Discussion Paper No. 644

ALBERT K. ANDO (1929-2002)

Charles Yuji Horioka

October 2005

The Institute of Social and Economic Research
Osaka University
6-1 Mihogaoka, Ibaraki, Osaka 567-0047, Japan

ALBERT K. ANDO (1929-2002)
By Charles Yuji Horioka

October 15, 2005

Institute of Social and Economic Research
Osaka University
6-1, Mihogaoka
Ibaraki, Osaka 567-0047, JAPAN
Telephone: 81-6-6879-8586, 8574
Facsimile: 81-6-6878-2766
Email: horioka@iser.osaka-u.ac.jp
andNational Bureau of Economic Research, Inc.

S. N. Durlauf and L. E. Blume, The New Palgrave Dictionary of Economics,
forthcoming, Palgrave Macmillan, reproduced with permission of Palgrave Macmillan.
This article is taken from the author's original manuscript and has not been reviewed oredited.

The definitive published version of this extract may be found in the complete

New Palgrave Dictionary of Economics in print and online, forthcoming.

ALBERT K. ANDO (1929-2002)

Albert K. Ando is an eminent Japanese-born

American economist who made many seminal contributions in a broad range of areas ofeconomics.

Born in Tokyo, Japan, on November 15, 1929, Ando went to the UnitedStates after World War II instead of joining the family business (ANDO Corporation, amajor construction company).

He received his B.S. in economics from the Universityof Seattle in 1951, his M.A. in economics from St. Louis University in 1953, and an
M.S. in economics in 1956 and a Ph.D. in mathematical economics in 1959 from
Carnegie Institute of Technology (now Carnegie Mellon University).

After teaching atCarnegie and the Massachusetts Institute of Technology, Ando moved to the Universityof Pennsylvania in 1963 and remained there until his death from leukemia on September
19, 2002, first as an associate professor of economics and finance, and from 1967, as aprofessor of economics and finance.

Ando held visiting appointments at universities in Louvain, Bonn, and Stockholm andconsulted with the International Monetary Fund, the Federal Reserve Board, The Bankof Italy, and the Economic Planning Agency of Japan.

During his long and productive career, Ando received many honors and awards.

For

example, he was named Fellow of the Econometric Society, Ford Foundation Faculty
Research Fellow, Guggenheim Fellow, and Japan Foundation Fellow and was given theAlexander von Humboldt Award for Senior American Scientists.

Ando made important contributions in such diverse fields as econometrics (theory andapplications), stochastic optimal control, the theory of aggregation and partitions indynamic systems, monetary economics, macroeconomic modeling and policy design1with emphasis on interactions between economic growth and cyclical fluctuations,investment behavior, theoretical and empirical investigations of household saving andconsumption behavior, and demography, and his geographic breadth was equally greatwith particular focus on Italy, Japan, and the United States. Ando collaborated, among
others, with Nobel laureate Herbert Simon on questions regarding aggregation andcausation in economic systems (see, for example, Simon and Ando (1961) and Ando,Fisher, and Simon (1963)) and with another Nobel laureate, Franco Modigliani, onextending the life cycle hypothesis of saving (see, for example, Ando and Modigliani(1963)) and constructing large-scale macroeconomic models (see, for example, Andoand Modigliani (1969)).
A common thread in much of Ando’s work is the care with which he analyzed data.
He subjected all of the data he used (be it national accounts data, data from household
surveys, or company data) to careful scrutiny, was constantly on the lookout forinconsistencies, conceptual deficiencies, etc., in the data, and made the necessary
adjustments to the data to correct for any inconsistencies, conceptual deficiencies, etc.
He then analyzed the resulting data meticulously and creatively to shed light on
important questions such as the causes of the decade-long recession in Japan in the1990s (he found that it was due primarily to the massive capital losses on household
holdings of corporate equities; see, for example, Ando (2002a)), whether aged
households dissave (he found that they dissave relatively rapidly in Italy and the U.S.
but moderately or not at all in Japan; see, for example, Ando and Kennickell (1987),
Hayashi, Ando, and Ferris (1988), and Ando and Nicoletti-Altimari (2004)), how thecost of capital compares in the U.S. and Japan (he found that it is considerably higher in
the U.S. if individual company data are used but not if national accounts data are used;2

see, for example, Ando and Auerbach (1990) and Ando, Hancock, and Sawchuk (1997)),
etc., etc.
Ando played a central role in the construction of the Massachusetts Institute ofTechnology, University of Pennsylvania, and Social Science Research Council (MPS)model, an early large-scale macroeconomic model of the U.S. economy, as well of theBank of Italy’s macroeconomic model of the Italian economy (see, for example, Andoand Modigliani (1969) and Ando (1974)), and in his later years, he devoted considerable
energy to constructing a dynamic micro simulation model of demographic structure for
Italy, Japan, and the United States, which he used to project future trends in the savingrate (he projected that Japan’s saving rate would increase slightly in the immediatefuture as the number of children per family declined sharply, then fall moderately as theproportion of older persons in the population increased, and he projected similar trends
in Italy as well; see, for example, Ando, et al. (1995) and Ando and Nicoletti-Altimari(2004)).
CHARLES YUJI HORIOKA

SELECTED WORKS
Anderson, Robert; Ando, Albert; and Enzler, Jared (1984), “Interaction between Fiscal
and Monetary Policy and the Real Rate of Interest,” American Economic Review, vol.
74, no. 2 (May), pp. 55-60.
Ando, Albert (1971), “On a Problem of Aggregation,” International Economic Review,vol. 12, no. 2 (June), pp. 306-11.
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Ando, Albert K. (1974), “Some Aspects of Stabilization Policies, the Monetarist
Controversy, and the MPS Model,” International Economic Review, vol. 15, no. 3(October), pp. 541-71.
Ando, Albert (1979), “On the Contributions of Herbert A. Simon to Economics,”
Scandinavian Journal of Economics, vol. 81, no. 1, pp. 83-93.
Ando, Albert (2002a), “Missing Household Saving and Valuation of Corporations:Inquiry into Japanese National Accounts I,” Journal of the Japanese and International
Economies, vol. 16, no. 2 (June), pp. 147-76.
Ando, Albert (2002b), “The Elusive Total Budget Outlay of the Japanese Government:
An Inquiry into the Japanese Accounts II” Journal of the Japanese and International
Economies, vol. 16, no. 2 (June), pp. 177-93.
Ando, Albert K., et al. (1974), “On the Role of Expectations of Price and Technological
Change in an Investment Function,” International Economic Review, vol. 15, no. 2(June), pp. 384-414.
Ando, Albert, et al. (1992), “Saving among Young Households: Evidence from Japanand Italy,” Scandinavian Journal of Economics, vol. 94, no. 2, pp. 233-50
Ando, Albert, et al. (1995), “Dynamics of Demographic Development and Its Impact onPersonal Saving: Case of Japan,” Ricerche Economiche, vol. 49, no. 3 (September), pp.
179-205.

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Ando, Albert, and Auerbach, Alan J. (1988), “The Cost of Capital in the United Statesand Japan: A Comparison,” Journal of the Japanese and International Economies, vol.
2, no. 2 (June), pp. 134-58.
Ando, Albert, and Auerbach, Alan J. (1990), “The Cost of Capital in Japan: Recent
Evidence and Further Results,” Journal of the Japanese and International Economies,
vol. 4, no. 4 (December), pp. 323-50.
Ando, Albert; Blume, Marshall E.; and Friend, Irwin (1985), The Structure and Reformof the U.S. Tax System (Cambridge, Massachusetts: MIT Press).
Ando, Albert; Christelis, Dimitrios; and Miyagawa, Tsutomu (2003), “Inefficiency ofCorporate Investment and Distortion of Savings Behavior in Japan,” in Magnus
Blomstrom, et al., eds., Structural Impediments to Growth in Japan (NBER ConferenceVolume) (Chicago and London: University of Chicago Press), pp. 155-90.
Ando, Albert; Fisher, Franklin M.; and Simon, Herbert A. (1963), Essays on Social
Science Models (Cambridge, Massachusetts; MIT Press).
Ando, Albert; Guiso, Luigi; and Terlizzese, Daniele (1994), “Dissaving by the Elderly,
Transfer Motives and Liquidity Constraints,” Albert Ando, Luigi Guiso, and Ignazio
Visco, eds., Saving and the Accumulation of Wealth: Essays on Italian Household andGovernment Saving Behavior (Cambridge; New York and Melbourne: Cambridge
University Press), pp. 188-213.
Ando, Albert; Hancock, John; and Sawchuk, Gary (1997), “Cost of Capital for theUnited States, Japan and Canada: An Attempt at Measurement Based on IndividualCompany Records and Aggregate National Accounts Data,” in Paul J. N. Halpern, ed.,5

Financing Growth in Canada (Industry Canada Research Series, vol. 8) (Calgary:
University of Calgary Press), pp. 71-133.
Ando, Albert, and Kaufman, G. M. (1965), “Bayesian Analysis of the Independent
Multinomial Process—Neither Mean nor Precision Known,” Journal of the American
Statistical Association, vol. 60, no. 309 (March), pp. 347-358.
Ando, A., and Kaufman, G. M. (1966), “Evaluation of an Ad Hoc Procedure forEstimating Parameters of Some Linear Models,” Review of Income and Statistics, vol.
48, no. 3 (August), pp. 334-40.
Ando, Albert, and Kennickell, Arthur B. (1985), “Some Results on Analytic OptimalControl Solution of a Rational Expectations Model,” Journal of Economic Dynamicsand Control, vol.9, no. 1 (September), pp. 55-61.
Ando, Albert, and Kennickell, Arthur B. (1987), “How Much (or Little) Life Cycle Is
There in Micro Data? The Cases of the United States and Japan,” in Rudiger Dornbusch,ed., Macroeconomics and Finance: Essays in Honor of Franco Modigliani (Cambridge,Mass., and London: MIT Press), pp. 159-223.
Ando, Albert, and Modigliani, Franco (1963), “The ‘Life Cycle’ Hypothesis of Saving:
Aggregate Implications and Tests,” American Economic Review, vol. 53, no. 1 (March),
pp. 55-84.
Ando, Albert, and Modigliani, Franco (1965), “The Relative Stability of Monetary
Velocity and the Investment Multiplier, American Economic Review, vol. 55, no. 4(September), pp. 693-728.

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Ando, Albert, and Modigliani, Franco (1969), “Econometric Analysis of Stabilization
Policies,” American Economic Review, vol. 59, no. 2 (May), pp. 296-314.
Ando, Albert, and Nicoletti-Altimari, Sergio (2004), “A Micro Simulation Model of
Demographic Development and Households’ Economic Behavior in Italy,” Economic
Working Paper No. 533, Economic Research Department, Bank of Italy (December).
Ando, Albert, and Palash, Carl (1976), “Some Stabilization Problems of 1971-75, with
an Application of Optimal Control Algorithms,” American Economic Review, vol. 66,no. 2 (May), pp, 346-48.
Fisher, Franklin M., and Ando, Albert (1962), “Two Theorems on Ceteris Paribus in theAnalysis of Dynamic Systems,” American Political Science Review, vol. 56 (March), pp.
110-113.
Hayashi, Fumio; Ando, Albert; and Ferris, Richard (1988), “Life Cycle and Bequest
Savings: A Study of Japanese and U.S. Households Based on Data from the 1984
NSFIE and the 1983 Survey of Consumer Finances,” Journal of the Japanese andInternational Economies, vol. 2, no. 4 (December), pp. 450-91.
Simon, Herbert A., and Ando, Albert (1961), “Aggregation of Variables in DynamicSystems,” Econometrica, vol.. 29, no. 2 (March), pp. 111-138.

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