George Akerlof

Last updated
George Akerlof
George Akerlof.jpg
Akerlof in 2007
Born
George Arthur Akerlof

(1940-06-17) June 17, 1940 (age 82)
Spouses
  • Kay Leong
    (m. 1974;div. 1977)
  • (m. 1978)
Children1
Relatives Carl Akerlof (brother)
Institution Georgetown University
London School of Economics
University of California, Berkeley
School or
tradition
New Keynesian economics
Alma mater Yale University (B.A)
Massachusetts Institute of Technology (Ph.D)
Doctoral
advisor
Robert Solow [1]
Doctoral
students
Charles Engel
Adriana Kugler
Influences John Maynard Keynes
Contributions Information asymmetry
Efficiency wages
Awards Nobel Memorial Prize in Economic Sciences (2001)
Information at IDEAS / RePEc
Academic background
Thesis Wages and capital  (1966)

George Arthur Akerlof (born June 17, 1940) is an American economist and a university professor at the McCourt School of Public Policy at Georgetown University and Koshland Professor of Economics Emeritus at the University of California, Berkeley. [2] [3] Akerlof was awarded 2001 Nobel Memorial Prize in Economic Sciences, jointly with Michael Spence and Joseph Stiglitz, "for their analyses of markets with asymmetric information."

Contents

Early life and education

Akerlof was born in New Haven, Connecticut, on June 17, 1940, into a Jewish family. His mother was Rosalie Clara Grubber (née Hirschfelder), a housewife of German Jewish descent, and his father was Gösta Carl Åkerlöf, a chemist and inventor, who was a Swedish immigrant. [4] [5] [6] George has an older brother, Carl, a physics professor at the University of Michigan. [6]

Akerlof attended Princeton Day School, before he graduated from the Lawrenceville School in 1958. [6] He received a bachelor's in economics from Yale University in 1962, and earned his PhD in economics from Massachusetts Institute of Technology (MIT) in 1966. [3] His dissertation was titled Wages and Capital under the supervision of Robert Solow, a noted economist who would later receive the Nobel Memorial Prize.

Academic career

In 1966, Akerlof joined the faculty at the University of California, Berkeley, as an assistant economics professor, where he taught for one year. In 1967, he spent some time as a visiting professor at the Indian Statistical Institute (ISI) in New Delhi and returned to the United States in September 1968. [6] Akerlof then became an associate professor at Berkeley and voted for a tenure-track position at the university. He also served as a senior economist at the White House Council of Economic Advisers (CEA) from 1973 to 1974. In 1977, Akerlof spent a year as a visiting research economist for the Federal Reserve Board of Governors in Washington, D.C. where he met his future wife and coauthor, Janet Yellen. [3] After that he hoped to be promoted to full professorship, however, Berkeley's department of economics failed to appoint him. Akerlof and Yellen then moved to the London School of Economics (LSE) in 1978, where he accepted a prestigious post as the Cassel Professor of Money and Banking, while she accepted a tenure-track lectureship. They remained in the United Kingdom for two years, then returned to the United States. [6]

In 1980, Akerlof becomes Goldman Professor of Economics at Berkeley and taught there for most of his career. [3] In 1997, he took a leave of absence from Berkeley to accompany his wife when she was named chair of the Council of Economic Advisers (CEA). At Washington, Akerlof began working for the Brookings Institution as a senior fellow. They both returned to teaching at UC Berkeley in 1999. Akerlof remained an active faculty member at the university until his retirement. He was awarded Koshland Professor of Economics Emeritus in 2010.

After that, he once again moved to Washington when Yellen returned to the Federal Reserve Board. [7] Akerlof received a position as visiting scholar at the International Monetary Fund (IMF) from 2010 to 2014 and joined the McCourt School of Public Policy at Georgetown University as a university professor in 2014. [2]

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 the 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. [10] In Efficiency Wage Models of the Labor Market, Akerlof and coauthor/wife, Janet Yellen propose rationales for the efficiency wage hypothesis in which employers pay above the market-clearing wage, in contradiction to the conclusions of neoclassical economics. This work introduced gift-exchange game to economics.

Identity economics

Akerlof and collaborator Rachel Kranton of Duke University have introduced 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 the 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 , [11] The Economic Journal , [12] 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. [13] [14]

Looting

In 1993 Akerlof and Paul Romer published "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. [15]

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. [16] He is considered[ according to whom? ] together with Gary Becker as one of the founders of social economics.

He is a trustee of 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 on 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. [17]

Personal life

Akerlof was briefly married to an architect, Kay Leong; they wedded in 1974 and divorced three years later, after he didn’t get promoted to a full professorship at Berkeley. Following their divorce, Kay moved to New York and remarried a fellow architect. [18] In 1978, Akerlof married Janet Yellen, an economist who is the current United States Secretary of the Treasury and former chair of the Federal Reserve, as well as a professor emeritus at Berkeley's Haas School of Business. [19] [20] [21] They have one child, a son named Robert, who was born in 1981. [6] Robert Akerlof is also an economist, earned a bachelor's degree in economics and mathematics from Yale University and obtained his PhD in economics from Harvard University, currently working as an associate professor of economics at the University of Warwick. [22]

Akerlof was one of the signees of a 2018 amici curiae brief that expressed support for Harvard in the Students for Fair Admissions v. President and Fellows of Harvard College lawsuit. [23] Other signees of the brief include Alan B. Krueger, Cecilia E. Rouse, Robert M. Solow, Janet L. Yellen, as well as numerous others. [23]

Bibliography

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References

  1. Akerlof, George (1966). Wages and capital (PDF) (Ph.D.). Massachusetts Institute of Technology. Retrieved June 28, 2017.
  2. 1 2 Reddy, Sudeep (September 23, 2014). "George Akerlof (aka Mr. Janet Yellen) Heads to Georgetown - Real Time Economics - WSJ". The Wall Street Journal. ISSN   1042-9840. Archived from the original on September 26, 2014. Retrieved September 24, 2014.{{cite news}}: CS1 maint: bot: original URL status unknown (link)
  3. 1 2 3 4 Laviola, Erin (May 11, 2021). "Janet Yellen's Husband, George Akerlof: 5 Fast Facts". heavy.com. Archived from the original on March 28, 2022. Retrieved May 12, 2021.
  4. 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.
  5. Secretary, O.H.; Sciences, N.A. (1980). Biographical Memoirs. Vol. 51. National Academies Press. p. 221. ISBN   9780309028882 . Retrieved 2014-10-25.
  6. 1 2 3 4 5 6 George Akerlof on Nobelprize.org OOjs UI icon edit-ltr-progressive.svg "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. Thompson, Marilyn W.; Spicer, Jonathan (September 29, 2013). "A Fed love story: Janet Yellen meets her match". reuters.com. Archived from the original on November 25, 2020. Retrieved September 30, 2013.
  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 . Archived from the original on 2012-07-23. Retrieved 2009-07-07.
  10. 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]
  11. Akerlof, George A.; Yellen, Janet & Katz, Michael L. (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, S2CID   11777041
  12. Akerlof, George A. (1998), "Men Without Children", Economic Journal, Blackwell Publishing, 108 (447): 287–309, doi:10.1111/1468-0297.00288, JSTOR   2565562
  13. Failed Promises of Abortion, archived from the original on 2008-10-12
  14. The Facts of Life & Marriage
  15. 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
  16. The Missing Motivation in Macroeconomics
  17. "Book of Members, 1780–2010: Chapter A" (PDF). American Academy of Arts and Sciences. Retrieved April 6, 2011.
  18. Luscombe, Belinda. "Everything You Need to Know About Mr. Janet Yellen". Time. Archived from the original on 7 March 2014. Retrieved 11 November 2022.
  19. "Janet Yellen Fast Facts". CNN. December 3, 2020. Archived from the original on December 4, 2020. Retrieved December 4, 2020.
  20. "Janet Yellen Fact Sheet | Berkeley-Haas". newsroom.haas.berkeley.edu. 2013-09-25. Retrieved 2014-10-25.
  21. Luscombe, Belinda (January 9, 2014). "Everything You Need to Know About Mr. Janet Yellen". Time. ISSN   0040-781X. Archived from the original on March 7, 2014. Retrieved January 10, 2014.
  22. "Robert Akerlof Resume" (PDF). robertakerlof.com. Archived (PDF) from the original on April 13, 2021. Retrieved March 13, 2021.
  23. 1 2 "Amicus brief - Economics Professors" (PDF). harvard.edu. Harvard University. Archived (PDF) from the original on April 13, 2021. Retrieved October 2, 2022.
  24. George A. Akerlof and Paul M. Romer (23 December 2007). "Looting: The Economic Underworld of Bankruptcy for Profit" (PDF). Archived from the original (PDF) on 2018-02-20. Retrieved 2014-10-25.

Official

Other

Articles
Awards
Preceded by Laureate of the Nobel Memorial Prize in Economics
2001
Served alongside: A. Michael Spence, Joseph E. Stiglitz
Succeeded by
Academic offices
Preceded by President of the American Economic Association
2006–2007
Succeeded by