Edmund Phelps
Edmund Phelps
Edmund Strother Phelps, Jr.is an American economist and the winner of the 2006 Nobel Memorial Prize in Economic Sciences. Early in his career he became renowned for his research at Yale's Cowles Foundation in the first half of the 1960s on the sources of economic growth. His demonstration of the Golden Rule savings rate, a concept first devised by John von Neumann and Maurice Allais, started a wave of research on how much a nation ought to spend on present...
NationalityAmerican
ProfessionEconomist
Date of Birth26 July 1933
CountryUnited States of America
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Most of the big banks were shot through with short-termism, deceptive practices and self-dealing. We must institute basic changes in corporate governance and in management practice to restore responsibility and honesty for the sake of the economy and for the self-respect of the country.
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I've lived to see key parts of my research absorbed in textbooks and in central banks around the world. And some finance ministries, too.
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Chancellor Angela Merkel and Wolfgang Schaeuble, her finance minister, are right to oppose fiscal and bank unions without political union.
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When the word 'morality' comes up in connection with economics, income distribution and financial stability are usually the issues. Is it moral for rich countries to use such a high proportion of the world's resources or for investment bankers to earn large bonuses?
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Overpaying the banks for their toxic assets could contribute capital, but that may not be politically feasible or attractive.
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Narrow banks could restart effective intermediation and ensure that consumers and employment-creating small and medium-size enterprises are adequately financed and can contribute to the reactivation of the economy.
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With less competition to fear, companies are emboldened to raise their mark-ups and profits. That lifts share prices and thus the wealth of already wealthy shareholders.
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I started to think about what drives innovation and what its social significance might be. The next step was to think innovators are taking a leap into the unknown. That led me to the thought that it is also a source of fun and employee engagement.
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There would be plenty of justification to raise revenues in order to subsidize businesses that employ low-wage workers. But there can be no justification for pandering to the economy's entire bottom half merely to attract its votes.
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Entrepreneurs' willingness to innovate or just to invest - and thus create new jobs - is driven by their 'animal spirits,' as they decide whether to leap into the void.
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Entrepreneurs have only the murkiest picture of the future in which they are making their bets, and also there is ambiguity: they don't know when they push this lever or that lever that the outcome is going to be what they think it is going to be - there is the law of unanticipated consequences.
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There's such a preoccupation with liquidity and such an unwillingness to invest beyond the horizon of the next quarter and making sure that the CEOs hit their quarterly earnings.
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Raising the minimum wage seems to all economists to, at the very least, fail to 'raise' employment, and we'd all like to see better inclusion of low-skilled workers into good-paying jobs.
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Everybody feels better about himself, his community, and his country if employers are paying workers well. Economics, though, teaches that if every employer is pressured to raise wages, some labor will be priced out of the market.