Economists From The United States

"A key element in all Keynesian models is a ‘trade-off between inflation and real output: the higher is the inflation rate; the higher is output (or equivalently, the lower is the rate of unemployment)."

"The Keynesian Revolution was, in the form in which it succeeded in the United States, a revolution in method. This was not Keynes’s intent, nor is it the view of all of his most eminent followers. Yet if one does not view the revolution in this way, it is impossible to account for some of its most important features."

"So I am skeptical about the argument that the subprime mortgage problem will contaminate the whole mortgage market, that housing construction will come to a halt, and that the economy will slip into a recession. Every step in this chain is questionable and none has been quantified. If we have learned anything from the past 20 years it is that there is a lot of stability built into the real economy."

"In the present decade, the U.S. economy has undergone its first major depression since the 1930’s, to the accompaniment of inflation rates in excess of 10 percent per annum. These events have been transmitted [...] to other advanced countries and in many cases have been amplified. These events did not arise from a reactionary reversion to outmoded, 'classical' principles of tight money and balanced budgets. On the contrary, they were accompanied by massive government budget deficits and high rates of monetary expansion, policies which, although bearing an admitted risk of inflation, promised according to modern Keynesian doctrine rapid real growth and low rates of unemployment. That these predictions were wildly incorrect and that the doctrine on which they were fundamentally flawed are now simple matters of fact, involving no novelties of economic theory. The task now [...] is to sort through the wreckage, determining which features of that remarkable intellectual event called the Keynesian Revolution can be salvaged and put to use and which others must be discarded.”"

"For policy, the central fact is that Keynesian policy recommendations have no sounder basis, in a scientific sense, than recommendations of non-Keynesian economists or, for that matter, non-economists."

"I guess everyone is a Keynesian in a foxhole."

"Lucas’s “Mechanics” Lectures caught the profession by surprise. His argument enraged some economists and startled or puzzled others. It was his first word on the subject of growth. It seemed to have come completely out of the blue. And even though his interest in the possibility of market failure seemed curiously in tune with fifty years of the Keynesian tradition, it was unfamiliar enough when expressed in the vernacular of Freshwater economics that the lectures at first caused more consternation than anything else, and in most quarters they were studiously ignored. A few young researchers, however, were galvanized into immediate action. The notion that trade and migration must be strongly linked to economic growth was hardly new. Nor was the insight that cities must be central to economic progress. Perhaps the real news from Lucas’s lectures was his identification of lock-in as a potentially serious puzzle."

"Lucas says: "You don't know anything," and in his more humble moments: "I don't know anything either, and therefore the government shouldn't do anything." Well, there is no well-defined criterion of the government's not doing anything. What he says the government should do and calls doing nothing is doing something very different from what the government has been doing for the last 40 years. Why is making a radical change of regime suddenly doing nothing? You see, we have had a regime that can be associated with the most successful period of capitalism in recorded history. Suddenly, he calls for a constant money growth rule. How, possibly, can one conclude that? I say, if he doesn't want "to do anything", then we should keep doing what we have been doing, for we haven't been doing that badly. To make a radical change in regime all of a sudden, gives us what we have now; a new depression. Right? We have a new regime now, or maybe we have if it is not overturned, partly because these guys come along saying that compensatory policy, that is Keynesian policy, got us in all kinds of trouble. But it didn't get us in all kinds of trouble. In effect, they say that if you don't know what you are doing, you should do something entirely different from what you have been doing. I don't understand why that is a conservative or risk-avoiding policy."

"He didn't really discuss my interpretations and criticisms of new classical economics. Instead he took the opportunity of the review to say that Keynesian economics was discredited by the stagflation of the '70s, as he and Sargent had already argued in their polemical piece "After Keynesian Economics" at the Nantucket conference in 1978. The idea seems to be that we were very wrong about the 1970s and therefore had no standing to criticize the new classical macroeconomics. Of course, I do not agree with that interpretation of the events of the last 15 years. In that review article Lucas didn't explain anything new. He just restated his point of view."

"Suppose someone sits down where you are sitting right now and announces to me that he is Napoleon Bonaparte. The last thing I want to do with him is to get involved in a technical discussion of cavalry tactics at the Battle of Austerlitz. If I do that, I'm getting tacitly drawn into the game that he is Napoleon Bonaparte. Now, Bob Lucas and Tom Sargent like nothing better than to get drawn into technical discussions, because then you have tacitly gone along with their fundamental assumptions; your attention is attracted away from the basic weakness of the whole story. Since I find that fundamental framework ludicrous, I respond by treating it as ludicrous – that is, by laughing at it – so as not to fall into the trap of taking it seriously and passing on to matters of technique."

"A lot of the Lucas critiques were the sort of thing that some of us used in debunking Friedman's positivism on the stable money supply. I thought that Lucas's Nobel Prize was richly deserved and even overdue. But it was not because of the boldness and the correctness of the New Classical theory and rational expectations (that there is some kind of expected value that a group mind gets as a result, and which is in some sense "correct"). I don't believe in macro efficiency of securities markets. I believe in their micro efficiency. Convertibles are priced about right. Black-Scholes derivatives are priced about right, because you can make a lot of money in correcting any deviation. You can't make money in a bubble, by fighting the bubble. You will lose your shirt. That means the bubble can go on, and bubbles go in both directions. Usually maybe they do not last as long in the downward direction because the correction is more severe. In fact, the supply shocks of the 1970s which made either fiscal or central policy very difficult to administer, gave poor performance to the macro system. And since the Keynesians had implicitly been boastful about the good performance, if you take credit for the sun you got to expect to be blamed for the rain. And not only was that puncturing the reputation of Keynesianism, but it was puncturing the self-esteem of economists and of Keynesian economists in particular. Because we always are looking in the mirror of the public to form our impression of how important we are."

"I think Lucas is an extremely capable man, and an undisputed intellectual leader of the school. On top of that, I think he's a very interesting and impressive human being. But I disagree with him, and I think I also disagree with his interpretation of his results. I have many, many objections."

"In the 1970s, Lucas and disciples take it up a notch, arguing that we should assume rational expectations: people make the best predictions possible given the available information. But in that case, how can we explain the observed stickiness of wages and prices? Lucas argued for a “signal processing” approach, in which individuals can’t immediately distinguish between changes in their wage or price relative to others — changes to which they should respond by altering supply — and overall changes in the price level. [...] In the 1980s, the Lucas project failed — pure and simple. It became obvious that recessions last too long, and there are too many sources of information, for rational confusion to explain business cycles. Nice try, with a lot of clever modeling, but it just didn’t work."

"I do not see how one can look at figures like these without seeing them representing possibilities. Is there some action a government of India could take that would lead the Indian economy to grow like Indonesia's or Egypt's? If so, what exactly? If not, what is it about the "nature of India" that makes it so? The consequences for human welfare involved in questions like these are simply staggering: once one starts to think about them, it is hard to think about anything else."

"The main development I want to discuss has already occurred: Keynesian economics is dead [maybe ‘disappeared’ is a better term]. I don’t know exactly when this happened but it is true today and it wasn’t true two years ago. This is a sociological not an economic observation, so the evidence for it is sociological. For example, you cannot find a good, under 40 economist who identifies himself and his work as ‘Keynesian’. Indeed, people even take offense if referred to in this way. At research seminars, people don’t take Keynesian theorizing seriously any more—the audience starts to whisper and giggle to one another. Leading journals aren’t getting Keynesian papers submitted any more."

"How could such a difficult, technical intellectual structure acquire the force first of a crusade, then of a dogma? [...] First, Lucas's approach to macroeconomics seemed to offer a way to heal a deep wound in the heart of economic theory. [...] When Lucas seemed to be able to do was derive business cycles from microeconomic model. [...] Second, the technicality and difficulty of Lucas's theory [...] was, in the world of academic economic, an asset rather than a liability. [...] Finally, we cannot ignore the role of political bias in making rational expectations macroeconomics attractive."

"Lucas's name, unlike Friedman's, is hardly a household word. He is neither a prolific writer nor easy to read; although he can write clear, forceful English when he chooses, he prefers to express himself through dense mathematics, leaving it to others to popularize his ideas. Where Friedman used his academic notoriety as a stepping stone to a wider public role, Lucas has in recent years seemed to retreat to safe, increasingly technical issues of theoretical economics. And yet for most of the 1970s there was little question that Robert Lucas was having more impact on economic thought, both through his own writings and through the extraordinary devotion of his intellectual disciples, than any other working economist. Above all, he became identified with a much stronger form of Friedman's argument against active monetary policy. Where Friedman argued that such policy would in practice do more harm than good, Lucas argued that in principle it could do nothing but harm."

"The Keynesian econometric methodology developed by Klein and associates was criticized by Lucas in his 1976 “Critique of Econometric Policy Evaluation” on the grounds that microfounded structural equations should contain expectations of future variables. Since the parameters of these expectations should depend on the parameters of the rules followed by the policy authorities, Lucas argued that the rational expectations assumption would invalidate the practice of using fixed parameter models as policy guides. The profession responded to the Lucas critique in two different ways. The first, introduced to economists in the book Rational Expectations and Econometric Practice, was to develop appropriate econometric methods to estimate parameters in rational expectations environments. The second, explained most clearly in Kydland and Prescott’s (1996) article, “The Computational Experiment,” was to develop a new methodology,calibration, that lowered the standards of what it means for a model to be successful by requiring that a good model should explain only a limited set of empirical moments."

"When I was on the economics faculty in Chicago, I had a sign in my office that said, “No smoking, except for Bob Lucas.” It was worth enduring the smoke to talk to Bob but not to any other economist-smoker. This behavior accorded with my view that his selection for a Nobel Prize was a great idea, one that had been anticipated by most economists for several years."

"In this chapter I want to raise the question partly in jest but partly also in seriousness whether the concept of the image cannot become the abstract foundation of a new science, or at least a cross-disciplinary specialization. As I am indulging in the symbolic communication of an image of images I will even venture to give the science a name — Eiconics — hoping thereby to endow it in the minds of my readers with some of the prestige of classical antiquity. I run some risk perhaps of having my new science confused with the study of icons. A little confusion, however, and the subtle overtones of half-remembered associations are all part of the magic of the name."

"Boulding was not left-wing in his politics nor involved in the radical economics of the time. In fact he was always hostile to Marx’s theory of capitalism and its emphasis on class conflict. What he did feel strongly about was the cause of peace, having become a Quaker early in life, and having been active throughout his career in a variety of ways in the cause of peace. Moreover, he himself saw peace and conflict research as his largest area of work (Boulding, 1989), and regarded his involvement in the founding of the ' and the as important lifetime achievements."

"Kenneth Boulding, a well-known economist and widely-read author. Boulding used an ecological model for understanding corporations and individuals as actors within a social system. His 1956 book, The Image is an early discussion of mental models. His 1978 book, Ecodynamics: A New Theory of Societal Evolution summarizes much of his earlier work."

"Kenneth E. Boulding was a most extraordinary economist. The narrow bounds of the economics discipline could not contain his interests and talents. In addition to economics, Professor Boulding made important contributions to the fields of , sociology, philosophy, and . His forays into subjects outside the usual concerns of economists were not an intellectual dilettantism; rather, they were a result of his conviction that an understanding of human behavior can only be accomplished by studying man in his totality. Much of Boulding's work was an attempt to move beyond the narrow economic view of humans as self-interested, rational utility maximizers to a general social science exploiting the full range of our rational, instinctual, and mystical knowledge."

"General systems theory is considered as a formal theory (Mesarovic, Wymore), a methodology (Ashby, Klir), a way of thinking (Bertalanffy, Churchman), a way of looking at the world (Weinberg), a search for an optimal simplification (Ashby, Weinberg), didactic method (Boulding, Klir, Weinberg), metalanguage (Logren), and profession (Klir)."

"“In any evolutionary process even in the arts the search for novelty becomes corrupting.”"

"“Nothing fails like success because we don't learn from it. We learn only from failure.”"

"If we saw tomorrow’s newspaper today, tomorrow would never happen."

"Don't go to great trouble to optimize something that never should be done at all. Aim to enhance total systems properties, such as creativity, stability, diversity, resilience, and sustainability–whether they are easily measured or not."

"Mathematics brought rigor to Economics. Unfortunately, it also brought mortis"

"Economists and technologists bring the "bits", but it requires the social scientists and humanists to bring the "wits.""

"The only religion that still demands human sacrifice is nationalism."

"The right to have children should be a marketable commodity, bought and traded by individuals but absolutely limited by the state."

"Production functions involving only land, labor and capital... never work and never explain economic development."

"Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist."

"[The integrative system] deals with such matters as respect, legitimacy, community, friendship, affection, love, and of course their opposites, across a broad scale of human relationships and interactions."

"The very act of thinking about power in our lives and experiences creates a process of revelation and self-analysis that may even make us look at ourselves in a new light... thinking about power and its complex manifestations may not simply lead to a better understanding of the abstract complexities of society, but may have an effect on one‟s own image and identity. Perhaps a warning label should be placed on the cover..."

"[Peace praxis is] a peace process that deals with conflict integratively."

"The most fundamental form of integrative power is the power of love."

"Integrative power [is] the ultimate power"

"We should always bear in mind that numbers represent a simplification of reality."

"...the perception of potential threats to survival may be much more important in determining behavior than the perceptions of potential profits, so that profit maximization is not really the driving force. It is fear of loss rather than hope of gain that limits our behavior"

"Prediction of the future is possible only in systems that have stable parameters like celestial mechanics. The only reason why prediction is so successful in celestial mechanics is that the evolution of the solar system has ground to a halt in what is essentially a dynamic equilibrium with stable parameters. Evolutionary systems, however, by their very nature have unstable parameters. They are disequilibrium systems and in such systems our power of prediction, though not zero, is very limited because of the unpredictability of the parameters themselves. If, of course, it were possible to predict the change in the parameters, then there would be other parameters which were unchanged, but the search for ultimately stable parameters in evolutionary systems is futile, for they probably do not exist... Social systems have Heisenberg principles all over the place, for we cannot predict the future without changing it."

"It is much more accurate to identify the factors of production as know-how (that is genetic information structure), energy, and materials, for, as we have seen, all processes of production involve the direction of energy by some know-how structure toward the selection, transportation, and transformation of materials into the product"

"We cannot walk befor we toddle, Though we may toddle far too long, If we embrace a lovely Model That is consistent, clear, and wrong. - Experts from "Notes from Wooods Hole", unpublished, 1976."

"In modern industry, research Has come to be a kind of Church Where rubber-aproned acolytes Perform their Scientific Rites And firms spend funds they do not hafter In hope of benefits Hereafter."

"The trouble with taxonomic boxes is... that that they tend to be empty, however beautiful they are on the outside."

"My father, William C. Boulding, was a working plumber in business for himself. At the back of the house was the yard, a corrugated iron shed full of pipes, wrenches, and blow torches, and other mysterious and rather frightening apparatus. He had two faithful employees, Billy Fox, who was moody and regarded as a little queer, and Billy Sankey, who was short and cheerful. They and my father always smelled strongly of some kind of grease. My father was a gentle man. I never I never heard his voice raised in anger. He had had a very hard childhood. His father died soon after he was born; his mother married again, a man known in the family legends as "Pa Hardacre," about whom endless stories were told. He was a bigamist. He drove my father out of the house at the age of twelve to earn his own living on the streets of Liverpool. He constantly mistreated my half-aunts, Ethel and Rosie. He died before I was born, but my mother's accounts of him sounded like something out of Dickens."

"I was born on January 18, 1910 at 4 Seymour Street, off. London Road, Liverpool, Lancashire, England, Great. Britain, Europe, the world, the solar system, the universe. Writing out my full address like this was a great satisfaction when I was a boy. Seymour Street had a solid row of narrow, four-story houses on both sides, each with a flight of steps leading up to the front door, and what we called an "airy," a rectangular hole in front of the basement window, often with steps leading down to a basement underneath the front door. The streets of the neighborhood spoke of the Napoleonic Wars in the early nineteenth century— St. Vincent Street, Rodney Street, Lord Nelson Street. Close by was dirty Lime Street Station; St. George's Hall, a magnificent classical structure the center of Liverpudlian splendor; the theaters; and the great Picton Library with its huge circular reading room. The neighborhood was very mixed; we belonged to the English minority in Liverpool, a city largely populated by the Irish and the Welsh."

"[Boulding once said, in response to a forecast that someday every American would be earning $100,000 per year] So what? Someone will still have to take out the garbage."

"Economics deals with the behavior of commodities rather than with the behavior of men."