2023-06-06 05:00:00
Edmund Phelps, 2006 Nobel Prize, publishes a book on economic theories. In an interview with Allnews, he deplores less creativity.
In Paris, at his hotel in the Latin Quarter, Edmund Phelps, winner of the 2006 Nobel Prize in Economics, receives Allnews on the occasion of the release of My journey in economic theories (Ed. Odile Jacob, 304 pages, 2023). The professor emeritus of economic policy at Columbia University and director of the Capitalism and Society center, of which he is the founder, has largely shaped economic theory in recent decades.
In his new book, the economist shares with us both his own intellectual journey and his encounters with most of the big names in the profession (John Rawls, Paul Samuelson, Amartya Sen, Friedrich Hayek, Paul Volcker. Above all, he allows us to guide us in the evolution of economic ideas and its discipline. It should be noted that Edmund Phelps had to rework his copy. The first version of the book included mathematical equations. The work will satisfy the general public. It is rich in anecdotes and personal opinions and gives us an inside look at the history of economic theories over the past 60 years.
Edmund Phelps first worked on Keynesian macroeconomic models and their reconciliation with microeconomics. He then revolutionized employment research and above all, by publishing mass prosperity (Ed.Odile Jacob, 448 page, 2017) on innovation. The economist showed here that it is “ordinary people” who, through their creativity and imagination, create innovation. His theory breaks with the teaching of Joseph Schumpeter that it is inventors who contribute to progress and not individuals themselves. Edmund Phelps introduces the notion of individual satisfaction in work, of personal fulfillment and more generally he underlines the role of work in what he calls “the good life”. The Nobel laureate in economics joins Voltaire here and his desire to “cultivate his own garden”. Moreover, his work for the Center Capitalisme et société reveals that prosperity results not only from good institutions, but also from individuals who share the modern values of individual creation and personal fulfillment. Life and a motivating job go hand in hand. Edmund Phelps answers questions from Allnews:
At 89, you continue to work. Are you thus showing that the fruit of your research is correct and that work is vital to the individual, that it is a source of accomplishment which is part of what you call the “good life”?
Work is not only an integral part of life, but it is also a desirable and attractive part of life. My God, how horrible it would be to live without working!
“The best way to raise low incomes is to subsidize companies to take action to raise low wages.”
I continue to work every day and devote most of my time to Center on Capitalism and Society which I founded. I no longer teach at Columbia University, but I still have an office there.
Why in the United States, for example, are so many people reluctant to find a job?
Some people simply prefer to continue receiving social benefits and stay at home.
You devoted your early research to models, combining macro and microeconomics, which you gradually emphasized the importance of values in economics, such as personal accomplishment and individual satisfaction. Has economics considered the individual as Homo Oeconomicus for too long?
Yes, with my concept of “good life”, I consider the individual in the broadest possible sense, including philosophical, and not only in its purely economic role. I have emphasized in recent years the desires of ordinary people for exploration and creativity in the process of innovation.
You have also been sensitive to John Rawls’ research on social justice. You are opposed to the idea of unconditional basic income. What do you propose to increase low incomes?
The best solution is to subsidize companies to take action to raise low wages. Different shapes are possible. I am thinking, for example, of tax credits for businesses.
Inflation stickiness is a major problem in global economies. You who have worked a lot on this subject, what is the solution? Is the problem monetary or fiscal?
The situation is the result of absolutely gigantic budget spending as well as excessive monetary stimulus. I think the US Federal Reserve was right to raise interest rates significantly. I would like to see the government also take steps towards reducing the budget deficit.
The US Congress has agreed on the debt ceiling. But the indebtedness of Western states is steadily increasing. Does this scare you?
Yes, we should have reduced the fiscal stimulus a long time ago. The government faces a dilemma. He hesitates to embrace this subject today for fear of a coming recession.
Ideally, the government should have tackled the budget deficit more decisively a year ago. In my opinion, the situation is more complicated today.
Are you optimistic regarding the evolution of the economy?
I am pessimistic regarding the economy. It seems to me that a large part of the population expresses no desire for creation and innovation. In this respect, there is a big difference with the situation observed between 1870 and 1970 in the United States. American society seems to have lost the need to express its creativity. A large population survey has reported a decline in job satisfaction since 1972, when productivity growth stopped picking up. The situation is very serious.
Isn’t it the opposite in Asia?
Indeed, interest in work is more marked in China. It is no coincidence that many companies have been created there.
For 40 years, economists have favored the finance professions. Capitalism is increasingly financial. What do you think?
My guess is that perhaps the financial activity is a result of an increase in financing needs, even if the investment itself is only increasing moderately. Self-financing may also have increased.
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