Nobel Laureates In Economics

"Education has in America's whole history been the major hope for improving the individual and society."

"By the time it comes to interpretation of the substantive conclusions, the assumptions on which the model has been based are easily forgotten. But it is precisely the empirical validity of these assumptions on which the usefulness of the entire exercise depends... A natural Darwinian feedback operating through selection of academic personnel contributes greatly to the perpetuation of this state of affairs."

"America has had gifted conservative statesmen and national leaders. But with few exceptions, only the liberals have gone down in history as national heroes."

"Much of current academic teaching and research has been criticized for its lack of relevance, that is, of immediate practical impact... The trouble is caused, however, not by an inadequate selection of targets, but rather by our inability to hit squarely any one of them... The weak and all too slowly growing empirical foundations clearly cannot support the proliferating superstructure of pure, or should I say, speculative economic theory."

"A criticism of Keynes and Hayek would have to begin by pointing out the fact that in their theoretical systems there is no place for the uncertainty factor and anticipations."

"It is important to remove artificial barriers–stumbling stones, often local in origin and coming from incumbent opposition to entry–and to not burden businesses with taxes that reduce their internally generated funds for reinvestment, growth and striving to overcome market challenges."

"The statistical study presented in the following pages may be best defined as an attempt to construct, on the basis of available statistical materials, a of the United States for 1919 and 1929. One hundred and fifty years ago, when Quesnay first published his famous scheme, his contemporaries and disciples acclaimed it as the greatest discovery since Newton’s laws. The idea of general interdepence among the various part of the economic system has become by now the very foundation of economic analysis. Yet, when it comes to the practical application of this theoretical tool, modern economists must rely exactly as Quesnay did upon fictitious numerical examples."

"The general, and at the same time dynamic, type of analysis still remains an unwritten chapter of economic theory, the claims of innumerable “model-builders” notwithstanding... The … theoretical approach, based on the combination of the complexities of a general interdependent system with the simplifying assumptions of static analysis, constitutes the background of this investigation."

"This work may be best described as an attempt to construct a of the United States."

"Among the many factors that have promoted economic change, I believe that technology or, rather, change in technology is the most prominent. I realize that it is dangerous to look for 'ultimate causes' in a world where everything seems to depend on everything else. But I believe that for the most part the economy, and ultimately the society, must adapt to the conditions that technology creates. If it cannot adjust to the challenges of changing technology, it fails."

"Sir John Hicks (1904–89) was a leading economic theorist of the twentieth century, and along with Kenneth Arrow was awarded the Nobel Prize in 1972. His work addressed central topics in economic theory, such as value, money, capital, and growth. An important unifying theme was the attention to economic rationality ‘in time’ and his acknowledgment that apparent rigidities and frictions might exert a positive role as a buffer against excessive fluctuations in output, prices, and employment. This emphasis on the virtue of imperfection significantly distances Hicksian economics from both the Keynesian and monetarist approaches."

"The British economist John Hicks is known for four contributions. The first is his introduction of the idea of the elasticity of substitution... His second major contribution is his invention of what is called the , a graphical depiction of the argument John Maynard Keynes gave in his ' (1936) about how an economy could be in equilibrium with less than full employment... Hicks’s third major contribution is his 1939 book ', in which he showed that most of what economists then understood and believed about value theory (the theory about why goods have value) can be derived without having to assume that utility is measurable... Hicks’s fourth contribution is the idea of the compensation test."

"The total number of multiplications involved in the practical solution of our problem exceeds 450,000. This task alone would mean a two-year job, at 120 multiplications per hour. Fortunately, the recent invention of the Simultaneous Calculator by Professor Wilbur of the Massachusetts Institute of Technology has made it possible to perform all the necessary computations in a small fraction of the time they otherwise would have required. This apparatus solves nearly automatically a system of nine simultaneous linear equations."

"Computers and robots replace humans in the exercise of mental functions in the same way as mechanical power replaced them in the performance of physical tasks. As time goes on, more and more complex mental functions will be performed by machines. Any worker who now performs his task by following specific instructions can, in principle, be replaced by a machine. This means that the role of humans as the most important factor of production is bound to diminish—in the same way that the role of horses in agricultural production was first diminished and then eliminated by the introduction of tractors."

"There were four years, 1931-1935, when I was myself a member of Hayek's seminar in London; it has left a deep mark on my thinking... At the end of the discussions in that seminar … we were, I believe, on the point of taking what now seems to me to be a decisive step. I was, at least, on the point of taking it myself. There is evidence for that in my "Value and Capital", much of the groundwork for which was done before I left London."

"Hayek was making us think of the productive process as a process in time, inputs coming before outputs."

"I did not begin from Keynes: I began from Pareto, and Hayek."

"It is not so well known that it [Keynes's and my own move from thinking in terms of price-levels and the rate of interest to thinking in terms of inputs and outputs] is matched by a movement from Hayek to Harrod. I once asked Harrod what had put him on to the construction of his so-call 'dynamic' theory; he said, to my surprise, that it was thinking about Hayek."

"I remember Robbins asking me if I could turn the Hayek model into mathematics... it began to dawn on me that... the model must be better specified. It was claimed that, if there were no monetary disturbance, the system would remain in 'equilibrium'. What could such an equilibrium mean? This, as it turned out, was a very deep question; I could do no more, in 1932, than make a start at answering it. I began by looking at what had been said by... Pareto and Wicksell. Their equilibrium was a static equilibrium, in which neither prices nor outputs were changing... That, clearly, would not do for Hayek. His 'equilibrium' must be progressive equilibrium, in which real wages, in particular, would be rising, so relative prices could not remain unchange … The next step in my thinking, was … equilibrium with perfect foresight. Investment of capital, to yield its fruit in the future, must be based on expectations, of opportunities in the future. When I put this to Hayek, he told me that this was indeed the direction in which he had been thinking. Hayek gave me a copy of a paper on 'intertemporal equilibrium', which he had written some years before his arrival in London; the conditions for a perfect foresight equilibrium were there set out in a very sophisticated manner."

"Anyway, I enrolled in Economics and one of the things I read was a brand new book, Hick's Value and Capital. You know, after reading though the mish-mash like Marshall and things like that, suddenly there was this clear, well-organized view, you knew exactly what was happening. Just the sort of thing to appeal to me. There was a whole, messy, confused literature on capital theory; all those great debates between Knight and von Hayek and all that. And now here was just the idea of dated commodities and suddenly scales fell from your eyes. A simple idea like dated commodities made whole issues transparent. But as I read Hicks, I could see there were things left out. I turned to this again when I returned from the War, which was really pretty much of a hiatus in any work I was doing - I was gone and very busy for about three and a half years. I had done all my examinations before I had left. So now it was just a question of my thesis. I decided to take Value and Capital and redo it properly. I could see all kinds of specific points that were of concern. I wanted to combine it with Samuelson's stability theory, which he had developed in the meanwhile, the papers on dynamic stability in '41 and '42. Maybe I would add some stochastic elements to the story because as a student of probability and statistics theory I could see noise in the system. Well, it was a lifetime of work, really; it was a very unrealistic thesis."

"The 'new theory of money and the cycle' which is spoken of in the opening paragraph is of course Hayek's. It was from Hayek that I began - where I got to will be seen. Even at the end, I was minimising my differences from Hayek. I could do so because, as I have elsewhere explained (Economic Perspectives, p. 141n), I still thought, like Pigou and Robertson, and Hayek, but by that time unlike Keynes, that 'we were talking about fluctuations, which, since they did not result in complete collapse or complete explosion, could not have engendered an expectation of going on forever. Booms could then be considered as times of high prices, slumps as times of low prices - with regard to some norm, which throughout the which throughout the fluctuations would not be changed, or not much changed'."

"How will the cessation of war purchases of planes, guns, tanks, and ships … affect the national level of employment? How many new jobs will be created by the consumers’demand for an additional one million of passenger cars, how many of these jobs can be expected to be located in the automobile industry itself, and how many in other industries such as Steel and the Chemicals, the Coal and the Petroleum industries? How much additional freight traffic and revenue can the American railroads expect to derive from every billion dollars worth spent on post-war housing construction?"

"The purpose of income calculations in practical affairs is to give people an indication of the amount which they can consume without impoverishing themselves. Following out this idea, it would seem that we ought to define a man's income as the maximum value which he can consume during a week, and still expect to be as well off at the end of the week as he was at the beginning."

"Income No. 3 must be defined as the maximum amount of money which the individual can spend this week, and still be able to spend the same amount in real terms in each ensuing week."

"So long as we confine our attention to income from property, and leave out of account any increment or decrement in the value of prospects due to changes in people's own earning power (accumulation or decumulation of “Human Capital”), Income No. 1 ex post is not a subjective affair, like other kinds of income; it is almost completely objective."

"There is much of economic theory which is pursued for no better reason than its intellectual attraction; it is a good game. We have no reason to be ashamed of that, since the same would hold for many branches of pure mathematics."

"The best of all monopoly profits is a quiet life."

"I can date my own personal 'revolution' rather exactly to May or June 1933. It was like this. It began... with Hayek. His "Prices and Production" is one of the influences that can be detected in The Theory of Wages; it could not have been otherwise, for 1931 was a Prices and Production year at the London School of Economics... I did not in fact find it all easy to fit in with my own ideas. What started me off in 1933 was an earlier work of Hayek's, his paper on 'Intertemporal Equilibrium', an idea which I found easier to reduce to my preferred (Paretian or Wicksellian) pattern."

"The standard stream corresponding to Income No. 3 is constant in real terms... We ask... how much he would be receiving if he were getting a standard stream of the same present value as his actual expected receipts. This amount is his income."

"While economic theory in general may be defined as the theory of how an economic condition or an economic development is determined within an institutional framework, the deals with how to judge whether one condition can be said to be better in some way than another and whether it is possible, by altering the institutional framework, to achieve a better condition than the present one."

"[An] epochal innovation [consisting of the] spreading application of science to processes of production and social organization."

"If the history of economics in the twentieth century were properly written, the two great figures associated with what has come to be called the Keynesian revolution would be John Maynard Keynes and Simon Kuznets. And this is a judgment in which Keynes would concur. Keynes showed in analytical terms the possibility of a shortage in aggregate demand and argued the means for its correction. But it remained for Simon Kuznets and his talented associates to put this in the quantitative terms that made it persuasive, indeed irresistible. The Keynesian argument could be resisted; the Kuznets figures could not."

"GDP! The right concept of economy-wide output, accurately measured. The U.S. and the world rely on it to tell where we are in the business cycle and to estimate long-run growth. It is the centerpiece of an elaborate and indispensable system of social accounting, the national income and product accounts. This is surely the signal innovative achievement of the Commerce Department in the 20th century. I was fortunate to become an economist in the 1930's when Kuznets, Nathan, Gilbert, and Jaszi were creating this most important set of economic time series. In economic theory, macroeconomics was just beginning at the same time. Complementary, these two innovations deserve much credit for the improved performance of the economy in the second half of the century."

"Microeconomics, including the study of individual choice and of group choice in market and nonmarket processes, has generally been considered a field science as distinct from an experimental science. Hence microeconomics has sometimes been classified as "non-experimental" and closer methodologically to meteorology and astronomy than to physics and experimental psychology (Marschak, 1950, p. 3; Samuelson, 1973, p. 7). But the question of using experimental or nonexperimental techniques is largely a matter of cost, and generally the cost of conducting the most ambitious and informative experiments in astronomy, meteorology, and economics varies from prohibitive down to considerable. The cost of experimenting with different solar system planetary arrangements, different atmospheric conditions, and different national unemployment rates, each under suitable controls, must be regarded as prohibitive."

"Economics today rides the crest of intellectual respectability and popular acclaim. The serious attention with which our pronouncements are received by the general public, hard-bitten politicians, and even skeptical businessmen is second only to that which was given to physicists and space experts a few years ago when the round trip to the moon seemed to be our only truly national goal."

"Simon Kuznets is best known for his studies of national income and its components. Prior to World War I, measures of GNP were rough guesses, at best. No government agency collected data to compute GNP, and no private economic researcher did so systematically, either. Kuznets changed all that. With work that began in the 1930s and stretched over decades, Kuznets computed national income back to 1869. He broke it down by industry, by final product, and by use. He also measured the distribution of income between rich and poor."

"We must give the system sufficient factors of stability to enable it to work; but we must not assume that these forces are so powerful as to prevent the system from being liable to fluctuations. There must be a tendency to rigidity of certain prices, particularly wage-rates; but there must also be a tendency to rigidity of certain price-expectations as well, in order to provide an explanation for the rigidity of these prices... Indeed we should do better to assume a good deal of variation in different people’s elasticities of expectations... Of course the way in which a population is divided with respect to this sort of sensitivity will vary very much in different circumstances... We have to be prepared to deal with a range of possible cases, varying from that of a settled community, which has been accustomed to steady conditions in the past (and which, for that reason, is not easily disturbed in the present), to that of a community which has been exposed to violent disturbances of prices (and which may have to be regarded, in consequence, as being economically neurotic."

"Along with Frisch and others Tinbergen developed the field of econometrics, the use of statistical tools to test economic hypotheses. Tinbergen was one of the first economists to create multiequation models of economies. He produced a twenty-seven-equation econometric model of the Dutch economy, and his 1939 book, Business Cycles in the United States, 1919–1932, includes a forty-eight-equation model of the American economy that explains investment activity and models American business cycles."

"Tinbergen's methodology was exceptional at that time and was received sometimes with scepticism. In particular J.M. Keynes (1939), at the time editor of the Economic Journal, reviewed 'Professor Tinbergen's Method' quite critically, raising as one of the fundamental points that 'The method is neither of discovery nor of criticism. It is a means of giving quantitative precision to what, in qualitative terms, we know already as the result of a complete theoretical analysis.' Of course the latter criticism illustrates precisely Tinbergen's conviction that knowledge relevant for policy making should preferably be quantitative in nature. As to 'discovery,' Tinbergen (1940) in his 'Reply' indicated that 'it sometimes happens that the course of the curves itself suggests that some factor not mentioned in most economic textbooks must be of great importance,' and he mentioned some examples. 'As to the possibility of 'criticism,' it seems to me,' Tinbergen (1940) argued, 'that the value found for one or more of the regression coefficients may imply a criticism on one or more of the theories that have been used.' In a 'Comment' to Tinbergen's 'Reply,' Keynes (1940) still held some doubts: 'that there is anyone I would trust with it at the present stage or that this brand of statistical alchemy is ripe to become a branch of science, I am not yet persuaded.' But Keynes concluded: 'No one could be more frank, more painstaking, more free from subjective bias or parti pris than professor Tinbergen... But Newton, Boyle and Locke all played with alchemy. So let him continue.' And so Tinbergen did."

"It is my hope that in such a way we may again, as Marx claimed, find scientific arguments in the competition between various systems, but up-to-date scientific arguments rather than obsolete ones. This more fundamental research in economics deserves relatively more attention and resources than the more superficial versions of economic research directed at forecasting or analysing very short-term fluctuations in market prices, on which quite some money is being spent to-day."

"What matters is the di¤erence between qualities available and qualities required by the demand side, that is by the organization of production."

"The two preponderant forces at work are technological development, which made for a relative increase in demand and hence in the income ratio... and increased access to schooling, which made for a relative decrease."

"It is also our hope that the interpretation of the socio-economic optimum as a set of institutions may help to get under way a discussion of a more scientific character than was usual so far about the relative merits of various existing socio-economic orders, especially those of Eastern and Western Europe, including such interesting cases as Sweden, Switzerland and Yugoslavia. A considerable amount of better information about various types of external effects will be one of the necessary ingredients if we want to give concrete content to such merit rating of various systems."

"First of all I want to remind you of the essential features of models. In my opinion they are: (i) drawing up a list of the variables to be considered; (ii) drawing up a list of the equations or relations the variables have to obey and (iii) testing the validity of the equations, which implies the estimation of their coefficients, if any. As a consequence of especially (iii) we may have to revise (i) and (ii) so as to arrive at a satisfactory degree of realism of the theory embodied in the model. Then, the model may be used for various purposes, that is, for the solution of various problems. The advantages of models are, on one hand, that they force us to present a "complete" theory by which I mean a theory taking into account all relevant phenomena and relations and, on the other hand, the confrontation with observation, that is, reality. Of course these remarks are far from new."

"The advantages of models are, on one hand, that they force us to present a "complete" theory by which I mean a theory taking into account all relevant phenomena and relations and, on the other hand, the confrontation with observation, that is, reality."

"The central question of economic policy is the question of the effectiveness of its various instruments."

"Models constitute a framework or a skeleton and the flesh and blood will have to be added by a lot of common sense and knowledge of details."

"The world is in a process of a great transformation. In a considerable part of it a new economic order, "communism," is being vigorously tried out. Elsewhere an old order is passing as one country after another throws of the yoke of colonialism. The wholesale introduction of Western techniques and ways of life shaking the foundations of numerous beliefs and attitudes, for good and for evil."

"The main sources of tension in today's world economy could be grouped under the following categories:"

"The factor of distance may also stand for an index of information about export markets."