Edmund S. Phelps

Born	July 26, 1933 Evanston, Illinois
Residence	USA
Nationality	American
Field	Economics
Institutions	Columbia University 1971- University of Pennsylvania 1966-71 Cowles Foundation 1960-66
Alma mater	Yale University Amherst College
Notable students	Roman Frydman Mordecai Kurz
Known for	Natural rate of unemployment Golden Rule savings rate
Notable prizes	Nobel Prize in Economics (2006)

Edmund Strother Phelps (born July 26, 1933 in Evanston, Illinois) is an American professor of economics at Columbia University, who was awarded the 2006 The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, commonly known as the Nobel Prize in Economics. He is renowned for his work on economic growth at Yale's Cowles Foundation in the 1960s, in particular the idea of the Golden Rule savings rate, which deals with how much should be spent today versus how much should be saved for future generations. His most seminal work is probably the introduction of expectations-based microfoundations into the theory of employment determination and price-wage dynamics, leading to his theory of the natural rate of unemployment – its existence, how its size is determined and how market forces may drive unemployment from it. is the 207th day of the year (208th in leap years) in the Gregorian calendar. ... 1933 (MCMXXXIII) was a common year starting on Sunday. ... Incorporated City in 1872. ... Image File history File links This is a lossless scalable vector image. ... Image File history File links This is a lossless scalable vector image. ... This article needs additional references or sources for verification. ... Columbia University is a private research university in the United States. ... This article is about the private Ivy League university in Philadelphia. ... The Cowles Commission for Research in Economics is a economic research institute, founded in Colorado Springs by the businessman and economist Alfred Cowles in 1932. ... “Yale” redirects here. ... Amherst College is a private, independent, elite[1][2] liberal arts college in Amherst, Massachusetts, USA. It is the third oldest college in Massachusetts. ... -1... In economics, the Golden Rule savings rate is the rate of savings which maximizes steady state growth consumption in the Solow growth model. ... The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel[1] (Swedish: Sveriges Riksbanks pris i ekonomisk vetenskap till Alfred Nobels minne), commonly called the Nobel Prize in Economics, or more acurately the Nobel Memorial Prize in Economic Sciences, is a prize awarded each year for outstanding intellectual... is the 207th day of the year (208th in leap years) in the Gregorian calendar. ... 1933 (MCMXXXIII) was a common year starting on Sunday. ... Incorporated City in 1872. ... Columbia University is a private research university in the United States. ... The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel[1] (Swedish: Sveriges Riksbanks pris i ekonomisk vetenskap till Alfred Nobels minne), commonly called the Nobel Prize in Economics, or more acurately the Nobel Memorial Prize in Economic Sciences, is a prize awarded each year for outstanding intellectual... “Yale” redirects here. ... In economics, the Golden Rule savings rate is the rate of savings which maximizes steady state growth consumption in the Solow growth model. ... Microeconomics is a branch of Economics that studies how individuals, households, and firms make decisions to allocate limited resources,[1] typically in markets where goods or services are being bought and sold. ... In economics, full employment has more than one meaning. ... -1...

Phelps has been the McVickar Professor of Political Economy at Columbia University since 1982. He is also the director of Columbia's Center on Capitalism and Society. Columbia University is a private research university in the United States. ...

He was awarded the Nobel in an announcement made on 9 October 2006. He received the award on his own, breaking the recent pattern of awarding the prize jointly to two or more winners. is the 282nd day of the year (283rd in leap years) in the Gregorian calendar. ... For the Manfred Mann album, see 2006 (album). ...

Biography

Early life and education

Edmund Phelps^[1] was born in 1933 near Chicago, but he grew up and spent his school years in Hastings-on-Hudson, New York, where his family had moved when he was six years old. In 1951, he went to Amherst College as an undergraduate student. At his father's advice, Phelps enrolled in his first economics course in the second year at Amherst. The course was lectured by James Nelson, based on the famous textbook by Paul Samuelson. Phelps was strongly impressed with the possibility of applying formal analysis to one of his old interests, business. Also, he quickly became aware of important unsolved problems and shortcomings of the existing theory, as the existing gap between microeconomics and macroeconomics. Nickname: Motto: Urbs In Horto (Latin: City in a Garden), I Will Location in the Chicago metro area and Illinois Coordinates: , Country United States State Illinois County Cook & DuPage Settled 1770s Incorporated March 4, 1837 Government  - Mayor Richard M. Daley (D) Area  - City  234. ... Hastings-on-Hudson is a village in Westchester County, New York, United States. ... Amherst College is a private, independent, elite[1][2] liberal arts college in Amherst, Massachusetts, USA. It is the third oldest college in Massachusetts. ... This article needs additional references or sources for verification. ... For the author of historical fiction, see James L. Nelson Jimmy Nelson was a Scottish international footballer who played for Cardiff City in the 1920s and captained the famous Wembley Wizards Scotland side of 1928. ... Paul Anthony Samuelson (born May 15, 1915, in Gary, Indiana) is an American neoclassical economist known for his contributions to many fields of economics, beginning with his general statement of the comparative statics method in his 1947 book Foundations of Economic Analysis. ...

After receiving his B.A. at Amherst in 1955, Phelps went to Yale University for graduate studies. Here, he had as professors some of the greatest economists, as Nobel prize winners James Tobin and Thomas Schelling, and was colleague with Arthur Okun. Also, he was strongly influenced by William Fellner and Henry Wallich, who put a large emphasis on agents' expectations in their courses. Phelps received his Ph.D. from Yale in 1959. His dissertation, based on an idea by Tobin, showed that demand shocks have a higher influence than cost shocks on the correlation between changes in prices and in output. A Bachelor of Arts (B.A. or A.B.) is an undergraduate academic degree awarded for a course or program in the arts and/or sciences. ... “Yale” redirects here. ... For the convicted Republican political operative, see James Tobin (political operative). ... Thomas Crombie Schelling (born 14 April 1921) is an American economist and professor of foreign affairs, national security, nuclear strategy, and arms control at the School of Public Policy at University of Maryland College Park. ... Arthur Melvin Okun (1928 - 1980) was a U.S. economist. ... Henry C Wallich, deceased. ... Doctor of Philosophy (Ph. ... Positive linear correlations between 1000 pairs of numbers. ...

Research in the '60s and '70s

After receiving his Ph.D., Phelps went to work as an economist for the RAND Corporation. However, feeling that he could not pursue his main research interest, macroeconomics, at RAND (which focused on defense work), Phelps decided to return to the academic world. So, the next year, in 1960, he took a research position at the Cowles Foundation, while also doing some teaching at Yale. While at the Cowles Foundation, his research focused mainly on neo-classical growth theory, following the seminal work of Solow. As part of this research, Phelps published in 1961 a famous paper^[2] on the golden rule savings rate, one of his major contributions to economic science. He also wrote papers dealing with other areas of economic theory, as monetary economics or Ricardian equivalence and its relation to optimal growth. Alternate meanings: See RAND (disambiguation) The RAND Corporation is an American think tank first formed to offer research and analysis to the U.S. military. ... The Cowles Commission for Research in Economics is a economic research institute, founded in Colorado Springs by the businessman and economist Alfred Cowles in 1932. ... The Exogenous growth model, also known as the Neo-classical model or Solow growth model is a term used to sum up the contributions of various authors to a model of long-run economic growth within the framework of neoclassical economics. ... Robert Merton Solow (born August 23, 1924) is an American economist particularly known for his work on the theory of economic growth. ... In economics, the Golden Rule savings rate is the rate of savings which maximizes steady state growth consumption in the Solow growth model. ... Central Bank or Finance Ministry based economics where the interest rate plays a pivotal role in the cost of money and the amounts banks must hold in their reserves. ... Ricardian equivalence, or the Barro-Ricardo equivalence proposition, is a controversial economic theory which suggests that government budget deficits do not affect the total level of demand in an economy. ...

Work at the Cowles Foundation gave Phelps the chance to interact with other top economists working on growth theory, as David Cass or fellow nobelist Tjalling Koopmans. Also, during the academic year 1962-63 Phelps visited MIT, where he was in contact with future Nobel prize winners Paul Samuelson, Robert Solow and Franco Modigliani. David Cass is a professor of economics at The University of Pennsylvania. ... Tjalling Charles Koopmans (s-Graveland, August 28, 1910 – New Haven, February 26, 1985) was the joint winner, with Leonid Kantorovich, of the 1975 Nobel Prize in Economics. ... The Massachusetts Institute of Technology (MIT) is a private, coeducational research university located in Cambridge, Massachusetts. ... Paul Anthony Samuelson (born May 15, 1915, in Gary, Indiana) is an American neoclassical economist known for his contributions to many fields of economics, beginning with his general statement of the comparative statics method in his 1947 book Foundations of Economic Analysis. ... Robert Merton Solow (born August 23, 1924) is an American economist particularly known for his work on the theory of economic growth. ... Franco Modigliani (June 18, 1918 – September 25, 2003) was an Italian-American economist at the MIT Sloan School of Management, and winner of the Nobel Memorial Prize in Economics in 1985. ...

In 1966, Phelps left Yale and moved to University of Pennsylvania, where he was offered a tenured position as professor of economics. While at Penn, Phelps' research focused mainly on the link between employment, wage setting and inflation, leading to his influential 1968 paper "Money-Wage Dynamics and Labor Market Equilibrium". This research contributed important insights in the microeconomics of the Phillips curve, including the role of expectations (in the form of adaptive expectations) and imperfect information in the setting of wages and prices. It also introduced the concept of the natural rate of unemployement and showed that labour market equilibrium is independent of the rate of inflation, thus there is no long run tradeoff between unemployment and inflation. This observation has the crucial implication that the Keynesian policy of demand management has only transitory effects and cannot be used to control the long run rate of unemployment in the economy. In January 1969, Phelps organised at Penn a conference in support of the research on the microfoundations of inflation and employment determination. The conference papers were published the next year in a book^[3] which had a strong and lasting influence, becoming known as the "Phelps volume".^[1][4] During this period, along with the research on the Phillips curve, Phelps also collaborated with other economists on research regarding economic growth, the effects of monetary and fiscal policy and optimal population growth. This article is about the private Ivy League university in Philadelphia. ... Look up tenure in Wiktionary, the free dictionary. ... For the album by the Kaiser Chiefs see Employment (album) Employment is a contract between two parties, one being the employer and the other being the employee. ... A wage is a compensation which workers receive in exchange for their labor. ... Phillips curve The Phillips curve is a historical inverse relation and tradeoff between the rate of unemployment and the rate of inflation in an economy. ... In economics, adaptive expectations means that people base their expectations of what will happen in the future based on what has happened in the past. ... Perfect information is a term used in economics and game theory to describe a state of complete knowledge about the actions of other players that is instantaneously updated as new information arises. ... This article includes a list of works cited or a list of external links, but its sources remain unclear because it lacks in-text citations. ... Human population increase from 10,000 BC – 2000 AD. Population growth is change in population over time, and can be quantified as the change in the number of individuals in a population per unit time. ...

Phelps spent the year 1969-1970 at the Center for Advanced Study in Behavioral Science at Stanford University. Discussions with fellow Nobel prize winners Amartya Sen and Kenneth Arrow, and especially the influence of the philosophy of John Rawls, whom he met during the year at the Center, lead Phelps to undertake some research outside macroeconomics. As a result, in 1972 he published seminal research in the new field he named statistical discrimination.^[5] He also published research on economic justice, applying ideas from Rawls' book A Theory of Justice. Leland Stanford Junior University, commonly known as Stanford University (or simply Stanford), is a private university located approximately 37 miles (60 kilometers) southeast of San Francisco and approximately 20 miles northwest of San José in Stanford, California. ... This article does not cite any references or sources. ... Kenneth Arrow Kenneth Joseph Arrow (born August 23, 1921) is an American economist, winner of the Bank of Sweden Prize in Economic Sciences in 1972. ... The philosopher Socrates about to take poison hemlock as ordered by the court. ... John Rawls (February 21, 1921 – November 24, 2002) was an American philosopher, a professor of political philosophy at Harvard University and author of A Theory of Justice (1971), Political Liberalism, Justice as Fairness: A Restatement, and The Law of Peoples. ... Statistical discrimination is an economic theory of inequality based on group stereotypes. ... Social justice refers to conceptions of a just society, where justice refers to more than just the administration of laws. ... A Theory of Justice is a book of political and moral philosophy by John Rawls. ...

In 1971, Phelps moved to the Economics Department at Columbia University, which also included future Nobel prize winners William Vickrey and James J. Heckman (future laureate Robert Mundell joined three years later), as well as Phoebus Dhrymes, Guillermo Calvo and John B. Taylor. He published research on the inflation tax and the impact of fiscal policy on optimal inflation. In 1972, Phelps published a new book^[6] which focused on the derivation of policy implications of his new theory. The book further popularized his "expectations-augmented Phillips curve", and also, among other things, introduced the concept of hysteresis with regard to unemployment (prolonged unemployment is partially irreversible as workers lose skill and become demoralized). Columbia University is a private research university in the United States. ... William Vickrey (June 21, 1914, Victoria, British Columbia - October 11, 1996, New York State) was a Columbia University professor, who was awarded the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel. ... James Heckman (born April 19, 1944) is an economist at the University of Chicago. ... Robert Alexander Mundell CC (born October 24, 1932) is a professor of economics at Columbia University. ... John B. Taylor John B. Taylor (born December 8, 1946) is an economics professor at Stanford University. ... An inflation tax is the economic disadvantage suffered by holders of cash and cash equivalents in one denomination of currency due to the effects of inflation, which acts as a hidden tax that subtracts value from assets. ... Fiscal policy is the economic term that defines the set of principles and decisions of a government in setting the level of public expenditure and how that expenditure is funded. ... Hysteresis is a property of systems (usually physical systems) that do not instantly follow the forces applied to them, but react slowly, or do not return completely to their original state: that is, systems whose states depend on their immediate history. ...

In the following years, the classical Keynesian economics came under heavy critique with the introduction of Muth's rational expectations, which were popularized by future Nobel prize winner Robert Lucas, Jr.. Phelps, with Calvo and John Taylor, started a programme to rebuild Keynesian economics with rational expectations by employing sticky wages and prices. They achieved this by explicitly incorporating in models the fact that wage contracts are set in advance for multiple periods, an idea originating from Phelps' seminal 1968 paper. This research lead to a paper published with John Taylor in 1977,^[7] proving that staggered wage setting gives monetary policy a role in stabilizing economic fluctuations. The use of staggered wage and price setting, further developed by Calvo in a 1983 paper,^[8] became a cornerstone of New Keynesian economics. During the '70s, Phelps and Calvo also collaborated on research regarding optimal contracts under asymmetric information. This article includes a list of works cited or a list of external links, but its sources remain unclear because it lacks in-text citations. ... John F. Muth (born 1930) is an American economist. ... Rational expectations is a theory in economics originally proposed by John F. Muth (1961) and later developed by Robert E. Lucas Jr. ... Robert Emerson Lucas, Jr. ... Sticky is a term used in the social sciences and particularly economics used to describe a situation in which a variable is resistant to change. ... New Keynesian economics developed partly in response to new classical economics. ... In economics, information asymmetry occurs when one party to a transaction has more or better information than the other party. ...

In the late '70s, Phelps and one of his former students, Roman Frydman, conducted some research on the implications of assuming rational expectations, first independently and then in collaboration. Their results suggested that rational expectations are not the correct way to model agents' expectations. They organised a conference on this issue in 1981 and published the proceeds in a 1983 book.^[9] However, as rational expectations were becoming the standard in macroeconomics, the book was initially received with hostility, being largely ignored afterwards.^[1]

In 1982 Phelps was appointed the McVickar Professor of Political Economy at Columbia. During the early '80s he wrote an introductory textbook synthesizing the current economics knowledge. The book, Political Economy, was published in 1985, but had limited classroom adoption.

European collaborations since mid-'80s

In the 1980s Phelps increased collaboration with European universities and institutions, including Banca d'Italia (where he spent most of his 1985-86 sabbatical) and Observatoire Français des Conjonctures Économiques (OFCE). He became interested in the puzzle of the persistent high unemployment in Europe and published some papers on this subject with Jean-Paul Fitoussi (the director of OFCE).^[10] Further study of the subject lead Phelps to believe that it is not a transitory phenomenon, but rather the effect of changes in equilibrium unemployment. During the next years, Phelps tryed to build a theory to determine endogenously the natural rate of unemployment. He published partial research results in a 1994 book.^[11] Phelps also collaborated closely with Luigi Paganetto at the University of Rome Tor Vergata and, between 1988-98, as co-organizers of the Villa Mondragone International Seminar. Headquarters Rome Established 1893 Governor Mario Draghi Central Bank of Italy Website bancaditalia. ... A sabbatical year is a prolonged hiatus, typically one year, in the career of an otherwise successful individual taken in order to fulfill some dream, e. ... In an economic model, an endogenous change is one that comes from inside the model and is explained by the model itself. ... The University of Rome Tor Vergata (Italian: Università degli Studi di Roma Tor Vergata) is a university located in Rome, Italy, and founded in 1982. ... Villa Mondragone is one of Villas in the Frascati territory. ...

In 1990 Phelps took part in a mission from the then-forming EBRD to Moskow, where he and Kenneth Arrow designed a proposal for the reformal of the USSR.^[12] After the EBRD was established, he became a member of its Economic Advisory Board, where he stayed until 1993. From work at EBRD and collaboration with his former student Roman Frydman, Phelps developed a strong interest in the Eastern European transition economies. The European Bank for Reconstruction and Development (EBRD) was founded in 1991 to promote private and entrepreneurial initiatives in the countries of central and eastern Europe and the Commonwealth of Independent States (CIS). ... Saint Basils Cathedral Moscow (Russian/Cyrillic: Москва́, pronounciation: Moskva), capital of Russia, located on the river Moskva, and encompassing 878. ... Pre-1989 division between the West (grey) and Eastern Bloc (orange) superimposed on current national boundaries: Russia (dark orange), other countries of the former USSR (medium orange),members of the Warsaw pact (light orange), and other former Communist regimes not aligned with Moscow (lightest orange). ... A transition economy is an economy which is changing from a planned economy to a free market. ...

Nobel Prize

In its announcement, the Royal Swedish Academy of Sciences said Phelps' work had "deepened our understanding of the relation between short-run and long-run effects of economic policy." The Royal Swedish Academy of Sciences or , founded in 1739 by King Frederick I, is one of the Royal Academies in Sweden. ...

George Mason University's Professor Tyler Cowen noted in the Marginal Revolution blog that "his main contribution is a better understanding of the Phillips curve and the dynamics of short-run unemployment and the concept of the natural rate of unemployment." Cowen also noted that "his 1960s macro work was true, important, and extremely influential. The capital theory work endures and provides a foundation for subsequent theory. The overall scope is impressive, and Phelps's concerns never strayed far from the real world." Cowen concluded by suggesting the award to Phelps meant that: "The big questions still matter. Unemployment, economic growth, labor markets, capital accumulation, fairness, discrimination, and justice across the generations are indeed worthy of economic attention." George Mason University, also known as GMU or simply Mason, is a public university in the United States. ... Tyler Cowen (COW-en) (b. ... Marginal Revolution is a blog focused on economics run by economists Tyler Cowen and Alex Tabarrok, both of whom teach at George Mason University. ... Phillips curve The Phillips curve is a historical inverse relation and tradeoff between the rate of unemployment and the rate of inflation in an economy. ...

Professor Cowen and Berkeley's Professor Brad DeLong both described the choice of Phelps as a good selection, while Harvard's Professor Gregory Mankiw called it "a wonderful choice". Sather tower (the Campanile) looking out over the San Francisco Bay and Mount Tamalpais. ... J. Bradford DeLong (b. ... Harvard University (incorporated as The President and Fellows of Harvard College) is a private university in Cambridge, Massachusetts, USA and a member of the Ivy League. ... Categories: Stub | 1958 births | Economists ...

Selected publications

• Phelps, Edmund S. (1961). "The Golden Rule of Capital Accumulation". American Economic Review 51: 638-643. 
• Phelps, Edmund S. (1966). Golden Rules of Economic Growth: Studies of Efficient and Optimal Investment. W. W. Norton, New York. ISBN 0-393-09708-0. 
• Phelps, Edmund S. (1966). "Models of Technical Progress and the Golden Rule of Research". Review of Economic Studies 33: 133-146. 
• Phelps, Edmund S. (1968). "Money-Wage Dynamics and Labor Market Equilibrium". Journal of Political Economy 76: 678-711. 
• Phelps, Edmund S. et al. (1970). Microeconomic Foundations of Employment and Inflation Theory. W. W. Norton, New York. ISBN 0-393-09326-3. 
• Phelps, Edmund S. (1972). Inflation Policy and Unemployment Theory. W. W. Norton, New York. ISBN 0-393-09395-6. 
• Phelps, Edmund S. (1972). "The Statistical Theory of Racism and Sexism". American Economic Review 62: 659-661. 
• Phelps, Edmund S. and John B. Taylor (1977). "Stabilizing Powers of Monetary Policy under Rational Expectations". Journal of Political Economy 85: 163-190. 
• Phelps, Edmund S., Roman Frydman et al. (1983). Individual Forecasting and Aggregate Outcomes: 'Rational Expectations' Examined. Cambridge University Press. ISBN 0-521-25744-1. 
• Phelps, Edmund S. (1994). Structural Slumps: The Modern Equilibrium Theory of Employment, Interest and Assets. Harvard University Press. ISBN 0-674-84373-8. 
• Phelps, Edmund S. (2003). Designing Inclusion. Cambridge University Press. ISBN 0-521-81695-5. 

W. W. Norton & Company is an American book publishing company that has remained independent since its founding. ... The headquarters of the Cambridge University Press, in Trumpington Street, Cambridge. ... The Harvard University Press is a publishing house, a division of Harvard University, that is highly respected in academic publishing. ...

Footnotes

References

• Phelps, Edmund S., "A Life in Economics", autobiography published in "The Makers of Modern Economics", Volume II (1995), edited by Arnold Heertje, Edward Elgar Publishing Co., Aldershot, UK, Brookfield, US [1]
• The Royal Swedish Academy of Sciences (2006), "Edmund Phelps’s Contributions to Macroeconomics", Advanced information on Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel [2]

External links

• Phelps' homepage
• Columbia University press release
• Nobel profile and links to further announcement details
• Edmund Phelps' syndicated op/ed column
• Center on Capitalism and Society -- Edmund Phelps, director
• Summary of Phelps' influence by George Mason University's Professor Tyler Cowen
• Phelps and the Nobel Prize by Arnold Kling. EconLog and Econlib
• Edmund Phelps's Contributions to Macroeconomics