ROBERT MUNDELL (1932-)

1999 Nobel Laureate IN ECONOMICS

for his analysis of monetary and fiscal policy under different exchange rate regimes and his analysis of optimum currency areas.

Background

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CURRICULUM VITAE

For the past twenty five years, Robert Mundell has been Professor of Economics at Columbia University in New York . He studied at the University of British Columbia and the London School of Economics before receiving his Ph.D. from MIT. He taught at Stanford University and the Bologna (Italy) Center of the School of Advanced International Studies of the Johns Hopkins University before joining, in 1961, the staff of the International Monetary Fund. From 1966 to 1971 he was a Professor of Economics at the University of Chicago and Editor of the Journal of Political Economy; he was also summer Professor of International Economics at the Graduate Institute of International Studies in Geneva, Switzerland. In 1974 he came to Columbia University.

Professor Mundell has lectured widely in North and South America, Europe, Africa, Australia and Asia. He has been an adviser to a number of international agencies and organizations including the United Nations, the IMF, the World Bank, the Government of Canada, several governments in Latin America and Europe, the Federal Reserve Board and the US Treasury. In 1970, he was a consultant to the Monetary Committee of the European Economic Commission, and in 1972-3 a member of the nine consultants to the Commission that prepared a report in Brussels on European monetary integration. He was a member of the Bellagio-Princeton study group on International Monetary Reform from 1964 to 1978 and Chairman of the Santa Colomba Conferences on International Monetary Reform between 1971 and 1987.

The author of numerous works and articles on economic theory of international economics, he is known as the father of the theory of optimum currency areas; he formulated what became a standard international macroeconomics model; he was a pioneer of the theory of the monetary and fiscal policy mix; he reformulated the theory of inflation and interest; he was a co-developer of the monetary approach to the balance of payments; and he was an originator of supply-side economics. He has written extensively on the history of the international monetary system and played a significant role in the founding of the euro. He has also written extensively on the "transition" economies and in 1997 co-founded the Zagreb Journal of Economics.

His books include The International Monetary System: Conflict and Reform (Montreal: Private Planning Association of Canada 1965); Man and Economics (New York: McGraw-Hill 1968); International Economics New York: Macmillan 1968); Monetary Theory: Interest, Inflation and Growth in the World Economy (Pacific Palisades, CA: Goodyear 1971); The New International Monetary System (ed. with J. J. Polak) (1977); Monetary Agenda for the World Economy (ed. with Jack Kemp) (1983); and co-edited books Global Disequilibrium (1990); Debts, Deficits and Economic Performance (1991); and Building the New Europe (ed. with M. Baldassarri) (1992); Inflation and Growth in China (ed. with M. Guitian) (1996); and The Euro as a Stabilizer in the International Monetary System (ed. with A. Clesse) (2000).

Professor Mundell gave the Frank Graham Memorial Lecture at Princeton University in 1965, the Marshall Lectures at Cambridge University in 1974, the Ohlin Lectures in 1998, and the Robbins Memorial Lectures in 2000. In 1983 he received the Jacques Rueff Medal and Prize in the French Senate; in 1997 he became a Distinguished Fellow of the American Economic Association; in 1998, he was made a fellow of the American Academy of Arts and Science; and in 1999, he received the Nobel Memorial Prize in Economic Science. He has received honorary degrees and professorships in several universities in North America, Europe and Asia.

http://www.columbia.edu/%7Eram15/bob2000.html

 

Why Mundell Won the Nobel

For work that led to the euro, not for his supply-side theory

The core of the Reagan Revolution of the 1980s was the idea that cutting taxes would stimulate the economy by restoring people's incentives to work and invest. Big tax cuts, President Reagan argued, would actually increase government revenues in the long run. Reagan learned his supply-side economics from the likes of Jack Kemp, Jude Wanniski, and Arthur B. Laffer. They, in turn, took their inspiration from a Canadian-born economist at Columbia University named Robert A. Mundell.

Naturally, supply-siders were ecstatic on Oct. 13 when Mundell was named the winner of the 1999 Nobel prize in economics. Exulted Wanniski, head of Polyconomics Inc. in Morristown, N.J.: ''Mundell is the most important economist of our time.'' Laffer said Mundell's prize is ''absolutely the most deserved prize I've ever seen in my life'' and called Mundell ''the best economist in the world today.''


But it's wrong to conclude that Mundell's prize constitutes an endorsement of supply-side economics by the Royal Swedish Academy of Sciences. The phrase doesn't even appear in its award announcement. Instead, the academy cites Mundell for his theoretical work in the 1960s on monetary and fiscal policy in open economies.

What's more, although Mundell is a fervent believer in tax cuts, he isn't as doctrinaire about supply-side theory as his own followers are. For instance, he believes that tight monetary policy triggered the Depression--a demand-side explanation that's anathema to supply-siders. Says Wanniski: ''I often accuse him of being not as 'Mundellian' as I am.'' Massachusetts Institute of Technology economist Rudiger W. Dornbusch, who studied under Mundell, says it's typical of his former professor to ''plant bombs and move on.''


Whatever his role in setting off the Reagan Revolution, Mundell's contribution to economic theory has been significant. In the 1960s, he originated the concept of the ''optimal currency area,'' which framed the debate that led this year to the creation of a single currency, the euro, for Western Europe. As Mundell defined an optimal currency area, a region should use a single currency only if the economies in it are alike enough that a single currency, and hence a single monetary policy, will work for all. He wrote this year that the euro ''may be the most important development in the international monetary system since the dollar replaced the pound sterling as the dominant international currency soon after the outbreak of World War I.''


PREVIEW. Being Canadian influenced Mundell's work. Canada floated its currency in the 1960s while other nations were still pegged to the gold standard, so he got a preview of what would happen after the Bretton Woods agreement broke down in 1973. He demonstrated that with a floating currency and free capital flows, fiscal policy can't affect overall demand because changes in government spending trigger changes in interest rates, exchange rates, and trade flows that are exactly offsetting. Says Paul A. Samuelson, who taught Mundell at MIT: ''He brought [a focus on] money back into international trade.''


With fiscal conservatism taking precedence over tax cuts in Washington these days, it's easy to see why supply-siders are gleeful over Stockholm's seeming recognition of one of their own. But supply-side economics is not what earned Mundell his Nobel.

BUSINESSWEEK ONLINE : OCTOBER 25, 1999 ISSUE
By Peter Coy in New York

 

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Prepared by Bob Dalrymple, PO Box 122, Dapto, NSW Australia 2350

eMail: bob@relativelyyours.com