How central banks are ruled by men from MIT…

I wish there were more women central bankers and trained at MIT..,the title of the post would have been less biased..

In case people have not read this article, it is a must read. Our economic lives are increasingly in the hands of econs trained at MIT:

As financial turmoil in Europe threatened to overwhelm the region’s banks last November, Bank of England Governor Mervyn King arranged conference calls with the world’s top central bankers to decide what steps to take.

The result: Six leading monetary authorities agreed to make it cheaper for financial institutions outside the U.S. to borrow dollars in emergencies. The funding squeeze on European banks eased and stocks worldwide rallied.

The Nov. 30 plan could be created and announced quickly because “we trust each other,” King told reporters the following day in his role as chairman of the bankers’ group.

For some, that trust has a common source: three of the six banks are led by economists who studied or taught at the Massachusetts Institute of Technology in the late 1970s and early 1980s. Then, as now, the emphasis was on what former MIT professor and now Bank of Israel Governor Stanley Fischer describes as “economics about the real world.”

There are some other names as well which have passed gates of MIT:

At MIT, King, 63, and then-professor Ben S. Bernanke, 58, had adjoining offices in 1983, spending the early days of their academic careers in an environment where economics was viewed as a tool to set policy. Earlier, Bernanke and European Central Bank President Mario Draghi, 64, earned their doctorates from the university in the late 1970s, Draghi with a thesis entitled “Essays on Economic Theory and Applications.”

Fischer, 68, advised Bernanke’s thesis on “Long-Term Commitments, Dynamic Optimization and the Business Cycle,” and taught Draghi. Greek Prime Minister and former ECB vice president Lucas Papademos and Olivier Blanchard, now chief economist for theInternational Monetary Fund in Washington, earned their doctorates from MIT at about the same time.

Other monetary policy makers who have passed through MIT’s doors include Athanasios Orphanides, head of the Central Bank of Cyprus, Duvvuri Subbarao, governor of the Reserve Bank of India and Charles Bean, King’s deputy in the U.K.

The authors say it is not just because of its rankings. It focuses more on real world policy:

Central banking is filled with former attendees of the Cambridge, Massachusetts, university not just because it was and is one of the world’s top schools for economics.

Its emphasis on solving policy problems instead of perfecting theories, as well as a collegial atmosphere, attracted students and professors alike. That was especially true during the late 1970s and early 1980s, when global oil- price shocks helped trigger both inflation andrecession.

“The faculty makes the place but the students also make the place,” Fischer said in a telephone interview. “One of the reasons you go to MIT is because you have the best students in the world.” To him, economics was a tool to “do something useful.”

“The goal was not to find beautiful theories, the goal was to have a grasp of what was actually happening, and we taught it that way,” said Robert Solow, a Nobel-prize winning economist who started as an associate professor at MIT in 1950 and has stayed there for his entire career. “We turned out students who were actually interested in macroeconomic policy and understanding daily events and not in showing off.”

This is the typical freshwater vs saltwater debate with latter focusing on real world policies. MIT clearly is a saltwater school…

Interesting stuff on MIT connections…


6 Responses to “How central banks are ruled by men from MIT…”

  1. Vipul Vivek Says:

    is there any similar comparison (freshwater v/s saltwater) of Indian economics departments?

  2. PB Says:

    I see a concentration risk.

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