Economists From The United States

"The standard neoclassical model the formal articulation of Adam Smith's invisible hand, the contention that market economies will ensure economic efficiency provides little guidance for the choice of economic systems, since once information imperfections (and the fact that markets are incomplete) are brought into the analysis, as surely they must be, there is no presumption that markets are efficient."

"Today, as we face a retreat from the rules-based, liberal global order, with autocratic rulers and demagogues leading countries that contain well over half the world’s population, Fukuyama’s idea seems quaint and naive."

"And it should be clear that, in spite of the increases in GDP, in spite of the 2008 crisis being well behind us, everything is not fine. We see this in the political discontent rippling through so many advanced countries; we see it in the widespread support of demagogues, whose successes depend on exploiting economic discontent; and we see it in the environment around us, where fires rage and floods and droughts occur at ever-increasing intervals."

"The top 1 percent have the best houses, the best educations, the best doctors, and the best lifestyles, but there is one thing that money doesn’t seem to have bought: an understanding that their fate is bound up with how the other 99 percent live. Throughout history, this is something that the top 1 percent eventually do learn. Too late."

"The theories that I (and others) helped develop explained why unfettered markets often not only do not lead to social justice, but do not even produce efficient outcomes. Interestingly, there has been no intellectual challenge to the refutation of Adam Smith’s invisible hand: individuals and firms, in the pursuit of their self-interest, are not necessarily, or in general, led as if by an invisible hand, to economic efficiency. The only question that has been raised concerns the ability of government to remedy the deficiencies of the market. Within academia, a significant fraction of economists are involved with developing and expanding on the ideas of imperfect information (and imperfect markets) that I explored. For instance, Edmund Phelps, this year’s Nobel Prize winner, belongs to this "school" of thought. But in political discourse, simplistic “market fundamentalism” continues to exert enormous influence."

"The fall of Wall Street is for market fundamentalism what the fall of the Berlin Wall was for communism."

"It's actually a tribute to the quality of economics teaching that they have persuaded so many generations of students to believe in so much that seems so counter to what the world is like. Many of the things that I'm going to describe make so much more common sense than these notions that seem counter to what ones eyes see every day."

"They [free market policies] were never based on solid empirical and theoretical foundations, and even as many of these policies were being pushed, academic economists were explaining the limitations of markets — for instance, whenever information is imperfect, which is to say always."

"The reason that the invisible hand often seems invisible is that it is often not there."

"Most poor people earn more than minimum wage when they are working; their problem is not low wages. The problem comes when they are not working."

"There is little doubt that the observation that quality may depend on price (productivity on wages; default probability on interest rates) has provided a rich mine for economic theorists: A simple modification of the basic assumptions results in a profound alteration of many of the basic conclusions of the standard paradigm. The Law of Supply and Demand has been repealed. The Law of the Single Price has been repealed. The Fundamental Theorem of Welfare Economics has been shown not to be valid. More than that, the theories that we describe here provide the basis of progress toward a unification of macroeconomics and microeconomics. They pro vide an explanation of unemployment and credit rationing, derived from basic microeconomic principles. It is a theory in which the extensive idleness that periodically confronts society's resources, human and capital, is seen as but the most obvious example of market failures that prevasively and persistently distort the allocation of resources."

"Where countries have been able to carry through on their reform commitments -- as in Korea, Thailand and the Philippines -- results are starting to come in the form of lower interest rates, new investment and increased growth."

"No free country will ever again have anything like the 90 percent tax rates that we had in this country. Past a certain point, high marginal tax rates are, indeed, terribly destructive."

"Things take longer to happen than you think they will and then they happen faster than you think they will."

"I think the economic logic behind dumping a load of toxic waste in the lowest-wage country is impeccable and we should face up to that. . . . I’ve always thought that countries in Africa are vastly under polluted; their air quality is probably vastly inefficiently low compared to Los Angeles . . . Just between you and me, shouldn't the World Bank be encouraging more migration of the dirty industries to the Least Developed Countries?"

"I vote to banish Larry Summers. Not from the planet. That wouldn't be nice. Just from public life. The criticisms of President Obama's chief economic adviser are well known. He's too close to Wall Street. And he's a frightful bully, of both people and countries. Still, we're told we shouldn't care about such minor infractions. Why? Because Summers is brilliant, and the world needs his big brain. And this brings us to a central and often overlooked cause of the global financial crisis: Brain Bubbles. This is the process wherein the intelligence of an inarguably intelligent person is inflated and valued beyond all reason, creating a dangerous accumulation of unhedged risk. Larry Summers is the biggest Brain Bubble we've got."

"Takeovers wouldn't cause the stock market to rise unless there is an upward reassessment of earnings (potential). People are more optimistic and confident about the future."

"The things you hear now about European unemployment -- that there are structural problems, that real wages have failed to adjust, that there are inflationary fears -- are the same things that were said during the early 1930. It is well established that government spending began to pull Germany out of its slump in 1935. There is no known reason why spending for peace can't do as well at getting the economy going as spending for war."

"The country will not have to pay the piper. Through a combination of sound policy actions and a great deal of good luck we are well on our way to a soft landing and a period of growth and price stability."

"Summers’s outlook on economic policy can be summarized by the remark that he gave me some years ago: "If I had your views on economics, I would find another profession." He meant that if free markets usually worked well and the government ought usually to stay out, then he would find economics to be an uninteresting occupation. Fortunately for Summers, he has always believed in the potential benefits from governmental activism, although the strength of this belief may have diminished over time."

"We know the first rule of holes is stop digging. We are in a hole that we have made. If we stop digging, the situation is less serious than if we continue to dig."

"[I]t's important to remember how fortunate we are as a country to have a currency and a bond market that is seen in every way as a source of strength and it’s a huge responsibility for us to keep it that way."

"With uncertainty in oil markets, a buildup of speculative pressures and the large U.S. current account deficit, there is a real possibility that Paulson's crisis-management skills will be tested."

"I know that there is one additional thing that I've learned and that is that what Harvard does and says has an enormous resonance that goes beyond Zip code 02138."

"I deeply regret the impact of my comments and apologise for not having weighed them more carefully … I was wrong to have spoken in a way that has resulted in an unintended signal of discouragement to talented girls and women."

"We must recognise that in an integrated world, trade cannot be divorced from other concerns. We need to promote free trade and serious global efforts with respect to common problems even as we support every nation's right to chart its own course."

"The situation in a number of countries reminds one that it's still a risky world out there in the emerging markets."

"From the development of the textile loom two centuries ago to today's Internet, output per hour has increased fifty fold."

"The probability of ten consecutive heads is 0.1 percent; thus, when you have millions of coin tossers, or investors, in the end there will be thousands of very successful practitioners of coin tossing, or stock picking."

"An area in which more rather than less government involvement is needed, in my judgment, is the rooting out of fraud. It is the bane of any market system."

"Over the years I have had the most contact with Lee Kuan Yew, most recently in 2006, and have always found him impressive, even though we do not always see eye to eye. I met him first when he was George Shultz's guest at the famous (or infamous, depending on your perspective) Bohemian Grove, a male only bonding retreat among the redwoods of California."

"In general, corruption tends to exist whenever governments have favors to extend, or something to sell."

"The Fabians laid the groundwork for modern social democracy, and their influence on the world would end up being at least as powerful as that of Marx."

"When trust is lost, a nation's ability to transact business is palpably undermined."

"Globalization was exerting a dis-inflationary impact."

"I came to a stark realization: chronic surpluses could be almost as destabilizing as chronic deficits."

"Of course, shedding the debt burden would be a happy development for our country, but it would nevertheless pose a big dilemma for the Fed. Our primary lever of monetary policy was buying and selling treasury securities-Uncle Sam's IOU's. But as the debt was paid down, those securities would grow scarce, leaving the Fed in need of a new set of assets to effect monetary policy."

"Once stock prices reach the point at which it is hard to value them by logical methodology, stocks will be bought as they were in the late 1920s not for investment but to be unloaded at a still higher price. The ensuing break could be disastrous because panic psychology cannot be summarily altered or reversed by easing money policies."

"The world of antitrust is reminiscent of Alice’s Wonderland: everything seemingly is, yet apparently isn’t, simultaneously. It is a world in which competition is lauded as the basic axiom and guiding principle, yet "too much" competition is condemned as "cutthroat." It is a world in which actions designed to limit competition are branded as criminal when taken by businessmen, yet praised as "enlightened" when initiated by the government. It is a world in which the law is so vague that businessmen have no way of knowing whether specific actions will be declared illegal until they hear the judge’s verdict—after the fact."

"Greenspan kept an eye on such fluctuations as the sale of vacuum cleaners in Cleveland to, as they say, " get a precise idea about where the economy is going," and of course he micromanaged us into chaos."

"In my view, Alan Greenspan will go down in history as one of the worst chairmen of the Federal Reserve. Future textbooks will refer to Greenspan as an example of how not to run a central bank. In order to underline the bipartisan support that Wall Street has in Congress, during his time of leadership at the Fed he was hailed not only by Republicans but also by most Democrats as "the Maestro." This, despite his extremely conservative views, which called for, among other reactionary policies, the elimination of the minimum wage. In 2000, at a House Financial Services Committee hearing on bank mergers, I asked Greenspan, "Aren't you concerned that with such a growing concentration of wealth, if one of these huge institutions fails it will have a horrendous impact on the national and global economy?" Greenspan replied, "No, I'm not. I believe that the general growth in large institutions has occurred in the context of an underlying structure of markets in which many of the larger risks are dramatically-I should say, fully-hedged." Greenspan could not have been more wrong. Yet after leaving the Fed, he was hired to advise some of the biggest banks and wealthiest hedge fund managers in the world."

"Greenspan's reaction with regard to the stock-market bubble has caused two more bubbles to grow: a real-estate bubble and a consumer-debt bubble... History will judge him one of the worst Central Bankers ever."

"[He is] one of the biggest political hacks we have in Washington."

"I sometimes say that Alan Greenspan overdosed on Ayn Rand when he was young. He thought that if an axe murder happened in a free market it was probably all for the best."

"The most devoted member of (Ayn Rand's) inner circle was Alan Greenspan, former head of the US Federal Reserve. Among the essays he wrote for Rand were those published in a book he co-edited with her called Capitalism: The Unknown Ideal. Here, starkly explained, you'll find the philosophy he brought into government. There is no need for the regulation of business—even builders or Big Pharma—he argued, as 'the "greed" of the businessman or, more appropriately, his profit-seeking … is the unexcelled protector of the consumer.' As for bankers, their need to win the trust of their clients guarantees that they will act with honour and integrity. Unregulated capitalism, he maintains, is a 'superlatively moral system.'"

"I would not only reappoint Mr. Greenspan -- if Mr. Greenspan should happen to die, God forbid -- I would do like was did in the movie, 'Weekend at Bernie's.' I'd prop him up and put a pair of dark glasses on him and keep him as long as we could."

"Greenspan doesn't get out of bed before examining the political consequences."

"If you want a simple model for predicting the unemployment rate in the United States over the next few years, here it is: It will be what Greenspan wants it to be, plus or minus a random error reflecting the fact that he is not quite God."

"If you look at the speeches he gave just before he left the Fed, it's pretty much “After me - the Deluge. I'm getting out while my reputation's intact”."

"I got to know a lot of people on Wall Street. I used to tell then that Alan Greenspan was a musician. He was at Juilliard when I was there, a clarinet major, and he played in the Henry Jerome Band at the . After he became chairman of the Fed, Time had his picture on the cover, and inside they had a picture of him with the Edison Hotel band. One of the guys said, "I don't understand something. Why did Greenspan give up the music business, to become an economist?" "Very simple," I told him, "you should have heard him play the clarinet.""