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Robert M. Solow

Bio: Robert M. Solow is an academic researcher from Massachusetts Institute of Technology. The author has contributed to research in topics: Unemployment & Medicine. The author has an hindex of 77, co-authored 264 publications receiving 57825 citations. Previous affiliations of Robert M. Solow include Princeton University & New York University.
Topics: Unemployment, Medicine, Productivity, Inflation, Wage


Papers
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10 citations

Journal ArticleDOI
TL;DR: I would like to state, briefly and bluntly, why I think the various "Doomsday Models" are worthless as science and as guides to public policy.
Abstract: I would like to state, briefly and bluntly, why I think the various \"Doomsday Models\" are worthless as science and as guides to public policy. I hope it will not be deduced that I believe the problems of population control, environmental degradation, and resource exhaustion to be unimportant, or that I think an adequate response to them is a vague confidence that something will turn up. They are important problems and, for that very reason, public policy had better be based on sound and careful analysis. I do not think that the global models under discussion provide even the beginnings of that kind of foundation. What follows are some of my reasons.

10 citations

Posted Content
TL;DR: In this paper, the authors present an exposition of the one-sector neoclassical growth model, which is a simplified description of the real side of a growing capitalist economy that happens to be free of fluctuations in aggregate demand.
Abstract: This chapter is an exposition, rather than a survey, of the one-sector neoclassical growth model. It describes how the model is constructed as a simplified description of the real side of a growing capitalist economy that happens to be free of fluctuations in aggregate demand. Once that is done, the emphasis is on the versatility of the model, in the sense that it can easily be adapted, without much complication, to allow for the analysis of important issues that are excluded from the basic model.Among the issues treated are: increasing returns to scale (but not to capital alone), human capital, renewable and non-renewable natural resources, endogenous population growth and technological progress. In each case, the purpose is to show how the model can be minimally extended to allow incorporation of something new, without making the analysis excessively complex.Toward the end, there is a brief exposition of the standard overlapping-generations model, to show how it admits qualitative behavior generally absent from the original model.The chapter concludes with brief mention of some continuing research questions within the framework of the simple model.

9 citations

Journal ArticleDOI
TL;DR: Friedman's famous presidential address of 1968 is nominally about the uses and conduct of monetary policy, but there is also a fairly plain, broader subtext as mentioned in this paper, which aims to undermine the eclectic American Keynesianism of the 1950s and 1960s.
Abstract: Milton Friedman’s famous presidential address of 1968 is nominally about the uses and conduct of monetary policy. But there is also a fairly plain, broader subtext. It aims to undermine the eclectic American Keynesianism of the 1950s and 1960s, the habits of thought to which Joan Robinson attached the (unintentionally) complimentary label of ‘bastard’ Keynesianism. I will only say a little about what that was. In fact, the adjective ‘eclectic’ is meant to remind you that it was not a tight axiomatic doctrine but rather the collection of ideas in terms of which people like James Tobin, Arthur Okun, Paul Samuelson and others (including me) discussed macroeconomic events and policies. These ideas usually included a distinction between aggregate demand and aggregate supply (or ‘potential’) along with the understanding that equilibrating mechanisms were weak enough and slow enough that persistent gaps could exist between them. When demand fell short of potential, some version of the IS–LM model was standard, to which extensions and refinements could be added when needed. In due course one or another variant of the Phillips curve became part of the standard apparatus. A systematic allowance for supply shocks and their consequences came later and was duly absorbed. In the section on ‘What monetary policy cannot do,’ Friedman goes after two of these lines of thought. His first claim is that the central bank, the Fed, cannot ‘peg’ the real interest rate. (The meaning of ‘peg’ will turn out to be important.) It has to be the real interest rate if it is to affect investment and other spending. The point here is to undermine the standard LM curve. Nowadays it is common practice to replace the old LM curve with given M by a central-bank reaction function that specifies a real policy rate as a function of the level of economic activity. In this setting Friedman’s claim is that there can be no such reaction function. The Fed can peg the nominal federal funds rate, but not the real rate. The basic reason is that the Fed controls a nominal variable, the size of its own balance sheet, and it can use this control to determine another nominal quantity but not a real one. (Eclectic American Keynesians took it more or less for granted that the woods were full of rigidities, lags, and irrationalities, so that nominal events could easily have real consequences.) But the essence of Friedman’s argument is explained more concretely. Suppose the Fed tries to achieve a lower real interest rate (starting from some initial equilibrium position); open-market purchases of securities will raise their price and lower their nominal yield. The price level does not respond instantaneously, however, so the real rate of interest also falls. As Friedman says, this is only the beginning of the process, not the end. Lower interest rates and higher cash balances will stimulate investment and perhaps other spending. (This was presumably the Fed’s purpose in the first place.) Higher spending will increase the demand for credit, raise prices and thus reduce real cash balances, and so on. After a brief discussion, Friedman comes to the point I want to emphasize. ‘These ... effects will reverse the initial downward pressure on interest rates fairly promptly, say, in something less than a year. Together Review of Keynesian Economics, Vol. 6 No. 4, Winter 2018, pp. 421–424

9 citations


Cited by
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Journal ArticleDOI
TL;DR: In this article, the authors consider the prospects for constructing a neoclassical theory of growth and international trade that is consistent with some of the main features of economic development, and compare three models and compared to evidence.

16,965 citations

Journal ArticleDOI
TL;DR: The authors examined whether the Solow growth model is consistent with the international variation in the standard of living, and they showed that an augmented Solow model that includes accumulation of human as well as physical capital provides an excellent description of the cross-country data.
Abstract: This paper examines whether the Solow growth model is consistent with the international variation in the standard of living. It shows that an augmented Solow model that includes accumulation of human as well as physical capital provides an excellent description of the cross-country data. The paper also examines the implications of the Solow model for convergence in standards of living, that is, for whether poor countries tend to grow faster than rich countries. The evidence indicates that, holding population growth and capital accumulation constant, countries converge at about the rate the augmented Solow model predicts. This paper takes Robert Solow seriously. In his classic 1956 article Solow proposed that we begin the study of economic growth by assuming a standard neoclassical production function with decreasing returns to capital. Taking the rates of saving and population growth as exogenous, he showed that these two vari- ables determine the steady-state level of income per capita. Be- cause saving and population growth rates vary across countries, different countries reach different steady states. Solow's model gives simple testable predictions about how these variables influ- ence the steady-state level of income. The higher the rate of saving, the richer the country. The higher the rate of population growth, the poorer the country. This paper argues that the predictions of the Solow model are, to a first approximation, consistent with the evidence. Examining recently available data for a large set of countries, we find that saving and population growth affect income in the directions that Solow predicted. Moreover, more than half of the cross-country variation in income per capita can be explained by these two variables alone. Yet all is not right for the Solow model. Although the model correctly predicts the directions of the effects of saving and

14,402 citations

ReportDOI
TL;DR: In this paper, the authors show that the stock of human capital determines the rate of growth, that too little human capital is devoted to research in equilibrium, that integration into world markets will increase growth rates, and that having a large population is not sufficient to generate growth.
Abstract: Growth in this model is driven by technological change that arises from intentional investment decisions made by profit-maximizing agents. The distinguishing feature of the technology as an input is that it is neither a conventional good nor a public good; it is a nonrival, partially excludable good. Because of the nonconvexity introduced by a nonrival good, price-taking competition cannot be supported. Instead, the equilibrium is one with monopolistic competition. The main conclusions are that the stock of human capital determines the rate of growth, that too little human capital is devoted to research in equilibrium, that integration into world markets will increase growth rates, and that having a large population is not sufficient to generate growth.

12,469 citations

Journal ArticleDOI
TL;DR: In this article, the authors argue that the style in which their builders construct claims for a connection between these models and reality is inappropriate, to the point at which claims for identification in these models cannot be taken seriously.
Abstract: Existing strategies for econometric analysis related to macroeconomics are subject to a number of serious objections, some recently formulated, some old. These objections are summarized in this paper, and it is argued that taken together they make it unlikely that macroeconomic models are in fact over identified, as the existing statistical theory usually assumes. The implications of this conclusion are explored, and an example of econometric work in a non-standard style, taking account of the objections to the standard style, is presented. THE STUDY OF THE BUSINESS cycle, fluctuations in aggregate measures of economic activity and prices over periods from one to ten years or so, constitutes or motivates a large part of what we call macroeconomics. Most economists would agree that there are many macroeconomic variables whose cyclical fluctuations are of interest, and would agree further that fluctuations in these series are interrelated. It would seem to follow almost tautologically that statistical models involving large numbers of macroeconomic variables ought to be the arena within which macroeconomic theories confront reality and thereby each other. Instead, though large-scale statistical macroeconomic models exist and are by some criteria successful, a deep vein of skepticism about the value of these models runs through that part of the economics profession not actively engaged in constructing or using them. It is still rare for empirical research in macroeconomics to be planned and executed within the framework of one of the large models. In this lecture I intend to discuss some aspects of this situation, attempting both to offer some explanations and to suggest some means for improvement. I will argue that the style in which their builders construct claims for a connection between these models and reality-the style in which "identification" is achieved for these models-is inappropriate, to the point at which claims for identification in these models cannot be taken seriously. This is a venerable assertion; and there are some good old reasons for believing it;2 but there are also some reasons which have been more recently put forth. After developing the conclusion that the identification claimed for existing large-scale models is incredible, I will discuss what ought to be done in consequence. The line of argument is: large-scale models do perform useful forecasting and policy-analysis functions despite their incredible identification; the restrictions imposed in the usual style of identification are neither essential to constructing a model which can perform these functions nor innocuous; an alternative style of identification is available and practical. Finally we will look at some empirical work based on an alternative style of macroeconometrics. A six-variable dynamic system is estimated without using 1 Research for this paper was supported by NSF Grant Soc-76-02482. Lars Hansen executed the computations. The paper has benefited from comments by many people, especially Thomas J. Sargent

11,195 citations

Posted Content
TL;DR: In this paper, the authors show that the stock of human capital determines the rate of growth, that too little human capital is devoted to research in equilibrium, that integration into world markets will increase growth rates, and that having a large population is not sufficient to generate growth.
Abstract: Growth in this model is driven by technological change that arises from intentional investment decisions made by profit maximizing agents. The distinguishing feature of the technology as an input is that it is neither a conventional good nor a public good; it is a nonrival, partially excludable good. Because of the nonconvexity introduced by a nonrival good, price-taking competition cannot be supported, and instead, the equilibriumis one with monopolistic competition. The main conclusions are that the stock of human capital determines the rate of growth, that too little human capital is devoted to research in equilibrium, that integration into world markets will increase growth rates, and that having a large population is not sufficient to generate growth.

11,095 citations