Amherst College Alumnus Edmund S. Phelps ’55 Receives Nobel Memorial Prize in Economics
October 9, 2006
Director of Media Relations
AMHERST, Mass.—The Royal Swedish Academy of Sciences has awarded the 2006 Alfred Nobel Memorial Prize in Economic Sciences to Edmund S. Phelps, a 1955 graduate of Amherst College. The academy said in a statement that Phelps, a professor of political economy at Columbia University, “challenged the earlier view on the relationship between inflation and unemployment. He recognized that inflation does not only depend on unemployment but also on the expectations of firms and employees about price and wage increases.” “Amherst College is deeply honored by this recognition,” says Anthony W. Marx, the president of the college. “Ned Phelps is a brilliant scholar and a wonderful colleague.” Phelps is the fourth Nobel laureate from Amherst College: he joins Joseph E. Stiglitz ’64 (Economics 2001), Harold E. Varmus ’61 (Medicine, 1989) and Henry W. Kendall ’50 (Physics, 1990).
Phelps “has fundamentally altered our views on how the macroeconomy operates,” according to the Royal Swedish Academy. Geoffrey R. Woglom, the Richard S. Volpert ’56 Professor of Economics at Amherst College, says Phelps’s work on “intertemporal tradeoffs in macroeconomic policy is still taught in the intermediate macroeconomics course at Amherst and at most other schools.” According to Woglom, Phelps “analyzed how the apparent tradeoff in the short run between lower unemployment at the cost of more inflation would disappear in the long run, and laid the groundwork for the New Classical revolution in macroeconomics, around 1975, which fundamentally changed the way economists analyze government stabilization policies.” This “Phelps-Friedman analysis” was co-developed independently in 1969 with Milton Friedman.
Woglom says that Phelps’s “earlier work in the theory of economic growth showed that increases in the savings rate typically would lead eventually to increases in consumption as economic growth raised income: you could trade off less consumption today for more in the future. But increasing the savings rate too much would lower consumption now and also in the future.
“Phelps was viewed as a major contributor to the theory of growth in the 1960s,” Woglom concludes, “and his ideas are used in analyzing current issues such as the reform of the Social Security system.”
Born in Evanston, Ill., Phelps earned a B.A. in economics from Amherst in 1955, and received M.A. (1956) and Ph.D. (1959) degrees from Yale University. He has taught at Columbia since 1971, where he directs the Center on Capitalism and Society.