Economists From The United States

"Which brings us to a third group of macroeconomists: those who fall into neither the pro- nor the anti-Keynes camp. I count myself among the ambivalent. We credit both sides with making legitimate points, yet we watch with incredulity as the combatants take their enthusiasm or detestation too far. Keynes was a creative thinker and keen observer of economic events, but he left us with more hard questions than compelling answers."

"With the death of Lawrence K. Frank on September 23, 1968, one of the founders and major catalysts of the child development movement was lost to the field."

"We exist in the geographical environment, moving about in space-time, as we carry on our continual intercourse with nature, through breathing, drinking, eating, absorbing light, heat and other forms of radiant energy, eliminating through breathing, urination and defecation, through the skin and by radiation of heat, as the geographical environment flows in and out of us, as it does in all other organisms."

"While he served as a foundation officer, he fostered studies of child growth and development, adolescents, family living, and aging; parent education programs; and nursery schools. He was long active in the field of mental health, stressing what is now called "Primary Prevention, "and emphasizing the importance of mental health programs in schools and colleges."

"Frank was one of the two or three men who used foundations the way the Lord meant them to be used."

"A policy is a formulation of long term goals and purposes and of the values and aspirations by which those goals and purposes are not only defined but are to be translated into activities and practices. Thus a policy is an affirmation, perhaps a reaffirmation, of what may be taken for granted or is implied, but what is frequently ignored or neglected or inadequately recognized in plans and programs and customary operations. Sometimes a policy serves to point out where these goals and purposes and these values are being blocked or sacrificed to various short-term ends or convenience."

"A policy therefor might be likened to strategy, the broad, overall, long term conception which gives direction and purpose to the tactics of immediately daily operations and decisions."

"[I call for] imagination and courage in the endless endeavor to make human life more meaningful and significant, more nearly expressive of the values we cherish... A national policy for the family will earn affirmation and as such should give re-direction to what we are now doing in our social life, and new hope and inspiration to individual men and women and new promise to youth."

"When we scrutinize the actual procedures that may be called projective methods we find a wide variety of techniques and material being employed for the same general purpose, to obtain from the subject 'what he cannot or will not say,' frequently because he does not know himself and is not aware what he is revealing about himself through his projections."

"Coming directly to the topic of projective methods of personality study, we may say that the dynamic conception of personality as a process of organizing experience and structuralizing life space in a field leads to the problem of how we can reveal the way an individual personality organizes experience, in order to disclose or at least gain insight into that individual's private world of meanings, significances, patterns, and feelings."

"In similar fashion we may approach the personality and induce the individual to reveal his way of organizing experience by giving him a field (objects, materials, experiences) with relatively little structure and cultural patterning so that the personality can project upon that plastic field his way of seeing life, his meanings, significances, patterns, and especially his feelings, Thus we elicit a projection of the individual's private world, because he has to organize the field, interpret the material, and react affectively to it. More specifically, a projection method for study of personality involves the presentation of a stimulus-situation designed or chosen because it will mean to the subject, not what the experimenter has arbitrarily decided it should mean (as in most psychological experiments using standardized stimuli in order to be “objective”), but rather whatever it must mean to the personality who gives it, or imposes it, his private, idiosyncratic meaning and organization. The subject then will respond to his meaning of the presented stimulus-situation by some form of action and feeling that is expressive of his personality."

"We are living the events which for centuries to come will be minutely studied by scholars who will undoubtedly describe these days as probably the most exciting and creative in the history of mankind. But preoccupied with our daily chores, our worries and personal hopes and ambitions, few of us are actually living in the present."

"Past and future are but two aspects of behavior, the past being the persistent modifications in the behaving organism, and the future the controlling direction or pattern imposed upon the unfolding behavior according to those persistent modifications."

"The concepts of purposive behavior and teleology have long been associated with a mysterious, self-perfecting or goal-seeking capacity or final cause, usually of superhuman or super-natural origin. To move forward to the study of events, scientific thinking had to reject these beliefs in purpose and these concepts of teleological operations for a strictly mechanistic and deterministic view of nature. This mechanistic conception became firmly established with the demonstration that the universe was based on the operation of anonymous particles moving at random, in a disorderly fashion, giving rise, by their multiplicity, to order and regularity of a statistical nature, as in classical physics and gas laws. The unchallenged success of these concepts and methods in physics and astronomy, and later in chemistry, gave biology and physiology their major orientation. This approach to problems of organisms was reinforced by the analytical preoccupation of the Western European culture and languages. The basic assumptions of our traditions and the persistent implications of the language we use almost compel us to approach everything we study as composed of separate, discrete parts or factors which we must try to isolate and identify as potential causes. Hence, we derive our preoccupation with the study of the relation of two variables. We are witnessing today a search for new approaches, for new and more comprehensive concepts and for methods capable of dealing with the large wholes of organisms and personalities."

"The concept of teleological mechanisms, however it be expressed in many terms, may be viewed as an attempt to escape from these older mechanistic formulations that now appear inadequate, and to provide new and more fruitful conceptions and more effective methodologies for studying self-regulating processes, self-orienting systems and organisms, and self-directing personalities. Thus, the terms feedback, servomechanisms, circular systems, and circular processes may be viewed as different but equivalent expressions of much the same basic conception"

"The most important things about the individual are what he cannot or will not say."

"Alchian: Perhaps it might have been more appropriate for the Nobel Prize to have gone to you and Hicks together, and [Kenneth] Arrow and [[Gunnar Myrdal|[Gunnar] Myrdal]] together. Hayek: Oh, surely. [laughter]"

"Then during the early '50s Kenneth Arrow published his book Social Choice and Individual Values (1951). That stirred up a great deal of interest, both in political science and economics. My general reaction was that the people who criticized Arrow, and Arrow himself, really didn't quite get the message in the sense that the concentration was on the fact that majority rule would not give you a political equilibrium, that you get this political cycle and so forth. My criticism basically was, if that's the way the preferences are, that's what you want to have. A democracy should not mean one majority simply ruling. It ought to be a rotation, if that's the way the preferences are. I was kind of an anti-majoritarian then and now. So my critique of Arrow, which not many people paid much attention to, got me further into thinking about these things."

"In technical economics, I see a peak with Paul Samuelson and Kenneth Arrow and some of the core developments in game theory. Since then there are fewer iconic figures being generated in this area of research, even though there are plenty of accomplished papers being published."

"In 1972 American economist Kenneth Arrow, jointly with Sir John Hicks, was awarded the Nobel Prize in economics for “pioneering contributions to general equilibrium theory and welfare theory.” Arrow is probably best known for his Ph.D. dissertation (on which his book Social Choice and Individual Values is based), in which he proved his famous “impossibility theorem.” He showed that under certain assumptions about people’s preferences between options, it is always impossible to find a voting rule under which one option emerges as the most preferred."

"Once individuals are acting to carry out a norm and cannot be fully checked, their natural norm of self-interest will come into play. The rules actually acted upon will therefore move away from any norm that might be acceptable on the basis of general principles."

"We don’t have a laissez-faire system. The intervention of the federal government, as measured by expenditures, is growing. It is not a private system at all. Roughly 50 percent of health costs are paid for by the government, and state governments are spending more and more on health. It’s crowding out education. State budget-support for education, especially higher education, is crowded out by two things: health and prisons. Nobody is prepared for the idea of a laissez-faire system, and we never really had one."

"During this period I also came-across Kenneth Arrow's now famous Social Choice and Individual Values. Although I hardly did full justice to that pioneering work, it emboldened me to take a stab at a much more formal presentation than I had encountered in political theory. The form of my two chapters certainly owes something to my having ploughed my way through that book. For better or worse, Arrow's book must also have influenced my decision to present parts of the argument in a formal notational system (though only in footnotes and appendices)."

"There’s a famous Churchill quote: “democracy is the worst form of government, except for all the others.” That applies to regulation as well. In the late 1800s, we had a natural monopoly: railroads. The government created a regulatory enterprise – the Interstate Commerce Commission – and of course it was captured. But it still made a difference. I think we just have to accept that capture does occur, but it’s limited. The Federal Trade Commission, for example, is a pretty active body. Monopolies have been broken up. The AT&T telephone monopoly was broken up in 1982 – Stigler was still writing about regulatory capture then. AT&T was a classic monopoly, but a pretty benevolent one. It delivered good service – rates were too high, but not by that much. It didn’t necessarily pass on value to the consumers, but Bell Labs were a source of great innovative function. Nevertheless, it was broken up by antitrust measures, brought on by government. So there is regulatory capture, but it is by no means complete. Regulations do play a role. One example of non-regulatory capture fighting against effective regulation was during the run-up to the 2008 crash, when several officials argued for CDOs to be regulated, which means they would have had to meet certain requirements of transparency. This was not accepted. I’m not saying the crash could have been avoided if that happened, but that would have made a big difference."

"We don't have much time left. We are moving towards temperature increases of around two degrees Celsius, which is going to have consequences in the tropics, and we will lose things like glaciers. That's not a theory; it's happening right now. It's not a prediction; it's happening right now. But you just sightsee near those glaciers. But the glaciers are a big source of water. And on the questions of water, in California we store our water in a snowpack. When that's gone, the rain will be the same but it won't accumulate. With warming temperatures the snowpack will not work. It might be possible to substitute with dams, but that's complicated. This is conjoined with a big energy problem and I think that we really have to encourage development in this area. Just waiting for technological improvement won't work. We need to encourage it."

"I then follow up with four major aspects of economic research in the last 60 years, the period of my scholarly activity. One, econometric methodology and practice, is of such fundamental importance that it cannotgo unnoticed, although I played no role in it. With the other three, general equilibrium, dynamic processes, and uncertainty and information, I was more intimately involved."

"Clearly, information is of the utmost importance in making economic decisions, especially when it comes to securities or other assets whose value depends on events not yet known. Now the distribution of information cannot simply be taken as given. On the contrary, information can be acquired at some cost."

"There are information asymmetries in this story. Health insurance is limping along. It's limited in scope, and then you other consequences. Insurance companies have high premiums to protect themselves. The ones who come to the insurance company are sicker and the people have to pay more. You have adverse selection. You have moral hazard. And the doctor does what's on the safe side -- defensive medicine -- without regard to cost. These are fundamental conditions that make health insurance difficult. You have some things that help. Some doctors understand that they shouldn't abuse the system. But you still see problems in the way doctors behave towards patients. They goof off. Sometimes it's too much work. Some things are difficult and risky to diagnose."

"I was influenced very early on, my first time at the—I spent a year at the Center at Palo Alto, the Center for Advanced Study there, and I became a good friend of Kenneth Arrow. I think he was not at the Center that year but he lived in Palo Alto. [...] Marvelous man. Both as a person and as a scholar. And I became as I say greatly influenced by the way in which he dealt with phenomena. [...] So I was influenced by that as a model, a way of thinking more abstractly, perhaps, than customary, about democratic theory. Making clear the premises, the epistomological assumptions and matters of that kind, and I think that sort of set the stage. And then once you get in of course, into that field, which was not highly— I don’t know how to put this properly—as a formal field of political science was not highly developed at the time, once you get into it you quickly become aware of how rich the potential subject matter is. One of the enormous changes, perhaps anticipating your question, one of the changes in the world is the extraordinary increase in the number of countries that, by the standards that we use today, can be called democratic—always, I repeat this and repeat this, but, always keeping in mind the difference between the ideal and the threshold at which we now accept a country as democratic, or a polyarchy as I would say. And the enormous increase in the number of those available for study—when I was a graduate student, there were maybe half a dozen countries that you could study: France and Britain and, I’m not quite sure of Canada at that time . . . and then the expansion created out there a field . . . that was both a challenge and an opportunity."

"The Austrian a priori dogmatism (von Mises, especially; Hayek, to a lesser degree)."

"I don't know which way human psychology will go wrong. We have a world in which there is uncertainty. There are new technologies. And one of the problems is that we do things today with a thought to the future. Any purchase is one for the future. If you buy a refrigerator you are making a commitment to the future, so that you have food to eat for the next ten years. That's a simple theory, one of many simple theories -- theories that people agree on and that don't, in a fundamental way, change. But every once in a while there is unemployment, and wages will drop, and there will be several different interpretations."

"As we see it, a choice is not something you do today in isolation; it is part of a plan that includes some choices to be made in the future."

"There are many unknowns in the creation and use of knowledge as a factor of production. Still, two main lessons stand out: * Every country or firm must have education and training in technology and science, even if the research is not on par with that being conducted elsewhere. Knowledge cannot be absorbed unless some knowledge is already possessed. * Countries and firms must be open to new ideas, have multiple sources of new ideas, and see that ideas are diffused. This point strongly argues for freedom of entry, even when it seems to forgo economies of scale."

"Various medical groups are continually putting out advice as to health-inducing behavior (diet, exercise, and so forth). Individuals who follow this advice will reduce their demand for medical services. An extreme version is the campaign of the American Dental Association for fluoridation of water, a measure designed to reduce cavities and so the demand for dental services. There is also a logical problem. How does the relatively small group of physicians acquire power? In a democratic system, political power derives from numbers or from wealth. While physicians are certainly relatively well off, they do not have the concentration of wealth of many industries. Their power, it seems to me, is derived from moral authority. It is derived from the same professional respect that we are trying to explain. Indeed, when the American Medical Association came into conflict with either the retired or with the business interests that bought medical plans, the weakness of its power base quickly became apparent."

"My own view is that both endogenous and exogenous elements are important in explaining innovation. Incentives certainly play a role, but so does the general state of scientific knowledge, which is not directly produced by profit-making entities."

"Krugman's whole attack is directed at a statement made neither by Arthur nor by Cassidy. Krugman has not read Cassidy's piece with any care nor has he bothered to review what Arthur has in fact said."

"The conflict of incentives and information is increasingly leading to a diffusion of responsibility for medical decisions. The simple picture of the physician making decisions for the patient has certainly become more complicated. Patients always had a role in choosing to seek medical advice and from whom. Their choices are becoming increasingly restricted as medical practice becomes more organized. The problems of cost control in an insured world are partly met by the increasing use of control of medical services through review by health maintenance organizations and insurance carriers."

"For the voucher system to work, it would be necessary to have informed parents. One cannot be dogmatic without empirical evidence, but I would be surprised if the average parent has the time or patience or competence to digest the relevant information. Indeed, one wonders where the information is to come from and in what form it should exist. Do we use test scores, themselves affected by the selection processes of the students? Impressions of individual teachers or of the physical appearance of the school will tend to dominate."

"The creation of knowledge that constitutes an innovation is in turn dependent on the acquisition and application of existing knowledge; information is an input into the production of information. This background knowledge and the ability to use it are the most important elements of the social context of individually motivated innovation."

"Child care has grown up under different circumstances than education and probably for a mixture of reasons, good and bad. There are many systems of child care, some private, some public. As compared with primary and secondary education, there is clearly less need for coordination. The sequencing of classes is much less important. It would appear that the ability of parents to monitor the conduct of the child care activity is much greater because the activity is much closer to everyday experience and knowledge. Most of the informational and structural arguments for the public supply of education are absent in the case of child care. Reputation and experience may suffice for adequate monitoring."

"Information, one of the fundamental determinants of production, laps over from one firm to another, yet the firm has so far seemed reasonably sharply defined in terms of legal ownership. It seems to me there must be increasing tensions between legal relations and fundamental economic determinants. Small symptoms are already appearing in the legal and economic spheres. There is continual difficulty in defining intellectual property. The United States courts, at least, have come up with some strange definitions of property."

"Unfortunately, the word 'learning' is a very general word. It isn't a very specific theory and we can have a lot of learning models, and it's unlikely that any one is going to track. When you talk about learning, you talk about the human mind adapting to conditions, and we haven't nailed that down very well. This is always an objection to the whole idea of bounded rationality. Not that it's wrong, but if it's right, it doesn't actually tell you what to do. Rationality is unique. That isn't really quite true, but at least under many circumstances it is. To say that we're not at the top of a hill gives you a lot of variety as to where you might be. So the problem with bounded rationality is not that it's wrong. On the contrary, I think it's very apt to be correct. It's just that its predictions are a lot more vague than those implied by rationality. At the moment, I don't know what to do about that."

"I think one of the things we learned from the physicists and also the theoretical biologists is the idea that when you're dealing with very complex systems you're going to get a large variety of behavior which can be interpreted as hill climbing, but hill climbing with a lot of modifications, hill climbing with big jumps occasionally. This is an elaboration of the idea of the learning model. The learning model story takes off from psychology, but the adaptive processes take off from biology and physics. They have the same story. One thing it does suggest in some sense is that we have to be more modest in what we claim."

"I am old-fashioned enough to retain David Hume’s view that one can never derive “ought” propositions from “is” propositions. The two issues, method and value, are distinct."

"I was a very polite person, though. Paul Samuelson tells these stories how he used to correct his professors. I assume that’s true. But I wasn’t that type."

"As a general rule, the greater the uncertainty, the better to avoid large and irreversible commitments, to the extent that it is possible. When the famous 1930s gangster, Dutch Schultz, was dying, his incoherent last remarks were taken down by a stenographer. One of them was. "Don't make no bull moves." His words are a lesson for the kind of future that one might choose. Maintaining flexibility or keeping ones options open, is key in these matters."

"The slippery role of information as an economic good is of deep significance to economic behavior, especially in the relatively information-rich modern economy. It is an economic good in the traditional sense; it is valuable, and it is costly. But it has a peculiar algebra. Adding one ton of steel to another permits more to be done; repeating the same item of information does not add anything useful. On the other hand, supplying a ton of steel to another reduces the steel available to the supplier; supplying information to another does not reduce the information available to the supplier."

"Ken Arrow was involved with the Santa Fe Institute from its beginning. He is one of my heroes, because he’s a guy who does something, and then moves on. He’s moved on from general equilibrium to complexity."

"Gibbard's work was a bombshell. That was very exciting. I didn't know about Satterthwaite's work for a couple of years, but it was very much the same thing. I had taken the liberty of abstracting from manipulability in my thesis and I never went back to that issue. What's surprising is not really that there is an impossibility of non-manipulability, but that the issues should be essentially the same. That strikes one as a remarkable coincidence."

"The problem I have with utilitarianism is not that it is excessively rational, but that the epistemological foundations are weak. My problem is: What are those objects we are adding up? I have no objection to adding them up if there's something to add. But the one thing I retain from utilitarianism is that, basically, judgements are based on consequences. Certainly that's the sort of thing we do in the theory of the single individual under uncertainty; you make sure utility is defined only over the consequences. I view rights as arrangements which may help you in achieving a higher utility level."