringing Henry Clay's American System with him, Reutlingen, Germany-born economist Georg Friedrich List (1789-1846) pub. The National System of Political Economy (Nationales System der Politischen Okonomie), backing Alexander Hamilton's protectionism as necessary for a country to catch up with rivals, and considering state regulation of industry essential; advocates an alliance between Germany and Britain to counter the rising of the U.S. and Russia, becoming the bestselling German economics book after Karl Marx's "Das Kapital", influencing National Socialism and the European Economic Community; "Any nation which by means of protective duties and restrictions on navigation has raised her manufacturing power and her navigation to such a degree of development that no other nation can sustain free competition with her, can do nothing wiser than to throw away these ladders of her greatness, to preach to other nations the benefits of free trade, and to declare in penitent tones that she has hitherto wandered in the paths of error, and has now for the first time succeeded in discovering the truth"; "Adam Smith's doctrine is, in respect to national and international conditions, merely a continuation of the physiocratic system. Like the latter, it ignores the very nature of nationalities, seeks almost entirely to exclude politics and the power of the State, presupposes the existence of a state of perpetual peace and of universal union, underrates the value of a national manufacturing power, and the means of obtaining it, and demands absolute freedom of trade. Adam Smith fell into these fundamental errors in exactly the same way as the physiocrats had done before him, namely, by regarding absolute freedom in international trade as an axiom assent to which is demanded by common sense, and by not investigating to the bottom how far history supports this idea."
In 1843 Hanover-born German economist Wilhelm Georg Friedrich Roscher (1817-94) (proponent of the cyclical theory of nations, whose economies allegedly pass through youth, manhood, and senility) pub. Grundriss zu Vorlesungen uber die Staatswirtschaft nach Geschichtlicher Methode (Plan of Lectures about the State Economy according to the Historical Method), founding the German Historical School of Economics based in Prussia, which spreads to academia in England and the U.S., and dominates for the rest of the cent.; the three subschools are the Older, incl. Roscher, Bruno Hildebrand (1812-78), and Karl Gustav Adolf Knies (1821-98); the Younger, incl. Gustav von Schmoller (1838-1917) (leader), Georg Friedrich Knapp (1842-1926), Karl Wilhelm Bucher (Bücher) (1847-1930), Ernst Louis Etienne Laspeyres (1834-1913), Adolph Wagner, and Lujo Brentano; and the Youngest, incl. Werner Sombart, and Max Weber.
In Sept. 1843 Scottish economist and hatmaker James Wilson (1805-60) founds the weekly financial paper The Economist in London to campaign for free trade and laissez-faire, to "take part in a severe contest between intelligence, which presses forward, and an unworthy, timid ignorance obstructing our progress"; writers incl. Herbert Spencer (1820-1903) and Thomas Hodgskin (1787-1859); by the end of the 20th cent. it has a global circ. of 1.2M.
In 1844 Italian-born French economist Jules Dupuit (1804-66) pub. De la Mesure de l'Utilite des Travaux Publics, becoming the first to identify the downward-sloping demand curve with the marginal utility curve.
In 1844 Pentonville, London, England-born economist John Stuart Mill (1806-73) pub. Essays on Some Unsettled Questions in Political Economy, which makes the Catholic Prohibited Books Index, making it more popular? In 1848 he pub. Principles of Political Economy; 7th ed. 1871; used by Oxford U. until 1919; claims that internat. trade benefits the country whose demand for goods is most elastic; argues that Malthus' scenario can be defeated when technology advances faster than population and capital stock increases; shows sympathy with Fourierism and socialism, making him popular with the working classes.
In 1848 German economist Bruno Hildebrand (1812-78) pub. his magnum opus Economics of the Present and the Future, which claims that economic development is linear not cyclical; too bad, he is sentenced to death for treason, and flees to Switzerland, where he becomes a prof. at the U. of Zurich with Swiss citizenship.
In Feb. 1849 Scottish philosopher Thomas Carlyle (1795-1881) anon. pub. the article Occasional Discourse on the Negro Question, arguing for the reintroduction of slavery in the West Indies, and coining the term "the dismal science" for political economics; "...not a gay science... no, a dreary, desolate, and indeed quite abject and distressing one; what we might call, by way of eminence, the dismal science."
In 1850 French political economist Claude Frederic Bastiat (1801-50) pub. That Which is Seen and That Which is Unseen, which introduces the Parable of the Broken Window, proposing the concept of Alternative (Opportunity) Cost, that claims that the best choice is the one that minimizes the cost that would be incurred by not enjoying the benefit that would be gained by making the second best choice available, e.g., forgoing a dental procedure to take a vacation; he also pub. The Law, which condemns statism and "legalized plunder", claiming that a just system of laws protects each person's life, liberty, and property, using force only to defend their rights; "I do not dispute their right to invent social combinations, to advertise them, to advocate them, and to try them upon themselves, at their own expense and risk. But I do dispute their right to impose these plans upon us by law - by force - and to compel us to pay for them with our taxes."
In 1853 German historical school economist Karl Gustav Adolf Knies (1821-98) pub. Political Economy from the Standpoint of the Historical Method, which disses the classical school of Adam Smith and David Ricardo for its blind belief in the basic goodness to society of the pursuit of individual self-interest, with the soundbyte "In the public interest, so to speak, in its weakness, and dangerous in its strength"; he goes on to school John Bates Clark, the teacher of Frank Knight, who influences Paul Samuelson.
In 1854 Irish economist ("last of the classical economists") John Elliott Cairnes (1823-75) pub. An Examination into the Principles of Currency. In 1857 he pub. The Character and Logical Method of Political Economy, an addendum to John Stuart Mill's "Essays on Some Unsettled Questions in Political Economy" (1844). In 1862 he pub. The Slave Power, which exposes the disadvantages of the employment of slave labor, influencing Brits against the Confederate States of Am. In 1874 he pub. Some Leading Principles of Political Economy, Newly Expounded, which claims that political economy should be limited to tracing the connections among the phenomena of wealth but not dictate rules of practice, and adds abstinence to labor as a cost of production, pointing out that modern societies are split into noncompeting industrial groups with free competition only within each group. In 1875 he pub. The Character and Logical Method of Political Economy; 2nd ed. 1888.
In 1854 German economist Hermann Heinrich Gossen (1810-58) pub. Entwickelung der Gesetze des Menschlichen Verkehrs, und der Daraus Fließenden Regeln für Menschliches Handeln (The Development of the Laws of Human Intercourse and the Consequent Rules of Human Action); proposes Gossen's Laws, incl. Gossen's First Law, that marginal utilities are diminishing across the ranges relevant to decision making, Gossen's Second Law, that in equilibrium an agent will allocate expenditures so that the marginal cost of acquisition (ratio of marginal utility to price) is equal across all goods and services, and Gossen's Third Law, that scarcity is a requirement for economic value; first statement of the principles of marginal utility; too bad, the German Historical School gives it an icy reception, and it has little impact until Carl Menger of Austria restates it in 1871.
In 1860 Paris-born French economist Clement (Clément) Juglar (1819-1905) proposes the existence of Economic Waves (Cycles), starting with the Juglar Fixed Investment Wave of 7-11 years.
In 1862 Liverpool, England-born economist William Stanley Jevons (1835-82) pub. A General Mathematical Theory of Political Economy, popularizing the Final (Utility) Theory of Value, along with the Law of Diminishing Returns, giving economics a mathematical basis. In 1865 he pub. The Coal Question: An Inquiry Concerning the Progress of the Nation, and the Probable Exhaustion of Our Coal Mines, which introduces Jevons' Paradox that improving energy efficiency reduces energy costs, increasing use, and pioneers the concept of energy depletion. In 1871 he pub. his magnum opus The Theory of Political Economy.
In 1863 French economist Jules Augustin Frederic Regnault (1834-94) pub. Calcul des Chances et Philosophie de la Bourse, the first modern theory of stock price changes, using a random walk model.
In 1861-5 the horrific U.S. Civil War sees the invention of the first modern weapon when N.C.-born agricultural equipment maker Richard Jordan Gatling (1818-1903) patents the 10-barrel hand-cranked hundreds-of-rounds-per-min. Gatling Gun (the first practical machine gun) just in time for use on some Johnny Rebs; it is first used by the Union Army in 1864, but luckily never sees extensive use.
In 1866 Providence, R.I.-born neoclassical economist John Bates Clark (1847-1938) pub. The Philosophy of Wealth: Economic Principles Newly Formulated, promoting the Marginalist Rev. and opposing the Institutional Economics school. In 1888 he pub. Capital and Its Earnings to refute Henry George's single tax. In 1888 he also pub. The Limits of Competition, which contains the soundbytes: "The science adapted... is economic Darwinism... Though the process was savage, the outlook which it afforded was not wholly evil. The survival of crude strength was, in the long run, desirable", and "If nothing suppresses competition, progress will continue forever." In 1899 he pub. The Distribution of Wealth: A Theory of Wages, Interest and Profits (2nd ed. 1902), which proposes Clark's Theory of Capitalism: "Given competition and homogeneous factors of production labor and capital, the repartition of the social product will be according to the productivity of the last physical input of units of labor and capital", leading to the soundbyte: "What a social class gets is, under natural law, what it contributes to the general output of industry." In 1907 he pub. Essentials of Economic Theory. In 1914 he pub. Social Justice without Socialism. In 1947 the annual John Bates Clark Medal is established by the Am. Economic Assoc. (AEA) for the economist working in the U.S. under age 40 who makes the most significant contribution, becoming #2 to the Nobel Econ. Prize; the first winner is Paul A. Samuelson.
On Sept. 14, 1867 Trier, Prussia-born London-based economist Karl Heinrich Marx (1818-83) pub. Das Kapital: Kritik der Politischen Okonomie, Vol. 1 (Capital: A Critique of Political Economy), which condemns capitalism for exploitation of labor; incl. the chapter on Alienated Labour; three more vols. are planned, and only two are pub. (1885, 1894); Marx wanted to dedicate it to Charles Darwin until his religious wife Emma Darwin nixes it; his notes are pub. posth. in 1939 under the title Grundrisse der Kritik der Politischen Okonomie (Outlines of the Critique of Political Economy). Barmen, Prussia-born Friedrich Engels (1820-95) co-authors and edits Das Kapital, Vol. 2: The Process of Circulation of Capital (1885), and Das Kapital, Vol. 3: The Process of Capitalist Production as a Whole (1894); the most important volume? Marxian Economics can be differentiated from Marxian rev. politics - don't these people know that you can't tell what a tomato tastes like by squeezing it?
In the 1870s the Neoclassical Economics Rev. (term coined in 1900 by Thorstein Veblen) begins, led by Carl Menger, founder of the Austrian School of Economics, Leon Walras and Vilfredo Pareto, founders of the Lausanne School of Economics, and William Stanley Jevons and John Bates Clark, founders of the Cambridge School of Economics, emphasizing individual decisions based on full relevant info. and rational preferences to maximize utility, with firms attempting to maximize profits, which dominates microeconomic thought, causing a reaction with disparate groups lumped together as Heterodox Economics, incl. Georgism, Technocracy, Institutional Economics, Evolutionary Economics, and Social Economics. In 1999 the Assoc. for Heterodox Economics is founded in England.
In 1871 German economist Ernst Louis Etienne Laspeyres (1834-1913) pub. an article proposing the Laspeyres Price Index, which has an index of 1 when a person can afford to buy the same bundle in the current period that they consumed in the previous period if their income remains the same; meanwhile in 1877 German economist Hermann Paasche (1851-1925) proposes the Paasche Price Index, which has an index of 1 when a person could consume the same bundle in the base period that they are consuming in the current period if their income remains the same - that's the same cat and also not?
In 1871 Austrian economist Carl Menger (1840-1921) pub. Principles of Economics, which lays the foundation for the Austrian School of Economics, which challenges the cost-based theories of Adam Smith and David Ricardo with his Theory of Marginal Utility (Marginality), which claims that price is determined at the margin, and the Theory of Imputation, which claims that factor prices are determined by output prices, i.e., that value isn't made up of the factors that made up a good, but of the most valuable use that the last unit of the good could be put to, reversing the Labor Theory of Value of Adam Smith and David Ricardo. In 1883 he pub. Investigations into the Method of the Social Sciences with Special Reference to Economics, which attacks the German historical school, causing a bitter reply by Gustav von Schmoller (1838-1917), leading to the super-bitter Methodenstreit (Ger. "strife over method") with the Austrian School of Economics (name coined by Schmoller to indicate provincialism), which is won by the historical school by 1900, who advocate a Socialist welfare state; too bad, they go too far and get their rivals excluded from academia, causing Germany to fall behind until the historical school becomes kaput by the 1930s, and is replaced by the more open Freiburg School.
In 1874 French economist Marie-Esprit Leon Walras (1834-1910) pub. his magnum opus Elements of Pure Economics; or, The Theory of Social Wealth, which founds Gen. Equilibrium Theory, helping launch the Marginal Rev. along with William Stanley Jevons and Carl Menger.
In 1879 Philadelphia, Penn.-born political economist Henry George (1839-97) pub. the bestseller (3M copies) Progress and Poverty: An Inquiry into the Cause of Industrial Depressions and of Increase of Want with Increase of Wealth: The Remedy, reducing economics to land, labor, and capital, claiming that people should own what they create, except land, which belongs equally to all, advocating the land value tax (single tax); makes him one of the top celebs. in the U.S., launching Georgism (Geonomics) (Geoism).
In 1881 Irish economist Francis Ysidro Edgeworth (1845-1926) pub. Mathematical Psychics: An Essay on the Application of Mathematics to the Moral Sciences, which introduces the generalized utility function, indifference curves, optimal tariffs, Edgeworth's Conjecture, Edgeworth's Limit Theorem, and the game-theoretic concept of the core.
In 1881 the Wharton School of Finance and Economy of the U. of Penn. is founded in Philly by Quaker Joseph Wharton (1826-1909) (co-founder of the Bethlehem Steel Co. and Swarthmore College), becoming the first higher ed. for accountants in the U.S.
In 1882 Italian economist Maffeo Pantaleoni (1857-1924) pub. Theory of Tax Shifting, an analysis of tax incidence, founding Public Choice Theory.
In 1883 French mathematician Joseph Louis Francois Bertrand (1822-1900) proposes the Bertrand Model of Competition, which reworks Cournot's 1838 Duopoly Model using prices instead of quantities, describing interactions among sellers that set prices and customers that choose quantities at the prices set, showing that the equilibrium price is simply the competitive price. In 1889 Francis Ysidro Edgeworth extends the Bertrand Model to handle capacity constraints, and proposes the Edgeworth Paradox, where if there is a fixed limit to what firms can sell, there may exist no pure-strategy Nash equilibrium.
In 1883 Yorkshire, England-born utilitarian philosopher-economist Henry Sidgwick (1838-1900) (first pres. of the Society for Psychical Research) pub. Principles of Political Economy, followed by The Scope and Method of Economic Science (1885), which makes a fan of Alfred Marshall, who calls him his "spiritual mother and father".
In 1885 the Am. Economic Assoc. (AEA) is founded in Nashville, Tenn. by Progressive movement leader Richard Theodore Ely (1854-1943) et al., going on to found the Am. Economic Review in 1911. Ely goes on to pub. Private Colonization of Land in 1918, and found Lambda Alpha Internat. in 1930, becoming known as "the Father of Land Economics".
In 1887 French historical school economist Charles Gide (1847-1932) (Leon Walras follower) et al. found Revue d'Economie Politique.
In 1888 St. Louis, Mo.-born economist Frank William Taussig (1859-1940) pub. The Tariff History of the United States (6th ed. 1914), founding modern Internat. Trade Theory.
In 1889 Scottish economist Henry Dunning Macleod (1821-1902) (coiner of the term "Gresham's Law" in 1858) pub. The Theory of Credit, becoming the first work to create a theory of money from a theory of credit instead of vice-versa, known as the Credit Theory of Money, influencing Chartalism and Institutional Economics; "Money and Credit are essentially of the same nature: Money being only the highest and most general form of Credit."
In 1889 Austrian economist Friedrich von Wieser (1851-1926) (Carl Menger disciple) pub. Natural Value (Der Naturliche Werth), supporting Frederic Bastia's Alternative Cost Doctrine, which he later (1914) renames "Opportunity Cost", and coining the term "marginal utility" (Grenznutzen), which replaces William Stanley Jevons' "final degree of utility", and Carl Menger's "value". In 1914 he pub. Social Economics, applying his theories to the real world, calling the role of the entrepreneur "the heroic intervention of individual men who appear as leaders toward new economic shores". Too bad, in 1926 he pub. The Law of Power, rejecting classical liberalism and freedom for "a system of order".
In 1890 Bermondsey, London-born economist Alfred Marshall (1842-1924) pub. Principles of Economics, which supplants John Stuart Mill's textbook in the U.K., replacing the term political economy with the term economics, and pioneering the supply and demand curve (Marshallian Cross).
In 1890 the Royal Economic Society (originally the British Economic Assoc.) in England is founded, receiving a royal charter on Dec. 2, 1902; in 1891 it begins pub. The Economic Journal; in 1998 it begins pub. The Econometrics Journal.
In 1892 Swedish marginalist economist Johan Gustaf Knut Wicksell (1851-1926), rival of Irving Fisher pub. Value, Capital and Rent. In 1896 he pub. Studies in the Theory of Public Finance, advocating progressive taxation and a welfare state. In 1898 he pub. Interest and Prices, distinguishing between natural and money rate of interest, and proposing that interest rates be used to maintain price stability instead of the gold standard like the Austrian School of Economics wants, making a fan of John Maynard Keynes, and inspiring the Stockholm School of Economics.
In 1893 German economist Karl Wilhelm Bucher (Bücher) (1847-1930) pub. The Rise of the National Economy, founding the study of non-market (gift and exchange) economics.
In 1894 Leeds-born English economist (Unitarian clergyman) Philip Henry Wicksteed (1844-1927) (disciple of William Stanley Jevons and Henry George) pub. An Essay on the Coordination of the Laws of Distribution, an attempted mathematical proof that a distributive system that rewards factory owners according to marginal productivity will exhaust the total product produced. In 1910 he pub. The Common Sense of Political Economy, including a Study of the Human Basis of Economic Law (2 vols.), about the universal applicability of decision-making on the margin; "The master-theme is that economic theory is merely a clear working-out of the 'common-sense' of the administration of resources, and particularly that the same principle governs the organization of production and consumption" (Frank Knight); "Thus the same law holds in intellectual, moral, or spiritual as in material matters. Caesar tells how when surprised by the Nervii he had barely time to harangue his soldiers, obviously implying that the harangue was shorter than usual. He felt that a few moments, even at such a crisis, were well devoted to words of exhortation to his troops; but their value declined at the margin, and the price in delaying the onslaught rapidly rose; so the moment was soon reached when the time could be better spent than in prolonging a moving discourse"; makes a fan of Henry Hazlitt, who utters the soundbyte: "Much have I traveled in the realms of gold, etc./ Yet never did I breathe its pure serene./ Till I heard Wicksteed speak out loud and bold."
In 1895 German economist Georg Friedrich Knapp (1842-1926) pub. The State Theory of Money, coining the term "metallism", and founding Chartalism (Lat. "charta" = token or ticket), which claims that "money is a creature of law" (fiat money) rather than a commodity, with taxation establishing it as currency, "that which is accepted at the public pay offices", opposing the metallist theory that the value of currency depends on the quantity of precious metal backing it.
In Oct. 1895 the London School of Economics and Political Science (LSE) of London U. near the Aldwych in England is founded by Fabians Sidney Webb (1859-1947), Martha Beatrice Webb (1858-1943) (coiner of the term "collective bargaining"), George Bernard Shaw (1856-1950), and Graham Wallas (1858-1932) to focus on research into poverty, inequality, and related Socialist issues, becoming a big influence on the British Labour Party; in 1900 it joins London U. as the faculty of economics, becoming associated with Harold Laski and R.H. Tawney.
In 1898 Cato, Wisc.-born economist Thorstein (Torsten) Bunde Veblen (1857-1929) pub. Why is Economics not an Evolutionary Science, which coins the term Evolutionary Economics, making use of anthropology to deny that there is a universal human nature, emphasizing the conflict between "industrial" or instrumental and "pecuniary" or ceremonial values, which becomes known as the Ceremonial/Instrumental Dichotomy. In 1899 he pub. The Theory of the Leisure Class, the first detailed critique of consumerism, attacking the influence of laissez-faire economics and big business on society; coins the terms "conspicuous consumption" and "conspicuous leisure"; views economics as a class struggle, with the leisure class ever at the top, lording it over the underclasses by wasteful spending and wasteful activities incl. the study of philosophy and art. In 1900 he pub. The Preconceptions of Economic Science, which contrasts the U.S. school of Alfred Marshall, which prefers mathematical analysis to the Austrian School of Economics, which prefers deductive logic.
About 1900 the first professional economists split from academia and get involved with public policy.
On Mar. 29, 1900 French mathematician Louis Jean-Baptiste Alphonse Bachelier (1870-1946) (student of Henri Poincare) successfully defends his dissertation The Theory of Speculation at the Sorbonne, pioneering the study of Brownian Motion and stochastic processes and applying it to random walks of market prices, nearly coming up with the Black-Scholes Option Pricing Model.
In 1902 German economist-sociologist Werner Sombart (1863-1941) pub. his magnum opus Modern Capitalism (Der Moderne Kapitalismus: Historisch-Systematische Darstellung des Gesamteuropaischen Wirtschaftslebens von seinen Anfangen bis zur Gegenwart) (3 vols.) (1902-27), laying out a Youngest Historical School treatment of the history of economics, claiming that capitalism was made possible by double-entry bookkeeping. In 1911 he pub. The Jews and Modern Capitalism, reversing the anti-Semitic characterization of Communism as Jewish by tracing how the Jews broke out of the medieval guild system by creating capitalism, and even venturing that capitalism created Judaism; doesn't mention that capitalist Jews had to break out of religion too? Too bad, in 1915 he pub. Handler (Händler) und Helden: Patriotische Besinnungen, which welcomes the "German War" as the "inevitable conflict between the English commercial civilization and the heroic culture of Germany", which isn't about individuals but Volksgemeinschaft, giving them duties not rights; "The ideas of 1789 - Liberty, Equality, and Fraternity - are characteristically commercial ideals which have no other purpose but to secure certain advantages to individuals."
In 1902 Bocconi U. in Milan, Italy is founded, becoming the first Italian univ. to grant a degree in economics.
In 1902-3 French social psychologist Gabriel Tarde (Jean-Gabriel De Tarde) (1843-1904) pub. La Psychologie Economique (2 vols.), founding Economic Psychology.
In 1905 Burlington, Iowa-born economist Max Otto Lorenz (1876-1959) pub. Methods of Measuring the Concentration of Wealth, proposing the Lorenz Curve, a cumulative distribution function of the probability distribution of wealth, measuring social inequality.
In 1905 Erfurt, Saxony-born sociologist-economist Max Weber (1864-1920) pub. The Protestant Ethic and the Spirit of Capitalism, which claims that the Protestant (Calvinist) work ethic drove the development of capitalism instead of Karl Marx's atheistic historical materialism, giving the capitalist-communist debate a religious dimension, becoming one of the most important sociological works of the 20th cent. In 1909 his economist brother Alfred Weber (1868-1958) pub. Theory of the Location of Industries, developing the Least Cost Theory of Industrial Location (Weber Problem).
In 1906 Italian economist Vilfredo Federico Damaso Pareto (1848-1923) makes the observation that 20% of the pop. owns 80% of the property in Italy, which is generalized as the Pareto Principle.
In 1908 Italian Socialist economist Enrico Barone (1859-1924) pub. The Ministry of Production under a Collectivist State, proposing a mathematical model for a Socialist economy based on Shadow Prices that corresponds to least-cost-price of production from Pareto Efficiency reached in competitive equilibrium; too bad, it requires massive data collection by the govt. to work, giving the Austrian School of Economics a field day by bringing up the Economic Calculation Problem.
In 1909 Stockport, Iowa-born economist Henry Charles Taylor (1873-1969) establishes the Dept. of Agriculture Economics at Wisconsin U., founding Agricultural Economics (Agronomics), the application of economic methods to optimizing decisions made by agricultural producers.
In 1910 Vienna-born German Marxist economist Rudolf Hilferding (1877-1941) pub. Das Finanzkapital (Finance Capital), which claims that the dog-eat-dog "buccaneering" capitalism of the earlier liberal era has been superseded by monopolistic finance capitalism, which seeks a "centralized privilege-dispensing state"; "The policy of finance capital is bound to lead towards war, and hence to the unleashing of revolutionary storms."
In 1911 the Am. Economic Review (AER) begins pub. by the Am. Economic Assoc.
In 1911 Saugerties, N.Y.-born Irving Fisher (1867-1947) ("the greatest economist the United States has ever produced" - Milton Friedman, James Tobin) pub. The Purchasing Power of Money, which proposes the Quantity Theory of Money, launching the Monetarist School; 2nd ed. 1922.
In 1911 Moravian-born economist Joseph Alois Schumpeter (1883-1950) (successor to Frank William Taussig at Harvard U.) pub. The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle, which expounds the theory of business cycles, with a circular flow leading to a stationary state until a heroic entrepreneur upsets it. In 1942 he pub. Capitalism, Socialism and Democracy, developing the concept of creative destruction unleashed by capitalism.
In 1912 Austrian School economist Ludwig Heinrich Edler von Mises (1881-1973) pub. The Theory of Money and Credit, claiming that money has its origin in the market, with its value based on its usefulness as an exchange commodity, making him a star. In 1919 he pub. Nation, State, and Economy, which claims that "the essence of nationality lies in language". In 1920 he pub. the article Economic Calculation in the Socialist Commonwealth, which claims that a socialist govt. can't make the calculations required to operate a complex economy, launching the Economic (Socialist) Calculation Debate between classical liberals and socialists. In 1922 he pub. Socialism: An Economic and Sociological Analysis, an all-out attempt to refute socialism, which contains the soundbyte: "The only certain fact about Russian affairs under the Soviet regime with regard to which all people agree is: that the standard of living of the Russian masses is much lower than that of the masses in the country which is universally considered as the paragon of capitalism, the United States of America. If we were to regard the Soviet regime as an experiment, we would have to say that the experiment has clearly demonstrated the superiority of capitalism and the inferiority of socialism." In 1927 he pub. Liberalismus (The Free and Prosperous Commonwealth), which shows that all classical liberal freedoms follow from property rights free of govt. intervention; too bad, it praises Fascism for "saving European civilization", with the caviat "Fascism was an emergency makeshift. To view it as something more would be a fatal error." In 1929 he pub. A Critique of Interventionism. In 1933 he pub. Epistemological Problems of Economics, which contains the soundbyte: "The science of human action that strives for universally valid knowledge is the theoretical system whose hitherto best elaborated branch is economics. In all of its branches this science is a priori, not empirical. Like logic and mathematics, it is not derived from experience; it is prior to experience. It is, as it were, the logic of action and deed." In 1940 he flees the Nazis to the U.S. In 1941 he pub. Interventionism: An Economic Analysis. In 1944 he pub. Omnipotent Government: The Rise of Total State and Total War. In 1944 he also pub. Bureaucracy; claims that all types of bureaucratic mgt. of the market lack the basic ability to act in a rational economic manner. In 1947 he pub. Planned Chaos, containing the soundbyte: "The characteristic mark of this age of dictators, wars, and revolutions is its anti-capitalistic bias. Most governments and political parties are eager to restrict the sphere of private initiative and free enterprise. It is an almost unchallenged dogma that capitalism is done for and that the coming of all-around regimentation of economic activities is both inescapable and highly desirable." In 1949 he pub. his magnum opus Human Action: A Treatise on Economics, which defends laissez-faire capitalism based on the concept of Praxeology, a rational study of of human action and decision-making based on the Action Axiom, claiming that a free-market economy serves as the foundation of civilization; "The captain is the consumer... The consumers determine precisely what should be produced, in what quality, and in what quantities... They are merciless egoistic bosses, full of whims and fancies, changeable and unpredictable. For them nothing counts other than their own satisfaction. In their capacity as buyers and consumers they are hard-hearted and callous, without consideration for other people... Capitalists... can only preserve and increase their wealth by filling best the orders of the consumers... In the conduct of their business affairs they must be unfeeling and stony-hearted because the consumers, their bosses, are themselves unfeeling and stony-hearted." In 1951 he gives the lectures The Free Market and Its Enemies: Pseudo-Science, Socialism, and Inflation; pub. in 2004. In 1952 he pub. Planning for Freedom. In 1952 he gives the lectures Marxism Unmasked: From Delusion to Destruction, pub. in 2006. In 1956 he pub. The Anti-Capitalistic Mentality, which claims that anti-capitalist sentiment is rooted in envy. In 1957 he pub. Theory and History: An Interpretation of Social and Economic Evolution. In 1959 he gives the lectures Economic Policy: Thoughts for Today and Tomorrow; pub. in 1979. In 1962 he pub. The Ultimate Foundation of Economic Science. In 1962 he addresses a student rally by the Young Americans for Freedom at Madison Square Garden in New York City, uttering the soundbyte: "The spell of the dreadful conformity that threatened to convert our country into a spiritual desert is broken. There are again young men and women eager to think over the fundamental problems of life and action. This is a genuine moral and intellectual resurrection, a movement that will prevent us from falling prey to the arbitrary tyranny of dictators. As an old man I am greeting the young generation of liberators." In 1978 he posth. pub. The Clash of Group Interests and Other Essays, and On the Manipulation of Money and Credit (Causes of the Economic Crisis). In 1990 he posth. pub. Money, Method, and the Market Process, and Economic Freedom and Interventionism.
6 score and 17 (1913 - 1776 = 137) years into Project U.S.A., a silent coup by bankers J.P. Morgan, John D. Rockefeller, and Paul Warburg ends the freedom of Americans with the most insidious attack on individual liberty, which slides in real easy, puts out hooks, and can't be pulled out without gutting the patient? On Feb. 3, 1913 the Sixteenth (16th) (XVI) Amendment to the U.S. Constitution, giving Congress the power to levy an income tax, written by U.S. rep. (D-Tenn.) Cordell Hull (1871-1955) is ratified (not really, but Philander Knox lies to the public to get it in for his banker buddies?), and goes into effect on Feb. 25, along with a home mortgage deduction; too bad, the big secret that "income" can only constitutionally mean profits from corporate activity and not wages for labor is not grasped by the masses, and as the decades go by the greedy govt. begins grooming suckers to accept their word games and let them impose income tax on wages, gambling winnings, etc., then institute automatic tax withholding, finally tricking them into "voluntarily" filing income tax returns without a law requiring them to do so, then using the laws of perjury to "catch" them in lying, assess them penalties and interest, and file liens and seize property from helpless people unable to pay lawyers to fight back, thereby enslaving the U.S. pop. in a Communist Manifesto-inspired effort to redistribute income and set up a New World Order One World Govt.?; the whole idea goes back to the Roman Catholic Church and its 1166 income tax to help take back the Holy Land?; initially the payment date each year is June 30 - (6 + 30 = 36 = six sixes); 13 16 19 (one 3 one 6 one 9 = one 18 = one 6+6+6? 1913 February 25 The Sixteenth Amendment to the U.S. Constitution is ratified giving Congress the right to collect federal income taxes. On Dec. 23, 1913 taking advantage of Christmas vacation, the depleted U.S. Congress (bribed by the 16th Amendment banking group?) passes the U.S. Federal Reserve Act (a fraud because it requires a constitutional amendment?), based on the work of political economist James Laurence Laughlin (1850-1933) of the U. of Chicago, and Jewish German-Am. banker Paul Moritz Warburg (1868-1932); the Federal Reserve System (Fed) is created, with Warburg one of its initial members, with Congress handing it its power to coin money and regulate the value thereof, and turning itself into a customer borrowing money from it at interest, lowering the living standard of the people so that the bankers can make more profits; Wilson, who signs it, later utters the soundbyte "I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is now controlled by its system of credit. We are no longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of a small group of dominant men"; U.S. Dem. House Speaker (1911-9) Champ Clark unsuccessfully opposes it, after which it's no coincidence that his home state of Mo. becomes the home of two Federal Reserve Banks (Kansas City, St. Louis).
In May 1913 English diplomat-economist Alfred Mitchell-Innes (1864-1950) pub. What is Money?, which is reviewed favorably by John Maynard Keynes, followed in Dec. 1914 by The Credit Theory of Money, advocating the Credit Theory of Money; "The Credit Theory is this: that a sale and purchase is the exchange of a commodity for credit. From this main theory springs the sub-theory that the value of credit or money does not depend on the value of any metal or metals, but on the right which the creditor acquires to 'payment', that is to say, to satisfaction for the credit, and on the obligation of the debtor to 'pay' his debt and conversely on the right of the debtor to release himself from his debt by the tender of an equivalent debt owed by the creditor, and the obligation of the creditor to accept this tender in satisfaction of his credit"; "The best pair of articles on the nature of money written in the twentieth century." (L. Randall Wray)
On Aug. 4, 1914 - Nov. 11, 1918 the horrific World War I causes 15M deaths and 39M military casualties, and destroys the Old Order of white formerly Christian Europe.
In 1916 German anarchist economist Silvio Gesell (1862-1930) proposes Freiwirtschaft (Ger. "free economy"), a new economic system based on Freiland (Ger. "free land") (all land owned by the public), Freihandel (Ger. "free trade"), and Freigeld (Ger. "free money"), a new form of currency that automatically loses its value over time, taking away the incentive to hoard and reducing interest rates to near zero.
In 1919 Am. economist Walton Hale Hamilton (1881-1958) of Yale U. coins the term Institutional Economics. In 1924 Hollansburg, Ohio-born U. of Wisc. economist John Rogers Commons (1862-1945) pub. Legal Foundations of Capitalism. In 1934 he pub. Institutional Economics, which claims that the collective actions and interests of institutions define the economy, founding the new field of Institutional Economics, with the soundbyte: "An institution is defined as collective action in control, liberation and expansion of individual action."
In 1919 the Review of Economics and Statistics (Review of Economic Statistics until 1948) is founded by Harvard U.
In 1920 Swedish economist Karl Gustav Cassel (1866-1945) (teacher of Bertil Ohlin and Gunnar Myrdal) pub. Memorandum on the World's Monetary Problems, which is promoted by the League of Nations at the Internat. Finance Conference in Brussels, proposing the idea of Purchasing Power Parity (PPP), making a fan of John Maynard Keynes.
In 1920 Ryde, Isle of Wight-born economist Arthur Cecil Pigou (1877-1959) (successor of Alfred Marshall at Cambridge U., who fosters the studies of John Maynard Keynes) pub. The Economics of Welfare, which claims that economic externalities make markets inefficient, causing market failures that require govt. intervention, proposing the Pigovian (Pigouvian) Tax, which is to be applied to a market activity that is generating negative externalities, e.g., pollution. In 1933 he pub. The Theory of Unemployment, which claims that excessive govt. intervention in the labor market along with a minimum wage causes massive unemployment. In 1943 he pub. the paper "The Classical Stationary State", which popularizes the Pigou (Real Balance) Effect, the stimulation of output and employment during deflation by increasing consumption due to a rise in wealth - should be pig-out effect?
In 1920 Calcutta, India-born English economic historian (Christian socialist) Richard Henry "R.H." Tawney (1880-1962) pub. The Acquisitive Society, blasting capitalism for its amoral selfish individualism, promoting Christian socialism to combat greed and imperialism, becoming hugely influential in Britain and helping lead it to a welfare state; "a socialist bible" (Richard Crossman). In 1926 he pub. Religion and the Rise of Capitalism, accepting Max Weber's Protestant ethic thesis then blaming Protestantism for subordinating Christian morality to materialism, making his rep as a historian as well as economist, becoming the most influential historian in Britain. On July 14, 1926 he and Bermondsey, London-born economic historian Sir William James Ashley (1860-1927) (who in 1892 became the first prof. of economic history in the English-speaking world at Harvard U.) found the Economic History Society at the London School of Economics, which pub. the Economic History Review, going on to pressure the British govt. to enact a Christian socialist welfare state.
In 1921 McLean County, Ill.-born economist Frank Hyneman Knight (1885-1972) pub. Risk, Uncertainty and Profit, which claims that most business decisions involve an unmeasurable step into the unknown, which becomes known as Knightian Uncertainty, which is distinguished from economic risk, which is governed by known probability distributions, founding the strongly pro-Keynesian Old Chicago School of Economics along with Jacob Viner (1892-1970) and Henry Calvert Simons (1899-1946), with students incl. James M. Buchanan, Milton Friedman, and George Stigler, who go anti-Keynesian and libertarian, becoming known as the New School in the 1950s.
In 1923 Cambridge, England-born economist John Maynard Keynes (1883-1946) (pr. like canes) (British financial rep at the Versailles Conference, which he thought was a disaster that could lead to another world war) pub. A Tract on Monetary Reform, which argues for the need of a stable currency for a healthy world economy; "...this long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again." On Oct. 31, 1930 he pub. A Treatise on Money, which claims that recession is caused by an excess of savings over investment, and becomes a hit at Cambridge U., causing the formation of the Cambridge Circus, incl. Richard Kahn, James Meade, Joan Robinson, Austin Robinson, and Piero Sraffa, which meets until 1931. In 1936 Keynes pub. The General Theory of Employment, Interest and Money, which claims that Adam Smith's model only applies in times of full employment, promoting demand-side economics and revolutionizing economic thinking with the theory that the govt. needs to interfere in the economy to moderate the business cycle, using cool new terms incl. propensity to consume, inducement to invest, and liquidity preference, along with cool old terms incl. marginal efficiency of capital and multiplier effect; the U.S. gobbles it up, but Britain doesn't bite until the outbreak of WWII, giving him a peerage in 1942; "Our criticism of the accepted classical theory of economics has consisted not so much in finding logical flaws in its analysis as in pointing out that its tacit assumptions are seldom or never satisfied, with the result that it cannot solve the economic problems of the actual world."
In 1925 Russian (Soviet) economist Nikolai Dimitriyevich Kondratiev (1892-1938) pub. The Major Economic Cycles, proposing Kondratiev Waves, 50-60-year Western capitalist boom-bust supercycles. Too bad, Stalin doesn't like him and he iss arrested in July 1930 and shot on Sept. 17, 1938, not living as long as his waves; in the 1970s he is rediscovered.
It takes a Norwegian to introduce a new kettle of fish to economics? In 1926 Norwegian economist Ragnar Anton Kittil Frisch (1895-1973) pub. an article proposing that economics should follow the path of physics toward theoretical and empirical quantization, founding the discipline of Econometrics, defining ordinal and cardinal utility, and founding Production Theory. In 1930 he pub. Statics and Dynamics in Economic Theory, introducing dynamics to economic analysis, and co-founds the Econometric Society in Cleveland, Ohio along with Joseph Alois Schumpeter et al., founding the journal Econometrica in 1933. In 1933 he coins the distinction between macroeconomics and microeconomics, introduces the Frisch-Waugh (Frisch-Waugh-Lovell) Theorem, and develops the theory of impulse-propagation business cycles. In 1969 he shares the first-ever Nobel Econ. Prize with Jan Tinbergen.
In 1927 Cambridge-born English economist Frank Plumpton Ramsey (1903-30) (friend of Ludwig Wittgenstein) pub. a paper on subjective probability and utility, followed by one on optimal taxation in 1927, and optimal 1-sector economic growth in 1928, which Paul Samuelson in 1970 calls "three great legacies". In 1927 he pub. the first solution of the Ramsey Problem, the price a monopolist should set in order to maximize social welfare subject to a constraint on profit, which is to mark it up inversely to the price elasticity of demand. In 1928 he pub. A Mathematical Theory of Saving, about 1-sector growth, containing the soundbyte: "How much of its income should a nation save? To answer this a simple rule is obtained valid under conditions of surprising generality... The rate of saving multiplied by the marginal utility of money should always be equal to the amount by which the total net rate of enjoyment of utility falls short of the maximum possible rate of enjoyment"; he proposes the Ramsey Model of Economic Growth, which endogenizes the savings rate by explicitly modeling the choice of consumption at a point in time, giving an outcome that is Pareto optimal/efficient.
In 1928 Budapest, Hungary-born Am. mathematician John von Neumann (1903-57) pub. On the Theory of Parlor Games, announcing the Minimax Theorem; "As far as I can see, there could be no theory of games... without that theorem... I thought there was nothing worth publishing until the Minimax Theorem was proved." In 1944 he and Gorlitz, Germany-born Austrian School economist Oskar Morgenstern (1902-77) pub. Theory of Games and Economic Behavior, which treats cooperative multiplayer games with decision-making under uncertainty, founding Mathematical Game Theory, the study of conflict and cooperation between intelligent rational players.
In 1929 Polish-born Marxist economist Henryk Grossman (Grossman) (1881-1950) of Leipzig pub. The Law of Accumulation and Breakdown of the Capitalist System, an attempt to rescue Marxism; a few mo. after its pub. the 1929 Stock Market Crash makes him dance in da streets?
In 1929 Fulda, Minn.-born statistician Harold Hotelling (1895-1973) pub. Stability in Competition, which proposes Hotelling's Law, that in many markets it is rational for producers to make their products as similar as possible. In 1931 he pub. The Economics of Exhaustible Resources, which proposes Hotelling's Rule, that the most socially and economically profitable extraction path of a non-renewable resource is one along which the price of the resource, determined by the marginal net revenue from its sale, increases at the rate of interest. In 1932 he pub. Edgeworth's Taxation Paradox and the Nature of Demand and Supply Functions, which proposes Hotelling's Lemma, that a firm's net supply function is the partial derivative of the profit function with respect to the price. In 1938 he pub. Demand Functions with Limited Budgets, about how non-convexity and marginal cost pricing give monopolies and oligopolies market power, stimulating study of the supply-side of the economy.
In 1929 Northville, Mich.-born economist Fred Manville Taylor (1855-1932) pub. The Guidance of Production in a Socialist State, promoting Market Socialism, which he claims can perform better than a private enterprise economy if the state sets prices equal to marginal cost and uses a trial-and-error approach to clear markets, putting capitalist economists on the run until they regroup with the information economics approach.
In the 1930s the Keynesian Stockholm School of Economics is founded to oppose the Austrian School of Economics, based on the works of Knut Wicksell; members incl. Eli Heckscher, Gunnar Myrdal, and Bertil Ohlin, who help found the Swedish Socialist welfare state.
In 1931 Vienna, Austria-born economist-philosopher Friedrich August (von) Hayek (1899-1992) pub. Prices and Production, which traces business cycles to inflationary credit expansion by central banks that result in artificially low interest rates, causing capital misallocation; "The past instability of the market economy is the consequence of the exclusion of the most important regulator of the market mechanism, money, from itself being regulated by the market process." In Mar. 1944 he pub. The Road to Serfdom, which claims that socialism requires central economic planning, which leads to totalitarianism when the govt. tries to gather more and more knowledge about everybody, becoming a big hit with Ronald Reagan, Margaret Thatcher et al. In 1945 he pub. The Use of Knowledge in Society, arguing that the market price mechanism shares and synchronizes local and personal knowledge, allowing "a self-organizing system of voluntary cooperation", which he calls catallaxy, "that which is the result of human action but not of human design", promoting efficient distribution of resources, while allowing that the state should act as a "safety net", becoming a hit with Ronald Reagan and the leaders of the Velvet Rev. in C Europe. In 1988 he pub. The Fatal Conceit: The Errors of Socialism, which attributes the birth of civilization to private property.
In 1931 British Keynesian economist Richard Ferdinand Kahn, Baron Kahn (1905-89) (member of the Cambridge Circus) pub. The Relation of Home Investment to Unemployment, proposing the principle of the Multiplier, an increase in net national output after an increase in aggregate expenditure (govt. spending).
In 1932 Boston, Mass.-born lawyer-diplomat Adolf Augustus Berle Jr. (1895-1971) (pr. like burley) and Windham, Conn.-born economist Gardiner Coit Means (1896-1988) pub. The Modern Corporation and Public Property, about the "new age" of the bureaucratic corporation, with a growing div. between ownership and management, and the entrepreneurial spirit replaced by a managerial class that has a different mindset; claims that U.S. economic power is concentrated in the 200 largest corporations, which earn 43% of all corporate income; becomes std. work.; 2nd ed. in 1967; "Justification for the stockholder's existence thus depends on increasing distribution within the American population. Ideally the stockholder's position will be impregnable only when every American family has its fragment of that position and of the wealth by which the opportunity to develop individuality becomes fully actualized." In 1962 Means pub. Pricing Power and the Public Interest, which disses the steel industry for its "administered prices" that have risen at 6x the rate of labor costs, contributing to inflation, influencing the JFK admin. to hold prices down; The Corporate Revolution in America; "We now have single corporate enterprises employing hundreds of thousands of workers, having hundreds of thousands of stockholders, using billions of dollars' worth of the instruments of production, serving millions of customers, and controlled by a single management group. These are great collectives of enterprise, and a system composed of them might well be called 'collective capitalism'."
In 1932 Warwick, England-born economist Sir John Richard Hicks (1904-89) pub. The Theory of Wages, which becomes a std. textbook; 2nd ed. 1963. In 1937 he pub. the IS-LM (Investment Saving - Liquidity Preference) Money Supply Model, based on Keynesian macroeconomics, which treats the intersection of the IM and LM curves as gen. equilibrium in both markets. In 1939 he pub. his magnum opus Value and Capital, which popularizes and extends Leon Walras' Gen. Equilibrium Theory. In 1939 he and Budapest, Hungary-born British economist Nicholas Kaldor, Baron Kaldor (1908-86) pub. the Kaldor-Hicks Efficiency Compensation Criteria for welfare comparisons, which is less stringent than Pareto Efficiency, considering an outcome more efficient if a Pareto optimal outcome can be reached by arranging sufficient compensation from those that are made better off to those who are made worse off so that all would end up no worse than before. Meanwhile in 1938 Kaldor pub. the Cobweb Theorem, explaining why prices can be subject to periodic fluctuations in certain types of markets when the amount produced must be chosen before prices are observed. In 1967 Kaldor pub. Kaldor's Growth Laws, explaining the high correlation between living standards and the share of resources devoted to industrial activity. In 1972 Hicks is awarded the Nobel Econ. Prize.
In 1932 Swedish Stockholm School economist Karl Gunnar Myrdal (1898-1987) pub. Monetary Economics, proposing the idea that the govt. adjust its budget to slow or speed the economy, later grumbling that John Mayard Keynes got the credit instead of him. In 1957 Myrdal pub. his theory (co-developed by Nicholas Kaldor) of Circular Cumulative Causation, in which a change in one institution propagates to others. In 1974 Myrdal is awarded the Nobel Econ. Prize along with Friedrich Hayek, grumbling that it should be abolished because it had been given to "reactionaries" like Hayek and Milton Friedman.
In 1932 English economist Lionel Charles Robbins, Baron Robbins (1898-1984) pub. An Essay on the Nature and Significance of Economic Science, which contains the famous soundbyte: "Economics is the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses."
In 1933 La Conner, Wash.-born economist Edward Hastings Chamberlin (1899-1967) (student of Frank H. Knight) pub. The Theory of Monopolistic Competition: A Reorientation of the Theory of Value, based on the monopoly theory of Antoine Augustin Cournot and the concept of marginal revenue; he has his class at Harvard U. engage in an experiment to illustrate how prices don't necessarily reach equilibrium, concluding that most market prices are determined by monopolistic and competitive forces, founding Experimental Economics. Along with Joan Robinson and Joe Staten Bain, he founds the Structure-Conduct-Performance Paradigm, which is later criticized by game theorists until Paul Krugman rehabilitates it. The start of modern Industrial Org. Economics, which concentrates on industry in general, studying barriers to entry, market concentration and power, and rate of profit.
In 1933 Stockholm School economist Bertil Gotthard Ohlin (1899-1979), student of Eli Filip Heckscher (1879-1952) pub. Interregional and International Trade, proposing the Heckscher-Olin Model of Internat. Trade, which claims that countries will export products that use their abundant and cheap factors of production, and import products that use their scarce factors of production. In 1977 Ohlin wins a share of the Nobel Econ. Prize.
In 1933 Surrey, England-born economist Joan Violet Robinson (1903-83) pub. The Economics of Imperfect Competition, coining the term "monopsony". In 1942 she pub. An Essay on Marxian Economics (2nd ed. 1966), restoring Karl Marx's reputation as an economist. In 1953 she pub. her magnum opus The Production Function and the Theory of Capital, claiming that neoclassicists engage in circular reasoning about the costs of production. In 1956 she pub. The Accumulation of Capital, which extends Keynesianism. In 1962 she pub. Economic Philosophy, and Essays in the Theory of Economic Growth, which discusses Golden Age growth paths.
In 1934 English LSE mathematician-economist Sir Roy George Douglas Allen (1906-83) and Sir John Richard Hicks pub. A Reconsideration of the Theory of Value. In 1938 Allen pub. Mathematical Analysis for Economists, which introduces the concept of Elasticity of Substitution. In 1949 he pub. Statistics for Economists, followed by Mathematical Economics (1956), and Macro-Economic Theory: A Mathematical Treatment (1967), popularizing the use of mathematics in economics.
In 1934 after losing his shirt in the 1929 Stock Market Crash, London, England-born Am. economist ("Dean of Wall Street") ("Father of Value Investing") Benjamin Graham (Grossbaum) (1894-1976) and Berkeley County, W. Va.-born David LeFevre Dodd (1895-1988) of Columbia U. pub. Security Analysis, which becomes the bible for investors, founding Value Investing. In 1949 Graham pub. The Intelligent Investor, which advocates the group approach, "Try to buy groups of stocks that meet some simple criterion for being undervalued, regardless of the industry and with very little attention to the individual company", which fan Warren Buffett (who names a son after him) calls "the best book about investing ever written".
In 1934 Russian-born Am. economist Simon Smith Kuznets (1901-85) introduces the concept of Gross Domestic Product (GDP). In 1941 he pub. National Income and Its Composition, 1919-1938, which becomes a std. work. In 1942 he pub. Uses of National Income in Peace and War, disproving John Maynard Keynes' 1936 Absolute Income Hypothesis that predicts an increase in marginal savings with increase in aggregate income, shocking Keynesians. In 1955 he pub. Economic Growth and Income Equality, followed in 1963 by Quantitative Aspects of the Economic Growth of Nations, revealing an inverted U-shaped relation between income inequality and economic growth, meaning that economic growth increases income disparity between rich and poor in poor countries but decreases it in wealthy countries. In 1971 he wins the Nobel Econ. Prize.
In 1934 Hoxton, London-born economist Sir Arnold Plant (1898-1978) pub. The Economic Theory Concerning Patents for Inventions, which becomes a std. work.
In 1934 the Japan Economics Assoc. is founded; in 1995 it establishes the Nakahara Prize for Japanese economists under age 45.
In 1936 Polish market socialist economist Oskar Ryszard Lange (1904-65) pub. On the Economic Theory of Socialism, which tries to fit neoclassical economics into Marxian economics after throwing out the labor theory of value, proposing along with Fred M. Taylor and Russian-born British-Am. economist Abba Ptachya Lerner (1903-82) the Lang-Lerner-Taylor Theorem that a state-run economy could be more efficient than a private market economy if govt. planners use the price system as if in a market economy, using a trial-and-error approach to determining output targets and achieving economic equilibrium and Pareto Efficiency, causing English Fabians to declare that he won the Economic (Socialist) Calculation Debate with the Austrian School of Economics.
In 1936 Russian-Am. economist Wassily Wissilyovich Leontief (1905-99) pub. Quantitative Input and Output Relations in the Economic System of the United States, describing the Input-Output Model, which models the economy via linear algebra, and is ideal for the computer age, winning him the 1973 Nobel Econ. Prize. His students Paul Samuelson (1970), Robert Solow (1987), and Vernon L. Smith (2002) do ditto.
In 1936 Dutch economist Jan Tinbergen (1903-94) develops the first comprehensive nat. macroeconomic model. He later develops the Tinbergen Norm, which claims that if the ratio between the max and min salaries for a co. exceeds 5, it becomes counterproductive. In Jan. 1962 he pub. An Analysis of World Trade Flows, proposing the Gravity Model of Internat. Trade, based on Isaac Newton's Law of Gravity. In 1969 he shares the first Nobel Econ. Prize.
In 1937 Willesden, London-born Am. economist Ronald Harry Coase (1910-2013) pub. The Nature of the Firm, which claims that the reason for firms is the existence of transaction costs. In 1960 he pub. The Problem of Social Cost, which claims that law and govt. regulations are not as important or effective in helping people as once thought, and that the govt. should have the burden of proof that its intervention in the market has positive effects based on costs of action, and that well-defined property rights can overcome the problems of externalities; proposes the Coase Theorem, that if trade in an externality is possible and there are no transaction costs, bargaining will lead to an efficient outcome regardless of the initial allocation of property, leading to the creation of New Institutional Economics in the 1970s.
In 1938 New York City-born market socialist economist Abram Bergson (Burk) (1914-2003) pub. A Reformulation of Certain Aspects of Welfare Economics, defining the Social Welfare Function, which ranks social states based on variables affecting the economic welfare of society. In 1944 he pub. Structure of Soviet Wages, followed in 1950 by Soviet National Income and Product in 1937, calculating the nat. output and economic growth of the Soviet Union sans market valuation based on factor price.
In 1939 London-born English economist Sir Henry Roy Forbes Harrod (1900-78) pub. Internat. Economics, which becomes a std. textbook, reaching the 5th ed. in 1973. Also in 1939 he pub. An Essay in Dynamic Theory, which proposes the Harrod-Domar Model, later (1946) independently developed by Russian-born Am. economist Evsey David Domar (1914-97), which bases the economy's growth rate on the level of saving and the productivity of capital, distinguishing between warranted, actual, and natural rate of growth, and concluding that there is no natural reason for an economy to have balanced growth. In 1951 Harrod pub. The Life of John Maynard Keynes.
In 1939 Soviet mathematician-economist Leonid Vitaliyevich Kantorovich (1912-86) invents Linear Programming for the optimal allocation of resources, receiving the 1975 Nobel Econ. Prize. Linear programming is kept secret until 1947, the same year that Portland, Ore-born mathematician George Bernard Dantzig (1914-2005) pub. the Simplex Method, and Budapest, Hungary-born Am. mathematician John von Neumann (1903-57) pub. the theory of Duality.
In 1939 French mathematician Paul Pierre Levy (Lévy) (1886-1971) introduces the concept of Martingales into probability theory, where the expectation of the next value in a sequence is the present observed value, modeling fair games.
In 1939 the Am. Finance Assoc. (AFA) is established; in 1946 it begins pub. the Journal of Finance; in 1989 it establishes the Smith Breeden Prize.
On Sept. 1, 1939 - Sept. 2, 1945 the horrific $3.5T World War II resulted in 24M military and 49M civilian deaths, and featured the low point of the Jewish Holocaust (Shoah) by the German Nazis, I guess it was the Jews' fault for not ransoming themselves to go to Israel before they could round them up for the camps. The whole experience turned Jews from lovers into fighters, ramping up the Zionist movement with full world sympathy and support by new world superpower U.S., which had its own guilt trip because on Nov. 24, 1942 Budapest-born Am. Zionist leader Rabbi Stephen Samuel Wise (1874-1949) announced in a press conference in Washington, D.C. that he was authorized by the U.S. State Dept. to confirm that the Nazis had murdered 2M Jews as part of a plan to exterminate all Jews in Europe; too bad, the nat. newspapers didn't consider it front page news, and the U.S. govt. did nada. After the war ended and Americans toured the concentration camps in horror, Polish-born Jewish scholar Raphael Lemkin (1900-59), who single-handedly led an unsuccessful campaign to get the League of Nations to give internat. protections against genocide starting in 1933 finally got what he wanted after his own people got it, namely the Dec. 9, 1948 U.N. Convention on the Prevention and Punishment of the Crime of Genocide (Gen. Assembly Resolution 260), which didn't come in force until Jan. 12, 1951, and which the U.S. still didn't ratify until 1988.
In the 1940s Norwegian economist Trygve Magnus Haavelmo (1911-99) (assistant of Ragnar Frisch) pioneers the integration of statistical probability theory into econometrics, demonstrating that relations among all components of the economy must be considered in making a prediction about one, transforming economics "from armchair instinct to empirical science" (Bengt-Christer Ysander), and furnishing techniques used by econometrists Lawrence Klein et al. In 1954 he pub. A Study in the Theory of Economic Evolution, which shows that equivalent economic growth models expressed as either differential or difference equations have radically different behavior, with the latter possibly exhibiting chaotic behavior. He is awarded the 1989 Nobel Econ. Prize.
In 1940 British economist John Maynard Keynes (1883-1946) and German-born British economist Ernst Friedrich "Fritz" Schumacher (1911-77) propose the Bancor, a supranational currency to be used in internat. trade and cleared by the Internat. Clearing Union; too bad, it is rejected by the 1944 Bretton Woods Conference. In 1973 Schumacher pub. the bestseller Small is Beautiful: A Study of Economics As If People Mattered, about "Buddhist economics", how Intermediate (Appropriate) Technology, i.e., small-scale, labor-intensive, decentralized, energy-efficient, environmentally-friendly, locally-controlled technology ("smallness within bigness") will produce adequate economic growth without dehumanizing workers.
In 1940 the Economic History Assoc. is founded at Santa Clara U. in Calif., going on to establish several prizes incl. the Arthur Cole Prize, Alice Hanson Jones Prize, Gyorgi Ranki Prize, Alan Nevins Prize, Alexander Gerschenkron Prize, and Jonathan Hughes Prize; in 1941 it begins pub. the Journal of Economic History with Cambridge U. Press (until ?).
In 1941 Spokane, Wash.-born economist Joe Staten Bain (1912-91) ("Father of Modern Industrial Org. Economics") pub. The Profit Rate as a Measure of Monopoly Power. In 1944-7 he pub. The Economics of the Pacific Coast Petroleum Industry (3 vols.). In 1948 he pub. Pricing, Distribution and Employment: Economics of an Enterprise System. In 1952 he pub. Price Theory. In 1956 he pub. Barriers to New Competition: Their Character and Consequences in Manufacturing Industries. In 1959 he pub. his magnum opus Industrial Organization: A Treatise.
In 1941 Liverpool, England-born economist Kenneth Ewart Boulding (1910-93) pub. Economic Analysis, "a contribution to the development and systematization of the body of economic analysis itself", making him a star; he doesn't mention Keynesian economics until the 2nd ed. (1948). In 1945 he pub. The Economics of Peace, founding Peace Economics; proposes the Bathtub Theorem (the rate of accumulation is equal to the difference between the rate of production and the rate of consumption), and applies it to postwar reconstruction. In 1954 he and Vienna, Austria-born biologist Karl Ludwig von Bertalanffy (1901-72) et al. found the Society for the Advancement of General Systems Theory, which in 1956 is renamed the Society for Gen. Systems Research, and in 1988 renamed the Internat. Society for the Systems Sciences, founding Gen. Systems Theory. In 1950 he pub. A Reconstruction of Economics, which emphasizes stocks, assets, and shares of wages and profits in nat. income rather than flows, income, and prices of labor and capital, being panned as out of step with the Keynesian mainstream; coins the term "psychic capital", the accumulation of desirable mental states. In 1961 he pub. Economic Development as an Evolutionary System, about how society will move from civilized to "post-civilized".
In 1941 London, England-born economist Sir John Richard Nicholas Stone (1913-91) develops Britain's first nat. account, the first using double-entry accounting based on inspiration from Francois Quesnay, winning him the 1984 Nobel Econ. Prize.
In 1941 the Ph.D. program of the MIT Dept. of Economics is founded, making it one of the Big Five for economics incl. the U. of Chicago, Harvard U., Princeton U., and Stanford U.
In 1942 English economist William Henry Beveridge, 1st Baron Beveridge (1879-1963) pub. the Beveridge Report (Social Insurance and Allied Services), identifying the Five Giant Evils in society, incl. squalor, ignorance, want, idleness, and disease, which is used by the Labour Party to enact a Socialist welfare state after it is elected in 1945.
On July 1-22, 1944 the Internat. Bank for Reconstruction and Development (World Bank) and the Internat. Monetary Fund (IMF) are created at a 44-nation conference at Bretton Woods, N.H., originally designed to create fixed internat. exchange rates in the face of the collapse of the old gold standard; the net result is that the U.S. uses its position as victor in WWII to force other nations to let it pay for its trade deficits in either gold or dollars, while other nations can only pay for their deficits with gold or with dollars previously acquired in the course of trade with the U.S. or other nations, which Charles de Gaulle later calls "an exorbitant privilege".
In 1944 Lowell, Mass.-born UTA institutional economist Clarence Edwin Ayres (1891-1972) pub. The Theory of Economic Progress, followed in 1952 by The Industrial Economy: Its Technological Basis and Insitutional Destiny, combining Thorstein Veblen's idea of the Darwinian struggle between technological (instrumental) and institutional (ceremonial) structure with John Dewey's concept of Instrumentalism to create Institutionalist Dualism AKA the Veblenian Dichotomy, where there is an "institutional lag" that keep socio-cultural institutions one step behind er, behind technological changes.
In 1944 Omaha, Neb.-economist (fresh MIT Ph.D. grad) Lawrence Robert Klein (1920-) begins pioneering computer modeling for economic forecasting, starting with a model of the U.S. economy, which predicts an upturn rather than downturn after the end of WWII. In 1947 after becoming an avid Keynesian and devoting his life to using computer modeling (econometrics) to find empirical proof, he pub. The Keynesian Revolution. In 1954 after McCarthyism causes him to be denied tenure at the U. of Mich., and he moves to the U.K., he develops the Oxford Model along with English economist Sir James Ball (1933-), which leads to an explosion in econometric modeling. In 1955 he and Am. economist Arthur Stanley Goldberger (1930-2009) pub. An Econometric Model of the United States, 1929-1952, announcing the Klein-Goldberger Model of the U.S., which attempts to empirically verify Keynesian theory; too bad, it is subject to sudden wild oscillations. In the 1960s Klein develops the Brookings-SSRC Econometric Model, and the Wharton Econometric Forecasting Model (1967). In 1980 Klein wins the Nobel Econ. Prize.
In 1944 Hungarian economist Karl Paul Polanyi (1886-1964) pub. The Great Transformation, which claims that the market economy and nation-state should be treated as a unit, the Market Society, founding Substantivism, the view that economics deals with a society's livelihood (provisioning) strategy. In 1948 his polymath younger brother Michael Polanyi (1891-1976) pub. Full Employment and Free Trade, which claims that a free market economy needs a central bank to moderate booms and busts via strict/loose monetary policy.
In 1946 the Foundation for Economic Education (FEE) is founded in Manhattan, N.Y. to promote Austrian School of Economics theories, esp. free open markets and civil liberties, spawning the creation on Apr. 10, 1947 of the Mount Pelerin Society in Switzerland.
In 1947 Paris-born French economist Maurice Felix Charles Allais (1911-2010) pub. Economie et Interet, introducing the Overlapping Generations Model, and the Golden Rule Savings Rate (of Optimal Growth). In 1953 he introduces the Allais Paradox, which contradicts the Expected Utility Hypothesis. In 1988 he wins the Nobel Econ. Prize "for his pioneering contributions to the theory of markets and efficient utilization of resources".
In 1947 after leaving Harvard for MIT, which doesn't even have a Ph.D. program in economics, Gary, Ind.-born economist ("the last generalist in economics") Paul Anthony Samuelson (1915-2009) (brother-in-law of Kenneth Arrow) (coiner of the term "stagflation") pub. Foundations of Economic Analysis, a textbook based on his dissertation, which uses the classical thermodynamics methods of U.S. physicist Josiah Willard Gibbs (1839-1903) to derive a "general theory of economic theories", becoming the 2nd U.S. textbook to explain Keynesian economics, and the best-selling economic textbook so far (until ?) (4M copies), helping him win the 1970 Nobel Economics Prize (first American); it attempts to find a common mathematical structure for economics based on maximizing behavior of agents and stability of equilibria, promoting index numbers, welfare economics, and comparative statics (known for the correspondence principle), launching the Neoclassical Synthesis of Economics and value-free Positive (Value-Free) Economics.
In 1947 the CFA Inst. is founded in Charlottesville, Va. to offer the Chartered Financial Analyst (CFA) designation, the Certificate in Investment Peformance Measurement (CIPM), the Claritas Investment Certificate, and the Chartered Investment Counselor credential; in 1945 it begins pub. the Financial Analysts Journal; in 1960 it establishes the Graham and Dodd Award in honor of Benjamin Graham and David Dodd of Columbia U.
In 1948 Ft. Collins, Colo.-born economist Holbrook Working (1895-1985) pub. Theory of the Inverse Carrying Charge in Futures Markets, which claims that randomness is characteristic of a perfectly functioning financial market. In 1953 Working pub. Futures Trading and Hedging, and Hedging Reconsidered, reversing John Maynard Keynes' Backwardation Theory of Future Prices, which claims that short hedgers (farmers) drive down futures prices because of their demand for price insurance, arguing that there can be hedgers on both sides of the market, and that hedging isn't a risk reduction technique but "speculation on the basis".
In 1949 New York City-born Keynesian economist Sidney Weintraub (1914-83) pub. his first book Price Theory. On Jan. 1, 1958 he pub. An Approach to the Theory of Income Distribution. In 1959 he pub. A General Theory of the Price Level, Output, Income Distribution, and Economic Growth, advocating control of the money wage level to combat inflation, proposing the Wage-Cost Markup Equation (WCME), which regards the avg. markup of prices over unit wage costs to be stable, making price level a relation between wage rate and labor productivity. On Jan. 1, 1961 he pub. Classical Keynesianism, Monetary Theory, and the Price level, which disses Classical or Hicksian Keynesian for caricaturing true Keynesianism and not making enough use of supply-side aspects of macroeconomics. In 1973 he pub. Keynes and the Monetarists (2nd ed. 1978), dissing monetarism. In 1975 he and Berlin-born economist Henry Christopher Wallich (1914-88) pub. A Tax-Based Incomes Policy, promoting Tax-Based Incomes Policy (TIP). In 1978 he and his Brooklyn, N.Y.-born former student Paul Davidson (1930-) found the Journal of Post Keynesian Economics to promote Post-Keynesian Economics, using the income tax mechanism to implement an anti-inflationary income policy; the term is coined in 1975 by Washington, D.C.-born Alfred S. Eichner (1937-88) and Dallas, Tex.-born economist Jan. A. Kregel (1944-) in their article An Essay on Post-Keynesian Theory: A New Paradigm in Economics, don't ask where the hyphens go, it's so Keynesian.
In 1950 Argentine economist (Adam Smith free trade lover turned protectionist) Raul Prebisch (1901-86) pub. The Economic Development of Latin America and Its Principal Problems, which proposes the Singer-Prebisch Thesis, dividing the U.S. and other industrialized nations from the "periphery" of primary producers, who are doomed to see the prices of their primary products such as agricultural goods fall more than manufactured secondary prices. In Feb. 1949 German-born British economist Sir Hans Wolfgang Singer (1910-2006) pub. Postwar Relations between Underdeveloped and Industrialized Countries, showing a long-term deterioration in the terms of trade for underdeveloped countries, which Prebisch bases his book on, causing them to share credit.
In 1951 New York City-born Kenneth Joseph Arrow (1921-) pub. Social Choice and Individual Values (2nd ed. 1963), which announces Arrow's Impossibility Theorem, that there is no social choice rule that satisfies any given set of plausible requirements, leading to the Voting Paradox, that majority voting may fail to yield a stable outcome. In 1954 he and French economist Gerard (Gérard) Debreu (1921-2004) pub. Existence of a Competitive Equilibrium for a Competitive Economy, proposing the Arrow-Debreu Model of Equilibrium, and presenting the first rigorous proof of the existence of a market-clearing equilibrium under certain assumptions, winning Arrow the 1972 Nobel Econ. Prize (youngest winner until ?), and Debreu the 1983 Nobel Econ. Prize. In 1963 Arrow pub. Uncertainty and the Welfare Economics of Medical Care, founding Health Economics. In 1965 Arrow pub. The Theory of Risk Aversion, which combined with the 1964 paper by John W. Pratt titled Risk Aversion in the Small and in the Large proposes the Arrow-Pratt Measure of Absolute Risk Aversion (ARA).
In 1951 Russian-born Am. capitalist imperialist pig-hating Neo-Marxist economist Paul Alexander Baran (1909-64) becomes the only tenured Marxist economist in the U.S. at Stanford U. (until 1964). In 1952 he pub. The Political Economy of Underdevelopment, followed in 1957 by The Political Economy of Growth, proposing the concept of Economic Surplus, which he claims is consistent with Karl Marx's labor concept of value and category of surplus value, allowing a "scientific policy of conservation of human and natural resources" by a socialist govt. to keep the planned surplus less than the potential surplus and optimize consumption. In 1966 he and New York City-born Marxist economist Paul Marlor Sweezy (1910-2004) pub. Monopoly Capital: An Essay on the American Economic and Social Order, drawing attention to the monopolistic economy being created by megacorporations, giving new life to the New Left. In 1984 Notre Dame U. economist Charles K. Wilber pub. The Political Economy of Development and Underdevelopment.
In 1951 Swanage, Dorset, England-born economist James Edward Meade (1907-95) pub. vol. 1 of "The Theory of Internat. Economic Policy", The Balance of Payments, about the theory of domestic divergences (internal and external balance), promoting policy tools for govts., followed in 1955 by vol. 2 Trade and Welfare, promoting protectionism with the theory of the "second-best", winning a share of the 1977 Nobel Econ. Prize.
In Sept. 1951 Bluefield, W. Va. -born mathematician John Forbes Nash Jr. (1928-) pub. the article Non-Cooperative Games in The Annals of Mathematics, becoming the first to define a Nash Equilibrium for non-zero-sum games, winning a share of the 1994 Nobel Econ. Prize.
In 1952 New York City-born economist William Jack Baumol (1922-) pub. The Transactions Demand for Cash: An Inventory Theoretic Approach; in 1956 Champaign, Ill.-born economist James Tobin (1918-2002) pub. The Interest-Elasticity of the Transactions Demand for Cash; the two combine their efforts in the Baumol-Tobin Model of the transactions demand for money, based on nominal interest rate, level of real income, and transaction costs, which predicts that interest and income elasticity are both equal to a constant 0.5. In 1958 Tobin proposes the Tobit Model for censored endogenous variables. In 1968 he and fellow Yale U. economist William C. Brainard pub. Pitfalls in Financial Model-Building, proposing Tobin's Quotient, the ratio between the market value and replacement value of the same physical asset. In 1969 Tobin pub. A General Equilibrium Approach to Monetary Theory, calling it q (Q). In 1972 Tobin proposes the Tobin Tax, a penalty on short-term financial round-trip excursions into another currency in order to reduce speculation. In 1981 Tobin receives the Nobel Econ. Prize.
In 1952 6'8" Ontario, Canada-born Am. economist (former FDR New Dealer) John Kenneth "Ken" Galbraith (1908-2006) pub. American Capitalism: The Concept of Countervailing Power, claiming that the U.S. economy is distorted by oligopolies and crypto-monopolies. In 1958 he pub. The Affluent Society; Adlai Stevenson's Keynesian economics tutor in 1952 and 1956 coins the terms "affluent society", "conventional wisdom", and "countervailing power", claiming that Americans have their basic needs met, allowing advertisers to set up "machinery for consumer-demand creation" that robs public spending and investment, calling for the elimination of poverty, govt. investment in public schools, and the creation of a New Class, with the soundbyte "The basic demand on America will be on its resources of intelligence and education"; in the intro. to the 2nd ed. he writes "The Soviets sent up the first Sputnik. No action was ever so admirably timed. Had I been younger and less formed in my political views, I would have been carried away by my gratitude and found a final resting place beneath the Kremlin Wall. I knew my book was home." In 1967 he pub. The New Industrial State (rev. ed. in 1972), claiming that large corporations distort the traditional supply-demand mechanism with advertising and vertical integration, and that the producers are now the head honchos instead of the consumers; notes an "ill-defined discontent, especially among students and intellectuals, with the accepted and approved modalities of social thought... the views of 'The Establishment'". In 1973 he pub. Economics and the Public Purpose, advocating a "new socialism" incl. nationalization of health care and defense industries along with wage-price controls.
In 1952 Chicago, Ill.-born economist Harry Max Markowitz (1927-) pub. the Harry Markowitz Model of Portfolios, which is based on the expected returns (mean) and standard deviation (variance). In 1961 Jack L. Treynor pub. the Capital Asset Pricing Model (CAPM), which is based on the Markowitz model, emphasizing diversification; in 1964 William Forsyth Sharpe (1934-) independently pub. the CAPM, followed by John Virgil Lintner Jr. (1916-83) in 1965, and Jan Mossin (1936-87) in 1966; in 1990 Markowitz and Sharpe share the 1990 Nobel Econ. Prize for it.
In 1953 New York City-born economist Robert L. Heilbroner (1919-2005) pub. the bestseller (4M copies) The Worldly Philosophers: The Lives, Times and Ideas of the Great Economic Thinkers, about Adam Smith (1723-90), Karl Marx (1818-83), and John Maynard Keynes (1886-1946), which becomes the #2 bestselling economics textbook behind Paul A. Samuelson's (1947); it classifies economies as traditional (agriculture-based), command (planned economy), market (capitalism), and mixed; in 1989 he pub. an article in The New Yorker containing the soundbyte: "Less than 75 years after it officially began, the contest between capitalism and socialism is over: capitalism has won... Capitalism organizes the material affairs of humankind more satisfactorily than socialism"; in 1992 he pub. an article in Dissent containing the soundbyte: "Capitalism has been as unmistkable a success as socialism has been a failure"; the 7th ed. (1999) incl. the new final chapter "The End of Worldly Philosophy" which rues the current state of economics thought and pines for a "reborn worldly philosophy" that mixes capitalism and socialism, with his ideal being "a slightly idealized Sweden".
In 1953 Am. economist David Boyce Hamilton pub. "Newtonian Classicism and Darwinian Institutionalism", which is repub. in 1970 as Evolutionary Economics: A Study of Change in Economic Thought, which claims that institutionalist economists are a distinct group who differ from classical economists in their belief in evolution, which means that there is no "natural economy" because people can create new ones to solve perceived problems, causing the founding of the Assoc. for Evolutionary Economics. In 1982 New York City-born economist Richard R. Nelson (1930-) and Sidney Graham Winter (1935-) pub. An Evolutionary Theory of Economic Change, using the work of Joseph Alois Schumpeter and Herbert Simon to break with neoclassical economics and its belief in equilibrium and methodological individualism, showing how a company's "organizational knowledge" evolves and interacts with the economy, revitalizing the evolutionary economics movement. In 1986 the Internat. Joseph A. Schumpeter Society is founded in Germany, going on to pub. the Journal of Evolutionary Economics. In 1988 the European Assoc. for Evolutionary Political Economy is founded in London; in 2005 it begins pub. the Journal of Institutional Economics. In 1997 the Japan Assoc. for Evolutionary Economics is founded; in Nov. 2004 it begins pub. Evolutionary and Institutional Economics Review. On Oct. 22, 2009 Hamilton pub. Cultural Economics and Theory, a collection of his articles on institutional economics which stress the interaction of culture and technology in economic evolution.
In 1953 Arlington, S.D.-born economist Theodore William Schultz (1902-98) pub. The Economic Organization of Agriculture, followed by Reflections on Agricultural Production, Output and Supply (1956), relating development economics to agricultural economics, and wedding them to econometrics. In 1963 he pub. The Economic Value of Education, followed by Transforming Traditional Agriculture (1964), Economic Growth and Agriculture (1968), and Investment in Human Capital: The Role of Education and Research (1971). In 1979 he shares the Nobel Econ. Prize with Sir Arthur Lewis. In 1981 he pub. Investing in People: The Economics of Population Quality, founding Demographic (Population) Economics. In 1987 the European Society of Population Economics begins pub. the Journal of Population Economics. In 1993 he pub. The Economics of Being Poor. On Dec. 8, 1993 he pub. Origins of Increasing Returns.
In 1954 Saint Lucian economist Sir William Arthur Lewis (1915-91) pub. Economic Development with Unlimited Supplies of Labour, proposing the Lewis (Dual Sector) Model of Economic Development, which claims that a capitalist economy develops by taking labor from a non-capitalist backward "subsistence sector" until it reaches the Lewisian Turning Point where further capital accumulation begins to increase wages, winning him the 1979 Nobel Econ. Prize.
In 1954 Rome, Italy-born Am. economist Franco Modigliani (1938-2003) pub. the Life-Cycle Model of Consumption, which predicts that people will consume an annuity of their expected lifetime income at all points of their lives. In 1958 Modigliani and Boston, Mass.-born economist Merton Howard Miller (1923-2000) of the Carnegie Inst. of Tech. pub. The Cost of Capital, Corporation Finance and the Theory of Investment, proposing the Modigliani-Miller Theorem, that the value of a firm is the same whether it is financed by debt or equity. Modigliani wins the 1985 Nobel Econ. Prize, and Miller the 1990 Nobel Econ. Prize.
In 1955 Ukrainian-born Am. economist Jacob Marschak (1898-1977) pub. Elements for a Theory of Teams, founding Team Theory. In Jan. 1968 Am. economist Roy Radner pub. Competitive Equilibrium under Uncertainty, proposing the concept of Radner Equilibrium, an extension of the Arrow-Debreu Equilibrium for incomplete markets. In 1972 Marschak and Radner pub. Economic Theory of Teams.
In 1955 Polish-born British economist Tadeusz Rybczynski (1923-98) pub. the Rybczynski Theorem for the Heckscher-Ohlin Model of Internat. Trade, which states that at constant relative goods prices, a rise in the endowment of one factor will lead to a more than proportional expansion of the output in the sector which uses that factor intensively, and an absolute decline of the output of the other good, until ultimately there is factor price equalization.
In 1956 after serving in the OSS in WWII then helping develop the Marshall Plan, becoming an economic and foreign policy adviser to Pres. Eisenhower in 1954, advising him on a "world economic plan" incl. U.S. development aid to help secure foreign policy goals, New York City-born gung-ho pro-Western capitalist economist Walt Whitman Rostow (1916-2003) pub. The Take-Off into Self-Sustained Growth, followed in 1960 by The Stages of Economic Growth: A Non-Communist Manifesto (based on a 1959 article), proposing the Rostovian Takeoff Model of Economic Growth, with five basic stages: traditional society, preconditions for takeoff, takeoff, drive to maturity, and age of high mass consumption. The book impresses JFK, who makes him an asst. to JFK's nat. security adviser McGeorge Bundy, after which he is promoted to Bundy's job by LBJ, becoming his main Vietnam War hawk, leading to LBJ's resignation. Too bad, he says that the preconditions for takeoff can be speeded up via not only infusions of Western knowhow and culture to backwards benighted Third World countries, but diffusion of Western culture, triggering anti-Westernism.
In Feb. 1956 Brooklyn, N.Y.-born economist Robert Merton Solow (1924-) pub. A Contribution to the Theory of Economic Growth, proposing the Solow-Swan Exogenous Growth Model, based on productivity, capital accumulation, pop. growth, and technological progress, founding Neoclassical Growth Theory, and receiving the 1987 Nobel Econ. Prize. In Dec. 1956 Australian economist Trevor Winchester Swan (1918-89) pub. Economic Growth and Capital Accumulation, showing that in the long run growth cannot be sustained by capital growth, and proposing the Swan Diagram of the internal-external balance, with relative domestic costs and fiscal deficit as axes, making him a co-founder of the Solow-Swan Exogenous Growth Model; too bad, he is snubbed for the Nobel.
In 1957 Pottsville, Penn.-born Chicago School of Economics economist Gary Stanley Becker (1930-) pub. The Economics of Discrimination; revised ed. 1971. In 1964 he pub. Human Capital: A Theoretical and Empirical Analysis, with Special Reference to Education; 3rd ed. 1993. In the 1960s he and Polish-born economist (also of the Chicago School of Economics) Jacob Mincer (1922-2006) develop New Home Economics (NHE) at Columbia U., emphasizing the importance of household production, spawning Family Economics. In 1981 Becker pub. A Treatise on the Family; 2nd ed. 1991. In 2001 Becker and Am. economist Kevin Miles Murphy (1958-) pub. Social Economics: Market Behavior in a Social Environment, which incl. the social environment and standard goods and services in extended utility functions, allowing analysis of how the social environment is determined by the interactions of individuals.
In 1957 Evanston, Ill.-born economist Anthony Downs (1930-) pub. An Economic Theory of Democracy, proposing the Left-Right Axis, with the left being a state-planned economy, and the right being a completely deregulated economy, which becomes a staple in political debate. In 1992 he pub. Stuck in Traffic: Coping with Peak-Hour Traffic Congestion, followed in 2004 by Still Stuck in Traffic, proposing high occupancy toll lanes on crowded freeways along with congestion road pricing.
In 1957 Brooklyn, N.Y.-born economist Milton Friedman (1912-2006) pub. the Permanent Income Hypothesis, that consumers make choices regarding consumption patterns based on permanent income. In 1962 he pub. the bestseller (500K copies) Capitalism and Freedom, which argues that political freedom requires economic freedom, and disses U.S. liberals for coopting the European Enlightenment name; it advocates an all-volunteer military, free-floating exchange rates, abolition of medical licenses, a negative income tax, and education vouchers, becoming a big hit, making him a conservative-libertarian star. In 1963 he pub. A Monetary History of the United States, 1867-1960, which claims that changes in the rate of growth of the money supply (monetary policy) profoundly influence economic fluctuations, pushing the monetarist view that steady control of the money supply by govt. is necessary, while Keynsian govt. controls are bad and the free market good; claims that the Great Depression was caused by the Federal Reserve System - there's something else going on here? In 1980 he and his Ukrainian-born economist wife Rose Director Friedman (1910-2009) pub. the bestseller Free to Choose: A Personal Statement, lamenting the erosion of personal freedom by govt., based on the works of Friedrich Hayek; also a 1980 PBS TV series.
In Oct. 1957 Lithuanian-born Am. economist Hirsh Zvi Griliches (1930-99) pub. his dissertation Hybrid Corn: An Exploration in the Economics of Technological Change, demonstrating that the penetration of hybrid corn seeds follows the Logistic Equation; Am. economist Edwin Mansfield (1903-97) goes on to show that the Logistics Equation applies generally to innovation and technological change, causing the development of new technology to be treated by economists as an economic rather than exogenous phenomenon.
In 1958 Murfreesboro, Tenn.-born economist James McGill Buchanan Jr. (1919-2013) (disciple of Knut Wicksell and Ludwig von Mises) pub. Public Principles of Public Debt, followed by Fiscal Theory and Political Economy (1960). In 1962 he and Rockford, Ill.-born Gordon Tullock (1922-2014) pub. The Calculus of Consent: Logical Foundations of Constitutional Democracy, melding economics with political science, reviving Public Choice Theory by differentiating politics (the rules of the game) from public policy (the strategies to adopt within the rules), defining the constitution as the line drawn between private and collective action, and identifying the phenomenon of rent-seeking, founding Constitutional Economics, the economic analysis of constitutional law, which rejects "any organic conception of the state as superior in wisdom to the citizens of the state." In 1967 Buchanan pub. Public Finance in Democratic Process: Fiscal Institutions and Individual Choice, followed by The Demand and Supply of Public Goods (1968), Cost and Choice: An Inquiry in Economic Theory (1969), The Limits of Liberty: Between Anarchy and Leviathan (1975), Democracy in Deficit: The Political Legacy of Lord Keynes (with R. Wagner) (1977), Freedom in Constitutional Contract: Perspects of a Political Economist (1978), What Should Economists Do? (1979), The Power to Tax: Analytical Foundations of a Fiscal Constitution (with G. Brennan) (1980), The Reason of Rules: Constitutional Political Economy (with G. Brennan) (1985), and Liberty, Market and State: Political Economy in the 1980s (1986), which contains the soundbyte that the "science of political economy" has the aim "to evaluate the structure of the constraints, 'the law', with some ultimate objective of redesign or reform aimed at securing enhanced efficiency in the exploitation of the potential mutuality of alternative systems." Buchanan also utters the soundbyte: "I certainly have a great deal of affinity with Austrian economics and I have no objections to being called an Austrian. Hayek and Mises might consider me an Austrian but, surely some of the others would not." In 1986 he is awarded the Nobel Econ. Prize.
In 1958 Brooklyn, N.Y.-born economist Alfred Haskell Conrad (1924-70) and Am. economist John R. Meyer (1927-2009) pub. The Economics of Slavery in the Antebellum South, which uses statistical methods and neoclassical economic theory to conclude that the notion that slavery would have disappeared without the U.S. Civil War is "a romantic hypothesis which will not stand against the facts", founding Cliometrics (New Economic History), which catches on at Purdue U., spreading through academia and causing economic historians to disappear from history depts. In 1960 Am. economist Stanley Reiter (1925-) coins the term "cliometrics" after Clio, muse of history to refer to the systematic application of economics and econometrics to the study of history - What is that about statistics being worse than damned lies? In 1960 Cambridge, Mass.-born economist Douglass Cecil North (1920-) and Columbus, Ohio-born economist William N. Parker (1919-2000) become the eds. of the Journal of Economic History (founded 1941), turning it on to Cliometrics. In 1960 the Internat. Economic History Assoc. (IEHA) is founded; in 1983 the allied Cliometric Society is founded at the U. of Wisc., annually awarding the Clio Can. In 1959 Meyer et al. pub. The Economics of Competition in the Transportation Industries, founding Transportation Economics, which works with engineers. North shares the 1993 Nobel Econ. Prize with Robert William Fogel.
In 1958 Berlin, Germany-born Jewish-Am. economist Albert Otto Hirschman (1915-2012) (WWII Resistance leader) pub. The Strategy of Economic Development, arguing for the need for unbalanced growth in developing countries that are short of decision-making skills, which can be stimulated by disequilibria, mobilizing resources, and encouraging industries with a large number of linkages to other firms. In 1970 he pub. Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States. In 1991 he pub. The Rhetoric of Reaction: Perversity, Futility, Jeopardy.
In 1958 New York City-born Harvard U. economist-historian David Saul Landes (1924-2013) pub. his first book Bankers and Pashas: International Finance and Economic Imperialism in Egypt. In 1969 he pub. The Unbound Prometheus: Technological Change and Industrial Development in Western Europe from 1750 to the Present, which describes the Industrial Rev. of the 18th cent. and popularizing the term Second Industrial Rev., and becomes a std. work. He follows with Revolution in Time: Clocks and the Making of the Modern World (1983), which becomes a std. work. He follows with The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor (1998), pissing-off multiculturalists by arguing for the Protestant work ethic, the hydraulic thesis (despots control water to force the pop. to submit), the climate thesis (tropical climates hold back development), and Adam Smith's doctrine of comparative advantage, debunking claims that the Asian Miracle didn't happen and/or was financed by Europeans. He follows with Dynasties: Fortunes and Misfortunes of the World's Great Family Businesses (2007).
Inflation wounds my heart with a monotonous languor? In 1958 Kiwi economist (in London) Alban William Housego "A.W." "Bill" Phillips (1914-75) pub. The Relation Between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861-1957, which reports an inverse historical relationship between money wage rates and unemployment. In 1960 Gary, Ind.-born economist Paul Anthony Samuelson (1915-2009) and Brooklyn, N.Y.-born economist Robert Merton Solow (1924-) pub. a paper publicizing an inverse relation between unemployment and inflation, which is called the Phillips Curve, capturing the public imagination and influencing public policy. Too bad, in 1970 many countries experience stagflation, high levels of both inflation and unemployment, causing Milton Friedman to observe that after inflation starts employment contracts will likely contain COLA (cost of living adjustments) that compensate for the inflation, cancelling the Phillips Curve out, making Keynesian monetary policy useless. In 1968 Edmund Strother Phelps Jr. (1933-) pub. Money-Wage Dynamics and Labor Market Equilibrium, introducing the concept of Non-Accelerating Inflation Rate of Unemployment (NAIRU), later (1975) called Non-Inflationary Rate of Unemployment (NIRU), which claims that there is a "natural rate of unemployment", distinguishing between a short-term Phillips Curve, and a vertical long-term Phillips Curve in which there is no tradeoff between inflation and unemployment. In 1977 Phelps and Yonkers, N.Y.-born John Brian Taylor (1946-) pub. Stabilizing Powers of Monetary Policy under Rational Expectations, proving that staggered (overlapping) setting of wages and prices gives monetary policy a role in stabilizing economic fluctuations if prices or wages are sticky, even when all workers and firms have rational expectations, giving Keynesians a new life, and founding New Keynesian Economics. In 1993 Taylor pub. Discretion versus Policy Rules in Practice, giving Taylor's Rule (Principle) for central banks, that they should raise rates by more than 1% for each 1% rise in inflation to cool the economy, and lower rates ditto to heat it up. Seven Nobel Econ. Prizes are awarded for work critical of the Phillips Curve, incl. Friedrich A. Hayek (1974), Milton Friedman (1976), Robert E. Lucas (1995), Robert A. Mundell (1999), Edward C. Prescott (2004), Edmund Phelps (2006), Thomas J. Sargent (2011), and Christopher Sims (2011).
In 1959 Am. mathematician Robert Duncan Luce (1925-2012) pub. Individual Choice Behavior: A Theoretical Analysis, which introduces Luce's Choice Axiom, which states that the probability of selecting one item over another is not affected by the presence or absence of other items in the pool, which becomes important in psychology and economics.
Let the games begin? In 1959 Am. economist Martin Shubik (1926-) pub. Edgeworth Market Games, and Strategy and Market Structure: Competition, Oligopoly, and the Theory of Games, which establish game theory as an essential component of economic theory. In 1960 he pub. Game Theory as an Approach to the Firm. In 1960 New York City-born mathematician-economist David Gale (1921-2008) pub. The Theory of Linear Economic Models, which becomes a std. textbook on linear programming and linear inequalities. In 1962 he and Cambridge, Mass.-born mathematician-economist Lloyd Stowell Shapley (1923-) pub. College Admissions and the Stability of Marriage, solving the Stable Marriage Problem. In 1969 Shapley and Shubik pub. On Market Games. In 1969 Shapley pub. Utility Comparison and the Theory of Games. In 1971 Shubik pub. The Dollar Auction Game: A Paradox in Noncooperative Behavior and Escalation, describing the Dollar Auction Game. In 1971 Shapley and Shubik pub. The Assignment Game I: The Core. In 1994 Shapley and German-born Israeli-Am. mathematician Robert John Aumann (1930-) pub. Long-Term Competition: A Game-Theoretic Analysis. In 1995 Aumann pub. Repeated Games with Incomplete Information. Aumann shares the 2005 Nobel Econ. Prize. Shapley shares the 2012 Nobel Econ. Prize.
In 1960 after pub. the 1926 paper The Laws of Returns under Competitive Conditions, about firms with increasing returns to scale, Italian economist (in Britain) Piero Sraffa (1898-1983) pub. Production of Commodities by Means of Commodities: Prelude to a Critique of Economic Theory, attempting to refute neoclassical economics by a technique of aggregating capital as "dated inputs of labor", leading to the Cambridge Capital Controversy, and founding the Neo-Ricardian School of Economics.
In 1960 Belgian economist Robert Triffin (1911-93) (U.S. citizen in 1942-77) testifies before the U.S. Congress, exposing serious flaws in the Bretton Woods system as the U.S. pledge to convert dollars into gold that it can't honor causes a dollar glut outside the U.S., resulting in large U.S. deficits that will eventually erode both liquidity and confidence in the U.S. dollar, which becomes known as the Triffin Dilemma (Paradox), which is resolved with the 1971 Nixon Shock.
In 1961 Am. economist John Fraser Muth (1930-2005) pub. his Theory of Rational Expectations, that agents' expectations equal true statistical expected values, i.e., are model-consistent, i.e., assume the validity of the model's predictions.
In 1962 Scottish economist John Marcus Fleming (1911-76), followed in 1963 by Canadian economist Robert Alexander Mundell (1932-) independently pub. the Mundell-Fleming (IS-LM-BoP) Model of the Economy, extending the IS-LM Model from a closed to open economy, proposing the Impossible (Unholy) (Irreconcilable) (Inconsistent) Trinity, that an economy cannot simultaneously maintain a fixed exchange rate, free capital movement, and an independent monetary policy, only two of the three. In 1963 Mundell pub. Inflation and Real Interest, showing that expected inflation has real economic effects, causing nominal interest rates to rise less than 1-for-1 with inflation after people exchange money for non-money assets; in 1965 Champaign, Ill.-born economist James Tobin (1918-2002) pub. Money and Economic Growth, echoing him, causing it to become known as the Mundell-Tobin Effect. After becoming known as "the Father of the Euro", Mundell receives the 1999 Nobel Econ. Prize.
In 1962 Jersey City, N.J.-born economist Arthur Melvin "Art" Okun (1928-80) pub. Potential GNP: Its Measurement and Significance, proposing Okun's Law, that each 1% increase in unemployment makes a country's GDP 2% lower than its potential GDP. In the 1970s he develops the Misery Index, which is used by U.S. presidents Jimmy Carter and Ronald Reagan in their campaigns. In 1975 he pub. Equality and Efficiency: The Big Trade-Off.
In 1962 Bronx, N.Y.-born economist Murray Newton Rothbard (1926-95) pub. Man, Economy, and State: A Treatise on Economic Principles, which is repub. in 1970 as "Power and Market: Government and the Economy", which argues for a stateless society, calling the state "the organization of robbery systematized and writ large", opposing central and fractional reserve banking, and govt. interventionism in the affairs of other nations, making him the hero of the anarcho-capitalist movement; the Austrian School of Ludwig von Mises is back?
In 1963 Soviet economist Nikolay Prokofyevich Fedorenko (1917-2006) becomes head of the Central Economic Mathematical Inst. in Moscow (until 1985), going on to implement the System of Optimal Functioning of the Economy (SOFE), a computer network that uses linear programming to centrally plan the Soviet economy, surviving criticisms that the approach is too Western, and becoming a precursor to the Internet.
In 1963 Swedish anti-welfare state economist Assar Lindbeck (1930-) et al. pub. The Housing Shortage: A Study of the Price System in the Housing Market, showing how rent control leads to homelessness. In 1971 he pub. The Political Economy of the New Left: An Outsider's View, showing how in general the welfare system is self-destructive, containing the soundbyte: "Next to bombing, rent control seems in many cases to be the most efficient technique so far known for destroying cities."
In 1964 Swansea, Wales-born British economist Sir Clive William John Granger (1934-2009) (asst. of John Tukey at Princeton U.) pub. Spectral Analysis of Economic Time Series along with Michio Hatanaka, followed in 1966 by The Typical Spectral Shape of an Economic Variable, pioneering the use of Fourier Series in economics. In 1969 Granger introduces the Granger Causality Test for regressions. In 1974 he pub. a paper on Spurious Regression. Meanwhile in 1965 Am. mathematicians James William Cooley (1926-) and John Wilder Tukey (1915-2000) discover the cool Cooley-Tukey Fast Fourier Transform (FFT) (Butterfly) Algorithm for computers, radically speeding up the calculation of Fourier Transforms and permitting real-time computer spectral analysis; it was actually discovered in 1805 by German mathematician Carl Friedrich Gauss; the FFT becomes the most important computer algorithm of the 20th cent. In 2003 Granger shares the Nobel Econ. Prize.
In 1964 after joining the Bureau of Labor Statistics in 1940 to compile historical unemployment statistics, then joining Wesleyan U. in 1962, Detroit, Mich.-born economist Stanley Lebergott (1918-2009) pub. Manpower in Economic Growth: The American Record Since 1800, becoming a hit with economists. In 1993 he pub. Pursuing Happiness: American Consumers in the Twentieth Century, detailing the positive impact of U.S. consumerism incl. better technology, esp. for women doing housework, higher wages, improved health, decreased drug use, and more privacy.
In 1964 Chicago, Ill.-born economist Burton A. Weisbrod (1931-) pub. Collective-Consumption Services of Individual-Consumption Goods, which coins the term "option value" for the benefit that individuals might derive from having access to a publicly-provided good or service, which becomes important in Welfare Economics.
In 1965 New York City-born economist Peter Arthur Diamond (1940-) pub. National Debt in a Neoclassical Growth Model, developing the Overlapping Generations (OLG) Model, an extension of the infinite-agent-life Ramsey Exogenous Growth Model in which agents have finite lives, but live long enough to overlap with another agent's life, proving that the decentralized equilibrium might be dynamically Pareto efficient even though it is ex ante inefficient. In 1982 Diamond pub. Aggregate Demand Management in Search Equilibrium, proposing the Diamond Coconut Model of a search economy in which traders cannot find partners instantaneously, claiming that peoples' expectations as to the level of aggregate activity play a crucial role in determining this level ("people will only climb trees to pick coconuts if they believe that enough other people are doing it"), meaning that there may be no unique natural rate of unemployment, and even if there is, it may not be efficient. In 1994 Diamond wins the first-ever biennial Erwin Plein Nemmers Prize in Economics, the largest monetary prize for economics in the U.S. In Apr. 2005 Diamond and Boston, Mass.-born economist Peter Richard Orszag (1968-) pub. Saving Social Security: The Diamond-Orszag Plan, proposing small incremental increases in contributions based on actuarial tables adjusted for changes in life expectancy, and an increase in the proportion of earnings subject to taxation. On Jan. 20, 2009 Orszag becomes dir. #7 of the Office of Mgt. and Budget (until July 30, 2010). In 2010 Diamond shares the Nobel Econ. Prize with Dale T. Mortensen and Christopher A. Pissarides. Too bad, after being nominated for a Federal Reserve seat by Pres. Obama in Apr. 2010, Diamond withdraws his nomination in June 2011 after being blocked by Senate Republicans.
In 1965 after digging up Louis Bachelier's 1900 dissertation in 1955, Paul Samuelson pub. Proof That Properly Anticipated Prices Fluctuate Randomly, giving Working's 1948 thesis a mathematical form, proposing the Efficient Market Hypothesis. The same year Boston, Mass.-born Eugene Francis "Gene" Fama (1939-) (student of Benoit B. Mandelbroit) pub. his dissertation which concludes that stock price movements follow a random walk, sharing the credit. In 1969 he pub. The Adjustment of Stock Prices to New Information, becoming the first attempt to analyze how stock prices respond to an event, using data from the new Center for Research in Security Prices (CRSP) Database. In May 1970 he pub. Efficient Capital Markets: A Review of Theory and Empirical Work, proposing that efficient markets can be strong, semi-strong, or weak, and proposing the Joint Hypothesis Problem, that the idea of market efficiency can't be rejected without also rejecting the market (price-setting) mechanism, i.e., it denotes how info. is factored into price; he shares the 2013 Nobel Econ. Prize with Lars Peter Hansen and Robert Shiller.
In 1965 the Soviet Economic Reforms of 1965 (ends 1971), designed by Ukrainian-born economist Evsei Grigorievich Liberman (1897-1981) are based on the Leninist principles of New Dem. Centralism, introducing capitalist mgt. methods incl. material incentives, saving the Soviet economy from stagnation, ditto the East German economy.
In 1965 Harvard-educated economist Barack Obama Sr. (1936-82) of the finance ministry of Kenya proposes dumping pres. Jomo Kenyatta's planned move from Socialism toward capitalism and going 100% Communist, with a 100% income tax to be "utilized in investment for future development", causing Kenyatta to kick him out of the govt., ending his career, after which he goes into a tailspin of alcoholism and drunk driving - leave it to his son to carry on and implement his polices in the U.S.?
In 1966 New Orleans, La.-born Henry G. Manne (1928-2015) pub. Insider Trading and the Stock Market, which claims that changes in the price of a share of stock in the stock market will occur more rapidly when insider trading is prohibited than when it is permitted, founding the theory of a market for corporate control as first pub. in the article Mergers and the Market for Corporate Control in Journal of Political Economy (1965).
In 1968 Am. human ecologist Garrett James Hardin (1915-2003) pub. The Tragedy of the Commons, which argues that individuals acting like Adam Smith says inevitably deplete common resources incl. fish, energy, water, air, etc., proclaiming Hardin's First Law of Human Ecology: "You cannot do only one thing", which "modestly implies that there is at least one unwanted consequence."
In 1968 Dutch economist Bernard Marinus Siegfried van Praag (1939-) pub. his dissertation Individual Welfare Functions and Consumer Behavior: A Theory of Rational Irrationality, proposing the Individual Welfare Function of Income (WFI), a cardinal concept; in 1970 he founds the Leyden School Project (ends 1984) to give the Income Evaluation Question (IEQ) to thousands of subjects in W Europe, asking them what income level they would label good, sufficient, bad, etc., discovering a preference drift where the WFI depends on current income, shifting up with rising income. In 2004 he and Dutch economist Ada Ferrer-i-Carbonell pub. Happiness Quantified: A Satisfaction Calculus Approach, founding Happiness Economics.
In 1968 the Journal of Economic Theory (JET) is founded (until ?), becoming a top academic journal in economics.
On Dec. 10, 1969 the first-ever Nobel Prize in Economics, funded by the Sveriges Riksbank (central bank of Sweden) is awarded to Ragnar Anton Kittil Frisch (1895-1973) (Norway) and Jan Tinbergen (1903-94) (Netherlands) for "having developed and applied dynamic models for the analysis of economic processes" [econometrics].
In 1969 English economist David Ernest William Laidler (1938-) pub. The Demand for Money: Theories and Evidence, proving the stability of the relationship between income and demand for money, promoting monetarism; 4th ed. 1993.
In 1969 Yakima, Wash.-born Chicago School economist Robert Emerson Lucas Jr. (1937-) and Am. economist Leonard A. Rapping (1934-91) propose the Lucas-Rapping Model of Aggregate Supply, AKA Equilibrium Business Cycle Theory, which makes labor supply a direct function of wages and models decreases in employment as voluntary choices of workers to reduce their work effort in response to the prevailing wage to make more leisure time. In 1972 Lucas proposes the Lucas Aggregate Supply Function, which states that economic output is a function of money or price "surprise", breaking from the Phillips Curve by claiming that only unanticipated price level changes lead to changes in output, maintaining the neutrality of money, i.e., absence of a long run price or money supply relationship with output and employment, along with the policy ineffectiveness proposition that people with rational expectations can't be systematically surprised by monetary policy, hence it can't be used to systematically influence the economy. In the early 1970s Lucas founds New Classical Macroeconomics using Milton Friedman's monetarist critique of Keynesianism and John Muth's theory of rational expectations to oppose the idea of govt. intervention in the economy. In 1976 Lucas pub. Econometric Policy Evaluation: A Critique, giving the Lucas Critique of Macroeconomic Policymaking, to the effect that large-scale macroeconometric models based on aggregated historical data that are not structural (policy-invariant) can't be used to predict the effects of change in economic policy. In 1990 Lucas uses John Fraser Muth's theory to develop the Lucas Paradox (Puzzle), that capital doesn't flow from developed to developing countries despite the lower levels of capital per worker. In 1995 Lucas receives the Nobel Econ. Prize.
In 1969 the Journal of Money, Credit and Banking is founded by Ohio State U. (until ?).
In the 1970s Personnel Economics is founded by Edward Paul "Ed" Lazear (1948-), Bengt Robert Holmstrom (Holmström) (1949-), Sherwin Rosen (1938-2001) et al. to study the relationship between wages and productivity in a firm incl. pay structure and promotions.
About 1970 the Saltwater and Freshwater Schools of Economics in the U.S. (terms coined by Robert E. Hall in 1976), the coastal economics faculties at UCB, Harvard U., Yale U., Princeton U., Columbia U., and the U. of Penn., and Great Lakes faculties at the U. of Chicago, U. of Minn., U. of Rochester, and Carnegie Mellon U. split on macroeconomics theory, with the freshwater school wanting the field to be dynamic, quantitative, and based on interactions between individuals and institutions with emphasis on decisions made under uncertainty, claiming that govt. spending doesn't effectively stabilize business cycles because of market failures, and that the govt. should concentrate on structural reforms rather than discretionary spending while providing a welfare safety net.
In 1970 New Haven, Conn.-born economist George Arthur Akerlof (1940-) of UCB pub. the paper The Market for Lemons: Quality Uncertainty and the Market Mechanism, establishing the theory of info. assymetry in economics, e.g., when somebody won't pay a good price for a good car from a dealer because he thinks it might be a lemon, leading to the founding of the theory of Information Economics, winning him a share of the 2001 Nobel Econ. Prize along with Joseph E. Stiglitz. In 1985 Akerlof and his wife Janet Louise Yellen (1946-) pub. a theory of Menu Costs and Nominal Price Ridigity (Sticky Prices). In 1993 Akerlof and Denver, Colo.-born economist Paul Michael Romer (1955-) pub. Looting: The Economic Underworld of Bankruptcy for Profit, containing the soundbyte: "Bankruptcy for profit will occur if poor accounting, lax regulation, or low penalties for abuse give owners an incentive to pay themselves more than their firms are worth and then default on their debt obligations. Bankruptcy for profit occurs most commonly when a government guarantees a firm's debt obligations."
In 1970 Indian Hindu economist (atheist) ("the Mother Teresa of Economics") Amartya Kumar Sen (1933-) (disciple of Kenneth Arrow) pub. Collective Choice and Social Welfare, proposing the Liberal Paradox which claims to disprove the claims of libertarians that markets are efficient and respect individual freedoms. In 1981 he pub. Poverty and Famines: An Essay on Entitlement and Deprivation, which argues that the root cause of famine is inequalities in the food distribution system. In 1998 he wins the Nobel Econ. Prize.
On Aug. 15, 1971 after deciding that inflation is uncontrollable without his divine intervention, and noting that the U.S. is running its first trade deficit this year since 1888 ($2.05B), and taking the advice of U.S. treasury secy. John Connolly that as a temporary measure it might help insure his reelection, U.S. pres. (1969-74) Richard Milhous Nixon (1913-94) announces his New Economic Policy, AKA the Nixon Shock (along with the 1972 visit to China), incl. a 90-day wage, rent and price freeze (extended for another 1K days), and a 10% "surcharge" (tariff) on imported goods (violating trade agreements), and floats the U.S. dollar, suspending the convertibility of dollars into gold to stop France (which had been stockpiling Federal Reserve Notes since the early 1960s) and other nations from cleaning out Ft. Knox, effectively ending the 1944 Bretton Woods (N.H.) system of fixed internat. currency exchange rates and taking the U.S. off the Gold Standard; foreign exchange markets close; Nixon utters the soundbyte "We are all Keynesians now" (or attempts to quote Milton Friedman's Feb. 4, 1966 statement in Time mag. with the lame version "I am now a Keynsian in economics"); the news causes the Dow Jones to jump a record 32.93 points on a record volume of 31.7M shares; the AFL-CIO announces that it has "absolutely no faith in the ability of President Nixon to successfully manage the economy of this nation", and refuses to cooperate in the wage freeze; too bad, after the surcharge causes the Japanese to have to revalue the yen in Dec., Nixon stops it on Dec. 20 and raises the official gold price, devaluing the dollar by 8.57%, then caves in on tariffs again in the Tokyo Round in 1973, letting the Japanese ramp up their imports, causing U.S. manufacturing to decay; he also guesses wrong about gold, as by 1980 it sells for more than $800 an oz.
In 1971 the Journal of Internat. Economics is founded.
In 1972 Chicago, Ill.-born economist Harold Demsetz (1930-), founder of Managerial (Business) Economics, and Fresno, Calif.-born economist Armen Albert Alchian (1914-2013) pub. Production, Information Costs and Economic Organization, founding New Institutional Economics, which integrates institutional economics into mainstream economics, differentiating institutions, which are the "rules of the game" from organizations, which are nested groups they create to coordinate team actions. In 1975 Superior, Wisc.-born economist Oliver Eaton Williamson (1932-) (student of Ronald Coase) coins the term "new institutional economics", winning a share of the 2009 Nobel Econ. Prize. In 1964 Alchian and William R. Allen pub. the Alchian-Allen Effect, which states that a company will "ship the good apples out" and sell the lower quality ones locally because of transportation costs.
In 1972 Albuquerque, N.M.-born Yale U. economist William Dawbney "Bill" Nordhaus (1941-) (known for taking over Paul A. Samuelson's textbook "Economics") and Champaign, Ill.-born economist James Tobin (1918-2002) pub. Is Growth Obsolete?, introducing the Measure of Economic Welfare (MEW), the first model for economic sustainability assessment, intended to replace the GDP by adding income distribution, pollution costs, and unsustainable costs. In Nov. 1992 Nordhaus pub. An Optimal Transition Path for Controlling Greenhouse Gases, introducing the Dynamic Integrated Climate-Economy (DICE) Model, followed by Reflections on the Economics of Climate Change (1993), and A Question of Balance: Weighing the Options on Global Warming Policies (June 24, 2008). On Jan. 27, 2012 French scientist-politician Claude (Jean) Allegre (Allègre) (1937-) et al. pub. No Need to Panic About Global Warming in the Wall Street Journal, causing Nordhaus to come out swinging in a series of articles in New York Review of Books, incl. Why the Global Warming Skeptics Are Wrong (Mar. 22, 2012), In the Climate Casino: An Exchange (Apr. 26, 2012), and The Climate Contrarians (Aug. 16, 2012).
In 1972 New York City-born economist Hugo Freund Sonnenschein (1940-) pub. Market Excess Demand Functions. In 1974 Argentine economist Rolf Ricardo Mantel (1934-99) pub. On the Characterization of Aggregate Excess Demand. In 1974 French economist Gerard (Gérard) Debreu (1921-2004) pub. Excess Demand Functions, combining to propose the Sonnenschein-Mantel-Debreu Theorem, that the excess demand function for an economy is not restricted by the usual rationality restrictions on individual demands, thus microeconomic rationality assumptions have no equivalent macroeconomic implications, and with many interdependent markets there may not exist a unique equilibrium point.
On Apr. 26, 1973 the Chicago Board Options Exchange opens with 282 members sporting hand-held calculators using the new Black-Sholes Option Pricing Formula of Fischer Sheffey Black (1938-95) and Myron Samuel Scholes (1941-) on 16 NYSE stocks; by 1995 1M options a day are traded; Scholes receives the 1997 Nobel Econ. Prize - if they could only see ahead to 2008? Their 1973 paper is titled The Pricing of Options and Corporate Liabilities, defining a stochastic partial differential equation governing the price of an option over time which tries to hedge the option perfectly by trading the underlying asset so as to eliminate risk, AKA delta hedging. In 1992 Black and Robert Litterman pub. Global Portfolio Optimization, which proposes the Black-Litterman Model of Portfolio Allocation, which applies the views of the investor to an asset allocation. In 2002 the biennial Fischer Black Prize is established for the best contributions to the theory and practice of finance by an economist under age 40; the first award goes to Raghuran Rajan in 2003.
In 1973 Moscow-born Am. economist-mathematician Leonid "Leo" Hurwicz (1917-2008) pub. The Design of Mechanisms for Resource Allocation, founding Mechanism (Market) Design Theory (AKA Reverse Game Theory), which allows people to distinguish situations in which markets work well from those in which they don't, allowing efficient trading mechanisms, voting procedures, and regulation schemes to be identified, developing the theory and sharing the 2007 Nobel Econ. Prize with New York City-born economist Eric Stark Maskin (1950-) and Boston, Mass.-born economist Roger Bruce Myerson (1951-). In Apr. 1983 Myerson and Mark Satterthwaite pub. Efficient Mechanisms for Bilateral Trading, proposing the Myerson-Satterthwaite Theorem, which states that there is no efficient way for two parties to trade a good when they each have secret and probabilistically varying valuations for it without the risk of forcing one party to trade at a loss.
In 1973 New York City-born economist-jurist Richard Allen Posner (1939-) pub. Economic Analysis of Law, which becomes a std. textbook, making him the most cited legal scholar of the 20th cent. In 1981 he pub. The Economics of Justice, which claims that the logic of the law in many ways appears to be an economic one, with judges interpreting the common law as if they are trying to maximize economic welfare.
In 1974 New York City-born economist Robert Joseph Barro (1944-) pub. Are Government Bonds Net Wealth?, which argues that govt. bonds saddle future generations with debt, proposing the Barro-Ricardo Equivalence Theorem (Ricardian Equivalence), that the timing of a tax change doesn't affect consumer spending. In 1976 he pub. Rational Expectations and the Role of Monetary Policy, which integrates the role of money into neoclassical economics, arguing that info. assymetries cause real effects as rational economic actors in response to uncertainty but not in response to expected monetary policy changes. In 1984 he pub. Macroeconomics, which becomes a std. textbook. In 1988 he and Gary Becker pub. A Reformulation of the Economic Theory of Fertility. In 1995 he and Spanish economist Xavier Sala i Martin (Sala-i-Martin) (1962-) pub. Economic Growth, which becomes another std. textbook. Barro goes on to conclude that the Keynesian multiplier is less than one, hence Pres. Bush's and Pres. Obama's stimulus spending policies are "garbage", and "the worst bill since the 1930s".
In 1974 Am. cliometric economist Stanley Lewis Engerman (1936-) and New York City-born cliometric economist Robert William Fogel (1926-2013) pub. Time on the Cross: The Economics of American Negro Slavery (2 vols.), which rehabilitates South plantation slavery as more productive per unit of labor than Northern farms, and beneficial for blacks, and argues that it would have continued long after the 1860s if not for the U.S. Civil War, causing a firestorm of controversy; "Slave owners expropriated far less than generally presumed, and over the course of a lifetime a slave field hand received approximately ninety percent of the income produced"; "The cliometricians announced the scientific discovery of a vastly different South led by confident and effective slaveowning entrepreneurs firmly wedded to handsome profits from a booming economy with high per capita incomes and an efficiency ratio 35 percent - greater than that of free Northern agriculture. In the new dispensation the efficient, often highly skilled, and very productive slaves embraced the Protestant work ethic and prudish Victorian morals, avoided both promiscuity and substantial sexual exploitation by planters, lived in father-headed and stable nuclear families, kept 90 percent of the fruits of their labor, and enjoyed one of the best sets of material conditions in the world for working class people." (Charles Crowe) In 1975 New York City-born historian Herbert G. Gutman (1928-85) pub. Slavery and the Numbers Game: A Critique of Time on the Cross, a refutation of some arguments in Fogel and Engerman's 1974 book, incl. their assumption that slaves adopted a white Euro Protestant work ethic instead of being whipped into submission. In 1993 Fogel shares the Nobel Econ. Prize with Douglass North.
In 1974 Endicott, N.Y.-born economist Anne Osborn Krueger (1934-) pub. The Political Economy of the Rent-Seeking Society, coining the term rent-seeking for those who go to the govt. to get monopoly privileges, incl. state licenses and certifications, the opposite of profit-seeking.
In 1974 Raleigh, N.C.-born economist Daniel Little McFadden (1937-) of UCB pub. Conditional Logic Analysis of Qualitative Choice Behavior, introducing Conditional Logit Analysis to help determine how individuals will choose between finite alternatives in order to maximize their utility. In 1984 he pub. Econometric Analysis of Qualitative Response Models, pioneering Discrete (Qualitative) Choice Models. In 2000 he shares the Nobel Econ. Prize with James Heckman.
In 1975 Pasadena, Calif.-born economist Thomas John "Tom" Sargent (1943-) and New York City-born economist Neil Wallace (1939-) pub. Rational Expectations and the Theory of Economic Policy, using rational expectation theory to propose the Policy-Ineffectiveness Proposition, that monetary policy can't systematically manage the levels of output and employment in the economy, pissing-off Keynesian economists for bursting their bubble; Sargent is awarded a share of the 2011 Nobel Econ. Prize.
In 1976 Newburgh, N.Y.-born labor economist Richard B. Freeman (1943-) pub. The Overeducated American, written after the premium for a college education falls to less than 50% from 60% in the 1960s, making a degree only a credential rather than proof of a raise in productivity?; too good, it rises to 65% in the 1980s, and to 75% in 1997.
In 1976 Chicago, Ill.-born economist James Joseph Heckman (1944-) develops Heckman Correction to help researchers correct for selection bias, winning the 2000 Nobel Econ. Prize.
In 1976 Rochester, Minn.-born economist Michael Cole "Mike" Jensen (1939-) (student of Merton H. Miller) and Am. economist William H. Meckling (1921-98) pub. Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure, treating public corporations as ownerless entities made up only of contractual relationships, causing widespread use of stock options for executive compensation. In 1990 Jensen and economist Kevin J. Murphy pub. CEO Incentives: It's Not How Much You Pay, But How, causing Section 162 (m) of the U.S. Internal Revenue Code to be passed in 1993, making it cost-effective to pay executives with stock options, which backfires when they begin manipulating accounting figures and outsourcing labor to use the savings to repurchase stock, with total stock buypacks reaching the trillions of dollars in 20 years.
In 1976 after the 1974 Bangladeshi Famine gets him involved in poverty reduction, Bangladeshi economist Muhammad Yunus (1940-) loans $27 to 42 impoverished Muslim women, making a 2 cent profit on each loan, founding Grameen ("Village") Bank in 1983, and pioneering the concepts of microcredit and microfinance as a way out of poverty, winning the 2006 Nobel Peace Prize.
In 1977 N.J.-born economist Martin A. Armstrong (1949-) proposes the Economic Confidence Model, which claims economic waves every 3,141 days (pi x 1000) (8.6 years), and a confidence crisis in private markets every 51.6 years; it successfully predicts economic crises in 1977, 1989, and 1998; he also proposes a 309.6-year Republicanism Cycle, which is set to go off in 2032; too bad, on Sept. 29, 1999 Armstrong is indicted in U.S. federal court for securities fraud involving Republic New York, and isn't released from prison until Sept. 2, 2011.
In 1977 Glens Falls, N.Y.-born New Classical School economist Edward Christian Prescott (1940-) and Norwegian economist Finn Erling Kydland (1943-) pub. Rules Rather than Discretion: The Inconsistency of Optimal Plans, pointing out that individuals and their assumptions and predictions of the future interfere with govt. economic planning and policy, with the soundbyte: "Even if there is a fixed and agreed upon social objective function and policy makers know the timing and magnitude of the effects of their actions... correct evaluation of the end-of-point position does not result in the social objective being maximized." In 1982 they pub. Time to Build and Aggregate Fluctuations, correlating 70% of the fluctuation in output, investment, consumption, productivity, and employment since WWII to changes and growth in technology, founding Real Business Cycle Theory and the theory of Dynamic Stochastic Gen. Equilibrium (DSGE), which supersedes Lucas' theory of a money-driven business cycle with a supply-based model that uses technology and other real shocks to explain output fluctuations. In 2004 they win the Nobel Econ. Prize.
In 1977 The Economist coins the term Dutch Disease, named after the 1959 discovery of a large natural gas field in the Netherlands for the phenomenon where an increase in revenues from natural resources or foreign aid leads to a decline in the manufacturing sector.
In 1978 the first biennial Frisch Medal is awarded by Econometrica mag. to Scottish economist Angus Stewart Deaton (1945-). In June 1980 he and English economist John Muellbauer pub. An Almost Ideal Demand System, describing the Almost Ideal Demand System (AIDS), a consumer demand model based on a first-order approximation that satisfies the axioms of choice.
In 1978 Palo Alto, Calif.-born economist Robert Ernest "Bob" Hall (1943-) pub. Stochastic Implications of the Life Cycle-Permanent Income Hypothesis, startling macroeconomists with the news that under assumptions of rational expectations, consumption is a martingale, i.e., unpredictable, and should only change when there is surprising news about expected future income. On Dec. 10, 1987 Hall and political scientist Alvin Rabushka (1940-) of Stanford U. pub. A Proposal to Simplify Our Tax System in The Wall Street Journal, advocating that the U.S. federal income tax be replaced with the Hall-Rabushka Flat Tax, a 19% flat tax that's allegedly so simple that it can be filed on a postcard-sized form - even simpler would be for the govt. to confiscate everything sans forms? It goes on to influence the 1986 U.S. Tax Reform Act, designed to simplify the income tax code and eliminate tax shelters, lowering the top tax rate from 50% to 28% and raising the bottom rate from 11% to 15%, reducing the number of tax brackets from 15 to four. Too bad, the 1990 U.S. Omnibus Budget Reconciliation Act creates a 31% rate on the "rich", and the 1993 U.S. Omnibus Budget Reconciliation Act creates two new brackets of 36% and 39.6%. After the Soviet Union breaks up in the early 1990s, the flat tax is adopted by former satellites Estonia (1994), Latvia (1995), Lithuania (1995), Russia (2001), Serbia (2003), Ukraine (2004), Slovakia (2004), Georgia (2005), Romania (2005), Kyrgyzstan (2006), Macedonia (2007), Mauritius (2007), and Mongolia (2007).
In 1979 Tel Aviv, Israel-born Am. psychologist Daniel Kahneman (1934-) and Haifa, Israel-born Am. psychologist Amos Nathan Tversky (1937-96) pub. Prospect Theory: An Analysis of Decision under Risk, founding Prospect Theory, an attempt to model real-life choices rather than optimal decisions. In 1980 they pub. Toward a Positive Theory of Consumer Choice, founding Behavioral Economics. In 2002 Kahneman wins the Nobel Econ. Prize.
In 1979 Albany, N.Y.-born economist Paul Robin Krugman (1953-) pub. a paper founding the New Trade Theory, explaining the role of increasing returns to scale and network effects in internat. trade. In 1991 delivers a set of lectures in Leuven, followed by the paper Geography and Trade, founding New Economic Geography, which emphasizes how economic regions with the most production will be the most profitable and attract even more production. In 1995 he is awarded the Nobel Econ. Prize. On Sept. 1, 2001 Krugman, English economist Anthony J. Venables (1953-), and Japanese economist Masahisa Fujita (1943-) pub. The Spatial Economy: Cities, Regions, and International Trade, which becomes a std. work on the New Economic Geography.
In 1979 Ann Arbor, Mich.-born business economist Michael Eugene Porter (1947) pub. How Competitive Forces Shape Strategy, describing Porter's Five Forces, incl. threat of new entrants, threat of substitute products, competitive rivalry within industry, bargaining power of suppliers, and bargaining power of customers. In 1980 he pub. Competitive Strategy: Techniques for Analyzing Industries and Competitors, which becomes a std. textbook.In 1979 Belgian economists Jacques Francois Thisse (1946-) and Jean Jaskold Gabszewicz pub. Price Competition, Quality and Income Disparities, analyzing the functioning of markets in which goods of different qualities are sold (product differentiation).
In June 1980 New York City-born economist Martin Stuart "Marty" Feldstein (1939-) and Boston, Mass.-born economist Charles Yuji Horioka (1956-) pub. Domestic Savings and International Capital Flows, proving that in the long run capital tends to stay in the home country instead of flowing to the countries with the most productive investment opportunities, becoming known as the Feldstein-Horioka Puzzle.
In 1980 the New Economics Inst. (originally the E.F. Schumacher Society) in Cambridge, Mass. is founded by Robert Swann (1918-2003) and Susan Witt to promote New Economics, which rejects mainstream neoclassical and Keynesian economics, claiming that human well-being should take precedence over economic growth; in 1986 the New Economics Foundation in London is founded.
In 1980 Livingston, Mont.-born political economist Lester Carl Thurow (1938-) pub. the bestseller The Zero-Sum Society: Distribution and the Possibilities for Economic Change, claiming that the U.S. economy can't get out of its slump unless the more prosperous half accepts the burden of more taxation. In 1983 he pub. Dangerous Currents: The State of Economics, taking pokes at microeconomics, claiming that the profession of economics is becoming a guild, and those who still believe in the conventional supply-demand model of the economy are like Flat Earthers. In 1985 he pub. the bestseller The Zero-Sum Solution: Building a World-Class American Economy, claiming to show the U.S. the way to stay #1. In 1993 he pub. Head to Head: The Coming Economic Battle Among Japan, Europe and America, touting the Third Way of govt. involvement in the economy a la Europe and Japan, along with a stronger internat. patent system that undergirds a knowledge economy. In 1995 he pub. the bestseller The Future of Capitalism: How Today's Economic Forces Shape Tomorrow's World, claiming that the fall of Communism is leading to a new form of Capitalism where brainpower is the biggest capital. In 2003 he pub. Fortune Favors the Bold: What We Must Do to Build a New and Lasting Global Prosperity, touting the triumph of U.S. capitalism in a "third industrial revolution" based on a knowledge-based global economy with a global info. infrastructure, which he claims can meet the challenges of the U.S. trade deficit, surge of Chinese exports, stagnation of the Japanese et al.; proposes that the IMF be replaced by internat. bank deposit insurance, that govts. use eminent domain to take over pharmaceutical patents, and that the U.S. govt. permit U.S. corporations to ignore copyrights originating in countries that refuse to prosecute copyright pirates.
In 1980 Am. econometrist Halbert L. White Jr. (1950-2012) pub. A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity, about Heteroscedasticity-Consistent Standard Errors, where errors have different variances across observation points, which becomes the most cited paper in economics since 1970.
In June 1981 Detroit, Mich.-born economist Robert James "Bob" Shiller (1946-) pub. Do Stock Prices Move Too Much to Be Justified by Subsequent Changes in Dividends?, shocking the economics community by challenging the Efficient Market Hypothesis (1965) by arguing that in a rational stock market investors will base stock prices on the expected receipt of future dividends, discounted to a present value. In Mar. 2000 he pub. Irrational Exuberance, warning that the U.S. stock market had become a bubble, which happens in Mar., making him a hero. In 2003 he pub. Is There a Bubble in the Housing Market? On Sept. 17, 2007 he pub. Bubble Trouble, predicting the late 2008 U.S. housing market collapse, zooming him to the top of the heap among world economists; in 2013 he shares the 2013 Nobel Econ. Prize.
On Aug. 13, 1981 in a ceremony at his Calif. ranch Cielo del Rancho outside Santa Barbara, Calif., Pres. Reagan signs the 1981 U.S. Economic Recovery Tax Act (ERTA), AKA the Kemp-Roth Tax Cut, his historic package of supply-side economics legislation, mandating $750B in tax cuts over the next five years (deepest tax and budget cuts in U.S. history), incl. tax incentives for savings and real estate investment as well as deductions for charitable donations, and reductions for estate and gift taxes, as designed by Calif. economist Arthur Betz Laffer (1940-), creator of the well-named (author bets it's a laffer?) Laffer Curve, which predicts an increase in tax revenues after a decrease in tax rates, producing the longest peacetime boom in U.S. history, although low taxes leads to deterioration of infrastructure incl. inner cities, plus massive deficits from foreign borrowing; too bad that the nation is moving into a recession?; in 1980 vice-pres. George H.W. Bush calls it "voodoo economics". Reaganomics was co-founded by Am. economist Paul Craig Roberts (1939-). In 1981 New York City-born George F. Gilder (1939-) pub. the internat. bestseller Wealth and Poverty, extolling the virtues of supply-side economics, becoming a favorite of Ronald Reagan. On June 10, 2013 Gilder pub. Knowledge and Power: The Information Theory of Capitalism and How It is Revolutionizing Our World, which attempts to reformulate economics in terms of info. theory.
In 1981 Superior, Wisc.-born economist Oliver Eaton Williamson (1932-) pub. The Economics of Organization: The Transaction Cost Approach, distinguishing between repeated case-by-case bargaining and relationship-specific contracts. In 2002 he pub. The Theory of the Firm as Governance Structure: From Choice to Contract. In 2009 he shares the Nobel Econ. Prize.
In 1981 the Peter G. Peterson Inst. for Internat. Economics is founded in Washington, D.C. by Am. economist C. Fred Bergsten (1941-), becoming the world's leading think tank on internat. economics.
In July 1982 Champaign, Ill.born economist Lars Peter Hansen (1952-) of the U. of Chicago pub. Large Sample Properties of Generalized Methods of Moments Estimators, which introduces the Generalized Method of Moments for estimated parameters in statistical models where the full shape of the distribution function is unknown and maximum likelihood estimation can't be used; he shares the 2013 Nobel Econ. Prize with Eugene Fama and Robert Shiller.
In Feb. 1982 Detroit, Mich.-born economist Paul Robert Milgrom (1948-) and Am. economist Nancy Laura Stokey (1950-) (wife of Robert E. Lucas Jr.) pub. Information, Trade and Common Knowledge, proposing the No-Trade Theorem, that in a market whose structure is common knowledge, any attempt to initiate a trade reveals the bidder's private knowledge, allowing everyone else to incorporate it into market prices, making them refuse any offers to avoid becoming suckers.
In 1982 Passaic, N.J.-born economist Nathan Rosenberg (1927-) pub. Inside the Black Box: Technology and Economics, emphasizing investment in human capital, science, technology, and innovation in economic growth, launching Endogenous Growth Theory, which emphasizes economic growth from the inside not outside and tries to uncover the choices that cause the residual growth rate to vary across countries. In 1986 Denver, Colo.-born economist Paul Michael Romer (1955-) (son of Colo. gov. Roy Romer) pub. Increasing Returns and Long-Run Growth, proposing the AK Model of Endogenous Growth. In 1990 Romer pub. Endogenous Technological Change. In 1994 he pub. The Origins of Exogenous Growth.
In 1982 Israeli economist Ariel Rubenstein (1951-) pub. Perfect Equilibrium in a Bargaining Model, which describes the Rubenstein Bargaining Model, a 2-person bargaining game with perfect info. and impatient players who alternate offers, becoming a breakthrough in game theory.
In Sept. 1983 Argentine economist Guillermo Antonio Calvo (1941-) pub. Staggered Prices in a Utility-Maximizing Framework, which proposes the Calvo Staggered Pricing Model as a way to produce price stickiness. In Dec. 1991 he pub. The Perils of Sterilization, about the situation in which a central bank responds to a money supply increase in the nat. economy by selling securities and/or taking deposits to "sterilize" it and lessen the inflationary consequences, which backfires when the larger amount of govt. debt itself induces higher inflationary expectations "because sticking to a stable price level... would make servicing the public debt excessively costly from a social and political point of view."
In 1983 Am. economists Douglas W. Diamond (1953-) and Philip H. Dybvig pub. the Diamond-Dybvig Model of Bank Runs, showing how they can be caused by banks holding too many illiquid assets.
In 1984 Swedish anti-welfare state economist Assar Lindbeck (1930-) and Austrian economist Dennis J. Snower (1950-) pub. Involuntary Unemployment as an Insider-Outsider Dilemma, followed in 1988 by The Insider-Outsider Theory of Employment and Unemployment, proposing the Insider-Outsider Theory of Employment, where a group of insiders forms a cartel resisting competition by outsiders, and when an economic shock forces some of them to become outsiders, the remaining insiders work against them too, trying to keep them out while trying to get higher wages when the economy recovers, keeping unemployment permanently higher. In 1987 French economist Olivier Jean Blanchard (1948-) and New Haven, Conn.-born economist Lawrence Henry "Larry" Summers (1954-) pub. Hysteresis and the European Unemployment Problem, calling it hysteresis. In 1992-3 Lindbeck heads the Lindbeck Commission to study the economic crisis, recommending reforms. In Sept. 1997 he pub. The Swedish Experiment.
In 1984 Gary, Ind.-born economist Joseph Eugene Stiglitz (1943-) and Austin, Tex.-born Carl Shapiro (1955-) pub. the Shapiro-Stiglitz Model of Unemployment, which explains why there is unemployment even in equilibrium with the soundbyte "Unemployment is driven by the information structure of employment." In 1999 Shapiro and Wooster, Ohio-born Harold Ronald "Hal" Varian (1947-) (Bill Gates lookalike) pub. Information Rules: A Strategic Guide to the Network Economy, applying information economics to the Internet, incl. how to save Encyclopedia Britannica from Wikipedia, getting Varian hired by Google in 2002, after which he works up to chief economist. In 2001 Stiglitz wins a share of the Nobel Econ. Prize. In 2002 he pub. Globalization and Its Discontents, which blames the IMF for funding developing economics which don't develop. On June 11, 2012 he pub. the NYT bestseller The Price of Inequality: How Today's Divided Society Endangers Our Future, about the top 1%; "Their fate is bound up with how the other 99 percent live... It does not have to be this way."
In Apr. 1985 Indian-born Am. economist S. Rao Aiyagari (1951-97) of the U. of Rochester pub. Observational Equivalence of the Overlapping Generations and the Discounted Dynamic Programming Frameworks for One-Sector Growth. In 1986 Am. economist Truman Fassett Bewley (1941-) of Yale U. pub. Stationary Monetary Equilibrium with a Continuum of Independently Fluctuating Consumers, together proposing the Aiyagari-Bewley Economic Model, founding Dynamic Macroeconomics. In Aug. 1994 Aiyagari pub. Uninsured Idiosyncratic Risks and Aggregate Saving, which finds that the contribution of uninsured idiosyncratic risks to aggregate saving is modest for plausible values of risk aversion, variability, and persistence of earnings (max. 3%), but can be significantly larger with higher variability and persistence parametes for the earning stochastic process. In Dec. 1995 Aiyagari pub. Optimal Capital Taxation with Incomplete Markets, Borrowing Constraints, and Constant Discounting, criticizing the elimination of tax on capital income. Too bad, Aiyagari dies on May 20, 1997 in his youth and prime while playing tennis. In 1999 Bewley pub. Why Wages Don't Fall During a Recession, which claims that mgt. tries to keep morale up by not decreasing employee compensation during times of low demand.
In 1985 Canadian economists James Alan "Jim" Brander (1953-) and Barbara J. Spencer (1945-) pub. Export Subsidies and International Market Share Rivalry, proposing the Brander-Spencer Model of Internat. Trade, which shows how a govt. can successfully subsidize domestic firms to aid them in competition against foreign firms and enhance nat. welfare; it becomes the most-cited article since the 1971 founding of the Journal of Internat. Economics. In 1986 Brander and and Am. economist Tracy R. Lewis pub. Oligopoly and Financial Structure: The Limited Liability Effect, proposing a model of a dupopoly where one dupolist prefers low risk, allowing the other to engage in a risky low-margin high-output strategy to gain market share; too bad, if they both do it, they end up worse off than if they hadn't tried it, like with the deregulated North Am. airline industry.
In 1985 English economist Paul David Klemperer (1956-), Am. economist Jeremy I. Bulow (1953-), and Am. economist John Geanakoplos (1955-) pub. Multimarket Oligopoly: Strategic Substitutes and Strategic Complements, proposing the concept of Strategic Complements, where the decisions of the players mutually reinforce one another. In 2010 Geanakoplos pub. The Leverage Cycle, showing how a financial crisis can be caused by overleveraging in good times followed by deleveraging in bad times.
In 1985 the Oxford Review of Economic Policy begins pub. (until ?).
In 1986 the Economic Policy Inst. in Washington, D.C. is founded as a liberal think tank on economic issues by economists Geoffrey "Jeff" Faux (pres. until 2002), Freddie Ray Marshall (1928-), Lester Carl Thurow (1938-), Robert Bernard Reich (1946-), Barry Bluestone, and Robert Kuttner (1943-).
In 1986 the European Economic Assoc. holds its first annual congress in Vienna; in 2003 it founds the Journal of the European Economic Assoc..
In 1987 French economist Olivier Jean Blanchard (1948-) and Japanese economist Nobuhiro Kiyotaki (1955-) pub. Monopolistic Competition and the Effects of Aggregate Demand, proving the importance of monopolistic competition to the aggregate demand multiplier. In 1989 Kiyotaki and Canadian economist Randall D. Wright (1956-) pub. On Money as a Medium of Exchange, followed by A Contribution to the Pure Theory of Money (1991), pioneering Economic Search Theory AKA Matching Theory, which explicitly describes the frictions that make money essential, proving that fiat money can be valued as a medium of exchange even when it has an inferior rate of return. In 1993 they pub. A Search-Theoretic Approach to Monetary Economics, which discusses the Double Coincidence of Wants Problem in a pure barter setup, in which money is the medium of exchange. In 2005 Wright and Ricardo Froilan Lagos Escobar (1938-) (pres. of Chile in 2000-6) pub. A Unified Framework for Monetary Theory and Policy Analysis, expanding the model to make it useful for monetary policy.
In 1987 Swansea, Wales-born New Keynesian economist Huw David Dixon (1958-) pub. A Simple Model of Imperfect Competition with Walrasian Features, becoming the first work to demonstrate in a simple gen. equilibrium model that the fiscal multiplier could be increasing with the degree of imperfect competition in the output market, helping develop New Keynesian economics.
In 1987 Syracuse, N.Y.-born economist Robert Fry Engle III (1942-) et al. of UCSD pub. Estimation of Time Varying Risk Premia in the Term Structure: The ARCH-M Model, displaying methods of analyzing economic time series with time-varying volatility. In 1987 he and Swansea, Wales-born British economist Sir Clive William John Granger (1934-2009) of UCSD pub. Co-Integration and Error Correction: Representation, Estimation and Testing, coining the term Cointegration, formalizing the cointegrating vector approach. Engle and Granger share the 2003 Nobel Econ. Prize. Meanwhile in 1988 after visiting them in UCSD, Danish econometrician Soren (Søren) Johansen (1969-) pub. Statistical Analysis of Cointegration Vectors, going on to pub a number of key papers on cointegration.
In 1987 English economist Paul Mosley pub. Foreign Aid: Its Defense and Reform, which proposes the Micro-Macro Paradox, where donor agencies regularly report success for most of their projects, while at the macro level there is no significant correlation between aid to developing countries and GDP growth rate. In 2008 he and John Hudson pub. The Macroeconomic Impact of Aid Volatility. In 2008 he and Ales Bulir and Alan Gelb pub. Introduction: the Volatility of Overseas Aid.
In 1988 Canadian economist Campbell Russell "Cam" Harvey (1958-) pub. The Real Term Structure and Consumption Growth, followed in 1989 by Forecasting Economic Growth with the Bond and Stock Markets, claiming that when short-term interest rates are higher than long-term rates (inverted yield curve), a recession follows, which turns out to be true in 1989/1990-1, 2000/2001, and 2006/2007-9. In 1991 he and his mentor Wayne E. Ferson (1950-) pub. The Variation of Economic Risk Premiums, arguing that not only the business cycle but risk exposures and premia should be predictable.
In 1988 Peruvian economist Hernando de Soto Polar (1941-) and his Inst. for Liberty and Democracy (ILD) begin reforming Peru's economic system to take black market enterprises out of the shadows into the formal economy, turning Peruvian pres. (1990-2000) Alberto Fujimori (1938-) from a Keynesian to a neoliberal that agrees to abide by rules set by the IMF et al. to reduce inflation, having the effect of undermining the leftist guerrilla Shining Path movement by removing their support by small coca farmers; he goes on to enact similar programs in El Salvador, Haiti, Tanzania, and Egypt, gaining praise from U.S presidents Ronald Reagan, George H.W. Bush, and Bill Clinton, who calls him "The world's greatest living economist."
In 1988 Kiwi economist Marilyn Joy Waring (1952-) pub. If Women Counted (Counting for Nothing): A New Feminist Economics, which criticizes the use of GDP as the only measure of progress, and claims that failing to value women and nature are resulting in bad globalization decisions, founding Feminist Economics.
In 1988 the Review of Financial Studies is founded by Oxford U. Press, becoming one of the top three academic financial journals along with the Journal of Finance, founded in 1946, and the Journal of Financial Economics, founded in 1989.
In 1989 Am. economist James Andreoni (1959-) pub. Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence, followed by Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving (1990), proposing the Theory of Warm-Glow Giving,
In 1989 Am. economists Herman Edward Daly (1938-) and John B. Cobb Jr. (1925-) propose the Index of Sustainable Economic Welfare (ISEW), revealing that in the U.S. the increase in economic welfare of the avg. citizen stabilized after the 1970s despite growth of GDP due to the external effects of production and inequity of income distribution. On Apr. 26, 1999 Daly pub. Uneconomic Growth in Theory and Fact, advancing the concept of Uneconomic Growth (also proposed by Marilyn Waring), economic growth that reflects or creates a decline in the quality of life. On Oct. 16, 2003 he pub. Ecological Economics: The Concept of Scale and Its Relation to Allocation, Distribution, and Uneconomic Growth. On Nov. 1, 2003 he pub. Ecological Economics: Principles and Applications.
In 1989 English economist John Williamson (1937-) of the Peterson Inst. coins the term Washington Consensus to describe the strongly market-based approach of the IMF, World Bank, and U.S. Treasury Dept. to developing countries incl. macroeconomic stabilization, opening to trade and investment, and expansion of the domestic economy.
In 1989 the Journal of Financial Economics is founded; in 1997 it establishes the Fama-DFA Prize for the best paper on capital markets and asset pricing research.
In 1990 Cuban-born Am. economist George (Jorge) Jesus Borjas (1950-) (leading U.S. immigration economist) pub. Friends or Strangers: The Impact of Immigrants on the U.S. Economy, arguing that the U.S. must attract more skilled immigrants, followed in 1999 by Heaven's Door: Immigration Policy and the American Economy, arguing for U.S. immigration rates to be reduced from 1M per year to 1970s levels of 500K per years - another immigrant wants to shut the door behind him? In 1996 he pub. Labor Economics, which becomes a std. textbook in the U.S.
In 1990 Swedish economist Thomas Lindhqvist (1954-) proposes the Polluter Pays Principle, AKA Extended Producer Responsibility (EPR).
In 1990 Australian economist Martin Ravallion (1952-) of the World Bank proposes the $1 a day poverty line.
In 1990 San Diego, Calif.-born Austrian School economist Mark Andrew Skousen (1947-) pub. The Structure of Production, pushing supply-side Austrian macroeconomics as a better solution than the Keynesian aggregate demand and consumer spending model for global economics.
On Jan. 18, 1991 the Center for Economic Studies at the U. of Munich, Germany is founded; in 1994 it begins pub. Economic Policy; in 1994 it awards the first Distinguished CES Fellow Award to Indian-Am. economist Avinash Kamalakar Dixit (1944-).
On June 21, 1991 Pamulaparti Venkata Narasimha Rao (1921-2004) becomes PM #10 of the Repub. of India (until May 16, 1996), becoming known as "the Father of Economic Reforms" and "New Chanakya" as he launches free market reforms created by Indian economist Subramian (Subramiam) Swamy (1939-) that rescue the nearly-bankrupt country despite heading a minority govt.
In 1992 Health Economics begins pub. (until ?).
In 1993 Swedish economist Hans Carlsson and Dutch economist Eric van Damme (1956-) pub. Global Games and Equilibrium Selection, founding Global Games Theory, based on games of incomplete info. where players receive possibly correlated signals about the underlying state of the world, find application in bank runs, currency crises, economic crises, and political upheavals. In 1998 Am. economist Stephen Morris (1963-) and South Korean economist Hyun-Song Shin (1963-) pub. Unique Equilibrium in a Model of Self-Fulfilling Currency Attacks, proving that a unique equilibrium can be attained. In 2001 Andrew G. Atkeson pub. Rethinking Multiple Equilibria in Macroeconomic Modeling: Comment, proving that when a theory of prices is introduced, a multiplicity of equilibria may return. In 2006 Greek economist George-Marios Angeletos (1975-) and Argentine economist Ivan (Iván) Werning (1974-) pub. Crises and Prices: Information Aggregation, Multiplicity, and Volatility, and German economist Christian Hellwig (1976-) et al. pub. Self-Fulfilling Currency Crises: The Role of Interest Rates, showing that when prices act as an endogenous public signal and private info. is sufficiently precise, equilibrium multiplicity may be restored.
In 1993 Am. economist Michael Robert Kremer (1964-) of Harvard U. pub. The O-Ring Theory of Economic Development, proposing the O-Ring Theory of Economic Development, named after the 1986 Space Shuttle Challenger disaster, where tasks of production must be executed proficiently together in order for any of them to be of high value, leading to Assortative Matching, where people with similar skill levels work together, raising each other's wages, explaining brain drain and global economic disparity; "If strategic complementarity is sufficiently strong, microeconomically identical nations or groups within nations could settle into equilibria with different levels of human capital."
In 1993 French economists Jean-Jacques Marcel Laffont (1947-2004) and Jean Tirole (1953-) pub. A Theory of Incentives in Procurement and Regulation, which becomes a std. reference. In 1993 the first Yrjo (Yrjö) Jahnsson Award for the Euro economist under age 45 who made the best contribution to the study of economics in Europe is awarded to Laffont and Tirole. Tirole wins the 2014 Nobel Econ. Prize. In 2002 Laffont and French economist David Martimort pub. The Theory of Incentives: The Principal-Agent Model, discussing the Principal-Agent Problem. In 2005 Laffont pub. Regulation and Development, giving policies for improving the economies of less-developed countries (LDCs).
In 1993 economist Matthew Joel Rabin (1963-) pub. Incorporating Fairness Into Game Theory and Economics, introducing Rabin Fairness, where a person is only fair to a person who treats him/her kindly. In 2006 J. Souten et al. pub. Violating Equality in Social Dilemmas: Emotional and Retributive Reactions as a Function of Trust, Attribution, and Honesty, generalizing the principle of Rabin Fairness (1993) to the provision of public goods.
In 1993 the NetEc Project is launched, followed in 1997 by the Research Papers in Economics (RePEc) Project, which creates a free online database of over 1M articles, using citations to rank the Top 1000 Economists.
On Apr. 15, 1994 the Uruguay Round of GATT meets in Marrakesh Palace in Morocco, attended by reps from 116 nations, lowering tariffs on manufactured goods incl. drugs and electronics while bringing vast new areas of economic activity into the global trading system incl. the service sector and intellectual products incl. pharmaceutics, which are protected by the TRIPS (Trade-Related Aspects of Intellectual Property Rights) Agreement; Japan and Korea agree to open their domestic rice markets to imports; the EU agrees to limit subsidies to farmers; the World Trade Org. (WTO) in Geneva is formed effective next Jan. 1, ending the 1947 Gen. Agreement on Tariffs and Trade (GATT) with a new world governing body representing 153 member nations (95% of world trade), meeting every two years; it holds its first round of talks in Doha in Nov. 2001, becoming "a defining moment in modern political and economic history." (Peter Sutherland)
In 1994 Enterprise, Ore.-born economist Dale Thomas Mortensen (1939-) and Cypriot economist Sir Christopher Antoniou Pissarides (1948-) pub. Job Creation and Job Destruction in the Theory of Unemployment, which describes the Mortensen-Pissarides Model of Unemployment, postulating search frictions, winning them the 2010 Nobel Econ. Prize.
In 1995 Am. economists Richard McKelvey (1944-2002) and Thomas R. Palfrey III pub. Quantal Response Equilibria for Normal Form Games, followed in 1998 by Quantal Response Equilibria for Extensive Form Games, introducing the concept of Quantal Response Equilibrium, an equilibrium measure with bounded rationality which is different from but not necessarily a refinement of Nash equilibrium, in which players are assumed to make errors in choosing which pure strategy to play because of erroneous beliefs about other players' probability distribution over strategies, and the probability of any particular strategy being chosen is positively related to the payoff from that strategy, minimizing the likelihood of costly errors; in equilibrium, a player's beliefs are correct.
In 1996 eyepatch-wearing Rochester, N.Y.-born economist Richard W. Rahn (1942-) pub. What Is the Optimum Size of Government; proposes the U-shaped Rahn Curve, which indicates that a 15%-25% level of govt. spending maximizes economic growth.
In 1997 Israeli economist Oded Galor (1956-) and David N. Weil of Brown U. pub. From Malthusian Stagnation to Modern Growth, followed in Sept. 2000 by Population, Technology, and Growth: From the Malthusian Regime to the Demographic Transition and Beyond, founding Unified Growth Theory to explain the transition from Malthusian stagnation to sustained economic growth. On Jan. 20, 2005 Galor pub. From Stagnation to Growth: Unified Growth Theory, containing the soundbyte: "Deciphering the fundamental determinants of the transition from stagnation to growth and the great divergence has been widely viewed as one of the most significant research challenges facing researchers in the field of growth and development." In Apr. 1, 2005 he pub. Discrete Dynamical Systems. In 2006 he and Israeli economist Omer Moav pub. Das Human Kapital: A Theory of the Demise of the Class Structure. In 2008 he and Quamrul H. Ashraf pub. Dynamics and Stagnation in the Malthusian Epoch. In 2013 they pub. Genetic Diversity and the Origins of Cultural Fragmentation (May), and The Out of Africa Hypothesis: Human Genetic Diversity and Comparative Development.
In 1997 Japanese economist Nobuhiro Kiyotaki (1955-) and English economist John Hardman Moore (1954-) pub. Credit Cycles, proposing the Kiyotaki-Moore Model of Credit Cycles, where small perturbations to the economy can be amplified into large output fluctuations via the interaction between real estate prices and credit availability.
On Jan. 14, 1997 Lebanese-Am. mathematician-economist Nassim Nicholas Taleb (1960-) pub. Dynamic Hedging: Managing Vanilla and Exotic Options, about derivatives risk. In 2001 he pub. Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets, about why people mistake blind luck for skill. On Apr. 17, 2007 he pub. the NYT bestseller (3M copies) The Black Swan: The Impact of the Highly Improbable (2nd ed. 2010), about how major scientific discoveries tend to be undirected and unpredicted "black swans" (outliers), incl. the PC and Internet, forming counterexamples to the Western idea that "All swans are white" (originated by Juvenal in 82 C.E.); how banks should "avoid being the turkey" by identifying areas of vulnerability. In 2012 he pub. Antifragile: Things That Gain from Disorder, incl. fasting, mythology, urban planning, plus biological, cultural, economic, and technological systems.
In Jan. 1997 Chicopee, Mass.-born economist Michael Dean Woodford (1955-) and Argentine economist Julio J. Rotemberg (1953-) pub. An Optimization-Based Econometric Framework for the Evaluation of Monetary Policy, becoming the first microfounded DSGE New Keynesian macroeconomic model. In 2003 Woodford pub. Interest and Prices: Foundations of a Theory of Monetary Policy, which becomes a std. textbook.
On Dec. 5, 1997 Gus Van Sant's Good Will Hunting debuts, based on failed genius William James Sidis (1898-1944), becoming a breakthrough for Boston-raised screenwriter-actor buddies Matthew Paige "Matt" Damon (1970-) (Mad Demon?) and Ben Affleck (Benjamin Geza Affleck-Boldt) (1972-) (Son of Affliction?), who star as precious math genius orphan Will Hunting and his blue-collar buddy Chuckie Sullivan; also stars Robin Williams as pshrink Sean Maguire, Stellan Skarsgard as Fields Medal-winning MIT math prof. Gerald Lambeau, and Amelia Fiona J. "Minnie" Driver (1970-) as Will's Harvard pre-med student babe Skylar; makes Woody's L Street Tavern in South Boston famous; Will abandons his brain career for his wiener after curing his pshrink of the loss of his wife, then is cured of his childhood abuse problems in return; brings in $226M on a $10M budget; "If you're not thinking with your wiener then you're acting directly on its behalf" (Driver); "Sorry, guys, I gotta see about a girl" (Williams); "It's not about you, you mathematical dick" (Williams to Skarsgard); "It's not your fault" (Williams to Damon); "You wanna read a real history book? Read Howard Zinn's People's History of the United States. That book'll knock you on your ass" (Will); cops an article from the Dec. 1, 1994 New York Review of Books by Gordon S. Wood and James T. Lemon for a barroom debate about early Am. economics, stimulating interest in U.S. history and/or economics?; "You dropped $150K on an education you coulda got for a dollar fifty in late charges at the public library."
In 1999 St. Louis Park, Minn.-born journalist Thomas Loren Friedman (1953-) pub. The Lexus and the Olive Tree, claiming that the world is undergoing simultaneous struggles for prosperity and development along with the desire to retain local identities and traditions, followed in 2005 by The World is Flat: A Brief History of the Twenty-First Century, about his visit to Bangalore, India, where he witnessed work flow software converge the personal computer with fiber-optic micro cable, which he calls Globalization 3.0, superseding Globalization 2.0 (mutlinat. corps.) and Globalization 1.0 (govts.), arguing for countries to surrender a degree of economic sovereignty to the "golden straitjacket" of global capital markets and multinational corporations while preserving local traditions via "glocalization"; the U.S. needs energy independence from the Saudis so that their younger generation can overthrow them, and needs to open up immigration to "the world's first-round intellectual draft choices in an age when everyone increasingly has the same innovation tools and the key differentiator is human talent."
In 1999 Spanish economist Jordi Gali (Galí) (1961-) pub. Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations?, which uses structural vector autoregressions to claim that improvements in labor productivity cause decreases in employment, contradicting New Classical models. In Nov. 2005 he and his former teacher Olivier Blanchard pub. Real Wage Rigidities and the New Keynesian Model, coining the term "divine coincidence" for the property of New Keynesian macroeconomic models that stabilizing the inflation rate stabilizes the output gap, allowing central bankers to pursue a simplified Taylor Rule focused only on inflation stabilization without needing to consider output growth, then showing that with frictional unemployment and other frictions added to the model, there is a tradeoff between stabilizing inflation and stabilizing the output gap.
On July 14, 1999 the U.S. Fair Tax Act is introduced to the U.S. Congress, based on the research of Bozeman, Mont.-born economist Dale Weldeau Jorgenson (1933-), replacing the income tax with a nat. sales tax and monthly tax rebate to households; it is passed in ?
In 1999 Irish economist Philip R. Lane (1969-) and Am. economist Aaron Tornell (1961-) pub. The Voracity Effect, in which a shock, e.g. a trade windfall perversely generates a more-than-proportionate increase in fiscal redistribution and reduces growth, which is ameliorated by diluting the concentration of power.
On Mar. 1, 2000 Belgian economist Gerard (Gérard) Roland (1954-) pub. Transition and Economics: Politics, Markets and Firms, about Transition Economics, the shift from a centrally-planned to a free market economy.
In 2001 Turkish economist Kamer Daron Acemoglu (1967-), British economist Simon H. Johnson (1963-), and Am. political scientist James Arthur Robinson (1932-) pub. The Colonial Origins of Comparative Development, which claims that Europeans only set up growth-inducing institutions in areas where the disease environment was favorable for their settlement, and in unfavorable environments like C Africa they set up extractive/exploitative institutions instead.
In 2001 Boston, Mass.-born economist Susan Carleton Athey (1970-) and Claude, Tex.-born economist Kyle Bagwell (1961-) pub. Optimal Collusion with Private Information, exposing how open auctions with a lenient dispute mechanism can result in legal disputes followed by settlements that are rife with collusion, e.g., when winners share a portion of their spoils with losers who cooperate with them in the bidding, recommending the use of sealed bids, which is widely adopted. In 2007 Athey becomes the first female winner of the John Bates Clark Medal, going on to become the chief economist for Microsoft Corp.
In 2001 Am. economists Ben Shalom Bernanke (1953-) and Mark Lionel Gertler (1951-) pub. Should Central Banks Respond to Movements in Asset Prices?, which argues that the Federal Reserve should limit its policies to targeting inflation and price stability while avoiding the more aggressive approach of managing asset price bubbles such as the Dot-Com Bubble of 1997-2000.
On July 1, 2001 Morgantown, W. Va.-born economist William Russell Easterly (1957-) pub. The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics, which criticizes foreign aid to Third World countries esp. debt relief for failing to produce sustainable growth. In 2006 he pub. The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good, a reply to Jeffrey Sachs' "The End of Poverty" (2005), dissing foreign aid donors as ineffective do-gooders, and dividing them into top-down Planners and bottom-up Searchers, the latter having the best chance of success.
In 2001 the German Bernacer (Germán Bernácer) Prize is established to recognize economic research by European economists under age 40.
On Sept. 1, 2002 Korean heterodox economist (in Britain) Ha-Joon Chang (1963-) pub. Kicking Away the Ladder: Development Strategy in Historical Perspective, which claims that developed countries climb to the top then you know what to keep developing countries down. On Dec. 23, 2008 he pub. Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism, claiming that history proves that the modern economic superpowers got that way by shameless protectionism and govt. intervention in industry, and are promoting a fairy tale about free trade that the IMF, World Bank, and WTO are ramming down developing countries' throats.
In 2002 Austrian economist Ernst Fehr (1956-) and Swiss economist Urs Fischbacher pub. Why Social Preferences Matter: The Impact of Non-Selfish Motives on Competition, Cooperation and Incentives, attacking the selfishness hypothesis of the "dismal science", with the soundbyte: "A substantial number of people exhibit social preferences, which means they are not solely motivated by material self-interest but also care positively or negatively for the material payoffs of relevant reference agents. We show empirically that economists can fail to understand fundamental economic questions when they disregard social preferences, in particular, that without taking social preferences into account, it is not possible to understand adequately (i) effects of competition on market outcomes, (ii) laws governing cooperation and collective action, (iii) effects and the determinants of material incentives, (iv) which contracts and property rights arrangements are optimal, and (v) important forces shaping social norms and market failures."
In 2002 Venezuelan Neo-Schumpeterian economist Carlota Perez (1939-) pub. Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages, claiming techno-economic paradigm shifts in five past technological revolutions, with the soundbyte: "So during this period, financial capital generates a powerful magnet to attract investment into the new areas, hence accelerating the hold of the paradigm on what becomes the 'new economy'... In a world of capital gains, real estate bubbles and foreign adventures with money, all notion of the real value of anything is lost. Uncontrollable asset inflation sets in while debt mounts at a reckless rhythm; much of it to enter the casino." In 2009 she pub. Technological Revolutions and Techno-Economic Paradigms.
In 2002 after helping Bolivia end hyperinflation in 1985, then advising ex-Communist govts. in Poland, Slovenia, Estonia, and Russia on the transition from central planning to market economies, Detroit, Mich.-born Harvard U. economist Jeffrey David Sachs (1954-) becomes dir. (until 2006) of the U.N. Millennium Project Development Goals, which consists of eight internat.-sanctioned objectives to reduce extreme poverty, hunger, and disease by 2015. In 2005 he pub. the NYT bestseller The End of Poverty, followed by Common Wealth: Economics for a Crowded Planet (2008), which advocates plug-in hybrid electric vehicles, and The Price of Civilization: Reawakening American Virtue and Prosperity (2011), which calls U.S. politics a "corporatocracy" in which "powerful corporate interest groups dominate the policy agenda", naming the Military-Industrial Complex, the Wall St.-Washington Complex, the Big Oil-Transport-Military Complex, and the Health Care Industry.
In 2002 the Inst. for the Study of Labor in Bonn, Germany awards the first IZA Prize in Labor Economics to Polish-born Am. economist Jacob Mincer (1922-2006) of Columbia U.; in 2010 it awards the prize to Francine Dee Blau (1946-) of Cornell U. (first woman).
In 2004 London-born British economist Martin Wolf (1946-), former free market economist turned New Keynesian pub. Why Globalization Works, which blames past failure on govts., which he claims can be reformed, helping drive the 2008–2009 Keynesian Resurgence, a massive fiscal and monetary response to the Financial Crisis of 2007–8, which is torpedoed by the 2009-10 Eurozone Crisis, causing the IMF, led by French economists Dominique Gaston Andre Strauss Khan (DSK) (1949-) (IMF dir. in 2007-11) and Olivier Blanchard (1948-) (chief IMF economist in 2008-) to drop neoliberal policy and return to progressive policy.
In 2004 Econ Journal Watch is founded (until ?).
In Aug. 2005 New Delhi, India-born Am. economist Raj Chetty (1979-) and French economist Emmanuel Saenz (1972-) pub. Dividend Taxes and Corporate Behavior: Evidence from the 2003 Dividend Tax Cut, which reports that the 2003 dividend rate cut from 35% to 15% caused more companies to pay out dividends, but also that they are likelier to pay dividends if top execs own substantial stock, and that when the rate is too high, or execs own too few shares, mgt. tends to reinvest earnings in low priority projects or frivolous purchases to keep the money within the firm. Saenz goes on to pub. a number of articles on income and wealth inequality, incl. Income Inequality in the United States, 1913-1998 (with Thomas Piketty) (2003). In Apr. 2008 Chetty pub. Moral Hazard vs. Liquidity and Optimal Unemployment Insurance. In 2009 Saenz wins the John Bates Clark Medal, followed in 2013 by Chetty.
On Apr. 12, 2005 New York Times journalist Stephen J. Dubner (1963-) and U. of Chicago economist Steven David "Steve" Levitt (1967-) pub. the bestseller (4M copies) Freakonomics: A Rogue Economist Explores the Hidden Side of Everything, about how simple fixes can solve big problems; the drop in violent crime traces to Roe v. Wade?; backyard swimming pools are more dangerous than guns? On May 24, 2011 they pub. SuperFreakonomics: Global Cooling, Patriotic Prostitutes, and Why Suicide Bombers Should Buy Life Insurance .
In 2005 Indian economist Raghuram Govinda Rajan (1963-) (chief economist of the IMF in 2003-6) pub. Has Financial Development Made the World Riskier?, predicting disaster for the global financial sector, making him a hero when the Great (Global) Recession hits in Dec. 2007. On Apr. 8, 2009 he pub. Cycle-Proof Regulation, proposing a global regulatory system to avoid boom-bust cycles. In May 2012 he pub. The True Lessons of the Recession: The West Can't Borrow and Spend Its Way to Recovery, getting into a debate with Paul Krugman, advocating supply-side solutions to the Great Recession, while Krugman sticks with the Keynesian stimulus solution.
On Nov. 17, 2007 the Intergovernmental Panel on Climate Change (IPCC) (founded 1988) pub. its Fourth Assessment Report in Paris, written by Argentine-born Am. economist Graciela Chichilnisky (1944-) (lead author) et al., warning that human activity poses a risk of "abrupt or irreversible changes" on Earth, and proposing the Carbon Credit Emissions Trading Market, which is adopted by the Kyoto Protocol; the IPCC is awarded the 2007 Nobel Peace Prize along with former U.S. vice-pres. Al Gore (1948-).
In Dec. 2007 after the U.S. Housing Bubble peaks in 2005-6, and subprime mortgages go into delinquincy and foreclosure, dragging down the securities they back, the Great (Global) Recession begins (ends ?), seeing world wealth drop 11.7% to $92.4T; bailouts received: Bank of America $45B, AIG $180B, Citigroup $50B, Gen. Motors $50.4B, Chrysler $12.5B, GMAC $12.5B, Chrysler $1.5B; China surpasses the U.S. as the largest consumer of the automobile, with sales of 12.8M cars and light trucks vs. 10.3M in the U.S., up by 40% since 2008. The percentage of Americans in poverty rises to 14.3%, worst in decades. For the first time 1B (1.02B) people worldwide go hungry according to the U.N. World Food Program (100M than in 2008), and on Nov 11, 2009 UNICEF pub. a report claiming that almost 200M children have stunted growth because of malnutrition. More than half of the U.S. Treasury Dept. is owned by foreign lenders, who also own a third of U.S. corporate bonds and a sixth of U.S. corporate assets; the percentage of U.S. treasury notes purchased by China and Hong Kong drops to 9% from a high of 55% in 2006; China's banking system has 25x the reserves of the U.S. Federal Reserves, vs. (1/2.5)x in 1990; the U.S. dollar comprises 19% of the world's money supply vs. 100% at the end of WWII; the U.S. income gap between rich and poor is the widest since 1917, with the top 10% receiving 49.7%; meanwhile China's economy grows 8.7% this year, and China has 130 billionaires, up from 101 in 2008 and zero in 2003, making it #2 after the U.S. U.S. GDP falls 3.9% this year, becoming the worst drop since records began to be kept in 1947; the U.S. loses 4.7M jobs, 3.1M held by men and 1.6M by women, causing U. of Mich. economist Mark Perry to coin the term Mancession; Mexico's GDP drops 10% in the 2nd quarter, worst since 1981; in the 3rd quarter the U.S. economy grows at an annual rate of 5.7%, fastest since the 3rd quarter of 2003, indicating that the recession is ending. This year the U.S. imports 13.1M barrels of oil a day, incl. 2M from Canada, 1.4M from Saudi Arabia, 1.1M from Mexico, 1M from Venezuela, .87M from Nigeria, .55M from Angola, and .52 from Iraq; shale gas is discovered in North Am., creating a new picture vis a vis oil. China's share of world exports reaches 10% for the first time, passing up Germany (9%) to become #1, and up from 3% in 1999; U.S.: 8%.
In 2007 Hanqing Advanced Inst. of Economics and Finance in Beijing, China is founded to study Western-style economics; on Apr. 23, 2012 Matthew Shou-Chung "Matt" Shum of Caltech becomes dean.
On Mar. 16, 2008 the Subprime Mortgage Crisis begins when JPMorgan Chase buys New York City investment bank Bear Stearns (founded 1923), whose stock slid from $170 to $2 because of its giant portfolio of worthless subprime mortgages for a measly $236M, with the U.S. govt. guaranteeing $30B of it, causing rumors of a coming new Great Depression, fueled again on Mar. 17 when the Federal Reserve lowers the prime rate for the 6th time in 6 mo., although the Dow Jones jumps 420.41 points (to 12,392.66) on Mar. 18, the biggest daily point gain in five years; on Mar. 17 the price of gold tops $1,035, the highest in history, then slides to $990 on Mar. 18. Just when McCain has a sure forced checkmate, his own bumbling king gets exposed for his years of bad moves, throwing the game back in Obama's favor without even having to make a move of his own? On Sept. 14 after months of the fit hitting the shan, and failing to find a buyer, Wall Street broker Lehman Brothers (founded 1850) declares plans to file for Chapter 11 bankruptcy, and a govt.-brokered $50B takeover of Merrill Lynch, CEO John Alexander Thain (1955-) by the Bank of Am., CEO Kenneth D. "Ken" Lewis (1947-) is also revealed, bringing the brokerage failures to three since the credit crisis began 14 mo. ago, with only Goldman Sachs and Morgan Stanley remaining; Lewis only went through with it after U.S. treasury secy. Hank Paulson threatened to fire him along with the entire BOA board; news that Am. Internat. Group Inc. (AIG), the world's largest insurance co. needs a $40B restructuring (increased to $150B by Nov. 10) to avoid bankruptcy shakes the U.S. up more, causing the Dow Jones to drop 504.48 points on Sept. 15, AKA Black Monday, the worst day on Wall Street in seven years; on Sept. 15 there is a coordinated withdrawal of $550B from U.S. banks; meanwhile John McCain makes fatal error #1 by repeatedly uttering the dumbass-on-my-forehead statement "the fundamentals of the economy are strong" (which cinches Obama's coming V?), and Wonderless Woman Sarah Palin praises the govt. for not bailing out any more investment (as opposed to commercial and savings) banks, while claiming that her ticket is going to reform them in speeches in Colo., with the soundbyte "We're going to reform the way Wall Street does business and stop the golden parachutes for CEOs who betray the public trust", while McCain tells the press that he doesn't want taxpayers to be "on the hook for AIG"; too bad, on Sept. 16 at 7:30 p.m. EST news leaks that the federal govt. is going to bail out AIG with an $85B loan (80% share), causing maverick, er, Bush yes-man McCain to flip-flop and state "I didn't want to do that... But there are literally millions of people whose retirement, whose investment, whose insurance were at risk here. They were going to have their lives destroyed because of the greed and excess and corruption"; too bad, the news doesn't stop the Dow from plummeting 449.36 points on Sept. 17 (after recovering by 141.51 points on Sept. 16), until Euro and Asian countries on Sept. 18 announce that they're pumping in $180B to stabilize the world markets, causing the Dow to rebound by 410.03 points; but that still isn't enough to prevent the U.S. economy from continuing into a tailspin, causing Ben Bernanke to tell Congressional leaders on Sept. 18 that the country is days (hours?) away from collapse, with panic withdrawals from U.S. banks and money market accounts totalling $5.5T unless they take emergency action to create a superagency to buy all of the risky mortgages that are at the root of the problem, even though it will cost the taxpayers $700B, and the money goes to the investors not the homeowners; is it because the big investment houses are owned by ahem, Jews that a power play is being tried to get in the wallets of taxpayers, causing all the main candidates to fall in line, when the theory of free enterprise says let them fail, then let new investment houses rise? - it's all really a cover story to pay for the Iraq War while patsy Bushy Baby is still in office, stiffing his successor with the tax collection headaches, then backfiring as the U.S. elects a socialist who sees his chance? On Sept. 24, 2008 a new poll indicates that Obama has passed McCain up bigtime because of the economic crisis, leading by 52%-43%. On Sept. 25, 2008 John McCain announces that he is suspending his campaign to return to Washington, D.C. and work to pass the economic bailout package; he also bugs out of a scheduled debate with Obama on Sept. 26 (Fri.), and invites Obama to join him in Washington, then changes his mind after a White House meeting with bipartisan congressmen ends up in failure, with House Repubs. saying they are philosophically opposed to bailing out Wall Street even after Bush folds on limiting exec pay; meanwhile on Sept. 24 the U.S. Senate okays a $630B package to finance the federal govt. for 6 mo., lifting their 25-y.-o. ban on offshore drilling, and Iraqi lawmakers pass a law setting provincial elections by early next year; meanwhile on Sept. 26 119-y.-o. Washington Mutual (WaMu) ($300B assets) files for bankruptcy after losing $19B on bad mortgages, becoming the largest banking failure in U.S. history, soon being auctioned by the FDIC for $1.9B to JP Morgan. On Sept. 29, 2008 after days of wheeling-dealing accompanied by popular protest at "bailing out Wall Street", and sneers at its architect, U.S. treasury secy. (since 2006) bald (Treasuredome?) Henry Merritt "Hank" Paulson Jr. (1946-), (former CEO of Goldman-Sachs, who is himself worth $500M+, and is not a Jew but a Christian Scientist), the $700B "economic rescue" program" to buy the toxic mortgages from the banks in the hopes that one day they will make the govt. a profit (as if there won't be a massive vandalism of the "Bush houses", stripping most of them to the ground?) is defeated in the House by 228-205, causing the Dow to drop by 666, er, 777.68 points, costing shareholders $1T, followed by Pres. Bush appealing for them to go back and reverse their votes; every stock on the Standard & Poor's 500 drops except Campbell Soup Co.; too bad, House Speaker Nancy Pelosi goofs by giving a speech before the vote blaming the crisis on the Bush admin., giving several Repubs. an excuse to switch their vote to no; on Sept. 29 Wachovia announces that it is selling its banking operations to Citigroup for $2.2B; on Sept. 30 the House takes off for the Jewish holiday of Rosh Hashanah (Jewish New Year), while the Dow rallies by 485.21 points on news that a new House vote will be taken afterwards; Merrill Lynch, which went for $75 a share a year ago, now goes for $29 a share; on Oct. 1 the Senate beats them to it, passing the bailout package by 74-25, even though it is loaded with earmarks (pork), and on Oct. 3 it finally passes the House by 263-171, and Pres. Bush signs it 1 hour later; on Nov. 13 Henry Paulson flip-flops and announces that the govt. will not purchase troubled bank assets - suckahs? On Nov. 22, 2008 pres.-elect Barack Obama says that he is crafting a massive 2-year Socialist, er, stimulus program to revive the economy, which in his first of three straight news conferences on Nov. 24 he estimates to be a $500B-$600B bailout, announcing Lawrence "Larry" Summers (1954-) as head of the Nat. Economic Council (more powerful than Tim Geithner), although he was one of the key architects of the policies that led to the financial meltdown, and was the Harvard pres. who made remarks on Jan. 14, 2007 that there are innate differences between men and women that explain why fewer women succeed in science and math, getting him fired - explaining why Obama closed the glass ceiling of the White House on Hillary, because to work up here you gotta know math, witness the mess Bush made, and just think of the mess McCain-Palin woulda made?
The more you bundle, the more you save, now that's progressive? In Oct. 2009 Italian economists Alberto Francesco Alesina (1957-) and Silvia Ardagna, AKA the Bocconi Boys pub. Large Changes in Fiscal Policy: Taxes Versus Spending, challenging the Keynesians by showing that fiscal austerity measures help economies recover. In 2010 Cuban-born Am. economist Carmen M. Reinhart (1955-) and Rochester, N.Y.-born economist Kenneth Saul "Ken" Rogoff (1953-) pub. Growth in a Time of Debt, analyzing public debt and GDP growth among 20 advanced economies since WWII and claiming that high debt countries grew at -0.1%, which is widely accepted, causing a wave of financial austerity in Europe. Too bad, in Apr. 2013 a spreadsheet coding error and several other flaws in their analysis are exposed by economists at the IMF and Roosevelt Inst., with the figure changed to +2.2%, giving the Keynesians an opening, and on June 6, 2013 Paul Krugman pub. How the Case for Austerity Has Crumbled in the New York Review of Books, calling the articles "a full frontal assault on the Keynesian proposition that cutting spending in a weak economy produces further weakness", arguing for an end to austerity - get your checkbooks ready?
On Mar. 17, 2009 Zambian economist Dambisa Moyo (1969-) pub. the NYT bestseller Dead Aid: Why Aid is Not Working and How There is Another Way for Africa (Mar. 17, 2009), calling development aid "the single worst decision of modern developmental politics" that encourages corruption, kleptocracy, and aid dependency, creating a vicious downward spiral, with the soundbyte that easy money from other govts. "allows the state to abdicate its responsibilities toward its people", lobbying for micro-financing to build a country from the bottom-up. In Jan. 2011 she pub. the NYT bestseller How the West Was Lost: Fifty Years of Economic Folly -- and the Stark Choices That Lie Ahead. On June 5, 2012 she pub. the NYT bestseller Winner Take All: China's Race for Resources and What It Means for the World. On May 28, 2013 world's richest man Bill Gates gives an interview to the Sydney Morning Herald, calling her "evil".
On Dec. 10, 2009 Los Angeles, Calif.-born political economist Elinor "Lin" Ostrom (1933-2012) becomes the first woman to receive the Nobel Econ. Prize for her work that demonstrated how common property could successfully be managed by the groups using it.
On Apr. 26, 2011 Indian economist Abhihit Vinayak Banerjee (1961-) and French economist Esther Duflo (1972-) pub. Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty, a "radical rethinking" of the economics of poverty based on randomized control trials.
In 2011 Manhattan, N.Y.-born high-rise-raised Edward Ludwig "Ed" Glaeser (1967-) pub. Triumph of the City: How Our Greatest Invention Makes Us Rich, Smarter, Greener, Healthier, and Happier. In June 2012 Wei Pan et al. pub. an article in Nature Communications that claims that city living generates super-linear productivity because of increased social ties.
In 2011 Turkish Jewish economist Dani Rodrik (1957-) pub. The Globalization Paradox: Democracy and the Future of the World Economy, claiming that hyperglobalization (deep economic integration), nat. sovereignty, and dem. politics can't all be maintained at the same time, only two of the three, arguing that nat. priorities should take precedence over globalization, which should be customized under a light frame of internat. rules.
In Apr. 2011 after successfully predicting the 2008 global recession, Istanbul-born Am. economist Nouriel Roubini (1958-), along with Am. political scientist Ian Bremmer (1969-) pub. A G-Zero World, which claims that "Old models of understanding global dynamics are struggling" to keep up with rapid changes, with the soundbyte: "We are now living in a G-Zero world, one in which no single country or bloc of countries has the political and economic leverage - or the will - to drive a truly international agenda. The result will be intensified conflict on the international stage over vitally important issues, such as international macroeconomic coordination, financial regulatory reform, trade policy, and climate change. This new order has far-reaching implications for the global economy, as companies around the world sit on enormous stockpiles of cash, waiting for the current era of political and economic uncertainty to pass. Many of them can expect an extended wait."
In June 2011 the Gary Becker Milton Friedman Inst. for Research in Economics is established at the U. of Chicago by Lars Peter Hansen et al.
In Feb. 2012 African-Am. economist William A. "Sandy" Darity Jr. (1952-) of Duke U. (critic of Pres. Obama for being too pro-private sector) calls for the creation of a Nat. Investment Employment Corps that would guarantee all U.S. citizens over the age of 18 a job at a min. salary of $20K plus $10K in benefits incl. medical coverage and retirement savings.
On June 27, 2013 Hungarian-born Am. billionaire Soros Fund Management chmn. George Soros (1930-) utters the soundbyte: "Economic theory has to be rethought from the ground up, because the prevailing paradigm of the efficient-market hypothesis, rational-choice theory, has actually run into bankruptcy very similar to the bankruptcy of the global financial system after Lehman Brothers."
On Mar. 10, 2014 French economist Thomas Piketty (1971-) pub. an English translation of his Aug. 2013 book Capital in the 21st Century, which brilliantly marshals 250 years of economic data to show that ever-increasing inequality is the inevitable outcome of free market capitalism, calling for the global taxation of capital to prevent social upheaval, which becomes an instant internat. bestseller, causing a flood of "Piketty Porn" by his eager believers. In Dec. 2014 Am. economist Daron Acemoglu pub. a paper criticizing Piketty for giving a "misleading characterization of the true nature of inequality", claiming that "Piketty goes wrong for exactly the same reasons that Marx, and before him Ricardo, went astray: these quests for general laws ignore both institutions and politics, and the flexible and multifaceted nature of technology."
In spring 2014 the Bureau of Economic Analysis introduces the Gross Output (GO) measure of economic production, the first new economic aggregate since the GDP was introduced by Simon Kuznets in 1934.
Ragnar Frisch (1895-1973) of Norway
Jan Tinbergen (1903-94) of the Netherlands
|"For having developed and applied dynamic models for the analysis of economic processes."|
Paul Anthony Samuelson (1915-2009) of the U.S.
|"For the scientific work through which he has developed static and dynamic economic theory and actively contributed to raising the level of analysis in economic science."|
Simon Smith Kuznets (1901-85) of the U.S.
|"For his empirically founded interpretation of economic growth which has led to new and deepened insight into the economic and social structure and process of development."|
Kenneth Joseph Arrow (1921-) of the U.S.
Sir John Richard Hicks (1904-89) of the U.K.
|"For their pioneering contributions to general economic equilibrium theory and welfare theory."|
Wassily Wassilyovich Leontief (1906-99) of the U.S.
|""For the development of the input-output method and for its application to important economic problems."|
Friedrich August Hayek (1899-1992) of the U.K./Austria
Karl Gunnar Myrdal (1898-1987) of Sweden
|"For their pioneering work in the theory of money and economic fluctuations and for their penetrating analysis of the interdependence of economic, social and institutional phenomena."|
Leonid Vitaliyevich Kantorovich (1912-86) of the Soviet Union
Tjalling Charles Koopmans (1910-85) of the Netherlands
|"For their contributions to the theory of optimum allocation of resources."|
Milton Friedman (1912-2006) of the U.S.
|"For his achievements in the fields of consumption analysis, monetary history and theory and for his demonstration of the complexity of stabilisation policy."|
Bertil Gotthard Ohlin (1899-1979) of Sweden
James Edward Meade (1907-95) of the U.K.
|"For their pathbreaking contribution to the theory of international trade and international capital movements."|
Herbert Alexander Simon (1916-2001) of the U.S.
|"For his pioneering research into the decision-making process within economic organizations."|
Theodore Schultz (1902-98) of the U.S.
Sir William Arthur Lewis (1915-91) of the U.K.
|"For their pioneering research into economic development research with particular consideration of the problems of developing countries."|
Lawrence Robert Klein (1920-) of the U.S.
|"For the creation of econometric models and the application to the analysis of economic fluctuations and economic policies."|
James Tobin (1918-2002) of the U.S.
|"For his analysis of financial markets and their relations to expenditure decisions, employment, production and prices."|
George Joseph Stigler (1911-91) of the U.S.
|"For his seminal studies of industrial structures, functioning of markets and causes and effects of public regulation."|
Gérard Debreu (1921-2004) of France
|"For having incorporated new analytical methods into economic theory and for his rigorous reformulation of the theory of general equilibrium."|
Sir Richard Stone (1913-91) of the U.K.
|"For having made fundamental contributions to the development of systems of national accounts and hence greatly improved the basis for empirical economic analysis."|
Franco Modigliani (1918-2003) of Italy
|"For his pioneering analyses of saving and of financial markets."|
James McGill Buchanan Jr. (1919-2013) of the U.S.
|"For his development of the contractual and constitutional bases for the theory of economic and political decision-making."|
Robert Merton Solow (1924-) of the U.S.
|"For his contributions to the theory of economic growth."|
Maurice Felix Charles Allais (1911-2010) of France
|"For his pioneering contributions to the theory of markets and efficient utilization of resources."|
Trygve Magnus Haavelmo (1911-99) of Norway
|"For his clarification of the probability theory foundations of econometrics and his analyses of simultaneous economic structures."|
Harry Max Markowitz (1927-) of the U.S.
Merton Howard Miller (1923-2000) of the U.S.
William Forsyth Sharpe (1934-) of the U.S.
|"For their pioneering work in the theory of financial economics."|
Ronald Harry Coase (1910-) of the U.K.
|"For his discovery and clarification of the significance of transaction costs and property rights for the institutional structure and functioning of the economy."|
Gary Stanley Becker (1930-) of the U.S.
|"For having extended the domain of microeconomic analysis to a wide range of human behaviour and interaction, including non-market behaviour."|
Robert William Fogel (1926-2013) of the U.S.
Douglas Cecil North (1920-) of the U.S.
|"For having renewed research in economic history by applying economic theory and quantitative methods in order to explain economic and institutional change."|
John Forbes Nash Jr. (1928-) of the U.S.
John Charles Harsanyi (1920-2000) of the U.S.
Reinhard Selten (1930-) of Germany
|"For their pioneering analysis of equilibria in the theory of non-cooperative games."|
Robert Emerson Lucas Jr. (1937-) of the U.S.
|"For having developed and applied the hypothesis of rational expectations, and thereby having transformed macroeconomic analysis and deepened our understanding of economic policy."|
William Spencer Vickrey (1914-96) of Canada
Sir James Alexander Mirrlees (1936-) of the U.K.
|"For their fundamental contributions to the economic theory of incentives under asymmetric information."|
Robert Carhart Merton (1944-) of the U.S.
Myron Samuel Scholes (1941-) Canada/U.S.
|"For a new method to determine the value of derivatives."|
Amartya Kumar Sen (1933-) of India
|"For his contributions to welfare economics."|
Robert Alexander Mundell (1932-) of Canada
|"For his analysis of monetary and fiscal policy under different exchange rate regimes and his analysis of optimum currency areas."|
Daniel Little McFadden (1937-) of the U.S.
James Joseph Heckman (1944-) of the U.S.
|"For his development of theory and methods for analyzing discrete choice."/"For his development of theory and methods for analyzing selective samples."|
George Arthur Akerlof (1940-) of the U.S.
Andrew Michael Spence (1943-) of the U.S.
Joseph Eugene Stiglitz (1943-) of the U.S.
|"For their analyses of markets with asymmetric information."|
Daniel Kahneman (1934-) of Israel/U.S.
Vernon Lomax Smith (1927-) of the U.S.
|"For having integrated insights from psychological research into economic science, especially concerning human judgment and decision-making under uncertainty."/"For having established laboratory experiments as a tool in empirical economic analysis, especially in the study of alternative market mechanism."|
Robert Fry Engle III (1942-) of the U.S.
Sir Clive William John Granger (1934-2009) of the U.K.
|"For methods of analyzing economic time series with time-varying volatility (ARCH)."/"For methods of analyzing economic time series with common trends (cointegration)".|
Finn Erling Kydland (1943-) of Norway
Edward Christian Prescott (1940-) of the U.S.
|"For their contributions to dynamic macroeconomics: the time consistency of economic policy and the driving forces behind business cycles."|
Robert John Aumann (1930-) of Israel/U.S.
Thomas Crombie Schelling (1921-) of the U.S.
|"For having enhanced our understanding of conflict and cooperation through game-theory analysis."|
Edmund Strother Phelps Jr. (1933-) of the U.S.
|"For his analysis of intertemporal tradeoffs in macroeconomic policy."|
Leonid Hurwicz (1917-2008) of Poland/U.S.
Eric Stark Maskin (1950-) of the U.S.
Roger Bruce Myerson (1951-) of the U.S.
|"For having laid the foundations of mechanism design theory."|
Paul Robin Krugman (1953-) of the U.S.
|"For his analysis of trade patterns and location of economic activity."|
Elinor Ostrom (1933-2012) of the U.S.
Oliver Eaton Williamson (1932-) of the U.S.
|"For her analysis of economic governance, especially the commons."/"For his analysis of economic governance, especially the boundaries of the firm."|
Peter Arthur Diamond (1940-) of the U.S.
Dale Thomas Mortensen (1939-) of the U.S.
Sir Christopher Antoniou Pissarides (1948-) of Cyprus
|"For their analysis of markets with search frictions."|
Thomas John Sargent (1943-) of the U.S.
Christopher Albert Sims (1942-) of the U.S.
|"For their empirical research on cause and effect in the macroeconomy."|
Alvin Elliot Roth (1951-) of the U.S.
Lloyd Stowell Shapley (1923-) of the U.S.
|"For the theory of stable allocations and the practice of market design."|