Interview of Robert Solow

Atish Rex Ghosh of IMF does a superb interview of Robert Solow- one of the pioneers of Growth economics.

Apart from many interesting titbits, his friendship with Paul Samuelson stands out. He never moved from MIT economics departments despite many offers. Why? His condition was also to move Paul Samuelson to the other university, which worked out. Hence, he remained with Samuelson and always had an office next to him.

Another interesting bit is that with Solow’s growth paper (in which he showed the key to growth is technology), another economist named Trevor Swan also released similar findings. And Solow always acknowledges the findings:

Regardless, he readily acknowledges his intellectual debt to Arthur Lewis’s work on growth in labor-surplus countries. He is also quick to give credit to Trevor Swan, who independently arrived at much the same model at almost exactly the same time, but never received as much recognition as Solow for it. The reasons for this are not clear, though Solow says he had “a slightly better mousetrap.”

In a 2007 paper, Solow speculates as to why his work attracted more attention. First, Swan presented his model in terms of a specific (the Cobb-Douglas) production function (and only in a posthumously published paper did it become clear he was aware of the more general case all along). This was a case where Solow’s more general assumption turned out to be simpler and more transparent.

Second, Swan’s model, which included an important appendix (“Notes on Capital”), was perceived to be a response to the likes of Joan Robinson and Piero Sraffa, mired in the “Cambridge capital controversy” (a technical and mathematical dispute over how to account for capital in economic models), and therefore lost attention as those controversies lost the profession’s interest.

And third, Solow was an American publishing in the Quarterly Journal of Economics, Swan an Australian publishing 10 months later in the less widely read Economic Record. What is clear is that, over the years, Solow has made what Barbara Spencer (Trevor Swan’s daughter, and a well-known trade economist) terms “generous efforts” to ensure that Swan’s work was not overlooked.

Great stuff from Prof Solow.

Ghosh also discusses Solow’s works and how his paper led to many new ideas:

The explosion of papers that followed proposed theories along three different lines. Some of the earliest contributions, such as Romer’s first paper, proposed that steady-state growth was possible even in the absence of technological progress, as long as capital did not have diminishing marginal returns. A second strand of papers added extra accumulable factors such as human capital. The final category of papers decided to model explicitly the process of technological innovation; Solow thinks of this as the most interesting strand, though he also thinks that economists have a lot to learn about how scientific and technological innovation actually comes about. Innovation to produce new varieties of products, or higher-quality products, was modeled as an active business decision of firms. Government policies on capital accumulation, and incentives for research and development, could now, at least in theory, affect the economy’s long-run growth rate.

What about state of economics after the crisis:

So where did that leave the state of macroeconomics on the eve of the 2008 global financial crisis? Too much the prisoner of its own (representative agent, real business cycle, frictionless equilibrium) models, in Solow’s view. Not that Solow would blame the crisis itself on whether economists were using quite the right models; rather, the crisis resulted from the belief that “if the market for orange marmalade is self regulating, the market for fixed-income securities must also be self regulating.” Economists, he says, played a role in furthering that belief, but even without such endorsement, too many people made too much money from that premise for it not to have taken hold anyway.

Two lessons Solow would like to see economists take to heart are that, in the modern world, it is impossible to pursue macroeconomics without taking account of finance; and second, financial markets are not necessarily stable or self-correcting.

He was actually happy with the new Keynesian models which looked at sticky prices and wages. THough much more needs to be done. Throughout the interview he comes across as a very modest economist giving credit to one and all:

His final words reflect his insistence, recurrent throughout our talk, on crediting others with contributing to his successes. And as he walks down the steps of the MIT economics building toward his wife, I am struck that someone who has accomplished so much in—and for—his profession should be so unassuming. A modest man, who has little to be modest about.

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