George Akerlof

George Akerlof
Born George Arthur Akerlof
(1940-06-17) June 17, 1940
New Haven, Connecticut
Nationality United States
Spouse(s) Janet Yellen
Institution Georgetown University
University of California, Berkeley
School or tradition
 New Keynesian economics
Alma mater Lawrenceville School
Yale University (B.A.)
MIT (Ph.D.)
Influences Robert Solow, John Maynard Keynes
Influenced Robert Shiller
Contributions Information asymmetry
Efficiency wages
Awards Nobel Memorial Prize in Economic Sciences (2001)
Information at IDEAS / RePEc

George Arthur Akerlof (born June 17, 1940) is an American economist and University Professor at the McCourt School of Public Policy at Georgetown University.[1][2] He won the 2001 Nobel Memorial Prize in Economic Sciences (shared with Michael Spence and Joseph E. Stiglitz). Previously he was Koshland Professor of Economics at the University of California, Berkeley.

Early life and education

Akerlof was born in New Haven, Connecticut, United States, the son of Rosalie (née Hirschfelder) and Gösta Åkerlöf, who was a chemist and inventor.[3][4] His mother was Jewish, from a family that had emigrated from Germany. His father was a Swedish immigrant.[5] Akerlof graduated from the Lawrenceville School[6] in 1958 and received the Aldo Leopold Award in 2002. In 1962 he received his BA degree from Yale University, in 1966 his PhD degree from MIT, and taught at the London School of Economics 1978–80.

Contributions to economics

"The Market for Lemons" and asymmetric information

Akerlof is perhaps best known for his article, "The Market for Lemons: Quality Uncertainty and the Market Mechanism", published in Quarterly Journal of Economics in 1970, in which he identified certain severe problems that afflict markets characterized by asymmetric information, the paper for which he was awarded the Nobel Memorial Prize.[7] In Efficiency Wage Models of the Labor Market, Akerlof and coauthor Janet Yellen (his wife) propose rationales for the efficiency wage hypothesis in which employers pay above the market-clearing wage, in contradiction to the conclusions of neoclassical economics.

Identity economics

In his latest work, Akerlof and collaborator Rachel Kranton of Duke University introduce social identity into formal economic analysis, creating the field of identity economics. Drawing on social psychology and many fields outside of economics, Akerlof and Kranton argue that individuals do not have preferences only over different goods and services. They also adhere to social norms for how different people should behave. The norms are linked to a person's social identities. These ideas first appeared in their article "Economics and Identity", published in Quarterly Journal of Economics in 2000.

Reproductive technology shock

In the late 1990s Akerlof's ideas attracted the attention of some on both sides of the debate over legal abortion. In articles appearing in The Quarterly Journal of Economics,[10] The Economic Journal,[11] and other forums Akerlof described a phenomenon that he labeled "reproductive technology shock." He contended that the new technologies that had helped to spawn the late twentieth century sexual revolution, modern contraceptives and legal abortion, had not only failed to suppress the incidence of out-of-wedlock childbearing but also had actually worked to increase it. According to Akerlof, for women who did not use them, these technologies had largely transformed the old paradigm of socio-sexual assumptions, expectations, and behaviors in ways that were especially disadvantageous. For example, the availability of legal abortion now allowed men to view their offspring as the deliberate product of female choice rather than as the joint product of sexual intercourse. Thus, it encouraged biological fathers to reject not only the notion of an obligation to marry the mother but also the idea of a paternal obligation.

While Akerlof did not recommend legal restrictions on either abortion or the availability of contraceptives his analysis seemed to lend support to those who did. Thus, a scholar strongly associated with liberal and Democratic-leaning policy positions has been approvingly cited by conservative and Republican-leaning analysts and commentators.[12][13]

Looting

In 1993 Akerlof and Paul Romer brought forth Looting: The Economic Underworld of Bankruptcy for Profit, describing how under certain conditions, owners of corporations will decide it is more profitable for them personally to 'loot' the company and 'extract value' from it instead of trying to make it grow and prosper. For example:

Bankruptcy for profit will occur if poor accounting, lax regulation, or low penalties for abuse give owners an incentive to pay themselves more than their firms are worth and then default on their debt obligations. Bankruptcy for profit occurs most commonly when a government guarantees a firm's debt obligations.[14]

Norms and macroeconomics

In his 2007 presidential Address to the American Economic Association, Akerlof proposed natural norms that decision makers have for how they should behave, and showed how such norms can explain discrepancies between theory and observed facts about the macroeconomy. Akerlof proposed a new agenda for macroeconomics, using social norms to explain macroeconomic behavior.[15]

He is a trustee of the Economists for Peace and Security, and co-director of the Social Interactions, Identity and Well-Being program at the Canadian Institute for Advanced Research (CIFAR). He is in the advisory board of the Institute for New Economic Thinking. He was elected a Fellow of the American Academy of Arts and Sciences in 1985.[16]

Personal life

His wife Janet Yellen is the Chair of the Board of Governors of the Federal Reserve System and professor emeritus at UC Berkeley's Haas School of Business,[17] and was the former President and CEO of the Federal Reserve Bank of San Francisco and former Chair of President Bill Clinton's Council of Economic Advisors.[18][19] His son Robert Akerlof[20] teaches Economics at the University of Warwick.[21]

Akerlof spoke at the Warwick Economics Summit in February 2012 with a talk entitled "Phishing for Phools".[22]

Bibliography

  • _____, 2005. "Identity and the Economics of Organizations," Journal of Economic Perspectives, 19(1), pp. 9–32.
  • _____, 2000. "Economics and Identity," Quarterly Journal of Economics, 115(3), pp. 715–53.

References

  1. ↑ "George Akerlof (aka Mr. Janet Yellen) Heads to Georgetown - Real Time Economics - WSJ". blogs.wsj.com. Retrieved 2014-10-25.
  2. ↑ http://explore.georgetown.edu/people/gaa53/
  3. ↑ Swedberg, R. (1990). Economics and Sociology: Redefining Their Boundaries : Conversations with Economists and Sociologists. Princeton University Press. p. 61. ISBN 9780691003764. Retrieved 2014-10-25.
  4. ↑ Secretary, O.H.; Sciences, N.A. (1980). Biographical Memoirs 51. National Academies Press. p. 221. ISBN 9780309028882. Retrieved 2014-10-25.
  5. ↑ George A. Akerlof : Autobiography, Nobelprize.org. Archived 3 April 2006 at WebCite
  6. ↑ George Akerlof: Nobel Prize Autobiography. Accessed March 12, 2011. "The Princeton Country Day School ended at grade nine. At that point most of my classmates dispersed among different New England prep schools. Both for financial reasons and also because they preferred that I stay at home, my family sent me down the road to the Lawrenceville School."
  7. ↑ Both the American Economic Review and The Review of Economic Studies rejected the paper for "triviality", while the reviewers for Journal of Political Economy rejected it as incorrect, arguing that if this paper was correct, then no goods could be traded. Only on the fourth attempt did the paper get published in Quarterly Journal of Economics.[8] Today, the paper is one of the most-cited papers in modern economic theory (more than 5800 citations in academic papers as of July 2009).[9]
  8. ↑ Writing the “The Market for ‘Lemons’”: A Personal and Interpretive Essay by George A. Akerlof
  9. ↑ "Citations of Akerlof: The Market for Lemons: Quality Uncertainty and the Market Mechanism". Google Scholar. Retrieved 2009-07-07.
  10. ↑ Akerlof, George A.; Yellen, Janet & Katz, Lawrence F. (1996), "An Analysis on Out-of-Wedlock Childbearing in the United States", Quarterly Journal of Economics (The MIT Press) 111 (2): 277–317, doi:10.2307/2946680, JSTOR 2946680
  11. ↑ Akerlof, George A. (1998), "Men Without Children", Economic Journal (Blackwell Publishing) 108 (447): 287–309, doi:10.1111/1468-0297.00288, JSTOR 2565562
  12. ↑ Failed Promises of Abortion
  13. ↑ The Facts of Life & Marriage
  14. ↑ 1993 George Akerlof and Paul Romer, "Looting: The Economic Underworld of Bankruptcy for Profit", Brookings Papers on Economic Activity 24, Brookings Institution, Washington, DC, 1993, as quoted in Yves Smith (2010), Econned, Palgrave Macmillan, ISBN 978-0-230-62051-3 pp. 164–165
  15. ↑ The Missing Motivation in Macroeconomics
  16. ↑ "Book of Members, 1780–2010: Chapter A" (PDF). American Academy of Arts and Sciences. Retrieved 2011-04-06.
  17. ↑ "Janet Yellen Fact Sheet | Berkeley-Haas". newsroom.haas.berkeley.edu. Retrieved 2014-10-25.
  18. ↑ Trustees, Economists for Peace and Security Archived July 23, 2008 at the Wayback Machine
  19. ↑ Janet L. Yellen, White House Council of Economic Advisors.
  20. ↑ "George A. Akerlof – Autobiography". nobelprize.org. Retrieved 2014-12-12.
  21. ↑ "Academic Staff – University of Warwick Department of Economics". www2.warwick.ac.uk. Retrieved 2014-12-12.
  22. ↑ http://www.warwickeconomicssummit.com/2012/programme Warwick Economics Summit 2012 Programme
  23. ↑ GEORGE A. AKERLOF and PAUL M. ROMER (23 December 2007). "Looting: The Economic Underworld of Bankruptcy for Profit" (PDF). Retrieved 2014-10-25.

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