Meeting the Nobel Giants

• Author: Mahvash Saeed Qureshi
• Pages: 10-12

8

IMF Research Bulletin

Meeting the Nobel Giants

Mahvash Saeed Qureshi

Every three years, a group of young econo -

mists from around the world gets a uni que

opportunity in the picturesque to wn of

Lindau to meet with some of the most

esteemed names in their f ield, and to con-

nect with each other. This year’s gather-

ing—the fifth Lindau Meeting in Ec onomic

Sciences—saw about 450 young researche rs, among them 20

IMF economists, and 18 Nobel Laureate s, come together in

August for an intensive exchang e of ideas on a wide range

of topics including inf lation, inequality, repugnant mark ets,

and the usefulness of e conomics. This article provides a br ief

account of some of the talks and di scussions that occurred at

the meeting.1

As the shadow of the global n ancial crisis lingers, a

recurrent theme in the d iscussions and presentations of

the laureates in Lindau, G ermany, this year was the chal-

lenges impeding a robust globa l economic recovery, and how

these could be tack led. Oen departing from conventional

think ing, the Nobel Laureates—which included Robert

Aumann, Peter Diamond, La rs Peter Hansen, Finn Kydland,

Eric Maskin, Da niel McFadden, Robert C. Merton, James

Mirrlees, Roger Myerson, Edmund Phelps, Edwa rd Prescott,

Alvin Roth, Rei nhard Selten, William Sharpe , Christopher

Sims, Vernon Smith, Joseph Stiglitz, a nd Mario Vargas Llosa

(the 2010 Nobel Laureate in Literature)—did not shy away

from throwing arou nd provocative ideas. On the rs t day of

the meetings, for inst ance, Sims argued that the monetar-

ist view—that inat ion is determined by money growth—is

obsolete. In advanced economies today, nearly al l deposits

(including reserve deposits at the centr al banks) pay interest,

implying that the d istinction between “money” and interest

bearing debt has di sappeared, and the traditional money

multiplier link has b een broken. As a result, he contended,

initiatives li ke quantitative easing, which many consider

as an increase in res erves at the risk of creating rampant

1. e IMF partic ipants were Elif Arbatl i (APD), Aqib Aslam (RES),

Alberto Beha r (MCD), Nan Geng (EUR), Francesco Grigoli (W HD),

Fei Han (MCM), Burcu Hacibed el (FIN), Amr Hosny (MCD), Kareem

Ismail (AFR), Phak awa Jeasakul (MCM), Fabian Lipi nsky (WHD),

Lucy Liu (SPR), Tigran Poghosya n (FAD), Mahvash S. Qureshi (RE S),

Katsiarya na Svirydzenk a (SPR), Rene Tapsoba (FAD), Volodymyr

Tulin (APD), Anke Weber (FAD), Joyce Wong (WHD), and Tengteng

Xu (EUR). e lectures a nd discussions from the event a re available

online at http://ww w.mediatheque.lind au-nobel.org/.

ination, have been unable to spur in ation. So what could

be done? Relying on the sca l theory of price level, he

maintained t hat the solution to the current macroeconomic

conundrum requires a n expansionary scal polic y without a

commitment to cut future ex penditure or raise future taxes .

For without such a commitment, people’s expectation of a

payback of the incurred debt t hrough higher future primar y

surpluses, could rest rict them from increasing spending, a nd

debt could in fact become deationa ry.

Complementing Sims’ call for an e xpansionary scal

policy, Diamond argued that t he shi in the Beveridge curve

(the relationship between unemployment and vacanc y rates)

in the United States since the g lobal nancial crisis sug-

gests a deterioration in the match ing/hiring process in the

economy, which could partly be a struc tural issue, but there

may be an aggregate demand element to it as well. ere is

thus an importa nt role, in his opinion, for both monetary

and scal policie s to alleviate the problem and move the

economy to the full employment rate that is be ing targeted.

In a trenchant presentation, Stiglit z discussed another

reason for a drag on economic growth i n major advanced

economies: the high degree of i ncome and wealth inequality.

While recent data docu ment large increases in both wealth

and the wealth-to-income ratio, Sti glitz observed that there

has neither been an assoc iated decline in interest rates nor

an increase in wages t hat might be expected if “wealth ” is

taken to be capital. He a rgued that much of the increase

in the value of wealth i s an increase in the value of land,

Nobel Laureate Prof. Christopher Sims with IMF Staff in

Lindau (from left to right): Aqib Aslam, Lucy Liu, Katsiaryana

Svirydzenka, Mahvash Qureshi, Amr Hosny, Tengteng Xu,

Rene Tapsoba (back), Tigran Poghosyan, Kareem Ismail, and

Volodymyr Tulin.