George Arthur Akerlof
June 17, 1940
New Haven, Connecticut, U.S.
|Institution|| Georgetown University |
London School of Economics
University of California, Berkeley
|New Keynesian economics|
|Alma mater|| Yale University (B.A)|
Massachusetts Institute of Technology (Ph.D)
| Charles Engel |
|Influences||John Maynard Keynes|
|Contributions|| Information asymmetry |
|Awards||Nobel Memorial Prize in Economic Sciences (2001)|
|Information at IDEAS / RePEc|
George Arthur Akerlof (born June 17, 1940) is an American economist who is 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.He won the 2001 Nobel Memorial Prize in Economic Sciences (shared with Michael Spence and Joseph E. Stiglitz).
Akerlof was born in New Haven, Connecticut, United States, the son of Rosalie Clara Grubber (née Hirschfelder) and Gösta Carl Åkerlöf, who was a chemist and inventor.His mother was Jewish, from a family that had emigrated from Germany. His father was a Swedish immigrant. Akerlof attended Princeton Day School, graduated from the Lawrenceville School 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.
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.In Efficiency Wage Models of the Labor Market, Akerlof and coauthor/current Secretary of the U.S. Treasury 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.
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 the Quarterly Journal of Economics in 2000.
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 ,The Economic Journal , 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.
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.
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. [ according to whom? ] together with Gary Becker as one of the founders of social economics.He is considered
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.
His spouse, Janet Yellen serving as United States Secretary of the Treasury and professor emeritus at Berkeley's Haas School of Business, previously served as the chair of the Federal Reserve.She also served as the president and chief executive officer of the Federal Reserve Bank of San Francisco and as chair of President Bill Clinton's Council of Economic Advisors. His son Robert Akerlof has a PhD in economics from Harvard University and teaches at the University of Warwick.
Akerlof was one of the signees of a 2018 amici curiae brief that expressed support for Harvard University in the Students for Fair Admissions v. President and Fellows of Harvard College lawsuit. Other signees of the brief include Alan B. Krueger, Robert M. Solow, Janet Yellen, Cecilia Rouse, as well as numerous others.
Satisficing is a decision-making strategy or cognitive heuristic that entails searching through the available alternatives until an acceptability threshold is met. The term satisficing, a portmanteau of satisfy and suffice, was introduced by Herbert A. Simon in 1956, although the concept was first posited in his 1947 book Administrative Behavior. Simon used satisficing to explain the behavior of decision makers under circumstances in which an optimal solution cannot be determined. He maintained that many natural problems are characterized by computational intractability or a lack of information, both of which preclude the use of mathematical optimization procedures. He observed in his Nobel Prize in Economics speech that "decision makers can satisfice either by finding optimum solutions for a simplified world, or by finding satisfactory solutions for a more realistic world. Neither approach, in general, dominates the other, and both have continued to co-exist in the world of management science".
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Rachel E. Kranton is an American economist and James B. Duke Professor of Economics at Duke University. She is a member of the National Academy of Sciences, the American Academy of Arts & Science, Fellow of the Econometric Society, and 2010 recipient of the Blaise Pascal Chair. She was elected to serve on the Executive Committee of the American Economic Association from 2015 to 2018. Kranton's research focuses on how social institutions affect economic outcomes, and has applications in a variety of fields within economics, such as economic development, international economics, and industrial organization.
Identity economics captures the idea that people make economic choices based on both monetary incentives and their identity: holding monetary incentives constant, people avoid actions that conflict with their concept of self. The fundamentals of identity economics was first formulated by Nobel Prize–winning economist George Akerlof and Rachel Kranton in their article "Economics and Identity," published in the Quarterly Journal of Economics.
The gift-exchange game is a game that has been introduced by Akerlof and Yellen to model labor relations. Two players are at least involved in such game – an employee and an employer. The employer has to decide first, whether to award a higher salary. Then, the decision of the employee about putting extra effort follows. Like trust games, gift-exchange games are used to study reciprocity for human subject research in social psychology and economics. If the employer pays extra salary and the employee puts extra effort, then both players are better off than otherwise. The relationship between an investor and an investee has been investigated as the same type of a game.
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