Academic journal article The Reserve Bank of New Zealand Bulletin

Events Precede Ideas: Bob Gordon on Macroeconomics and Monetary Policy

Academic journal article The Reserve Bank of New Zealand Bulletin

Events Precede Ideas: Bob Gordon on Macroeconomics and Monetary Policy

Article excerpt

Professor Robert J. Gordon, the well-known macroeconomist, visited New Zealand recently to speak at the international conference "Markets and Models: Policy Frontiers in the AWH Phillips Tradition" held from 9 to 11 July 2008. Professor Gordon is Stanley G. Harris Professor in the Social Sciences and Professor of Economics at Northwestern University in Illinois, USA. He has written extensively on the topics of productivity, price indices and the Phillips curve. He served on the US Boskin Commission in 1995-96, which assessed the accuracy of the US Consumer Price Index. We caught up with Professor Gordon for a chat about macroeconomics and some of the challenges facing monetary policy.

When and why did you choose to become an economist?

My PhD was 41 years ago. As an undergraduate, I briefly majored in history but found it too subjective. I liked the certainty of economics. A major influence was also that my father was a well-known professor at the University of California, who went on to become president of the American Economic Association. I could see the wonderful combination of secure employment with no worries about career advancement or unemployment, together with being a self-employed entrepreneur able to choose, within limits, one's own hours and how you divide up your time.

How did you get on in those early years?

I learned fairly early on that there's a distinction in universities between the insiders and the outsiders. Everybody who receives tenure in a good university faces 35 unrelieved years of doing the same thing, unless they can find something interesting and different to do along the way. Insiders are those who are attracted by university administration. They put a lot of work into being chairman of the department in order to get promoted to being deans, and ultimately to being university presidents.

The outsiders reach out to have an influence on the thinking of people outside their own university. They like to go to conferences, they like to write papers and get them published and change the way people think. I was an outsider from the beginning. I never had any interest in university administration.

How did you come to choose the topics you've focused on?

There are two styles of research at least. There's a style associated with some of the most brilliant economists - for example, Greg Mankiw, Larry Summers - flitting around from topic to topic, having an impact on almost everything they touch, without any particular concentration on a single field. To do that, you've got to be very good and very smart.

There's another style that I associate with the late Zvi Griliches. That style is to own a topic, and to keep coming back to the puzzles in that basic topic. For him, it was everything to do with the production function, whether it was labour, the IQs of twins, capital, or measuring inputs.

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In my case, I started out fairly early, with the Phillips curve and the explanation of inflation. Models of inflation blew up and changed. I thought it was my job and my duty to pick up what Robert Lucas once called the wreckage, and reassemble the pieces and make it work again. That's a lot of what I did, in the first 10 or 15 years after my PhD.

I always had a second line of work, which continues to this day. That was an interest in economic measurement, especially of prices. I worked for many years on a book, published in 1990, in which I went back to the drawing board and tried to find ways of measuring prices that were completely independent of the way the government computed their own price indexes. I was particularly interested in durable goods like automobiles and computers. Two of the most important sources that I used were the Sears, Roebuck catalogue and Consumer Reports magazine. These had the kinds of nitty-gritty data that I needed. Lo and behold, I found that the official price indexes for these durable goods were biased upwards. …

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