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.

Leif Johansen (1930-1982): A Memorial

Abstract: Leif Johansen's first published article appeared in 1952, when he was just 22 years old. It must have been an early student paper, because his first degree in economics dates from 1952. I have no way of knowing what sort of student he was, or when his teachers and contemporaries first recognized the extraordinary and rather special talent that he had. Others will no doubt report at first hand on those biographical details. He began to publish regularly in 1955, as a research assistant at The University of Oslo. An article in English appeared in 1956, but it was published in Ekonomisk Tidsskrift. I certainly did not know of its existence, and I doubt that it was much read outside the Scandinavian countries. I cannot remember whether I read his "Note on the Theory of Interindustrial Wage Differentials" in 1958. But of course he burst on the world of English-speaking economics in 1959 with the famous "Substitution versus Fixed Production Coefficients in the Theory of Economic Growth". I can easily remember what an exhilarating pleasure it was to read that article. (He sent me a copy of the manuscript and we corresponded before it appeared in Econometrica.) The idea and its execution were a particular delight to someone like me who was then working on the same set of problems. There was an additional source of excitement, however, the unmistakable experience of meeting a powerful, lively, and original mind. I do not suppose that it was obvious then that Norwegian economics had found a natural successor to Frisch and Haavelmo, someone who could carry on the great tradition at Oslo. But it must soon have become clear to everyone who read his work. So the sudden and unexpected death of Leif Johansen at the sadly early age of 52 is a tragedy not only for Norwegian economics but for economics everywhere. It is, nevertheless, a special and

What's Right with Macroeconomics?

Abstract: Contents: Preface About the Series: Professor Robert M. Solow Introduction: Passing the Smell Test Robert M. Solow and Jean-Philippe Touffut 1. The Fireman and the Architect Xavier Timbeau 2. Model Comparison and Robustness: A Proposal for Policy Analysis after the Financial Crisis Volker Wieland 3. The `Hoc' of International Macroeconomics after the Crisis Giancarlo Corsetti 4. Try Again, Macroeconomists Jean-Bernard Chatelain 5. Economic Policies with Endogenous Innovation and Keynesian Demand Management Giovanni Dosi, Giorgio Fagiolo, Mauro Napoletano and Andrea Roventini 6. Booms and Busts: New Keynesian and Behavioural Explanations Paul De Grauwe 7. The Economics of the Laboratory Mouse: Where Do We Go from Here? Xavier Ragot 8. Round Table Discussion: Where is Macro Going? Wendy Carlin, Robert J. Gordon and Robert M. Solow Index

Some Problems of the Theory and Practice of Economic Planning

Abstract: It is an interesting fact that the main line of socialist economics consists almost entirely of a critique of capitalism, with little analysis--much less a blueprint--of the way a socialist economy might operate. Even in the Soviet Union-about which I know precious little--only in recent years has there been any serious theoretical discussion about the principles of tight economic planning. Earlier, there were mainly variations on the question of whether "the law of value still functions under socialism;" if it did, it would be pretty peculiar, considering that it never functioned anywhere else. Today it has become clear that economic planning is a matter of degree, not a matter of Manchester liberalism or of Big Brother. The government has an important guiding role even in capitalist countries, and the degree of centralization varies widely among socialist countries. Instead of a full-dress theory of economic planning, plain economic analysis and discussion of general principles, which will no doubt apply differently in different institutional contexts, now make more sense.

A Contribution to the Empirics of Economic Growth

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

Endogenous Technological Change

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.

Macroeconomics and reality

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

Endogenous Technological Change

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.