Robert M. Solow, Institute Professor Emeritus of Economics at MIT, won the 1987 Nobel Prize in economics. His most recent book is Work and Welfare. (May 2009)

How to Understand the Disaster

Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke at a congressional hearing on oversight of the federal government’s intervention at AIG, Washington, D.C., March 24, 2009
No one can possibly know how long the current recession will last or how deep it will go. That is because the dangerous combination of the “real” recession—the unemployment and idle productive capacity that come from lack of demand—and the financial breakdown, each being both cause and effect of the …

Trapped in the New ‘You’re on Your Own’ World

When the Bush-Cheney administration proposed to replace Social Security with a system of individually accumulated, individually owned, and individually invested accounts, my first thought was that its goal was to take the Social out of Social Security. It took a few minutes longer to realize that it also intended to …

‘Survival of the Richest’?

Look at the graph reproduced on this page. It shows the material standard of living of the average English person over a span of eight centuries beginning in 1200. In 1800 the average English person was literally no better off, in food, clothing, and shelter, than in 1200.

How to Understand the Economy

Educated friends who have never studied economics themselves often ask the economist Duncan Foley to recommend a book that will explain what economics is about. He doesnot find it easy, sees correctly that the standard seven-hundred-page elementary textbook is essentially unreadable, and usually ends up by suggesting the late Robert …

Mysteries of Growth

The standard measure of a national economy’s overall performance is its real gross domestic product (GDP). This is just the sum of all the goods and services produced during the year (except those used up in further production), valued at going market prices and then corrected for price inflation. The …

Party Line

The Employment Act of 1946 committed the federal government to the pursuit of “maximum employment, production and purchasing power,” a commitment whose cash value has fluctuated drastically from time to time. It also established the Council of Economic Advisers (CEA), to be appointed by the president in order to provide …

Should We Pay the Debt?

At the end of 1999 the federal debt held by the public amounted to $3,633 billion, or about $15,000 for every man, woman, and child in the population. We will be hearing a lot of big numbers like that during the presidential election campaign, because Mr. Gore has said that …

Welfare: The Cheapest Country

In the early pages of any elementary economics textbook, the beginning student sees a rudimentary plumbing-like diagram that illustrates the “circular flow” in every capitalist market economy. There is a business sector and a household sector, connected by two pipes. Business firms employ workers; and these businesses arrange to use …

On Golden Pond

The population of the US is getting older on the average. Why? Because families are having fewer children, people are living longer (and retiring earlier), and because the roughly twenty-year-long bulge of births that we call the baby boom has reached the fifth of Shakespeare’s seven stages and will soon …

Guess Who Pays for Workfare?

It is one thing to claim—as the politicians of both parties now do—that the replacement of welfare by work would be a good thing for recipients, for taxpayers, and for the general reputation of public assistance to the poor. It is quite another question whether that transformation can actually be …

Blame the Foreigner

The collapse of the Soviet Union and the dissolution of its empire are the source of all sorts of changes in the West. To take an important example, defense-related industries have lost a good chunk of their market, with further shrinkage to come. One sober estimate suggests that a million …

Dr. Rivlin’s Diagnosis & Mr. Clinton’s Remedy

It really was “the economy, stupid” that elected Mr. Clinton to the presidency. He also emphasized a parallel and important theme: “change.” Its potential significance is suggested by the fact that even Mr. Bush, that apostle of domestic passivity, tried to represent himself as the candidate of “change.” The content …

How to Stop Hunger

When I was a small boy, the traditional thing for a mother to say to a child who would not eat his vegetables was that he should “remember the starving Armenians” and be ashamed of himself for wasting food. I would gladly have donated any amount of broccoli to the …