Economists in The Region on their student experiences and the need for economic literacy
Quotes from Alan Blinder, Robert Lucas and others on the need for economic literacy.
Published December 1, 1998 | December 1998 issue
I think the economists, with some exceptions, don't help a lot in that they spend precious little time talking ... to ordinary people in ways that ordinary people can understand. It's also due to what I see as some failures in our educational system. Too many American kids are brought up without any basic literacy in economics. I don't mean knowledge of fancy economic theory, I mean fairly elementary things like "demand curves usually slope down."
I believe that a society that has a higher average level of economic literacy will produce better economic policies because the people will demand more of their legislators. In a democratic system, legislative bodies do indeed respond to the electorate ... If the public as a whole had a better understanding of economics, and if more economists were writing "graceful English prose," that would help a little bit and better economic policies would be produced by the political system.
The unfortunate part is that's easy to say and not easy to do. First of all, you have to get people writing it. Secondly, and even harder, you have to get people reading it. And when the choice comes down to Sports Illustrated or the economists, I think it's easy to see what most Americans will pick.
Alan Blinder, then Federal Reserve Board vice chairman and currently professor of economics at Princeton University, was interviewed for the December 1994 Region.
Milton Friedman's courses were the major event in graduate study [at the University of Chicago]. I didn't work with Friedman on my thesis, but his price theory courses were tremendously exciting. They changed my whole way of looking at economics and social science.
I ... began graduate work in history at Berkeley. I was there for a semester and took pretty much all graduate courses in economic history. I realized that I didn't know enough economics to do it, so I started sitting in on some economics courses. I was caught by surprise at the technical nature of economics, and realized I couldn't sort of pick it up on the side, so I moved [to the University of Chicago] and entered the economics department. I suppose I thought I was going to get back into economic history, but one thing led to another.
Nobel Laureate Robert Lucas' interview appeared in the June 1993 Region magazine. He is the John Dewey Distinguished Service Professor of Economics at the University of Chicago.
I was coming through school at the time portfolio theory was being developed. I have to cite Markowitz, Sharpe and Modigliani as having influenced me, and then also Stigler and Peltzman on the economics of regulation, and others from the Chicago school. A lot of my thinking does go back to market efficiency.
Susan Phillips was interviewed for the March 1992 Region magazine when she was a member of the Federal Reserve Board of Governors. Phillips is currently dean of the School of Business and Public Management at George Washington University.
My thinking has been heavily influenced by Bob Lucas. I met him in 1964 [when] ...he was a new professor and I a new graduate student at Carnegie-Mellon. As a graduate student, however, he did not influence my thinking much. His impact on my economic agenda began a few years after graduate school—beginning about 1969—when we collaborated on the paper, "Investment Under Uncertainty." That collaboration along with his seminal paper, "Expectations and the Neutrality of Money," forced me to rethink completely how to do macroeconomics.
Another person that influenced my thinking a lot is Robert Townsend. He was a graduate of the University of Minnesota. He came to Carnegie-Mellon, around 1976, as an assistant professor. ...There are two other people for whom I have incredible respect for making economics better. These two people have been associated with the Minneapolis Federal Reserve bank—Tom Sargent and Neil Wallace. They along with Lucas were the ones responsible for the use of dynamic economic theory to study macroeconomic phenomena. I, of course, was influenced by the writings of Arrow, Debreu and McKenzie, the great general equilibrium theorists ....
My first economics professor was very important simply because he got me interested in economics. He was Reuben Zubrow, who has recently retired from the University of Colorado. At that time he was teaching at Indiana University, where I took a summer school course between my freshman and my sophomore year. I decided economics was really fun, so I changed my major. I think the person who probably influenced me most, but a little later in my career, was Joseph Pechman, who was the director of economic studies at the Brookings Institution.
I think presidents need both economists and poets—the poets to keep them sane and to keep them focused on the right values. But economists are useful too. Presidents face very difficult choices about the economy. Economists aren't always right, but they know how to structure the choices. And that's why they tend to find themselves in the White House.
[That we have so many economists] tells us that our economy is more and more complicated, also that economists know more and have more to offer to policymakers than they used to have.
Alice Rivlin is vice chair of the Federal Reserve Board. She was interviewed for the June 1997 Region.
Female labor force participation has increased enormously, especially with slow wage growth and declining wages for less educated men. Economics is a central motivator for women. Certainly Betty Friedan is right that economic issues—getting the kind of education and training that's necessary to have a career and to succeed in the workplace, and juggling work and family responsibilities—remain central for most women.
... Macroeconomics is intuitively harder to understand than microeconomics, since it concerns the interaction of many different markets simultaneously. In the end, macroeconomics comes down to understanding how supply and demand work in the economy as a whole, but it takes some time before MBAs and executives can really understand, for example, the transmission mechanism and how Fed policy affects the economy. The determination of exchange rates and the relationship between trade and capital movements in the international economy are also particularly difficult for students to grasp.
Janet Yellen was a member of the Federal Reserve Board when she was interviewed for the June 1995 Region. She is currently chair of the White House Council of Economic Advisers.
Special study: The Economic Literacy Project