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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Economists of a classical bent lay a large part of the decline of employment, and thus lagging output, to a contraction of labour supply.
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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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The main cause of Europe's deep fall - the losses of inclusion, job satisfaction and wage growth - is the devastating slowdown of productivity that began in the late 1990s and struck large swaths of the continent. It holds down the growth of wages rates, and it depresses employment.
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In countries operating a largely capitalist system, there does not appear to be a wide understanding among its actors and overseers of either its advantages or its hazards.
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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.
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Disciples of Keynes, who focus on aggregate demand, view any increase in household wealth as raising employment because they say it adds to consumer demand.
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The 1920s and 1930s were a period of sensational productivity growth: new products were springing up all over the place, and most of those new products and new methods were developed by people who started their own companies.