Monday, October 11, 2004
Nobel Truths
Professors Finn E. Kydland at Carnegie Mellon University and Edward C. Prescott at Arizona State University have been awarded the Nobel Prize for Economics. These two have been on the short list for the prize since I was a student of economics back in the 1990s. While neither economist is known as a political activist, their ideas are unfortunately relevant to U.S. politics.
Both econonmists are students of Robert Lucas, the Father of Rational Expectations. They published multiple articles in the 1970s and 1980s that challenged the idea that the government can manage the economy and described the business cycles as caused by technology changes not ignorant consumers. Prescott has even created controversy recently by writing that lower marginal tax rates are why U.S. workers work longer than European workers.
When Republicans and Democrats state that they are going to “create jobs” they are just mouthing the words that people want to hear. The government can affect the economy in the long run, but the President cannot get you a job. The work of Prescott and Kydland illuminates this fact.
Both econonmists are students of Robert Lucas, the Father of Rational Expectations. They published multiple articles in the 1970s and 1980s that challenged the idea that the government can manage the economy and described the business cycles as caused by technology changes not ignorant consumers. Prescott has even created controversy recently by writing that lower marginal tax rates are why U.S. workers work longer than European workers.
When Republicans and Democrats state that they are going to “create jobs” they are just mouthing the words that people want to hear. The government can affect the economy in the long run, but the President cannot get you a job. The work of Prescott and Kydland illuminates this fact.
