Economists From The United States

"To understand the economy then is to comprehend how it is driven by the animal spirits. Just as Adam Smith’s invisible hand is the keynote of classical economics, Keynes’ animal spirits are the keynote to a different view of the economy — a view that explains the underlying instabilities of capitalism."

"This [covariance] is something that is not in the habit of thinking of most amateur investors. They look at their investments one at a time, and they don't, you always have to go back and say, what's the covariance? That's what really matters for what happen to your portfolio. Because when you invest in a lot of companies that are all the same, you're asking for trouble, because the whole thing is going to either blow up or succeed. And you can't live like that. You have to be looking for low covariance."

"The question is when is good? The answer is never."

"I was reminded of how much I had misjudged the potential the profession would see in the time series rational expectations models. When I, as a graduate student at the Massachusetts Institute of Technology (MIT) around 1970 did some work on the econometrics of rational expectations time series models, I felt rather apologetic about the extreme assumptions in the models. I did not expect others to regard them as anything more than a passing gimmick. Richard Sutch had just written in his MIT doctoral dissertation (1968) an exposition of the coefficient restrictions implied for time series representations of long-term and short-term interest rates, but he never bothered to publish this work. I remember conversations with him and others about rational expectations models, and I did not come away thinking they were the wave of the future."

"If active managers win, it has to be at the expense of other active managers. And when you add them all up, the returns of active managers have to be literally zero, before costs. Then after costs, it's a big negative sign"

"If assets are priced rationally, variables that are related to average returns, such as size and book-to-market equity, must proxy for sensitivity to common (shared and thus undiversifiable) risk factors in returns. The time-series regressions give direct evidence on this issue. In particular, the slopes and R2 values show whether mimicking portfolios for risk factors related to size and [book-to-market] capture shared variation in stock and bond returns not explained by other factors."

"Princeton's Edwin W. Kemmerer [was] widely referred to as the “money doctor” by virtue of his advisory missions to position foreign governments on the gold standard in the 1920s."

"Firms that have a high BE/ME (a low stock price relative to book value) tend to have low earnings on assets. Conversely, low BE/ME (a high stock price relative to book value) is associated with persistently high earnings."

"Let us not be surprised, however, if the study of the principles of argumentation — or even Burke's much mis-taught Speech — seems dry without the prospect of actual debate. We should hardly expect a half-back to feel much enthusiasm over reading the rules of the game and tackling a dummy if he could not look forward to tackling a man. When elocution and argumentative writing have failed to stimulate interest, formal debate may succeed, for it is a kind of game. In the time limit, the order of speakers, the alternation of rides, the actual struggle of opposing forces, the give and take of rebuttal, the fixed rules and the ethics of conduct, the qualifications for success, and the final awarding of victory, debate has much in common with tennis and football."

"Our results are disturbing in that, like Fama and French (1992), they suggest that traditional measures of risk do not determine expected returns. In equilibrium asset pricing models the covariance structure of returns determines expected returns. Yet we find that variables that reliably predict the future covariance structure do not predict future returns. Our results indicate that high book-to-market stocks and stocks with low capitalizations have high average returns whether or not they have the return patterns (i.e., covariances) of other small and high book-to-market stocks. Similarly, after controlling for size and book-to-market ratios, a common share that ‘act like’ a bond (i.e., has a low market beta) has the same expected return as other common shares with high market betas."

"Foster gained widespread attention when he announced that Reed, from the start, would reject competitive intercollegiate sports and fraternal organizations in favor of a democratic and intellectual environment, with emphasis on a quality of teaching compatible with his idea of a “Johns Hopkins for undergraduates.” He also eschewed grading in an effort to underscore Reed’s commitment to knowledge for knowledge’s sake, and set the senior thesis and oral exam as mandatory goalposts for graduation."

"One of the early presidents of Harvard College wrote a dissertation on the question, "Whether angels speak any language; if so, whether it is Hebrew." Much futile discussion on such questions has at various times brought debating into ill repute. A question should offer something more than an ingenious exercise; it should offer the chance of arriving at some conclusion regarded by the particular audience or disputants as of some practical importance. It should be discarded if, like the proposition, "The pen is mightier than the sword/' it offers no possibility of arriving at reasonably sound conclusions through the process of argument."

"The great superiority of debating, as the schools should look upon it, lies in the fact that it adds to many of the elements of the present absorbing interest in athletics those educational values which contribute directly to the highest type of citizenship."

"Colander: What’s your view of the New Keynesian approach? Tobin: I’m not sure what that means. If it means people like Greg Mankiw, I don’t regard them as Keynesians. I don’t think they have involuntary unemployment or absence of market clearing. It is a misnomer to call Mankiw any form of Keynesian. Colander: How about real-business-cycle theorists? Tobin: Well, that’s just the enemy."

"It is not easy to phrase the proposition so that it shall mean precisely what we wish to argue; so that it shall include the whole matter at issue, nothing more and nothing less ; so that there shall be no possible ambiguity. Yet, unless the proposition is so phrased, a debate may degenerate into a lifeless quibble concerning the meaning of the terms, under which the living heart of the question is buried."

"It is essential to realize that it was this analysis of the social characteristics of commodity production, and not an arbitrary preconception or an ethical principle, which led Marx to identify labor as the substance of value."

"Most people take capitalism for granted, just as they take the solar system for granted. The eventual passing of capitalism, which is often conceded nowadays, is thought of in much the same way as the eventual cooling of the sun, that is to say, its relevance to contemporary events is denied."

"In possessing use value a commodity is in no way peculiar. Objects of human consumption in every age and in every form of society likewise possess use value. Use value is an expression of a certain relation between the consumer and the object consumed. Political economy, on the other hand, is a social science of the relations between people."

"In possessing exchange value relative to one another, commodities show their unique characteristic. It is only as commodities, in a society where exchange is a regular method of realizing the purpose of social production, that products have exchange value."

"It seems obvious that in this way the economist avoids a systematic exploration of those social relations which are so universally regarded as having a relevance to economic problems that they are deeply imbedded in the everyday speech of the business world. And it is even more obvious that the basic point of view which modern economics has adopted unfits it for the larger task of throwing light on the role of the economic element in the complex totality of relations between man and man which make up what we call society."

"Discussions of methodology in economics, as in other fields, are likely to be tiresome and unrewarding. Nevertheless, to avoid the problem altogether is to risk serious misunderstanding."

"It must be emphasized, because the contrary has so often been asserted, that Marx was not trying to reduce everything to economic terms. He was rather attempting to uncover the true interrelation between the economic and the non-economic factors in the totality of social existence."

"Society is more than a number of individuals. It is a number of individuals among whom certain definite and more or less stable relations exist."

"The notion of a steady state has meant different things at different times in history. To the traditional or classical economist, the steady state takes the biophysical dimensions of the planet — including population and available resources — as given and adapts technology and tastes to these objective conditions."

"The real danger from advertising is that it helps to shatter and ultimately destroy our most precious non-material possessions: the confidence in the existence of meaningful purposes of human activity and respect for the integrity of man."

"The legitimate purpose of abstraction in social science is never to get away from the real world but rather to isolate certain aspects of the real world for intensive investigation."

"It is imaginable that someday we will discover how to create materials from nothing, how to achieve perpetual motion, how to reverse time’s arrow, and so on. But to take such science-fiction miracles as a basis for economic policy would be absurd."

"Current economic growth has uncoupled itself from the world and has become irrelevant. Worse, it has become a blind guide."

"There is something fundamentally wrong with treating the earth as if it were a business in liquidation."

"Organisms cannot survive in a medium consisting of their own final outputs. Neither can economies."

"Economists have focused too much on the economy’s circulatory system and have neglected to study its digestive tract. Throughput growth means pushing more of the same food through an ever larger digestive tract; development means eating better food and digesting it more thoroughly."

"Once we have replaced the basic premise of “more is better” with the much sounder axiom that “enough is best,” the social and technical problems of moving to a steady state become solvable, perhaps even trivial."

"If economic reality is actually so complex that it can only be described by complicated mathematical models that add epicycles to epicycles and externalities to externalities, then the reality should be simplified."

"We have lived for 200 years in a growth economy. In this time we have come to believe that all our major economic ills – from unemployment and poverty to overpopulation and even environmental degradation – can be solved by more growth. And if the global economy existed in a void perhaps that would be true. But it does not."

"Instead the economy is a subsystem of the finite biosphere that supports it. When the economy’s expansion encroaches too much on the surrounding biosphere, we begin to sacrifice natural capital (animals, plants, minerals and fossil fuels) that is worth more than the manmade capital (roads, factories, appliances) added by ‘growth’."

"Towards the end of his life, Schumpeter re-painted his picture of capitalist development on an even broader canvas. In Capitalism, Socialism and Democracy (Schumpeter 1950), he offered a complex, multifaceted argument that the type of capitalism he had earlier described might be passing from the historical scene, morphing by small degrees into some variety of socialism."

"The cosmology of scientific materialism … considers the cosmos an absurd accident, and life within it to be no more than another accident."

"The economy is a wholly owned subsidiary of the environment, not the reverse."

"The term ‘kinship’ correctly suggests the existence not only of contemporary relatives but also of ancestors. Indeed, the recent discussion of dynamic capability was prefigured historically, with a variety of terminology, in a number of sources. Perhaps the most directly relevant example among these earlier contributions is Schumpeter’s discussion of the ‘routinization of innovation’ (Schumpeter 1950). Schumpeter’s argument presented, however, an issue that remains central in contemporary discussion of dynamic capability—the possibly problematic character of the claim that there is such a thing as ‘learned competence’ for doingnew things."

"I'm no genius, and others can outwork me. What I do is ask the naive, honest questions, and then I’m not satisfied until I get the answers."

"The optimal scale of the economy is smaller, the greater (a) the degree of complementarity between natural and man-made capital; (b) our desire for direct experience of nature; and (c) our estimate of both the intrinsic and instrumental value of other species. The smaller the optimal scale of the economy, the sooner its physical growth becomes uneconomic."

"Economic logic requires that we maximize the productivity of the limiting factor in the short run, and invest in increasing its supply in the long run. When the limiting factor changes, then behavior that used to be economic becomes uneconomic. Economic logic remains the same, but the pattern of scarcity in the world changes, with the result that behavior must change if it is to remain economic. Instead of maximizing returns to and investing in man-made capital (as was appropriate in an empty world), we must now maximize returns to and invest in natural capital (as is appropriate in a full world). This is not “new economics,” but new behavior consistent with “old economics” in a world with a new pattern of scarcity."

"The writings of Joseph Schumpeter contributed an essential part of the broad conceptual framework that now embraces the discussion of dynamic capabilities."

"The second dimension is called "command," and it refers to those aspects of economic relationships that involve power, coercion, hierarchy, subordination, or authority. In capitalist (and many other) societies, command is a central aspect of the workplace, the household, and the government. It concerns relations among nations, classes, races, men, women, and other groups in society as well."

"The third dimension of three-dimensional economics, change, suggests that studying economics also means studying history. The process of change in society cannot be understood without considering the past and how it changed, eventually becoming the present. Change in political economy may be contrasted with the static approach of conventional economics that freezes time at a moment."

"The aristocratic and the modern were inextricably combined in Joseph Schumpeter. The paradoxes of this great economist, who also served as minister of finance in the post-World War I government of Austria, are suggested by the fact that at his first teaching post, he challenged the university librarian to a duel to win freer access to books for the students. Perhaps Schumpeter was attracted to the big issues because he himself witnessed drastic changes in society."

"The first dimension is called "competition," and it refers to that aspect of an economic system in which exchanges of one sort or another play the most important part. In capitalism, of course, competition and exchange occur primarily in markets."

"The view that early humans lived in worlds with little contact outside one's family--Dawkins' ideal conditions for self-interested cooperation to flourish--is difficult to square with what is known about the Late Pleistocene and early Holocene. Like Jean-Jacques Rousseau's philosophers, Dawkins, Huxley, and other biologists seem to have jumped on a faulty time machine, and have journeyed to an imaginary ancestral world."

"Endangered liberal values would stand a better chance in a society committed to defending the weak and vulnerable, as did the early liberals, and to insuring people against the economic insecurities that inevitably accompany a technologically dynamic and cosmopolitan economy."

"Keynes was no revolutionary, but his ideas revolutionized 20th-century economics."