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George Arthur Akerlof (born June 17, 1940) is an American economist and Koshland Professor of Economics at the University of California, Berkeleymarker. He won the 2001 Nobel Prize in Economics (shared with Michael Spence and Joseph E. Stiglitz). His father was Swedish and his mother a Jewish/German-American. Akerlof graduated from the Lawrenceville Schoolmarker and received hisB.A. degree from Yale Universitymarker in 1962, and his Ph.D. degree from MITmarker in 1966, and has taught at the London School of Economicsmarker. His maternal great-grandfather was born in Oakland, Californiamarker and was an alumnus of UC Berkeley (class of 1873). His maternal grandfather was also a Berkeley alumnus. His wife Janet Yellen is president of the Federal Reserve Bank of San Franciscomarker and a professor of economics at UC Berkeley and served on President Bill Clinton's Council of Economic Advisors.Akerlof is perhaps best known for his article, "The Market for Lemons: Quality Uncertainty and the Market Mechanism", published in Quarterly Journal of Economics in 1970, in which he identified certain severe problems that afflict markets characterized by asymmetrical information.

Berkeley and trip to India

After Akerlof graduated from MIT in 1966 he obtained an assistant professorship at Berkeley. He wrote the original draft of "The Market for Lemons" in his first year at Berkeley. In 1967-68 he took leave from Berkeley to spend a year at the Indian Statistical Institute in New Delhi, where Steve Marglin headed a group that was seeking to develop a program to allocate the waters of the Bhakra-Nangal Dam in northern Punjab. He wanted to produce a timetable for the release of the water so that peasants planting the new varieties of wheat could be assured that they would get the water they needed to make such an investment worthwhile. He was brought into the project as an extra. By joining it, he thought that he would gain a first-hand view why India was so poor. His role in the project very quickly came to an end, when he discovered problems with the basic assumption needed to make the project feasible. Because of unseasonal rain and glacial melt he was unable to predict winter in flow into the reservoir from the rainfall of the previous monsoon. Instead, he wrote a paper on Federal-State fiscal policy in India. Planning had been temporarily suspended in India because of the bad monsoons, and his paper gave principles for planning if it should be revived.

He also revised "The Market for 'Lemons'" which was rejected two or three times in the course of the year by editors who felt that the issues in the paper were too trivial to merit publication in a serious academic journal. He included examples of incomplete markets from his readings of Indian economic history.

The trip to India was important for his intellectual development. Especially, it confirmed for him that nonstandard analyses were needed to understand many economic transactions. What he learned in India became the keystone for his later contributions to the development of an efficiency wage theory of unemployment in Western countries. This theory unfolded over the next twenty years. Joseph Stiglitz visited Kenya at about the same time and developed models embodying alternative efficiency wage theory based on his similar observations of the underdeveloped world.

In Efficiency Wage Models of the Labor Market, Akerlof and coauthor Janet Yellen propose rationales for the efficiency wage hypothesis in which employers pay above the market-clearing wage, in contradiction to the conclusions of neoclassical economics.

Reproductive technology shock

In the late 1990s Akerlof's ideas attracted the attention of some on both sides of the debate over legal abortion. In articles appearing in The Quarterly Journal of Economics, The Economic Journal, and other forums Akerlof described a phenomenon that he labeled "reproductive technology shock." He contended that the new technologies that had helped to spawn the late twentieth century sexual revolution, modern contraceptives and legal abortion, had not only failed to suppress the incidence of out-of-wedlock childbearing, they had actually worked to increase it. According to Akerlof, for women who did not use them, these technologies had largely transformed the old paradigm of socio-sexual assumptions, expectations, and behaviors in ways that were especially disadvantageous. For example, the availability of legal abortion now allowed men to view their offspring as the deliberate product of female choice rather than as the chance product of sexual intercourse. Thus it encouraged biological fathers not only to reject any supposed obligation to marry the mother, but to reject the very idea of paternal obligation.

While Akerlof did not recommend legal restrictions on either abortion or the availability of contraceptives, his analysis seemed to lend support to those who did. Thus, a scholar strongly associated with liberal and Democratic-leaning policy positions, has been approvingly cited by conservative and Republican-leaning analysts and commentators.

Address to American Economic Association

In his 2007 presidential Address to the American Economic Association, Akerlof proposed natural norms that decision makers have for how they should behave. In this lecture Akerlof proposed a new agenda for macroeconomics with inclusion of those norms.

He is a trustee of the Economists for Peace and Security, and co-director of the Social Interactions, Identity and Well-Being program at CIFAR.

Bibliography

  • Akerlof, George A. and Robert J. Shiller. 2009. "Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism", Princeton, New Jersey: Princeton University Press. ISBN 978-0-691-14233-6.
  • Akerlof, George. " Thoughts on global warming." chinadialogue (2006). 14 July 2008.
  • Akerlof, George A. 2005. "Explorations in Pragmatic Economics", Oxford University Press. ISBN 0-19-925390-0.
  • Akerlof, George, and Janet Yellen. 1986. Efficiency Wage Models of the Labor Market. Orlando, Fla.: Academic Press.
  • Akerlof, George A. 1984. "An Economic Theorist's Book of Tales", Cambridge University Press.


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