Profile of George Akerlof

Prakash Loungani of IMF profiles George Akerlof, one of the most brilliant minds ever.

What strikes you in the profile (and most of Akerlof’s work) is his focus on unemployment. It is like his lemon/ information asymmetry papers are just part of some random thoughts which econs keep getting from time to time:

Akerlof says the topic that has motivated him the most over his 40-year career is unemployment. “I have always thought of unemployment as a terrible thing. In fact that has been the motivation for almost everything I have ever written. A person without a job loses not just his income but often the sense that he is fulfilling the duties expected of him as a human being.”

Why does unemployment arise? Akerlof, in joint work with noted economist Janet Yellen (who also happens to be his wife), has argued that the notion of fairness plays a key role. Akerlof and Yellen draw on sociology to enrich the description of how exchange takes place in markets, including the labor market. In economic theory, the price at which an exchange takes place is determined by supply and demand. If more sellers bring fruit to a farmers’ market than there are buyers that day, the price at which fruit is sold drops. If there is an unexpected snowstorm, a hardware store, according to the economic theory, will raise the price of shovels and is justified in doing so to reflect their sudden scarcity.

The whole thing is pretty interesting

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