Phillip D. Cagan
Encyclopedia
Phillip D. Cagan is an American
scholar and author. He is Professor of Economics Emeritus at Columbia University
.
, Washington, Cagan and his family moved to Southern California
shortly thereafter. Cagan joined the U.S. Navy at age 17 and fought in World War II
. After the war, Cagan decided to go to college, and earned his B.A.
from UCLA in 1948. Cagan received his M.A.
in 1951, and his Ph.D.
in Economics
in 1954 from the University of Chicago
.
After graduate school, Cagan joined the National Bureau of Economic Research
(NBER) in New York
where he worked for two years. Then Cagan re-entered academia, teaching at the University of Chicago for three years, and at Brown University
for seven years. In 1966 Cagan was hired by Columbia University
, where he taught economics for nearly thirty years — save for fifteen months spent in Washington, D.C.
, when he was on the staff of the Council of Economic Advisors (CEA).
During his time at Columbia, Cagan was also associated with the American Enterprise Institute
(AEI) in Washington, D.C., writing on public policy issues.
Cagan lives in Palo Alto
, California
.
and the control of inflation
. Cagan has published over 100 books, journal articles, reviews, reports, and pamphlets on these and other topics in macroeconomics
. He is perhaps best-known for Determinants and Effects of Changes in the Stock of Money, 1875-1960, a work that sought to identify the "causal relationships between changes in money, prices and output." The book, part of the NBER series that contained Milton Friedman
and Anna J. Schwartz's Monetary History of the United States, 1867-1960, was praised for its "careful empirical work" and called "the most complete study in the area."
Cagan's most important contribution to economics, however, is the article included in Milton Friedman
's edited volume Studies in the Quantity Theory of Money (1956), entitled "The Monetary Dynamics of Hyperinflation," a work that became an "instant classic" in the field.
The article, which contained "extensive manipulation of differential equation
s and an ingenious use of exponentially weighted averages", analyzed seven hyperinflations and found that "the parameters of money demand functions estimated during hyperinflation
generally satisfy the condition of dynamic stability
that precludes the inflation
from being self-generating, or displaying period-to-period oscillations."
After its publication, Cagan's article generated a significant body of work, as a number of leading macroeconomists either reexamined or extended Cagan's model, most notably "Barro (1970), Sargent and Wallace (1973), Frenkel (1975, 1976a, 1976b, 1977, 1979), Sargent (1977), Abel et al. (1979), Salemi (1979), and Salemi and Sargent (1979)." In addition, monetary economists today often refer to a "Cagan demand function" when modeling the real value of money.
Because of the impact that this groundbreaking work had upon the economics profession, Cagan was elected Fellow of the Econometric Society
(the most prestigious society in the field), and has been mentioned as a possible candidate for the Nobel Prize in Economics.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
scholar and author. He is Professor of Economics Emeritus at Columbia University
Columbia University
Columbia University in the City of New York is a private, Ivy League university in Manhattan, New York City. Columbia is the oldest institution of higher learning in the state of New York, the fifth oldest in the United States, and one of the country's nine Colonial Colleges founded before the...
.
Biography
Born in SeattleSeattle, Washington
Seattle is the county seat of King County, Washington. With 608,660 residents as of the 2010 Census, Seattle is the largest city in the Northwestern United States. The Seattle metropolitan area of about 3.4 million inhabitants is the 15th largest metropolitan area in the country...
, Washington, Cagan and his family moved to Southern California
Southern California
Southern California is a megaregion, or megapolitan area, in the southern area of the U.S. state of California. Large urban areas include Greater Los Angeles and Greater San Diego. The urban area stretches along the coast from Ventura through the Southland and Inland Empire to San Diego...
shortly thereafter. Cagan joined the U.S. Navy at age 17 and fought in World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
. After the war, Cagan decided to go to college, and earned 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...
from UCLA in 1948. Cagan received his M.A.
Master of Arts (postgraduate)
A Master of Arts from the Latin Magister Artium, is a type of Master's degree awarded by universities in many countries. The M.A. is usually contrasted with the M.S. or M.Sc. degrees...
in 1951, and his Ph.D.
Ph.D.
A Ph.D. is a Doctor of Philosophy, an academic degree.Ph.D. may also refer to:* Ph.D. , a 1980s British group*Piled Higher and Deeper, a web comic strip*PhD: Phantasy Degree, a Korean comic series* PhD Docbook renderer, an XML renderer...
in 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"...
in 1954 from the University of Chicago
University of Chicago
The University of Chicago is a private research university in Chicago, Illinois, USA. It was founded by the American Baptist Education Society with a donation from oil magnate and philanthropist John D. Rockefeller and incorporated in 1890...
.
After graduate school, Cagan joined the National Bureau of Economic Research
National Bureau of Economic Research
The National Bureau of Economic Research is an American private nonprofit research organization "committed to undertaking and disseminating unbiased economic research among public policymakers, business professionals, and the academic community." The NBER is well known for providing start and end...
(NBER) in New York
New York
New York is a state in the Northeastern region of the United States. It is the nation's third most populous state. New York is bordered by New Jersey and Pennsylvania to the south, and by Connecticut, Massachusetts and Vermont to the east...
where he worked for two years. Then Cagan re-entered academia, teaching at the University of Chicago for three years, and at Brown University
Brown University
Brown University is a private, Ivy League university located in Providence, Rhode Island, United States. Founded in 1764 prior to American independence from the British Empire as the College in the English Colony of Rhode Island and Providence Plantations early in the reign of King George III ,...
for seven years. In 1966 Cagan was hired by Columbia University
Columbia University
Columbia University in the City of New York is a private, Ivy League university in Manhattan, New York City. Columbia is the oldest institution of higher learning in the state of New York, the fifth oldest in the United States, and one of the country's nine Colonial Colleges founded before the...
, where he taught economics for nearly thirty years — save for fifteen months spent in Washington, D.C.
Washington, D.C.
Washington, D.C., formally the District of Columbia and commonly referred to as Washington, "the District", or simply D.C., is the capital of the United States. On July 16, 1790, the United States Congress approved the creation of a permanent national capital as permitted by the U.S. Constitution....
, when he was on the staff of the Council of Economic Advisors (CEA).
During his time at Columbia, Cagan was also associated with the American Enterprise Institute
American Enterprise Institute
The American Enterprise Institute for Public Policy Research is a conservative think tank founded in 1943. Its stated mission is "to defend the principles and improve the institutions of American freedom and democratic capitalism—limited government, private enterprise, individual liberty and...
(AEI) in Washington, D.C., writing on public policy issues.
Cagan lives in Palo Alto
Palo Alto, California
Palo Alto is a California charter city located in the northwest corner of Santa Clara County, in the San Francisco Bay Area of California, United States. The city shares its borders with East Palo Alto, Mountain View, Los Altos, Los Altos Hills, Stanford, Portola Valley, and Menlo Park. It is...
, California
California
California is a state located on the West Coast of the United States. It is by far the most populous U.S. state, and the third-largest by land area...
.
Contributions to economic science
Cagan's work focused on monetary policyMonetary policy
Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability. The official goals usually include relatively stable prices and low unemployment...
and the control of inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
. Cagan has published over 100 books, journal articles, reviews, reports, and pamphlets on these and other topics in macroeconomics
Macroeconomics
Macroeconomics is a branch of economics dealing with the performance, structure, behavior, and decision-making of the whole economy. This includes a national, regional, or global economy...
. He is perhaps best-known for Determinants and Effects of Changes in the Stock of Money, 1875-1960, a work that sought to identify the "causal relationships between changes in money, prices and output." The book, part of the NBER series that contained Milton Friedman
Milton Friedman
Milton Friedman was an American economist, statistician, academic, and author who taught at the University of Chicago for more than three decades...
and Anna J. Schwartz's Monetary History of the United States, 1867-1960, was praised for its "careful empirical work" and called "the most complete study in the area."
Cagan's most important contribution to economics, however, is the article included in Milton Friedman
Milton Friedman
Milton Friedman was an American economist, statistician, academic, and author who taught at the University of Chicago for more than three decades...
's edited volume Studies in the Quantity Theory of Money (1956), entitled "The Monetary Dynamics of Hyperinflation," a work that became an "instant classic" in the field.
The article, which contained "extensive manipulation of differential equation
Differential equation
A differential equation is a mathematical equation for an unknown function of one or several variables that relates the values of the function itself and its derivatives of various orders...
s and an ingenious use of exponentially weighted averages", analyzed seven hyperinflations and found that "the parameters of money demand functions estimated during hyperinflation
Hyperinflation
In economics, hyperinflation is inflation that is very high or out of control. While the real values of the specific economic items generally stay the same in terms of relatively stable foreign currencies, in hyperinflationary conditions the general price level within a specific economy increases...
generally satisfy the condition of dynamic stability
Economic stability
Economic stability refers to an absence of excessive fluctuations in the macroeconomy. An economy with fairly constant output growth and low and stable inflation would be considered economically stable. An economy with frequent large recessions, a pronounced business cycle, very high or variable...
that precludes the inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
from being self-generating, or displaying period-to-period oscillations."
After its publication, Cagan's article generated a significant body of work, as a number of leading macroeconomists either reexamined or extended Cagan's model, most notably "Barro (1970), Sargent and Wallace (1973), Frenkel (1975, 1976a, 1976b, 1977, 1979), Sargent (1977), Abel et al. (1979), Salemi (1979), and Salemi and Sargent (1979)." In addition, monetary economists today often refer to a "Cagan demand function" when modeling the real value of money.
Because of the impact that this groundbreaking work had upon the economics profession, Cagan was elected Fellow of the Econometric Society
Econometric Society
The Econometric Society is an international society for the advancement of economic theory in its relation with statistics and mathematics. It was founded on December 29, 1930 at the Stalton Hotel in Cleveland, Ohio....
(the most prestigious society in the field), and has been mentioned as a possible candidate for the Nobel Prize in Economics.
Selected bibliography
.- ______, "Why Do We Use Money in Open Market Operations?" The Journal of Political Economy, Vol. 66, No. 1 (Feb., 1958), pp. 34–46. http://links.jstor.org/sici?sici=0022-3808%28195802%2966%3A1%3C34%3AWDWUMI%3E2.0.CO%3B2-T
- ______, "The Demand for Currency Relative to the Total Money Supply," The Journal of Political Economy, Vol. 66, No. 4 (Aug., 1958), pp. 303–328, http://links.jstor.org/sici?sici=0022-3808%28195808%2966%3A4%3C303%3ATDFCRT%3E2.0.CO%3B2-I
- ______, Determinants and Effects of Changes in the Stock of Money, 1875-1960, New York: Columbia University Press (1965).http://www.amazon.com/dp/B0000CMWRS
- ______, "The Non-Neutrality of Money In the Long Run: A Discussion of the Critical Assumptions and Some Evidence," Journal of Money, Credit and Banking, Vol. 1, No. 2, Conference on Money and Economic Growth (May, 1969), pp. 207–227. http://links.jstor.org/sici?sici=0022-2879%28196905%291%3A2%3C207%3ATNOMIT%3E2.0.CO%3B2-L
- ______, Persistent Inflation: Historical and Policy Essays, New York: Columbia University Press (1979).http://www.amazon.com/dp/0231047290
- ______, "Reflections on Rational Expectations," Journal of Money, Credit and Banking, Vol. 12, No. 4, Part 2: Rational Expectations (Nov., 1980), pp. 826–832. http://links.jstor.org/sici?sici=0022-2879%28198011%2912%3A4%3C826%3ARORE%3E2.0.CO%3B2-%23
- ______, "The Choice Among Monetary Aggregates as Targets and Guides for Monetary Policy," Journal of Money, Credit and Banking, Vol. 14, No. 4, Part 2: The Conduct of U.S. Monetary Policy (Nov., 1982), pp. 661–686. http://links.jstor.org/sici?sici=0022-2879%28198211%2914%3A4%3C661%3ATCAMAA%3E2.0.CO%3B2-A
- ______, "Does Endogeneity of the Money Supply Disprove Monetary Effects on Economic Activity?" Journal of MacroeconomicsJournal of MacroeconomicsThe Journal of Macroeconomics is a peer-reviewed academic journal established in 1979 that covers research on a broad range of issues in monetary economics and macroeconomics, including economic growth, fluctuations, fiscal policy, and macroeconomic forecasting....
, Vol. 15, (Summer 1993). - Phillip Cagan and William G. Dewald, "The Conduct of U.S. Monetary Policy: Introduction," Journal of Money, Credit and Banking, Vol. 14, No. 4, Part 2: The Conduct of U.S. Monetary Policy (Nov., 1982), pp. 565–574. http://links.jstor.org/sici?sici=0022-2879%28198211%2914%3A4%3C565%3ATCOUMP%3E2.0.CO%3B2-N
- Phillip Cagan and Arthur Gandolfi, "The Lag in Monetary Policy as Implied by the Time Pattern of Monetary Effects on Interest Rates," The American Economic Review, Vol. 59, No. 2, Papers and Proceedings of the Eighty-first Annual Meeting of the American Economic Association (May, 1969), pp. 277–284 http://links.jstor.org/sici?sici=0002-8282%28196905%2959%3A2%3C277%3ATLIMPA%3E2.0.CO%3B2-F
- Phillip Cagan and Anna J. Schwartz, "Has the Growth of Money Substitutes Hindered Monetary Policy?" Journal of Money, Credit and Banking, Vol. 7, No. 2 (May, 1975), pp. 137–159. http://links.jstor.org/sici?sici=0022-2879%28197505%297%3A2%3C137%3AHTGOMS%3E2.0.CO%3B2-3
- ______, "The National Bank Note Puzzle Reinterpreted," Journal of Money, Credit and Banking, Vol. 23, No. 3, Part 1 (Aug., 1991), pp. 293–307. http://links.jstor.org/sici?sici=0022-2879%28199108%2923%3A3%3C293%3ATNBNPR%3E2.0.CO%3B2-T
External links
- Faculty Emeriti, Department of Economics, Columbia University
- Major works of Phillip Cagan, New School's CEPA Website
- Overview of Monetarism, New School's CEPA Website
- Thayer Watkins, "Episodes of Hyperinflation," San José State University Department of Economics