INET-BW: Kindleberger, a new K-hero?

I was not in Bretton Woods this week. I followed the event throught the videos posted on the INET website and the exhilarating and exhausting experience of Benjamin, Floris and Tiago. And I found that something in the BW whisper curiously echoes my current interests.

Tiago reports abundant mentions to Keynes during the sessions. The old pipe gives the sweetest smoke, my google says the Irish say (The French would favor a wine analogy, I guess). But a new K-hero also seems to be emerging. From Larry Summers’s confession that the knowledge he found most useful in the face of the crisis was found in the “writings of Bagehot, Minsky, Kindleberger, and Eichengreen,” to Rogoff’s recollection that he was unengaged by Kindleberger’s teaching, from DeLong‘s ( repeated) mention of Kindleberger’s vision of financial crises, one triggered by one post’s headline by Mark Thoma, Kindleberger seem to be on every mouth at the INET conference. From the other side of the Atlantic, I’m thus left wondering to what extent what looks like a primary attempt to canonize the MIT economist derives from his long, exhaustive, and timely experience of The World in Depression, 1929-1939, Manias, panics and crashes, foreign trade, exchange rates, money matters and international economics at large (see his autobiography for more information, and take memories with caution, as always.) Or maybe his fame is also rooted in his his very idiosyncratic method, one he labelled “historical economics.” Historical economics was however left for dead in the wake of the generalization of the MIT-style economics Kindleberger’s colleagues spread and the rise of new economics history and cliometrics. But, in these times of tensions and challenges, it may look fashionable again.

Or maybe the rise of a new K-hero is a mere artifact of my interest in economics at MIT. After working at the NY Fed and architecting the Marshall Plan, Kindleberger was recruited in 1948 at the department of economics and social sciences at MIT by those few economists (including statistician Harold Freeman, chair Ralph Freeman, industrial economist Rupert McLaurin, and Samuelson) who set to turn the hitherto small service department of an engineering school into an elite department. He remained there until his last lectures in 1981 (?) and became a pillar of the department. How he fitted into in a community initially made up of economists, psychologists, sociologists and political scientists, which by the early sixties, had become the sanctuary of Samuelson and Solow’s “new economics” however remained a mystery to me. Last december, I intended to dig into the subject, but I did not have enough time to even lift the lid of his first archive box. My interest in Kindelberger subsequently wained because of the lack of material. I rather concentrated on the Samuelsons, Solows, Fishers, Diamonds and Foleys, whose then peculiar educational vision had brought MIT to the top of university rankings in the mid-sixties. For education, I soon discovered, was central to the rise of both economics at MIT and MIT economics. A viewpoint which put the visionary Solow and his dizzying list of PhD students at the center of my story (his students in the years 1966 and 1967 only included George Akerlof, Robert Gordon, Robert Hall, William Nordhaus, Eytan Sheshinski, Joseph Stiglitz, and Martin Weitzman).

Accordingly, the recent formal identification of Solow as the leading MIT graduate supervisor in the 50s to 70s (56 students) did not came as a revelation. More surprising was the endurance and importance of the role played by Kindleberger, ranking second. In that period, he supervised 48 graduate students, including Robert Mundell (PhD 56), Peter Temin (PhD 64), and Jagdish Bhagwati (PhD 67). Kindleberger taught international economics for a lifetime, and after the recruitment of Peter Temin in 1967, he opened a course in economic history with his former student. The INET whisper is another reminder that, in the dark basement of an East Coast University Library, dusty boxes await to be be open. And I’m curious to know whether Benjamin, Floris and Tiago also noted a crystallization over Kindleberger, or over any other hero of the past besides Keynes?

One thought on “INET-BW: Kindleberger, a new K-hero?

  1. I thought what was most provocative at the INET-BW conference was the ending comment at the complexity economics session. We need better conceptual models for reading economic data. With the flood of new data sources and changes in system complexity what seems to be limiting the development of models is the lack of new conceptual models to fit it to.

    It interests me particularly as that’s been my main subject for some time, how to read complex system behavior from available data, as a physicist studying natural systems that emerge in open environments. You might take the provocative data Prof. Foley presents, for example, that US “value added” was a strong leading indicator in 2006 of the 2008 collapse. The way he and others are still trying to use the data is for improving the theoretical models. That means the time is spent studying the economy as a ‘theoretical system’ for relating what people happen to have measurements of. That means the time is not spent studying the natural behavior of the far more complex and creative ‘non-theoretical’ system the economy also is.

    The discussion of complexity economics also tends to assume the problem of building an artificial economy needs to precede trying to understand the natural economy as a system that works by itself. I’d offer that “doing both” is the better paradigm, and to start first with considering data as indicating the behavior of the organic system as a way to generate the better questions, before thinking of it as the performance of a theoretical model. Theoretical models would then become properly seen as diagnostic tools for gauging the health of the organic system, rather than for representing the economy as a theoretical representation of how people find it easy to measure and explain things.

    If you consider the economy as a complex natural organism, then data displays how its natural organization is behaving, by itself, so the contest becomes how to identify changing and emerging organization and the need to alter our simpler models. An excellent example is the now 10 year phenomenon of global resource demand exceeding supply. I have a short essay about to appear in New European Economy, discussing it as “A defining moment for investing in sustainability”. The challenge is that the apparent collective response of the world food and fuel markets to excessive demand is essentially to panic, sending the floor price of resources on an exponential path, still unresolved.

    Click to access ASustInvestMoment.pdf

    It’s just one good example, of the difference of using data, informed by physics and economics, for forensic study, which switches the subject from mainly the study of models to study of the behavior of complex systems in their natural form. To me, the sharp decline Prof Foley showed beginning in 2006, for “value added” by the US economy, is a very helpful measure for better understand the behavior of the economy as an organism, and seems to connect to other organic indicators too.

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