Academic journal article Journal of Economic Issues

Vickrey, Eisner, the Budget, and the Goal of Chock-Full Employment

Academic journal article Journal of Economic Issues

Vickrey, Eisner, the Budget, and the Goal of Chock-Full Employment

Article excerpt

The Heterodox Message of Two Leading Economists

William Vickrey and Robert Eisner were leading economists, with impeccable credentials within the economics profession, who rejected natural rate explanations of unemployment and shared a passionate commitment to the aggressive and innovative use of fiscal policy to maintain what Vickrey [1992c] termed "chock-full employment." This paper explores their shared concern with achieving meaningful measures of budget deficits and with fiscal policy for full employment without inflation. [1] Their legacy is vigorously contested. Vickrey, as 1992 president of the American Economic Association and co-winner of the 1996 Nobel Memorial Prize in Economic Science, and Eisner, as 1988 president of the American Economic Association, ranked high in the establishment of the economics profession, and the mainstream of the discipline prefers to overlook the heterodox parts of their work. Vickrey's Nobel Prize was accepted for him, after his death, by his Columbia colleague, C. Lowell Harriss, who stresses Vickrey's work on tra ffic congestion, and in April 1997, Columbia sponsored a colloquium, "Pricing Transportation Right: William Vickrey's Legacy" [McQuaig 1998, 60-62]. The Nobel Prize citation and the "official" celebratory articles in the Scandinavian Journal of Economics and the Journal of Economic Perspectives [Sandmo 1999; Dr[grave{e}]ze 1997; cf. Dr[grave{e}]ze 1995] emphasize Vickrey's early writing on auction design and asymmetric information, leaving it to Richard Holt et al. [1998] to remind economists that in later years Vickrey came to dismiss that work as an abstract theoretical exercise of little ultimate interest. A single sentence in Agnar Sandmo [1999, 178] acknowledges that Vickrey's AEA Presidential Address included a plea for a full employment policy, followed by a guess that Vickrey would have delivered a Nobel Prize Lecture along the same lines. In the context of Vickrey's whole body of work, and the legacy he wished to leave to economics, reducing his message to his early work on auction design is comparab le to reducing Joan Robinson's contribution to imperfect competition (as is not unknown in textbooks on the history of economic thought). Similarly, different camps within economics remember Eisner for econometric studies of aggregate investment or, alternatively, as an outspoken opponent of the natural rate hypothesis. Although Eisner was an AEA past president and professor at Northwestern University, his later essays attacking NAIRU (the non-accelerating inflation rate of unemployment of Milton Friedman and Edmund Phelps) did not appear in mainstream journals, but rather in conference volumes edited by Post Keynesians or issued by such heterodox groups as the Economic Policy Institute (see the essays collected in Eisner [1999]). The exception is that the AEA Papers and Proceedings published Eisner's last paper, completed by his coauthors after his death [Coen et al. 1999].

Vickrey [1992a, 1999b, 1999c, 1993a] used his position as president-elect (program chair of the annual meeting) and president of the American Economic Association to present his heterodox macroeconomic message to the profession. His eminent former students in mainstream public economics could hardly exclude his AEA Presidential Address when editing a collection of his articles [Vickrey 1994], but they left out his three papers from the 1992 AEA meeting he organized, his heterodox addresses to the International Atlantic Economic Society [Vickrey 1986b, 1993b], his papers on the macroeconomics of disarmament, and his Seidman Award 2 acceptance paper [Vickrey 1992d]. [2] Speaking to the press after winning the Nobel Prize, Vickrey answered questions about traffic congestion and auction design but stressed the need for larger budget deficits to redirect resources to reducing unemployment. Shortly before, Vickrey had written a 22-page, single-spaced denunciation of "Fifteen Fatal Fallacies of Financial Fundamenta lism: A Disquisition on the Demand Side of Economics," which was rejected by the New York Times Magazine. …

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