Edmund Phelps's Book: My Journeys in Economic Theory

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Tunku Varadarajan, On the Way to the Nobel, and After; The memoirs of an economist who defends capitalism, stresses the importance of work to a meaningful life -- and met the love of his life at a Xerox machine. Wall Street Journal, May 13, 2023, at page C9
https://www.wsj.com/articles/my- ... -creativity-be0de76
(book review on Edmund Phelps, My Journeys in Economic Theory. Columbia University Press, May 16, 2023)

Note: "Mr Phelps declares that it is 'disappointing that UBI [Universal Basic Income]'—embraced by such modish politicians as Andrew Yang and Alexandria Ocasio-Cortez—'has not received widespread opposition.' "
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Edmund Phelps is a knotty riddle for taxonomists. In the present day, with thinkers consigned to “left” or “right” on the basis of a few well-worn clichés, some would be tempted to class him as progressive solely on account of his long friendship with John Rawls, the late philosopher-saint of American income redistributionists.

And yet Mr. Phelps, the winner of the 2006 Nobel Prize in economics and emeritus professor of political economy at Columbia University, is among the most lucid, passionate and original defenders of capitalism. (He is also the founding director of Columbia’s Center on Capitalism and Society.) He disparages European-style corporatist economies as being unsuited to dynamism or innovation. Progressives who’d claim him as their own would do well to remember that he takes a hostile view of the idea of a universal basic income.

In “My Journeys in Economic Theory,” Mr. Phelps declares that it is “disappointing that UBI”—embraced by such modish politicians as Andrew Yang and Alexandria Ocasio-Cortez—“has not received widespread opposition.” The idea, if implemented, “would entice people and their children away from meaningful work and thus from a sense of involvement in the economy—society’s central project.”

It is this last, humane observation that distinguishes Mr. Phelps from the economists’ tribe, reflecting his belief that the nobility of capitalism lies in the chance it offers for prosperity and self-discovery on a national scale. He calls this phenomenon “mass flourishing,” words that make up the title of his late-in-life magnum opus, published in 2013 when he was 80.

Mr. Phelps will turn 90 in July, and these memoirs—economical of word and sometimes almost bashful—had to be squeezed out of him by close colleagues and well-wishers. They are scarcely as self-revelatory as the recent memoirs of Amartya Sen, another Nobel laureate, reflecting the difference, perhaps, between an argumentative Indian (Mr. Sen’s own phrase) and a taciturn WASP. Mr. Phelps’s first draft—I’m told by those who know him—was full of equations and mentioned his wife only rarely, which was at odds with his uxorious disposition. The elegant finished book, mercifully, has no equations. It also tells us how he met Viviana Montdor, a feisty Argentine who worked as an administrator at Columbia’s economics department, in 1972. Mr. Phelps bummed cigarettes off her for three consecutive days after they first ran into each other at the Xerox machine. On the fourth day, he asked her out—to a concert of Leonard Bernstein’s New York Philharmonic—and they married two years later.

That Mr. Phelps isn’t always celebrated alongside the other great American economists of the past 50 years is an injustice. To him, with Milton Friedman, goes the credit for refuting the Phillips Curve—conceived in 1958 by A.W. Phillips, an economist—which stated that inflation and unemployment were inversely related. In other words, the higher the inflation in an economy, the lower the unemployment, and vice versa. In 1967, both Friedman and Mr. Phelps arrived independently at the conclusion that there is no such trade-off in the long run. Their view was borne out in eye-catching fashion by “stagflation” in the 1970s.

In “My Journeys in Economic Theory,” Mr. Phelps recalls an encounter in late 1968 with Richard Nixon, then president-elect, for whom he was working on a task force on inflation. Shaking hands with Mr. Phelps in the receiving line at a bustling banquet, Nixon exclaimed: “I want to reduce the inflation without causing more unemployment, but [Fed chairman-to-be] Arthur Burns said that’s impossible.” This was pure Phillips Curve reasoning, of course, and Mr. Phelps writes that he “felt this packed room with its long line behind me was not the place to try to convey my thinking on the subject.”

Mr. Phelps has, to be sure, done plenty of thinking on an uncommon range of subjects, as acknowledged by his Nobel citation in 2006. Among the work flagged as seminal by the prize committee was his very first published paper, “The Golden Rule of Accumulation,” which appeared in the American Economic Review in 1961.

He is also lauded for his work on tracing the microeconomic foundations of macroeconomic theory, the roots of which go back to his undergraduate days at Amherst (class of 1955). He had wanted to major in philosophy, but, encouraged by his father (who’d lost his job in the Depression), he took a course in economics. He found Paul Samuelson’s textbook, first published in 1948, “brilliant” but was puzzled by something he encountered in the introductory course: “It was not clear to me how macroeconomics . . . might be connected to microeconomics. . . . There seemed to be a disconnect between the two fields.” The precocious sophomore Phelps was also drawn by “the sense that bridging the gap might make a difference for economic policy.”

Mr. Phelps is a courtly man, and his memoirs are unstinting in their praise for others, including even Mrs. Murphy from second grade at his school in Hastings-on-Hudson, for teaching him how to read. Occasionally—and entertainingly—he bristles. There is a flash of indignation on the page when he describes James Tobin, the 1981 Nobel laureate in economics who had been his advanced statistics teacher when Mr. Phelps was a doctoral student at Yale (a classroom experience Mr. Phelps describes as “not my cup of tea”). Both men were later colleagues at Yale together, but they became estranged after Mr. Phelps published his first book, “Fiscal Neutrality Toward Economic Growth” (1965). Tobin, a cheerleader for government intervention in the economy, never spoke of the book to its author, who had deviated from Tobin’s own cherished ideas. Mr. Phelps writes of him as “the teacher who underestimated me.” Tobin was “pained when someone close to him took a different view. And he had a hard time dealing with it.”

It is apparent in his memoirs that Mr. Phelps wishes to be remembered most for his theories of the past two decades, which focus on the workplace and creativity. He believes that economists are mistaken in their supposition that the reward for work is pay alone. As he writes in “Dynamism” (2020), in America “it is very clear that work is central to a meaningful life.” People at all rungs of the economy “possess imagination and creativity,” and the modern economy is “a vast imaginarium” in which growth comes from “creativity within the workforce.”

Mr. Phelps underscores a connection between economic growth and job satisfaction. He urges economists “not to stop at the standard theory” but to explore an “uncharted realm” of human desires and fulfillments. There’s more to life than capital, mere employment and national income. And certainly more to economics.

--Mr. Varadarajan, a Journal contributor, is a fellow at the American Enterprise Institute and at Columbia University’s Center on Capitalism and Society.