Nobel prize

I know this is a belated entry. But it would be ‘strange’ if we do not mention at all about this year’s Nobel Prize in economics. Columbia University’s Edmund Phelps was honored the prize in the age of 1973. Since I am no macroeconomist, I can not really comment on his works.

I know that he was among those who developed the “micro foundations of macroeconomics” approach, along with his compatriots Milton Friedman and Robert Lucas who had won the Prize much earlier. He also reshaped the understanding of Philip’s Curve and the relationship between inflation and unemployment. His other contribution was in growth theory literature: the “Golden Rule” of savings and capital accumulation. (Basically, we can’t save too much!)

Here is a summary of his work. See also a very good but concise explanation about his works in the Marginal Revolution.

A week later, the Nobel committee announced that this year’s Nobel Peace Price was honored, not our President SBY, but to Dr. Muhammad Yunus and an institution he established in 1976, the Grameen Bank. Here is my comment on that. One quote from my article:

… the Grameen business has worked not on a charity basis. Nor has it worked by eliminating market mechanisms. Many argue that market mechanisms are bad for the poor. This is an incorrect assumption. Poor people suffer because the market does not work. So the right thing to do, as the Grameen group has shown, is make the market work for the poor.

I also argued that, despite its success, don’t see Grameen Bank model or microfinance initiatives as a magic bullet for ending world’s poverty. Nothing is a magic bullet (that includes the so-many-priorities-at-the-end-it-has-none Millennium Development Goals, right Prof. Sachs?). This article has a similar tone.

Nobel | Microfinance