George Akerlof

**George Arthur Akerlof** (born June 17, 1940) is an American economist who is a university professor at the McCourt School of Public Policy at Georgetown University and Koshland Professor of Economics Emeritus at the University of California, Berkeley.[2][3] He won the 2001 Nobel Memorial Prize in Economic Sciences (shared with Michael Spence and Joseph E. Stiglitz).

## George Akerlof

### Born

George Arthur AkerlofJune 17, 1940 (age 79)New Haven, Connecticut, U.S.

### Institution

Georgetown UniversityUniversity of California, BerkeleyBrookings Institute

### Alma Matter

Lawrenceville SchoolYale University (B.A.)MIT (Ph.D.)London School of Economics

### Awards

Nobel Memorial Prize in Economic Sciences (2001)

## Early Life and Education

Akerlof was born in New Haven, Connecticut, United States, the son of Rosalie Grubber (née Hirschfelder) and Gösta Åkerlöf, who was a chemist and inventor.[4][5] His mother was Jewish, from a family that had emigrated from Germany. His father was a Swedish immigrant.[6] Akerlof graduated from the Lawrenceville School[7] in 1958 and received the Aldo Leopold Award in 2002. In 1962 he received his BA degree from Yale University, in 1966 his PhD degree from MIT, and taught at the London School of Economics 1978–80.

## **Contributions to Economics**

### **"The Market for Lemons" and asymmetric information**

Akerlof is perhaps best known for his article, "The Market for Lemons: Quality Uncertainty and the Market Mechanism", published in *Quarterly Journal of Economics* in 1970, in which he identified certain severe problems that afflict markets characterized by asymmetric information, the paper for which he was awarded the Nobel Memorial Prize.[10] In *Efficiency Wage Models of the Labor Market*, Akerlof and coauthor/former Fed Chair Janet Yellen propose rationales for the efficiency wage hypothesis in which employers pay above the market-clearing wage, in contradiction to the conclusions of neoclassical economics.

### **Identity economics**

In his latest work, Akerlof and collaborator Rachel Kranton of Duke University introduce social identity into formal economic analysis, creating the field of identity economics. Drawing on social psychology and many fields outside of economics, Akerlof and Kranton argue that individuals do not have preferences only over different goods and services. They also adhere to social norms for how different people should behave. The norms are linked to a person's social identities. These ideas first appeared in their article "Economics and Identity", published in *the Quarterly Journal of Economics* in 2000.

### **Reproductive Technology Shock**

In the late 1990s, Akerlof's ideas attracted the attention of some on both sides of the debate over legal abortion. In articles appearing in The *Quarterly Journal of Economics*,[11] *The Economic Journal*,[12] and other forums Akerlof described a phenomenon that he labeled "*reproductive technology shock.*" He contended that the new technologies that had helped to spawn the late twentieth-century sexual revolution, modern contraceptives and legal abortion, had not only failed to suppress the incidence of out-of-wedlock childbearing but also had actually worked to increase it. According to Akerlof, for women who did not use them, these technologies had largely transformed the old paradigm of socio-sexual assumptions, expectations, and behaviors in ways that were especially disadvantageous. For example, the availability of legal abortion now allowed men to view their offspring as the deliberate product of female choice rather than as the joint product of sexual intercourse. Thus, it encouraged biological fathers to reject not only the notion of an obligation to marry the mother but also the idea of a paternal obligation.

While Akerlof did not recommend legal restrictions on either abortion or the availability of contraceptives his analysis seemed to lend support to those who did. Thus, a scholar strongly associated with liberal and Democratic-leaning policy positions has been approvingly cited by conservative and Republican-leaning analysts and commentators.[13][14]

### **Looting**

In 1993 Akerlof and Paul Romer brought forth "Looting: The Economic Underworld of Bankruptcy for Profit", describing how under certain conditions, owners of corporations will decide it is more profitable for them personally to 'loot' the company and 'extract value' from it instead of trying to make it grow and prosper. For example:

Bankruptcy for profit will occur if poor accounting, lax regulation, or low penalties for abuse give owners an incentive to pay themselves more than their firms are worth and then default on their debt obligations. Bankruptcy for profit occurs most commonly when a government guarantees a firm's debt obligations.[15]

### **Norms and Macroeconomics**

In his 2007 presidential address to the American Economic Association, Akerlof proposed *natural norms* that decision-makers have for how they *should* behave, and showed how such norms can explain discrepancies between theory and observed facts about the macroeconomy. Akerlof proposed a new agenda for macroeconomics, using social norms to explain macroeconomic behavior.[16] He is considered[*according to whom?*] together with Gary Becker as one of the founders of social economics.

He is a trustee of Economists for Peace and Security and co-director of the Social Interactions, Identity and Well-Being Program at the Canadian Institute for Advanced Research (CIFAR). He is on the advisory board of the Institute for New Economic Thinking. He was elected a fellow of the American Academy of Arts and Sciences in 1985.[17]

## Personal Life

His wife, Janet Yellen, was the Chair of the Board of Governors of the Federal Reserve System and professor emeritus at UC Berkeley's Haas School of Business,[18] and was the former President and CEO of the Federal Reserve Bank of San Francisco and former Chair of President Bill Clinton's Council of Economic Advisors.[19][20] His son Robert Akerlof[21] has a Ph.D. in economics from Harvard University and teaches at the University of Warwick.[22]

Akerlof was one of the signees of a 2018 *amici curiae* brief that expressed support for Harvard University in the Students for Fair Admissions v. Harvard lawsuit. Other signees of the brief include Alan B. Krueger, Robert M. Solow, Janet Yellen, Cecilia Rouse, as well as numerous others.[23]

## Bibliograph

* Akerlof, George A. (1984). *An economic theorist's book of tales: essays that entertain the consequences of new assumptions in economic theory*. Cambridge: Cambridge University Press.
* Akerlof, George A., Romer, Paul M., Brookings Papers on Economic Activity, "Looting: The Economic Underworld of Bankruptcy for Profit" Vol. 1993, No. 2 (1993), pp. 1–73 [24]
* Akerlof, George A. 2000. "Economics and Identity," *Quarterly Journal of Economics*, 115(3), pp. 715–53.
* Akerlof, George A. 2005. *Explorations in Pragmatic Economics*, Oxford University Press. ISBN 978-0-19-925390-6.
* Akerlof, George A. 2005. "Identity and the Economics of Organizations," *Journal of Economic Perspectives*, 19(1), pp. 9–32.
* Akerlof, George A. "Thoughts on global warming." chinadialogue (2006). 14 July 2008.
* Akerlof, George A.and Robert J. Shiller. 2009. *Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism*. Princeton, New Jersey: Princeton University Press. ISBN 978-0-691-14233-3.
* Akerlof, George A., and Rachel E. Kranton. 2010. *Identity Economics: How Our Identities Shape Our Work, Wages, and Well-Being*, Princeton, New Jersey: Princeton University Press. ISBN 978-0-691-14648-5. Description & TOC, "Introduction," pp. 3–8, and preview.
* George A. Akerlof and Robert J. Shiller. 2015. *Phishing for Phools: The Economics of Manipulation and Deception*, Princeton University Press. ISBN 978-0-691-16831-9.

### Critical studies and reviews of Akerlof's work

* Davidson, Sinclair (Jan–Feb 2016). "Phull of phallacies". Quadrant. 60 (1–2): 80–82. Review of Phishing for phools.

## References

* Akerlof, George (1966). *Wages and capital* (PDF) (Ph.D.). Massachusetts Institute of Technology. Retrieved June 28, 2017.
* "George Akerlof (aka Mr. Janet Yellen) Heads to Georgetown - Real Time Economics - WSJ". blogs.wsj.com. 2014-09-23. Retrieved 2014-10-25.
* "Faculty"
* Swedberg, R. (1990). *Economics and Sociology: Redefining Their Boundaries : Conversations with Economists and Sociologists*. Princeton University Press. p. 61. ISBN . Retrieved 2014-10-25.
* George Akerlof: Nobel Prize Autobiography Archived 2006-04-05 at the Wayback Machine. Accessed March 12, 2011. "The Princeton Country Day School ended at grade nine. At that point most of my classmates dispersed among different New England prep schools. Both for financial reasons and also because they preferred that I stay at home, my family sent me down the road to the Lawrenceville School."
* Writing the “The Market for ‘Lemons’”: A Personal and Interpretive Essay by George A. Akerlof
* Both the *American Economic Review* and *The Review of Economic Studies* rejected the paper for "triviality", while the reviewers for *the Journal of Political Economy* rejected it as incorrect, arguing that if this paper was correct, then no goods could be traded. Only on the fourth attempt did the paper get published in *the Quarterly Journal of Economics.* Today, the paper is one of the most-cited papers in modern economic theory (more than 5800 citations in academic papers as of July 2009).
* 1993 George Akerlof and Paul Romer, "Looting: The Economic Underworld of Bankruptcy for Profit", Brookings Papers on Economic Activity 24, Brookings Institution, Washington, DC, 1993, as quoted in  pp. 164–165
* *The Missing Motivation in Macroeconomics*
* Trustees, Economists for Peace and Security Archived July 23, 2008, at the Wayback Machine
* Janet L. Yellen, White House Council of Economic Advisors.
* George A. Akerlof and Paul M. Romer (23 December 2007). "Looting: The Economic Underworld of Bankruptcy for Profit" (PDF). Retrieved 2014-10-25.

## External links

* George A. Akerlof at University of California, Berkeley
* Identity Economics
* Biography at Encyclopædia Britannica
* Behavioral Macroeconomics and Macroeconomic Behavior 2001 lecture at NobelPrize.org
* Profile and Papers at Research Papers in Economics/RePEc
* Works by or about George Akerlof in libraries (WorldCat catalog)

Articles
* Akerlof's criticism of Bush, February 12, 2003
* Akerlof slams Bush government, July 29, 2003