Edmund Phelps: Bank of Sweden Winner for 2006

No honor in economics is more prestigious than the Bank of Sweden Prize, a.k.a. the "Nobel" prize in economics.

Winner for 2006 is Edmund Phelps (one of the rare single winners).

Frankly I just dimly recall Phelps from the "Friedman-Phelps" expectations-augmented Phillips curve. Then after reading the press release, I remember his name associated with the "golden rule" of growth theory. To summarize: he won for examining long-run trade-offs, between inflation and unemployment, and between consumption and investment.

For the inflation-unemployment trade-off he said: no such thing in the long run. Rather unemployment is held at the "natural rate" (later defined by Friedman as the unemployment rate "ground out by Walrasian equilibrium"P.

For the consumption-investment trade-off he said: if you don't believe in intergenerational discounting, you can adopt the "golden rule" in which equalized per capita consumption is maximized forever. Neat. This was a direct inspiration of the "sustainable development" idea of current consumption that does not sacrifice future consumption.

Just one problem: Phelps' prize is way overdue, and therefore dated. He could have won with Friedman, or Lucas, or some other monetarist-RBC type; or like Hayek and Myrdal, share it with Taylor or Modigliani (except he shared it with Miller already) or some other Keynesian-type.

The Committee should have been more forward-looking and rewarded recent work. Bhagwati, Krugman (trade), Fama (finance), Roemer (growth), Williamson, Baumol (industrial orgn.) I guess they tired of that already with the past 3 or 4 years of Bank of Sweden prizes.

Nevertheless my warmest congratulations.

Agriculture, development, and the Green Revolution

Johnston and Mellor’s vision of a broad-based yet labor-intensive technological change in Asian agriculture was to materialize in the form of the “Green Revolution”. The ex post impact of the Green Revolution have been evaluated by Evenson and Gollin (2003), in a Science paper. The Green Revolution began with the introduction of varieties of wheat and rice that could respond to greater application of fertilizer and water with much higher yields. Dissemination of improved varieties of rice, wheat, and corn became widespread in the 1960s and 1970s, while varietal improvement programs also began for other crops.

Yield of cereals, roots and tubers, and pulses jumped dramatically. From 1961 to 1980, production of these crops grew by 3.65% per year in developing Asia; only 14% of this can be attributed to area expansion – the rest is due to yield increases. Of the latter, the contribution of the improved variety was 22%, and the remainder is attributed to input intensification.

Food model simulations indicate that in the absence of a Green Revolution, crop yield and production in developing countries would have been much smaller compared to the actual figure for 2000, and agricultural area higher. Conversion of natural habitats to farm area would have had adverse environmental impacts: Lower supplies would have meant more expensive food and decreased calorie intake.