Event Recap: Edmund Phelps uncovers secret for making economic growth more dynamic

DATE: 2024-01-11



In this Discussions with Nobel Laureates, held on January 11, 2024, Edmund Phelps, 2006 Nobel Laureate in Economic Sciences and McVickar Professor Emeritus of Political Economy at Columbia University, joined the Society for the Analysis of Government and Economics (SAGE) for a candid talk on the topic of "Uncovering the Secret for Making Economic Growth More Dynamic." The webinar was the latest discussion with a Nobel laureate in economics in what has become a regular event for SAGE. 

Topic: Uncovering the Secret for Making Economic Growth More Dynamic  


Lecturer: Edmund Phelps, 2006 Nobel Laureate in Economic Sciences and McVickar Professor Emeritus of Political Economy at Columbia University 

Host: David Daokui Li, Director of the Academic Center for Chinese Economic Practice and Thinking (ACCEPT) at Tsinghua University and Co-President of the Society for the Analysis of Government and Economics (SAGE) 


Time: January 11 (Thursday), 16:00 - 16:30 


Speaker Bio:  
Edmund Phelps, the winner of the 2006 Nobel Prize in Economics, is McVickar Professor Emeritus of Political Economy and Director of the Center on Capitalism and Society at Columbia University. Born in 1933, he spent his childhood in Chicago and, from age six, grew up in Hastings-on Hudson, N.Y. He attended public schools, earned his B.A. from Amherst (1955) and got his Ph.D. at Yale (1959). After a stint at RAND, he held positions at Yale and its Cowles Foundation (1960 - 1966), a professorship at Penn and finally at Columbia in 1971. Dr. Phelps has written books on growth, unemployment theory, recessions, stagnation, inclusion, rewarding work, dynamism, indigenous innovation and the good economy.  


His work can be seen as a lifelong project to put "people as we know them" into economic theory. In the mid-‘60s to the early ‘80s, beginning with the "Phelps volume," Microeconomic Foundations of Employment and Inflation Theory (1970), he pointed out that workers, customers and companies must make many decisions without full or current information; and they improvise by forming expectations to fill in for the missing information. In that framework, he studied wage-setting, mark-up rules, slow recoveries and over-shooting. This served to underpin Keynesian tenet that say a cut in the money supply will not merely cause prices and wages to drop with no prolonged effect on employment.  


From the mid-‘80s to the late ‘90s, Dr. Phelps put aside the short-termism and monetarism of MIT and Chicago to develop a "structuralist" macroeconomics. Contrary to what Keynesian extremists see as unending and unexplained deficiency of "demand," he sees employment heading to its "natural" level and seeks to explain the effects of structural forces on it. His book Structural Slumps (1994) and later papers with Hian Teck Hoon and Gylfi Zoega find an economy's natural employment level is contracted by increases in household wealth, in overseas interest rates and by currency weakness. Thus, the big job losses in the US, UK and France result from the pile-up of wealth and puny investment, both stemming from the slowdown of productivity growth.  


In the most recent years, Dr. Phelps has worked to put economics on a new foundation. Powerful innovation over more than a century alters the nature of the advanced economies: Having higher income or wealth matters less. As his book Rewarding Work (1997) begins to argue, what matters more are non-material rewards of work: being engaged in projects, the delight of succeeding at something and the experience of flourishing on an unfolding voyage. His book Mass Flourishing (2013) remarks that cavemen had the ability to imagine new things and the zeal to create them. But a culture liberating and inspiring the dynamism is necessary to ignite a "passion for the new." This thesis on the central role of values for indigenous innovation and indeed the good life have been put to the test in the book Dynamism (2020). In his latest book, My Journeys in Economic Theory (2023), Dr. Phelps tells the story of his role in reshaping economic theory, offering a powerful personal account of a creative and rewarding career, while leaving readers with a profound vision of a dynamic, modern economy that offers lives rich with creativity and meaning.

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