My Journeys in Economic Theory

Edmund Phelps

McVickar Professor Emeritus of Political Economy
Director of the Center on Capitalism and Society, Columbia University
Winner of the 2006 Nobel Prize in Economics

host:

Colleen Becker

PhD GSAS '08
Multi-award winning serial entrepreneur

Edmund Phelps is among the most important economists of his generation. His work represents a lifelong project to put “people as we know them” into economic theory.

In this presentation, Phelps highlights his role in reshaping economic theory by building the microeconomic foundations for the employment theory pioneered by Keynes and Hicks through the introduction of expectations of wage setters and cofounding the “equilibrium” rate of unemployment. He will review his more recent conception of “mass flourishing” theory superseding Schumpeter and Solow’s conception of the process of innovating—a theory in which individuals’ creativity and society’s dynamism fuel grassroots innovation and generate job satisfaction in the process.

Phelps recounts his vivid experiences in the world of economics—fierce arguments, competition and collaboration, and the good fortune of time spent among some great figures—as well as his relationships with luminaries such as John Rawls, Thomas Nagel, Paul Samuelson, and Paul Volcker. He shares the joy of intellectual achievement: the excitement of coming up with a new idea that radically departs from prevailing views and the satisfaction of exercising one’s own ingenuity instead of applying or developing others’ models. 

Questions submitted in advance.

This program is part of the ColumbiaDC CUP series.

"Edmund Phelps is a renaissance intellectual among economists. He’s been producing ideas that are new, good, and fundamental for sixty years. His has been a remarkable life, and this extraordinary volume tells its story" Lawrence H. Summers, former U.S. secretary of the treasury

Edmund Phelps, the winner of the Nobel Memorial Prize in Economic Sciences in 2006, is the founding director of the Center on Capitalism and Society and McVickar Professor Emeritus of Political Economy at Columbia University. 

Born in 1933, he spent his childhood in Chicago and, from age six, grew up in Hastings-on Hudson, N.Y. He attended public schools, earned his B.A. from Amherst (1955) and got his Ph.D. at Yale (1959). After a stint at RAND, he held positions at Yale and its Cowles Foundation (1960 - 1966), a professorship at Penn and finally at Columbia in 1971. He has written books on growth, unemployment theory, recessions, stagnation, inclusion, rewarding work, dynamism, indigenous innovation and the good economy.

His work can be seen as a lifelong project to put “people as we know them” into economic theory. In the mid-‘60s to the early ‘80s, beginning with the “Phelps volume,” Microeconomic Foundations of Employment and Inflation Theory (1970), he pointed out that workers, customers and companies must make many decisions without full or current information; and they improvise by forming expectations to fill in for the missing information. In that framework, he studied wage-setting, mark-up rules, slow recoveries and over-shooting. This served to underpin Keynesian tenet that say a cut in the money supply will not merely cause prices and wages to drop with no prolonged effect on employment.

From the mid-‘80s to the late ‘90s, he put aside the short-termism and monetarism of MIT and Chicago to develop a “structuralist” macroeconomics. Contrary to what Keynesian extremists see as unending and unexplained deficiency of “demand,” he sees employment heading to its “natural” level and seeks to explain the effects of structural forces on it. His book Structural Slumps (1994) and later papers with Hian Teck Hoon and Gylfi Zoega find an economy’s natural employment level is contracted by increases in household wealth, in overseas interest rates and by currency weakness. Thus, the big job losses in the US, UK and France result from the pile-up of wealth and puny investment, both stemming from the slowdown of productivity growth.

Now he has worked to put economics on a new foundation. Powerful innovation over more than a century alters the nature of the advanced economies: Having higher income or wealth matters less. As his book Rewarding Work (1997) begins to argue, what matters more are non-material rewards of work: being engaged in projects, the delight of succeeding at something and the experience of flourishing on an unfolding voyage. His book Mass Flourishing (2013) remarks that cavemen had the ability to imagine new things and the zeal to create them. But a culture liberating and inspiring the dynamism is necessary to ignite a “passion for the new.”

Colleen Becker is a multi-award-winning serial entrepreneur, building businesses aligned with sustainable development goals. Current projects include co-authoring a comparative history of varieties of Capitalism in the United States and Northern Europe from 1900 to the present with Volker Berghahn, Seth Low Professor Emeritus of History at Columbia University.

She holds a PhD in Art History and Archaeology from Columbia University, taught in the core curriculum at Columbia, and completed her post-doc at the University of London. Previously, she had worked at the Smithsonian, Art Institute of Chicago, the Whitney Museum of American Art, and the Guggenheim. As a practicing artist, she's presented text-based and collaborative works of art at venues including the Tate Modern and Somerset House.

CUP Series: This is a new initiative between ColumbiaDC and Columbia University Press to showcase acclaimed and pioneering work by renowned academics, scholars, and researchers published by the Columbia University Press.