Shiller Presentation

8/2/2019 Shiller Presentation

1/75

TheYale

Tradition

in

Macroeconomics

RobertJ.Shiller

ArthurOkun ProfessorofEconomics

NewHaven,April8,2011


2/75

onlythree

professors:

Jeremiah

Day,

Prof.

of

MathematicsandNaturalPhiloso h Ben amin

Silliman,Prof.ofChemistryandMineralogy,

JamesL.

Kingsley,

Prof.

of

Language

and

Eccl.

History,andsixtutors,noeconomicsatall

PoliticalEconomyfirstappearsinYaleCatalog

18245

Stillnoeconomics rofessors


3/75

EconomicsTextUsed182837:Jean

BaptisteSay

(1767

1832)

d'conomie politique1803

Morelikely:Courscompletd'economie

politiquepratique1828


4/75


5/75


6/75


7/75

SecondYaleEconomicsText:Francis

WaylandUsed

Starting

1837

ofBrown

University

182755

PublishedElementsofPoliticalEconomy1837


8/75

FromWaylandsElementsof

PoliticalEconomy

1837

.

labor.No

man

will

labor

long

without

a

,

industriouslywillhelabor.

.

idleness.God,has,inourpresentconstitution,

,theseare,generally,sufficienttomakeaman

, .


9/75

WaylandontheTragedyofthe

Commons

ourwestern

forests.

A

tribe

among

them,

of

a

,

landaslargeasoneofourstates,butitisnot

,

.

..

everythinggoestowaste,andthewhole

.


10/75

e eg nn ngso eve opmen

E n mi t Y l 1 7

Supposeyou

were

cast

upon

an

island

,

indolent,thoughtheirsoilandclimatewerevery

,

wouldtaketorenderthemindustrious?(p.97)


11/75

WilliamGrahamSumner18401910,

FirstYale

Economist

GraduatedYaleCollege1863

Yalehired

him

as

tutor

in

mathematics18667

Later,becameYaleProfessorofPoliticaland

SocialScience

HissociologycoursewasthefirstsonamedinAmerica

att e oc a assesOweEachOther(answer:

nothing)


12/75

YalesfirstProfessorof

PoliticalEconomy,1873,

but

became

M.I.T.

president1881

FirstpresidentofAEA,

1886

92 RobertDimand:

Others,likeFrancisA.

,

duringtheircareers,

onl to fade in the

discipline'smemory.J.

Hist.EconThought1998


13/75

H nr W l tt F rn m 1 41

SonofNewHavencanalbuilder

andrailroadmagnate,B.A.Yale

1874,Yale

Prof.

of

Political

Economy1880inSheffieldSon

Henry

W.

Farnam:

ScientificSchool

Providedpersonalfundstohire

ArthurHadle

and

construct

Irvin

Fishersengine

ConvertedtheNewEnglandReview,

largelytoeconomicsuntilhe

foundedandfundedtheAER 1911

13 Presi entAEA,1911

Fishers

obituary

of

him

emphasizeshissocialactivismand


14/75

FarnamMemorialGardens(Edwards&

FarnamBA1866 YaleTreasurer188899


15/75

SonofYaleGreekprofessor,graduatedYale1873

FirstYale residentwhowasnot aminister,1899

Fifth

president

of

AEA,

SpecializedintwoofthesameareasasYale's

president:railroads

and

antitrust


16/75

HadleyEconomics:AnAccountofthePublicWelfare1896

demand):Desire

alone

cannot

increase

. .

...ifanintervaloftimeelapsesbetweenthe

hesellsandspendsthemoneythusobtained

,

reciprocaldemandceasestoworksmoothly.P.

.


17/75

bediminished

by

a

forced

reduction

in

the

.

unemployment,thetwomostimportantare

fluctuationsofcommercialcredit.p.405


18/75

WasClaysEconomics Assignedat

Yale? FromF.ScottFitzgeraldTheGreatGatsby

1925:

while

Jay

Gatsby

[a

Yale

man]

nervously

awaitedDaisyinNickCarrawayshousehe

lookedwithvacanteyesthroughClays

Economics.Why

this

book?

ButRayFairhasfoundnoevidencethatYale

everusedEconomics byHenryClay.Irving

Fishersown

text

ElementaryPrinciplesof

Economics1910,1912, andTaussigsPrinciplesofEconomics wereusedinthe1910s,FF&Bstarted

1925.


19/75

rd

YaleProfessor

of

EconomicHistor

&Bones)

AHistoryofCommerce1907,

is

an

economic

historyoftheentire

worldsinceancient

Egypt,fun

reading

on

GoogleBooks


20/75

YaleProfsArgueWWIShouldBe

Financedby

Taxes,

1917


21/75


22/75

ElementaryEconomicsFairchild

Furniss

&

Buck

AllYaleeconomicsstudents

FredRogers

Fairchild

(1877

1966),EdgarStevenson

urn ssan orman y ney

Buck.MacMillanCompany.

Firstedition

1927

Lasteditionwasapparently

1948,sameyearasfirst

Economics

PrinciplesofEconomics1954added4th author

ReubenEmmanuel


23/75

1936 O osed overnmentex enditurestimulusdurin

NewDeal.SaidNewDealhaddistinctlyamateurish

flavor Advocateofbalancedbudgetrule,soundfinance

1936TestifiedtoUSSenatecommitteeinfavorof

reducedexpenditures

and

a

moderate

increase

in

taxationRooseveltstheorythattheroadto

prosper ty sspen ng,notsav ng, s a ac ousan

pernicious.


24/75

governmentcould

still

borrow

to

stimulate

economy

sincenationalincomegrowthwouldeventuallybring

debt/NIratiodown

Fairchild:

the

new

philosophy

of

public

debt

amountstoromancingandwishfulthinking.

OpposedMarshallPlan:Unlessweabandonthe

currentgrandiose

notions

of

America

policing

the

world,feedingit,takingtheloadofreconstruction

afford

it.


25/75

Departmentof

Economics,Sociology

andGovernment,1929

Associate

dean,

SheffieldScientific

School,starting1929

Dean

of

the

Graduate

School,1934

a e rovost,


26/75

Ph.D.Yale

PoliticalEconomy1930

WinnerofYaleMedal,

1962


27/75

4th Edition(1939)ofFF&BElementary

EconomicsHad

No

Macroeconomics

,

business,division

of

labor)

theory,imperfectcompetition)

PartIIIDistri utiono Wea t Income

PartIVMoney&Banking


28/75

B thesummerof1929mostlinesofbusinessactivit intheUnitedStateswereshowingsomerecession,andthiswasfataltoadomesticstructureofspeculative

expansion,ofacceleratedprofittakingandofsecurity

valueswhich

could

move

up

only.

p.

605

FactualdescriptionofNewDealpolicies(especiallyregardingcreditandbanking)follows,reportingbrief

NomentionofKeynes,hardlyanyofFisher

No real theor of de ressions!


29/75

advocate AuthorofKe nesat Saxonsretirementparty:

Harvard:EconomicDeceptionasaPoliticalCredo

Retired1961

Died1962


30/75

FF&BandtheirConflictwithIrving

Fisher Fisherwasinhislateryearsalienatedfrom

someinhisdepartment

FF&Bseemtoseethemselvesasexpositorsof

receiveddoctrine.Nohintofcontroversyin

thebook.

Economists

names

are

hardly

ever

given(exceptinlistsofsuggestedreadingsat

endsofmajorsectionsofbook).Frequent

referencesinstead

to

government

agencies

andtheirstatistics.


31/75

Irvin Fi h r 1 7

1 47

B.A.Yale1888,YalesfirsteconPhD

1891

,

RobertDimand:

Once

the

most

citedmonetaryeconomist,the

thecenterofcontroversiesover

theoryandpolicy,Fisherlostthe

profession'sattention,

vanished

fromcitationlistsin

macroeconomics,andwas

regardedasanembarrassmentby

discipline.Then,

after

his

death,

his

contributionstomacroeconomics

becameincreasin l citedand

influential,asmacroeconomics

developed

in

ways

that

brought

it

closertoFisher'sapproach.


32/75


33/75

MyFatherIrvingFisherbyIrvingNorton

Fisher

1956

onhis

work

was

so

complete

that

he

was

progressuntilhewentoutsidetomailsome

.


34/75

FisherCoFounderofLifeExtension

Institute,which

Encouraged

Exercise


35/75

FisherWasbehindYalesSwitch

FromGymnastics

to

Athletics,

1914


36/75

FisherisVicePresidentofNon

SmokersLeague

1923


37/75


38/75

FisherCriticismoftheMedical

Establishment Hedeploredtheultraconservativeattitudeof

therunofthemillmedicalmanandoften

remarkedthatthemajorityofthemwerefiftyyearsbehindthetimesbecauseofthetime

lag

between

making

new

discoveries

and

their

generalapplication.(IrvingN.Fisherp.116)

IrvingFisherrodeabicycletoworkatYale,

jogged,hiked

the

East

Rock

for

exercise,

in

an

erawhenfewadultsdidsuchthings.

AlltheprofitsfromhisHowtoLivebookwent


39/75

ElementsofGeometry1896

Inventions:(asmemberofYale

crewteam strokeindicatorfor

InfinitesimalCalculus1897 EffectofDietonEndurance1907

Yalecrew,VisibleIndex(Rand

Kardex1925,

precursor

to

Rolodex 1956 foldin chair PurchasingPowerofMoney1910 HowtoLive1915(21editions,

400kco ies

b

37,

6

million

electricbedsuspendedby

pulleysfromtheceiling,an

givenawaybyMetropolitanLife)

TheMoneyIllusion1928

,

entirelyfromwood,pricelevel

mechanism,FisherIdealIndex

TheStockMarketCrashandAfter1930

, ,

icosahedralequal

area

map

projection

WorldMapsandGlobes1944


40/75


41/75


42/75

Brainar & Scar s 2000


43/75

Brainar &Scar s 2000

(2Good,2ConsumerCase)

Fishers 1945 Patented Equal Area Icosahedral Map


44/75

Fisher s1945PatentedEqualAreaIcosahedralMap

Pro ection anIm rovementofR.Buckminster

FullersDymaxionProjection)

AtBISinSwitzer an T ereIsan


45/75

BankStatistics


46/75

Collegeinto

a

single

Faculty

of

Arts

and

DepartmentofEconomicscreatedthen


47/75

, ,

IrvingFisher

no

longer

there

New iresa vise to et eretooutvote t e

icecap,theconservativeeconomists

Departmentwastransformedfroma

conservativetomoderneconomics

department


48/75

Advisers

1973

5 Authorofman books

StabilizationPolicyTen

YearsAfter

with

DuesenberryandPerry

11980


49/75

PhDHarvard1942

Durin WWII devised

system

to

figure

out

fromserialnumbers

whatwereproduction

numbersatmunitions

ac or es

Statistician,developed

accounting

Department

chair

1959


50/75

PhDHarvard1949

SeniorResearc

Economistwith

the

andSocialPolicy

Studiesat

Yale

University

Jointlyauthoredmuch

ofhusband

Richard

Ruggleswork

MarriedRichard1946,

Accidentaldeath

1987


51/75

graduates

Yale

1950 Skull&Bones

Authorof50books,first

ofwhich

was

God&ManatYale 1951

Syndicatedcolumnist

TVshow

Firing

Line

196699

BestknownAmerican

conservative

Buckleys God and Man at Yale: The


52/75

BuckleysGodandManatYale:TheSuperstitionso Aca emicFree om 1951

.. ,

himselfto

Yale

economics

during

his

, ,

reliance,andindependence,itisonlybecause

texts.Itisbecausehehasnothearkenedto

,

glorifythe

government,

enshrine

security,

and

. .


53/75

194647:EconomicAnalysisandPublicPolicyby,

19478:

TheElementsofEconomics LorieTarshis

194850:Economics,AnIntroductoryAnalysis byPaul.

Prof.Buck:Apparentlyherefusedtoadoptthe

departmentprescribedtextbooks.Instead,heuses

thetext

that

for

many

years,

and

in

a

happier

age,

wasusedbytheentiredepartmentofeconomicsa

bookwhichhecoauthoredwithProfessorFairchild

and,

mirabiledictu,

Prof.

Furniss.

p.

99


54/75

Ph.D.

Harvard

1936,

joined

Yale

1945

EconChair1950?60

DefendedYaleagainstBuckley

FormerYale

president

Kingman

BrewsterJr.oncecreditedDr.

ReynoldswithtransformingYale's

economicsfacultyfromoneof

theworst

departments

in

the

countryintooneofthebest.Dr.

ReynoldstoldBrewsterthathe

diditbyhiringpeoplebrighter

an mse . ur ng s

chairmanship,the

faculty

grew

from31to65members,twoof

.

(WashPost2005)


55/75

Reynolds

expansion

1950

CouncilofEconomic

Advisers

under

Kennedy NobelPrize1981


56/75

department

1951

as

partofReynolds

expansion

Triffin

dilemma

that

reservecurrencymust

rundeficits

Keynes

Triffin

plan

for

asupranationalcentral


57/75

JoinedYale

1951

as

part

ofReynoldsexpansion

EisenhowerCEA

member1959

Newsweekcolumnist

from1965

voca e

ax

ase

incomespolicyTIP1971

ofGovernors

1974

86

,

isanextralegalformof

redistribution


58/75

AlfredCowles (1891

,

alsofounded

1932ColoradoSprings

CowlesCommission

U.Chicagostarting1939

Commissionfrom

Chicago,1955,along

withTjalling Koopmans

andJacob

Marshak

Kenneth Boulding on Cowles


59/75

KennethBouldingonCowles

Foundation,

quoted1955

" " ,

continued,"that

the

Cowles

Commission

and

constitutesuchagroupinthepresentday,in

worldcanaffordtoremaincompletely

,

researchtechniques

and

new

points

of

view

activities"oftheCommission.


60/75

,

makethe

Cowles

Foundation

non

exclusive

,

economicsdepartmentthatspecializedin

,

WhenBillNordhausreturnedfrombeingYale

provost,

e

not

ta e

an

o ce

at

ow es.

Thismayhavebrokenthetraditionthatall

ow espeop e aveo cesat ouse

Robert Solow Cowles and the


61/75

RobertSolow Cowlesandthe

Traditionof

Macroeconomics,

1991

Anniversarycelebration

1983

FoundationPapersincludesalmostnone

marketclearingschoolthathascaptivatedso

fromthe

bracing

air

of

the

New

England

.

moneyand

growth

tradition


62/75

eminentlyscientific

view

that

in

a

world

with

a

,

institutions,andpaperassets(somewithfixed

,

monetarytheoryandmonetarypolicyarenot

undifferentiated"M"

is

exogenously

varied

by

,

helicopterdropsatthat.


63/75

, ,

exemplifiedby

younger

people

today,

is

a

,

tobeconfusedwithicecap).

.

Friedmangotgreatpublicityby

overemp as z ng

t e

connect on

etween

moneysupplyandinflation,playingtothe

pu c,creat nga a ses mp c tya outpo cy

Tobinwas

moral,

not

jumping

on

bandwagons


64/75

"

ofAssets",1938,

Econometrica.

"RationalBehavior,

UncertainProspects

andMeasurable

Utility",1950,

.

Electedpresidentof

,

beforehetookoffice


65/75

FoundationtoYale1955

Cowlescoffeehour

Measurementwithout

Theory NobelPrize1975

ReynoldsStartsEconomicGrowth


66/75

Center1961

persuadedFord

[Foundation]todonate$15milliontoestablish

theYaleEconomic

row

en er,w c

heservedasfounding

.

Nowthe

worlds

centerfordevelopment


67/75

EconomicAdvisers

underPresidentJohnson

Foundingeditor,

BrookingsPapersonEconomicActivity

OkunsLaw

MiseryIndex


68/75


69/75

Miller

PhDHarvard1937

Competition,Cartels

and

their

Regulation

1962

DeanofYalegraduate

school

1961

9 CofounderofYale

SchoolofManagement


70/75

describesalumni

resistancetocreatingavocationalschoolat

Yale

SchoolofOrganizationandManagement

sciences,public

as

well


71/75

HarvardBA1939 Ph.D1947

JuniorFellowHarvard1947

50

JohnBatesClarkMedal

1955

Ruggles,Reynolds,and

Millerconvincedmethat

t erewou ea

renaissanceof

the

department;itwouldgrow

andimprove. Thatwas

indeedwhathappened.


72/75


73/75

B referrin thesu ortofdomestictothatofforei n

industry,heintendsonlyhisownsecurity;andbydirecting

thatindustry

in

such

a

manner

as

its

produce

may

be

of

the

, , ,

asinmanyothercases,ledbyaninvisiblehand topromoteanendwhichwasnopartofhisintention.Norisitalwaysthe

worsefor

the

society

that

it

was

not

part

of

it.

By

pursuing

his

owninteresthefrequentlypromotesthatofthesocietymoreeffectuallythanwhenhereallyintendstopromoteit.Ihavenever

known

much

good

done

by

those

who

affected

to

tradeforthepublicgood. Itisanaffectation,indeed,notvery

,

employedindissuadingthemfromit.


74/75

me

understands

Smith

and

understands

how

a

improvedtocontributetosuchmoralpurpose

ThankstoRobertDimand,Ann


75/75

Juddfor

their

Historical

Work

FisherandModern

Macroeconomics,AmericanEconomic

Review,1997,editorof

rv ng

s erpapers,

JamesTobinpapers.

,

EconomicsDepartment:ofPastLeaders1999

Documents

Shiller Presentation