Edmund Phelps facts for kids

Quick facts for kids Edmund Phelps
Phelps in 2017
Born	(1933-07-26) July 26, 1933 (age 91) Evanston, Illinois, U.S.
Nationality	American
Institution	RAND Corporation Cowles Foundation University of Pennsylvania Columbia University
Field	Macroeconomics
Doctoral advisor	James Tobin Arthur Okun
Doctoral students	Gylfi Zoega Hian Teck Hoon
Influences	Paul Samuelson William Fellner Thomas Schelling John Rawls
Contributions	Microfoundations of macroeconomics Expectations in wage and price-setting Natural rate of unemployment Statistical discrimination Structural slumps Imagination in innovating Golden Rule rate of saving
Awards	Nobel Memorial Prize in Economic Sciences, 2006 Chevalier de la Legion d'Honneur, 2008 Pico Mirandola Prize, 2008 Global Economy Prize, 2008 China Friendship Award, 2014

Edmund Strother Phelps (born July 26, 1933) is an American economist. He won the 2006 Nobel Memorial Prize in Economic Sciences for his important work.

Early in his career, he studied how economies grow. He showed the idea of the "golden rule savings rate." This concept helps countries decide how much money to spend now versus how much to save and invest for the future.

Phelps taught at the University of Pennsylvania and later at Columbia University. His most important work looked at how people's ideas about wages and prices affect jobs and inflation. This led to his idea of the "natural rate of unemployment." In the early 2000s, he began studying how businesses come up with new ideas.

Since 2001, he has been the director of Columbia's Center on Capitalism and Society. He was a special professor of Political Economy at Columbia from 1982 to 2021.

Learning About Economics

Phelps was born on July 26, 1933, in Evanston, Illinois. When he was six, his family moved to Hastings-on-Hudson, New York. He spent his school years there.

In 1951, he started college at Amherst College. His father suggested he take an economics class. This class was taught by James Nelson and used a famous textbook by Paul Samuelson. Phelps was very impressed by how economics could be used to understand business. He saw that there was a missing link between different parts of economic theory.

After getting his first degree in 1955, Phelps went to Yale University for more studies. At Yale, he learned from future Nobel Prize winners like James Tobin. He also learned a lot from William Fellner, who taught about how people's expectations affect the economy. Phelps earned his advanced degree (Ph.D.) in Economics from Yale in 1959.

Important Economic Ideas in the 1960s and 1970s

After finishing his studies, Phelps worked as an economist for the RAND Corporation. But he wanted to focus on macroeconomics, which studies the economy as a whole. So, in 1960, he returned to teaching at Yale and doing research at the Cowles Foundation.

At Cowles, he studied how economies grow. In 1961, he published his famous paper on the Golden Rule savings rate. This was a big contribution to economics. He also wrote about other economic topics, like how money works in an economy.

His time at Cowles allowed him to work with other top economists. He also visited MIT, where he met more future Nobel Prize winners.

In 1966, Phelps moved to the University of Pennsylvania. There, he focused on how jobs, wages, and rising prices (inflation) are connected. His research showed how people's expectations about prices affect wages. He also introduced the idea of the natural rate of unemployment. This is the lowest unemployment rate an economy can have without causing inflation to speed up.

Phelps argued that government policies to increase demand only have a short-term effect on unemployment. They cannot control unemployment in the long run. In 1969, he organized a conference to discuss these new ideas. The papers from this conference were published in a book that became very important.

Later, other economists introduced the idea of "rational expectations." This meant people always make the best decisions based on all available information. Phelps, along with other economists, worked to combine this idea with his own theories. They showed that if wages and prices don't change instantly, government policies can still help stabilize the economy. This work became a key part of "New Keynesian economics."

In the early 1970s, Phelps also explored ideas outside of macroeconomics. He published important research on "statistical discrimination." This is when people are treated differently based on group averages, not individual abilities. He also wrote about economic justice, applying ideas from the philosopher John Rawls.

In 1971, Phelps joined the Economics Department at Columbia University. There, he continued his research on inflation and how government spending affects it. He also wrote a book that explained his new theories to a wider audience. This book helped popularize his "expectations-augmented Phillips curve." It also introduced the idea of hysteresis in unemployment. This means that if people are unemployed for a long time, they might lose skills and become discouraged, making it harder for them to find jobs later.

In the late 1970s, Phelps and his former student, Roman Frydman, questioned the idea of rational expectations. They believed that people's expectations are not always perfectly rational. They published a book on this topic in 1983. While it was not well-received at first, it gained more interest after the big economic downturn of 2007–2008.

Research in the 1980s and 1990s

In 1982, Phelps became a special professor at Columbia. In the early 1980s, he wrote a textbook to explain modern economics.

During the 1980s, he worked more with European universities. He became interested in why unemployment stayed high in Europe, even without rising inflation. He believed this was a lasting change in the natural rate of unemployment. Phelps tried to create a theory to explain this. He published some of his findings in a 1994 book called Structural Slumps. This book explained Europe's economic problems in the 1980s. He argued that factors like higher interest rates and less technological growth played a role.

In the early 1990s, Phelps helped design a plan for economic reform in the Soviet Union. He also became interested in the economies of Eastern Europe as they changed from communism to capitalism.

Phelps developed a new theory about employment where the value of business assets drives the natural rate of unemployment. His 1994 book, Structural Slumps, explained that big economic changes are often caused by non-money factors. He argued that unemployment changes in countries like the US and UK came from wealth building up with little new investment.

In the mid-1990s, he started researching "economic inclusion." In 1997, he wrote a book for the general public called Rewarding Work. It discussed why some workers have low wages or no jobs and how to fix these problems.

Current Work and Ideas

Phelps's current work focuses on the benefits of a country's "structural dynamism." This means how creative and active its entrepreneurs are, how well financiers support new projects, and how managers use new ideas. He believes that a dynamic economy improves almost every part of economic performance, not just productivity.

For Phelps, a creative business sector helps people explore and develop their talents. He argues that policies should aim to build a dynamic business sector that includes many people. His research now looks at which institutions help or hinder this dynamism.

His work on dynamism began in the early 1990s at the European Bank for Reconstruction and Development. He studied capitalism and privatization in Eastern Europe. Later, he looked at economic institutions in Western Europe and the United States.

In 2001, he and Roman Frydman started the Center on Capitalism & Society at Columbia. This center promotes research on capitalism.

After the big economic downturn of 2008, Phelps criticized some older economic models. He also expressed doubts about a return to John Maynard Keynes's ideas. He felt that while Keynes had deep insights, his employment theories were not perfect. Phelps believes economists should keep moving forward with new ideas.

Since about 2006, his main research has been on innovation and economic growth. He believes these are driven by the creativity of ordinary people. His 2013 book Mass Flourishing says that people have always been able to imagine and create. But a culture that encourages new ideas is needed to spark this "passion for the new."

Phelps has also criticized the economic policies of former U.S. president Donald Trump. He felt it was "like economic policy at a time of fascism," where the leader controls the economy.

In June 2020, Phelps and other Nobel Prize winners signed an international appeal. It supported the "purple economy," which focuses on the cultural side of economics.

Personal Life

In 1974, Phelps married Viviana Montdor. It has been noted that despite his many achievements, Phelps does not own a car.

Awards and Recognition

In 1981, Phelps was chosen to be a member of the National Academy of Science in the USA. In 2006, he won the Nobel Memorial Prize in Economic Sciences. He received it for his work on how economic policies affect things in the short and long term. The Royal Swedish Academy of Sciences said his work helped us better understand these connections.

In 2000, Phelps was named a Distinguished Fellow of the American Economic Association. In 2008, he received the title of Chevalier of France's Legion of Honor. He also received the Global Economy Prize from the Kiel Institute for the World Economy. In 2014, he got the Chinese Government's Friendship Award and a medal from Yale University.

Phelps has also received honorary degrees from many well-known universities around the world. These include his old college, Amherst College, and universities in Germany, Portugal, France, Iceland, Argentina, and China. From 2010 to 2016, he was the Dean of New Huadu Business School in China.

See also

In Spanish: Edmund S. Phelps para niños