In My Journeys in Economic Theory, Edmund Phelps ’55, H’85, chronicles his career and adventures as he interacted and collaborated with many of the leading economists of the 20th century. His journeys take us to places as varied as Met Galas; sabbaticals at Stanford University, the London School of Economics and the New Huadu Business School in Fuzhou, China; and, ultimately, Sweden to accept the 2006 Nobel Prize in economics.
The book is organized chronologically, and Amherst audiences will enjoy reading about Phelps’ interactions with the College’s legendary economics department of the mid-1950s. He mentions in particular the influences of James Nelson and Arnold Collery and the arrival of Willard Thorp, who created the College’s Merrill Center for Economics. The center held summer conferences overseen by Willard’s wife, Clarice, and attended by select undergraduates. Some readers of this review will be old enough to have known Clarice: She was a force of nature. I have heard from more than one economist about the important role that Clarice’s encouragement played in their careers; Ned Phelps is apparently no exception.
Much of the work that won Phelps the Nobel occurred in the 1960s and early 1970s, when he was at Yale and Penn. It started with his whimsical piece in growth theory entitled “The Golden Rule of Accumulation: A Fable for Growthmen.” Phelps extended the workhorse Solow-Swan model of economic growth to show that savings rates can be too high, and that savings rates present trade-offs between current and future generations.
He followed that (among other contributions) with a conference paper in 1970 on the microeconomics underlying the relationship between inflation and unemployment, the so-called Phillips Curve. That paper emphasized the importance of expectations in the inflation process and, along with Milton Friedman’s more macroeconomic analysis, revolutionized the way economists to this day think about the role and conduct of monetary policy.
I have highlighted these two contributions among Phelps’ many of that period because they had the most relevance to me. For 40 years at Amherst, I challenged students to think about trade-offs between current and future generations. The following anecdote from the book, in which Phelps describes what happened after the 1970 conference, particularly resonated:
The advances in macroeconomic theory made at this conference spread like wildfire with the appearance of the conference volume, Microeconomic Foundations of Employment and Inflation Theory. ... Jeffrey Sachs at a Columbia event in 2006 recalled the excitement he and other economics students felt on the arrival of the book in the Harvard Square bookstore.
I wasn’t at Harvard Square in 1970, but I was anxiously awaiting the book’s arrival at the Yale Coop. Phelps’ work provided fertile ground for scores of Ph.D. theses, including my own.
Over his career, Phelps’ interests broadened beyond technical economics. Undoubtedly his interactions with philosophers such as John Rawls, Thomas Nagel and Amartya Sen played a role in this development. Much of this later work took place at his current home, Columbia University’s Center on Capitalism and Society, and has led most recently to two books, which he believes to be his most important works: Mass Flourishing in 2017 and Dynamism in 2020 (co-authored with three other economists).
Phelps writes that a flourishing society ‘is rich in jobs offering a sense of agency.’”
In Journeys, Phelps describes what the development of the arguments in those books has meant to him personally. “[T]he thesis of Mass Flourishing is that a new sense of the possibilities of life—possibilities beyond those of working, saving, and investing for security and enjoyment—provided the spark that fired modern economies,” he writes, explaining that a flourishing society “is rich in jobs offering a sense of agency: people taking responsibility and exercising initiative.”
In other words: Flourishing societies provide meaningful work that allows individuals to exercise autonomy and their innate creativity, which fuels economic growth. “With Mass Flourishing,” he writes, “I had at long last used my creativity— creativity we all have in differing and perhaps variable amounts—to build a new theory of a nation’s ... happiness … and working life.”
As we look ahead to a century dominated by artificial intelligence and the challenges of automation, the questions that Phelps is studying—about how to provide meaningful work so that society can flourish—continue to be of vital importance.
Woglom is Amherst’s Richard S. Volpert ’56 Professor of Economics, Emeritus.