Robert Solow Explained

Robert Solow
School Tradition:Neo-Keynesian economics
Birth Name:Robert Merton Solow
Birth Date:23 August 1924
Birth Place:Brooklyn, New York, U.S.
Death Place:Lexington, Massachusetts, U.S.
Institution:Massachusetts Institute of Technology
Field:Macroeconomics
Doctoral Advisor:Wassily Leontief
Doctoral Students:George Akerlof[1]
Mario Baldassarri[2]
Francis M. Bator[3]
Charlie Bean[4]
Alan Blinder[5]
Vittorio Corbo
Peter Diamond[6]
Avinash Dixit[7]
Mario Draghi
Alain Enthoven[8]
Ray Fair[9]
Ronald Findlay[10]
Robert J. Gordon[11]
Robert Hall[12]
Michael Intriligator[13]
Katsuhito Iwai[14]
Ronald W. Jones[15]
Arnold Kling

Glenn Loury[16]
Herbert Mohring[17]
William Nordhaus[18]
Last:Perry
First:George
Date:1961
Aggregate wage determination and the problem of inflation
Type:Ph.D.
Publisher:Massachusetts Institute of Technology
Url:http://library.mit.edu/item/000741931
Access-Date:July 4, 2017

Robert Merton Solow, GCIH (; August 23, 1924 – December 21, 2023) was an American economist and Nobel laureate whose work on the theory of economic growth culminated in the exogenous growth model named after him.[19] [20]

He was Institute Professor Emeritus of Economics at the Massachusetts Institute of Technology, where he was a professor from 1949 on.[21] He was awarded the John Bates Clark Medal in 1961,[22] the Nobel Memorial Prize in Economic Sciences in 1987,[23] and the Presidential Medal of Freedom in 2014.[24] Four of his PhD students, George Akerlof, Joseph Stiglitz, Peter Diamond, and William Nordhaus, later received Nobel Memorial Prizes in Economic Sciences in their own right.[25] [26] [27] while an undergraduate student of Solow, H. Robert Horvitz, won in medicine.

Biography

Robert Solow was born in Brooklyn, New York, into a Jewish family on August 23, 1924, the oldest of three children. He regarded his parents as being very intelligent despite their not being able to attend college due to the necessity to work.[28] He was well educated in the neighborhood public schools and excelled academically early in life.[29] In September 1940, Solow went to Harvard College with a scholarship at the age of 16. At Harvard, his first studies were in sociology and anthropology as well as elementary economics.[29]

In 1942, Solow left the university and joined the U.S. Army. Because he was fluent in German, the Army put him on a task force whose primary purpose was to intercept, interpret, and send back German messages to base.[30] He served briefly in North Africa and Sicily, and later in Italy until he was discharged in August 1945.[29] [31] Shortly after returning, he proceeded to marry his girlfriend, Barbara Lewis (died 2014), whom he had been dating for six weeks.[30]

Solow returned to Harvard in 1945, and studied under Wassily Leontief. As Leontief's research assistant he produced the first set of capital-coefficients for the input–output model. Then he became interested in statistics and probability models. From 1949 to 1950, he spent a fellowship year at Columbia University to study statistics more intensively. During that year he also worked on his Ph.D. thesis, an exploratory attempt to model changes in the size distribution of wage income using interacting Markov processes for employment-unemployment and wage rates.[29]

In 1949, just before going off to Columbia, he was offered and accepted an assistant professorship in the Economics Department at Massachusetts Institute of Technology. At MIT he taught courses in statistics and econometrics. Solow's interest gradually changed to macroeconomics. For almost 40 years, Solow and Paul Samuelson worked together on many landmark theories: von Neumann growth theory (1953), theory of capital (1956), linear programming (1958) and the Phillips curve (1960).

Solow also held several government positions, including senior economist for the Council of Economic Advisers (1961–62) and member of the President's Commission on Income Maintenance (1968–70). His studies focused mainly in the fields of employment and growth policies, and the theory of capital.

In 1961 he won the American Economic Association's John Bates Clark Award, given to the best economist under age forty. In 1979 he served as president of that association. In 1987, he won the Nobel Prize for his analysis of economic growth[29] and in 1999, he received the National Medal of Science. In 2011, he received an honorary degree in Doctor of Science from Tufts University.[32]

Solow was the founder of the Cournot Foundation and the Cournot Centre. After the death of his colleague Franco Modigliani, Solow accepted an appointment as new Chairman of the I.S.E.O Institute, an Italian nonprofit cultural association which organizes international conferences and summer schools. He was a founding trustee of the Economists for Peace and Security.[33]

Solow's students include Nobel Prize winners Peter Diamond, George Akerlof, Joseph Stiglitz, and William Nordhaus, as well as Michael Rothschild, Halbert White, Charlie Bean, Michael Woodford, and Harvey Wagner.

Solow was one of the signees of a 2018 amicus curiae brief that expressed support for Harvard University in the Students for Fair Admissions v. President and Fellows of Harvard College lawsuit. Signers of the brief include Alan B. Krueger, George A. Akerlof, Janet Yellen, and Cecilia Rouse.[34]

Solow was one of the supporters of Joe Biden's Inflation Reduction Act of 2022.[35]

Solow died at his home in Lexington, Massachusetts, on December 21, 2023, at the age of 99.[36]

Model of economic growth

Solow's model of economic growth, often known as the Solow–Swan neoclassical growth model as the model was independently discovered by Trevor W. Swan and published in "The Economic Record" in 1956, allows the determinants of economic growth to be separated into increases in inputs (labour and capital) and technical progress. The reason these models are called "exogenous" growth models is the saving rate is taken to be exogenously given. Subsequent work derives savings behavior from an inter-temporal utility-maximizing framework. Using his model, Solow (1957) calculated that about four-fifths of the growth in US output per worker was attributable to technical progress.Solow also was the first to develop a growth model with different vintages of capital.[37] The idea behind Solow's vintage capital growth model is that new capital is more valuable than old (vintage) capital because new capital is produced through known technology. He first states that capital must be a finite entity because all of the resources on the earth are indeed limited.[30] Within the confines of Solow's model, this known technology is assumed to be constantly improving. Consequently, the products of this technology (the new capital) are expected to be more productive as well as more valuable.[37]

The idea lay dormant for some time perhaps because Dale W. Jorgenson (1966) argued that it was observationally equivalent with disembodied technological progress, as advanced earlier in Solow (1957). It was successfully advanced in subsequent research by Jeremy Greenwood, Zvi Hercowitz and Per Krusell (1997), who argued that the secular decline in capital goods prices could be used to measure embodied technological progress. They labeled the notion investment-specific technological progress. Solow (2001) approved. Both Paul Romer and Robert Lucas, Jr. subsequently developed alternatives to Solow's neoclassical growth model.[37]

To better communicate the meaning behind his work, Solow used a graphical design to illustrate his concepts. On the x-axis he puts capital per worker and for the y-axis he uses output per worker. The reason for graphing capital and output per worker is due to his assumption that the nation is at full employment. The first (top) curve represents the output produced at each given level of capital. The second (middle) curve shows the depreciating nature of capital which remains constantly positive. The third curve (bottom) conveys savings/investment per worker. As the old machinery wears down and breaks, new capital goods must be bought to replace the old. The point where the two lines meet is known as the steady state level, which means that the nation is producing just enough to be able to replace the old capital. Countries that are closer to the steady state level, on the left side, grow more slowly when compared to countries closer to the vertex of the graph. When countries are to the right of the steady state level, they are not growing because all the returns they create needs to go to replacing and repairing their old capital.[38]

Since Solow's initial work in the 1950s, many more sophisticated models of economic growth have been proposed, leading to varying conclusions about the causes of economic growth. For example, rather than assuming, as Solow did, that people save at a given constant rate, subsequent work applied a consumer-optimization framework to derive savings behavior endogenously, allowing saving rates to vary at different points in time, depending on income flows, for example. In the 1980s efforts have focused on the role of technological progress in the economy, leading to the development of endogenous growth theory (or new growth theory). Today, economists use Solow's sources-of-growth accounting to estimate the separate effects on economic growth of technological change, capital, and labor.[37]

In 2022, Solow was still an emeritus Institute Professor in the MIT economics department..[39]

Honors

Publications

Books

Journal articles

See also: Nicholas Georgescu-Roegen and Joseph Stiglitz.

See also

Sources

External links

Notes and References

  1. Akerlof . George A. . 1966 . Wages and capital . Ph.D. . Massachusetts Institute of Technology . June 28, 2017 . August 19, 2017 . https://web.archive.org/web/20170819142909/http://dspace.mit.edu/bitstream/handle/1721.1/12962/26075763-MIT.pdf?sequence=2 . live .
  2. Baldassarri . Mario . 1978 . Government investment, inflation and growth in a mixed economy : theoretical aspects and empirical evidence of the experience of Italian government corporation investments . Ph.D. . Massachusetts Institute of Technology . 1721.1/99791.
  3. Bator . Francis M. . 1956 . Capital, Growth and Welfare—Theories of Allocation . Ph.D. . Massachusetts Institute of Technology . 1721.1/97306.
  4. Bean . Charles Richard . 1982 . Essays in unemployment and economic activity . Ph.D. . Massachusetts Institute of Technology . June 30, 2017 . May 26, 2020 . https://web.archive.org/web/20200526091408/http://library.mit.edu/F/?func=find-b&find_code=SYS&local_base=mit01pub&request=000124484 . live .
  5. Blinder . Alan S. . 1971 . Towards an Economic Theory of Income Distribution . Ph.D. . Massachusetts Institute of Technology . July 1, 2017.
  6. https://www.nobelprize.org/nobel_prizes/economics/laureates/2010/diamond-autobio.pdf Peter A. Diamond – Autobiography – Nobelprize.org
  7. Dixit . Avinash K. . 1968 . Development Planning in a Dual Economy . Ph.D. . Massachusetts Institute of Technology . July 1, 2017.
  8. Enthoven . Alain C. . 1956 . Studies in the theory of inflation . Ph.D. . Massachusetts Institute of Technology . June 30, 2017.
  9. Fair . Ray C. . 1968 . The Short Run Demand for Employment . Ph.D. . Massachusetts Institute of Technology . 1721.1/80461.
  10. Findlay . Ronald Edsel . 1960 . Essays on Some Theoretical Aspects of Economic Growth . Ph.D. . Massachusetts Institute of Technology . June 30, 2017.
  11. Gordon . Robert J. . 1967 . Problems in the measurement of real investment in the U.S. private economy . Ph.D. . . 1721.1/105586.
  12. Hall . Robert E. . 1967 . Essays on the Theory of Wealth . Ph.D. . Massachusetts Institute of Technology . July 5, 2017.
  13. PhD . Intriligator . Michael D. . 1963 . Essays on productivity and savings . . 33811859.
  14. Iwai . Katsuhito . 1972 . Essays on Dynamic Economic Theory – Fisherian Theory of Optimal Capital Accumulation and Keynesian Short-run Disequilibrium Dynamics . Ph.D. . Massachusetts Institute of Technology . July 5, 2017.
  15. Jones . Ronald Winthrop . 1956 . Essays in the Theory of International Trade and the Balance of Payments . Ph.D. . Massachusetts Institute of Technology . 1721.1/106042.
  16. Loury . Glenn Cartman . 1976 . Essays in the Theory of the Distribution of Income . Ph.D. . Massachusetts Institute of Technology . 1721.1/27456.
  17. Mohring . Herbert D. . 1959 . The life insurance industry: a study of price policy and its determinants . Ph.D. . Massachusetts Institute of Technology . 1721.1/11790.
  18. Nordhaus . William Dawbney. . 1967 . A Theory of Endogenous Technological Change . Ph.D. . Massachusetts Institute of Technology . July 1, 2017. 18. Turgay Özkan
  19. Encyclopedia: Robert M. Solow American economist. Encyclopedia Britannica. June 8, 2017. en. August 1, 2017. https://web.archive.org/web/20170801185725/https://www.britannica.com/biography/Robert-Solow. live.
  20. Web site: Prospects for growth: An interview with Robert Solow. September 2014. McKinsey & Company. en. June 8, 2017. June 22, 2017. https://web.archive.org/web/20170622022118/http://www.mckinsey.com/global-themes/employment-and-growth/prospects-for-growth-an-interview-with-robert-solow. dead.
  21. Web site: MIT Economics Faculty. Massachusetts Institute of Technology. August 27, 2017. August 17, 2017. https://web.archive.org/web/20170817061534/http://economics.mit.edu/faculty. live.
  22. Web site: American Economic Association. www.aeaweb.org. en. June 8, 2017. August 1, 2017. https://web.archive.org/web/20170801102752/https://www.aeaweb.org/about-aea/honors-awards/bates-clark/robert-solow. live.
  23. Web site: Robert M. Solow – Biographical. Solow. Robert M.. www.nobelprize.org. June 8, 2017. December 12, 2017. https://web.archive.org/web/20171212003000/https://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/1987/solow-bio.html. live.
  24. News: President Obama Announces the Presidential Medal of Freedom Recipients. Schulman. Kori. November 10, 2014. whitehouse.gov. June 8, 2017. en. January 21, 2017. https://web.archive.org/web/20170121131137/https://obamawhitehouse.archives.gov/blog/2014/11/10/president-obama-announces-presidential-medal-freedom-recipients. live.
  25. Book: Dieterle, David A. Economics: The Definitive Encyclopedia from Theory to Practice. Greenwood. 2017. 978-0313397073. 4. 376.
  26. Web site: MIT Libraries' catalog – Barton – Full Catalog – Full Record. library.mit.edu. October 10, 2018. December 21, 2023. https://web.archive.org/web/20231221235732/https://libraries.mit.edu/research-support/new-search-platform-launched/. live.
  27. News: Nobel Prize in economics awarded to William Nordhaus and Paul Romer. Ivana Kottasová. CNN. October 10, 2018. October 9, 2018. https://web.archive.org/web/20181009231535/https://edition.cnn.com/2018/10/08/business/nobel-prize-economics/index.html. live.
  28. Web site: Martin . Caine . Robert Solow . youtube . InfiniteHistoryProjectMIT . November 13, 2019.
  29. Web site: Robert M. Solow – Autobiography . Nobelprize.org . August 23, 1924 . April 17, 2021 . April 17, 2021 . https://web.archive.org/web/20210417064000/https://www.nobelprize.org/prizes/economic-sciences/1987/solow/biographical/ . live .
  30. Web site: Martin . Caine . Robert Solow . https://ghostarchive.org/varchive/youtube/20211118/TSZsy33KhGs. November 18, 2021 . live. Youtube . InfiniteHistoryProjectMIT . November 13, 2019.
  31. Web site: Robert M Solow – Middlesex Massachusetts – Army of the United States. wwii-army.mooseroots.com. en-us. June 8, 2017.
  32. Web site: Honorary Degree Recipients 2011 . 2023-12-22 . Commencement . en . December 22, 2023 . https://web.archive.org/web/20231222145234/https://commencement.tufts.edu/honorary-degree-recipients/honorary-degree-recipients-2011/ . live .
  33. Web site: Economists for Peace & Security . January 21, 2021 . January 27, 2020 . https://web.archive.org/web/20200127215810/http://epsusa.org/main/who.htm . dead .
  34. Web site: Economists amended brief . October 22, 2018 . https://web.archive.org/web/20181022193921/https://admissionscase.harvard.edu/files/adm-case/files/economists_amended_brief_dkt._527-1.pdf . admissionscase.harvard.edu. December 30, 2018.
  35. Web site: DocumentCloud . August 9, 2022 . August 9, 2022 . https://web.archive.org/web/20220809003531/https://www.documentcloud.org/documents/22124998-letter-from-economists-to-congressional-leadership . live .
  36. News: Hershey . Robert . Weinstein . Michael . Robert M. Solow, Groundbreaking Economist and Nobelist, Dies at 99 . The New York Times . December 21, 2023 . December 21, 2023 . December 21, 2023 . https://web.archive.org/web/20231221235543/https://www.nytimes.com/2023/12/21/business/robert-solow-dead.html . live .
  37. Haines . Joel D. . Sharif, Nawaz M. . 2006 . A framework for managing the sophistication of the components of technology for global competition . Competitiveness Review . 16 . 2 . 10.1108/cr.2006.16.2.106 . 106–21 .
  38. Martin . Caine . A Contribution to the Theory of Economic Growth . The Quarterly Journal of Economics . February 1956 . 70 . 1 . 65–94 . 10.2307/1884513 . 1884513 . 10338.dmlcz/143862 . November 13, 2019 . July 31, 2020 . https://web.archive.org/web/20200731145804/https://www.econ.nyu.edu/user/debraj/Courses/Readings/Solow.pdf . live .
  39. Web site: Faculty | MIT Economics . October 29, 2022 . October 29, 2022 . https://web.archive.org/web/20221029004420/https://economics.mit.edu/people/faculty . live .
  40. Web site: Cidadãos Nacionais Agraciados com Ordens Portuguesas. Página Oficial das Ordens Honoríficas Portuguesas. July 31, 2017. February 8, 2012. https://web.archive.org/web/20120208164102/http://www.ordens.presidencia.pt/?idc=154. live.
  41. Web site: Robert Merton Solow . June 21, 2022 . American Academy of Arts & Sciences . en . June 21, 2022 . https://web.archive.org/web/20220621151112/https://www.amacad.org/person/robert-merton-solow . live .
  42. Web site: Robert M. Solow . June 21, 2022 . nasonline.org . August 14, 2022 . https://web.archive.org/web/20220814091914/http://www.nasonline.org/member-directory/members/50260.html . live .
  43. Web site: APS Member History . June 21, 2022 . search.amphilsoc.org . June 21, 2022 . https://web.archive.org/web/20220621150757/https://search.amphilsoc.org/memhist/search?creator=Robert+Solow&title=&subject=&subdiv=&mem=&year=&year-max=&dead=&keyword=&smode=advanced . live .

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