George Akerlof

George Akerlof

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George Arthur Akerlof is an American economist
Economist
An economist is a professional in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy...

 and Koshland Professor
Professor
A professor is a scholarly teacher; the precise meaning of the term varies by country. Literally, professor derives from Latin as a "person who professes" being usually an expert in arts or sciences; a teacher of high rank...

 of Economics
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...

 at the University of California, Berkeley
University of California, Berkeley
The University of California, Berkeley , is a teaching and research university established in 1868 and located in Berkeley, California, USA...

. He won the 2001 Nobel Prize in Economics (shared with Michael Spence
Michael Spence
Andrew Michael Spence is an American economist and recipient of the 2001 Nobel Memorial Prize in Economic Sciences, along with George A. Akerlof and Joseph E. Stiglitz, for their work on the dynamics of information flows and market development. He conducted this research while at Harvard University...

 and Joseph E. Stiglitz
Joseph E. Stiglitz
Joseph Eugene Stiglitz, ForMemRS, FBA, is an American economist and a professor at Columbia University. He is a recipient of the Nobel Memorial Prize in Economic Sciences and the John Bates Clark Medal . He is also the former Senior Vice President and Chief Economist of the World Bank...

).

The Market for Lemons and Asymmetric Information


Akerlof is perhaps best known for his article, "The Market for Lemons
The Market for Lemons
"The Market for Lemons: Quality Uncertainty and the Market Mechanism" is a 1970 paper by the economist George Akerlof. It discusses information asymmetry, which occurs when the seller knows more about a product than the buyer. A lemon is an American slang term for a car that is found to be...

: 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
Information asymmetry
In economics and contract theory, information asymmetry deals with the study of decisions in transactions where one party has more or better information than the other. This creates an imbalance of power in transactions which can sometimes cause the transactions to go awry, a kind of market failure...

, the paper for which he was awarded the Nobel Prize. In Efficiency Wage Models of the Labor Market, Akerlof and coauthor Janet Yellen
Janet Yellen
Janet Louise Yellen is an American economist and professor, who is currently the Vice Chair of the Board of Governors of the Federal Reserve System...

 (his wife) propose rationales for the efficiency wage hypothesis in which employers pay above the market-clearing
Market clearing
In economics, market clearing refers to either# a simplifying assumption made by the new classical school that markets always go to where the quantity supplied equals the quantity demanded; or# the process of getting there via price adjustment....

 wage, in contradiction to the conclusions of neoclassical economics
Neoclassical economics
Neoclassical economics is a term variously used for approaches to economics focusing on the determination of prices, outputs, and income distributions in markets through supply and demand, often mediated through a hypothesized maximization of utility by income-constrained individuals and of profits...

.

Identity Economics


In his latest work, Akerlof and collaborator Rachel Kranton
Rachel Kranton
Rachel E. Kranton is an American economist and professor at Duke University. She is a 2010 recipient of the Blaise Pascal Chair. Kranton's research focuses on how social institutions impact economic outcomes, and has applications in a variety of fields within economics, such as economic...

 of Duke University introduce social identity into formal economic analysis, creating the field of Identity Economics
Identity Economics
Identity economics captures the idea that we make economic choices based on both monetary incentives and our identity: holding monetary incentives constant, we avoid actions that conflict with our concept of self...

. Drawing on social psychology
Social psychology
Social psychology is the scientific study of how people's thoughts, feelings, and behaviors are influenced by the actual, imagined, or implied presence of others. By this definition, scientific refers to the empirical method of investigation. The terms thoughts, feelings, and behaviors include all...

 and many fields outside of economics, Akerlof and Kranton argue that individuals do not have preferences only over different goods and services. They also adhere to social norms
Norm (sociology)
Social norms are the accepted behaviors within a society or group. This sociological and social psychological term has been defined as "the rules that a group uses for appropriate and inappropriate values, beliefs, attitudes and behaviors. These rules may be explicit or implicit...

 for how different people should behave. The norms are linked to a person's social identities
Social identity
A social identity is the portion of an individual's self-concept derived from perceived membership in a relevant social group. As originally formulated by Henri Tajfel and John Turner in the 1970s and 80s, social identity theory introduced the concept of a social identity as a way in which to...

. These ideas first appeared in their article "Economics and Identity", published in Quarterly Journal of Economics in 2000.

Reproductive technology shock


In the late 1990s Akerlof's ideas attracted the attention of some on both sides of the debate over legal abortion
Abortion
Abortion is defined as the termination of pregnancy by the removal or expulsion from the uterus of a fetus or embryo prior to viability. An abortion can occur spontaneously, in which case it is usually called a miscarriage, or it can be purposely induced...

. In articles appearing in The Quarterly Journal of Economics
Quarterly Journal of Economics
The Quarterly Journal of Economics, or QJE, is a peer-reviewed academic journal published by the Oxford University Press and edited at Harvard University's Department of Economics. Its current editors are Robert J. Barro, Elhanan Helpman and Lawrence F. Katz...

, 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
Sexual revolution
The sexual revolution was a social movement that challenged traditional codes of behavior related to sexuality and interpersonal relationships throughout the Western world from the 1960s into the 1980s...

, modern contraceptives and legal abortion, had not only failed to suppress the incidence of out-of-wedlock childbearing but also 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 to reject not only the notion of an obligation to marry the mother but also the very idea of a 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.

Looting


In 1993 Akerlof and Paul Romer
Paul Romer
Paul Michael Romer is an American economist, entrepreneur, and activist. He is currently the Henry Kaufman Visiting Professor at New York University Stern School of Business and will be joining NYU as a full time professor beginning in 2011...

 brought forth Looting: The Economic Underworld of Bankruptcy for Profit, describing how under certain conditions, owners of corporations will decide it is more profitable for them personally to 'loot' the company and 'extract value' from it instead of trying to make it grow and prosper. IE:

"Bankruptcy for profit will occur if poor accounting, lax regulation, or low penalties for abuse give owners an incentive to pay themselves more than their firms are worth and then default on their debt obligations. Bankruptcy for profit occurs most commonly when a government guarantees a firm's debt obligations."


Yves Smith argues in her book "Econned" that Akerlof and Romer's "Looting" theory applies to the subprime mortgage crisis
Subprime mortgage crisis
The U.S. subprime mortgage crisis was one of the first indicators of the late-2000s financial crisis, characterized by a rise in subprime mortgage delinquencies and foreclosures, and the resulting decline of securities backed by said mortgages....

 and the Financial crisis of 2007-2010. She argues that the 'Looted' companies in this case are banks and others who were 'looted' by certain traders and executives within those companies.

Address to American Economic Association


In his 2007 presidential Address to the American Economic Association
American Economic Association
The American Economic Association, or AEA, is a learned society in the field of economics, headquartered in Nashville, Tennessee. It publishes one of the most prestigious academic journals in economics: the American Economic Review...

, 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 the Canadian Institute for Advanced Research
Canadian Institute for Advanced Research
The Canadian Institute for Advanced Research enables Canadian researchers to work on international research teams that are custom built to transform their fields of study...

 (CIFAR). He is in the advisory board of the Institute for New Economic Thinking
Institute for New Economic Thinking
The Institute for New Economic Thinking is a New York City-based nonprofit think tank founded in October 2009 with a $50 million pledge by George Soros as a result of the Financial crisis of 2007-2010.It has nobel laureates George Akerlof, Sir James Mirrlees, A...

. He was elected a Fellow of the American Academy of Arts and Sciences
American Academy of Arts and Sciences
The American Academy of Arts and Sciences is an independent policy research center that conducts multidisciplinary studies of complex and emerging problems. The Academy’s elected members are leaders in the academic disciplines, the arts, business, and public affairs.James Bowdoin, John Adams, and...

 in 1985.

Personal


His father was Swedish and his mother a Jewish German-American. Akerlof graduated from the Lawrenceville School
Lawrenceville School
The Lawrenceville School is a coeducational, independent preparatory boarding school for grades 9–12 located on in the historic community of Lawrenceville, in Lawrence Township, New Jersey, U.S., five miles southwest of Princeton....

 from which he received the School's highest award (the Lawrenceville Medal) in 2002, and received his
B.A.
Bachelor of Arts
A Bachelor of Arts , from the Latin artium baccalaureus, is a bachelor's degree awarded for an undergraduate course or program in either the liberal arts, the sciences, or both...

 degree from Yale University
Yale University
Yale University is a private, Ivy League university located in New Haven, Connecticut, United States. Founded in 1701 in the Colony of Connecticut, the university is the third-oldest institution of higher education in the United States...

 in 1962, and his Ph.D.
Doctor of Philosophy
Doctor of Philosophy, abbreviated as Ph.D., PhD, D.Phil., or DPhil , in English-speaking countries, is a postgraduate academic degree awarded by universities...

 degree from MIT
Massachusetts Institute of Technology
The Massachusetts Institute of Technology is a private research university located in Cambridge, Massachusetts. MIT has five schools and one college, containing a total of 32 academic departments, with a strong emphasis on scientific and technological education and research.Founded in 1861 in...

 in 1966, and has taught at the London School of Economics
London School of Economics
The London School of Economics and Political Science is a public research university specialised in the social sciences located in London, United Kingdom, and a constituent college of the federal University of London...

. His wife Janet Yellen
Janet Yellen
Janet Louise Yellen is an American economist and professor, who is currently the Vice Chair of the Board of Governors of the Federal Reserve System...

 is the current Vice Chairman of the Board of Governors of the Federal Reserve System
Federal Reserve System
The Federal Reserve System is the central banking system of the United States. It was created on December 23, 1913 with the enactment of the Federal Reserve Act, largely in response to a series of financial panics, particularly a severe panic in 1907...

 and a professor of economics at UC Berkeley, and was the former President and CEO of the Federal Reserve Bank of San Francisco
Federal Reserve Bank of San Francisco
The Federal Reserve Bank of San Francisco is the federal bank for the twelfth district in the United States. The twelfth district is made up of nine western states-—Alaska, Arizona, California, Hawaii, Idaho, Nevada, Oregon, Utah, and Washington--plus the Northern Mariana Islands, American Samoa,...

 and former Chair of President Bill Clinton
Bill Clinton
William Jefferson "Bill" Clinton is an American politician who served as the 42nd President of the United States from 1993 to 2001. Inaugurated at age 46, he was the third-youngest president. He took office at the end of the Cold War, and was the first president of the baby boomer generation...

's Council of Economic Advisors. His son Robert Akerlof is currently a postdoctoral associate in Applied Economics at the MIT Sloan School of Management
MIT Sloan School of Management
The MIT Sloan School of Management is the business school of the Massachusetts Institute of Technology, in Cambridge, Massachusetts....

.

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