Pier Francesco Asso

The Taylor rule and the practice of central banking

The Taylor rule has revolutionized the way many policymakers at central banks think about monetary policy. It has framed policy actions as a systematic response to incoming information about economic conditions, as opposed to a period-by-period optimization problem. It has emphasized the importance of adjusting policy rates more than one-for-one in response to an increase in inflation. And, various versions of the Taylor rule have been incorporated into macroeconomic models that are used at central banks to understand and forecast the economy. ; This paper examines how the Taylor rule is used as an input in monetary policy deliberations and decision-making at central banks. The paper characterizes the policy environment at the time of the development of the Taylor rule and describes how and why the Taylor rule became integrated into policy discussions and, in some cases, the policy framework itself. Speeches by policymakers and transcripts and minutes of policy meetings are examined to explore the practical uses of the Taylor rule by central bankers. While many issues remain unresolved and views still differ about how the Taylor rule can best be applied in practice, the paper shows that the rule has advanced the practice of central banking.

Human Nature and Economic Institutions Instinct Psychology, Behaviorism and the Development of American Institutionalism

Recent articles have explored from different perspectives the psychological foundations of American institutionalism from its beginning to the interwar years (Hodgson 1999; Lewin 1996; Rutherford 2000a, 2000b; Asso and Fiorito 2003). Other authors had previously dwelled upon the same topic in their writings on the originsand development of the social sciences in the United States (Curti 1980; Degler 1991; Ross 1991). All have a common starting point: the emergence during the second half of the nineteenth century of instinct-based theories of human agency. Although various thinkers had already acknowledged the role of impulses and proclivities, it was not until Darwins introduction of biological explanations into behavioral analysis that instincts entered the rhetoric of the social sciences in a systematic way (Hodgson 1999; Degler 1991). William James, William McDougall, and C. Lloyd Morgan gave instinct theory its greatest refinement, soon stimulating its adoption by those economists who were looking for a viable alternative to hedonism. At the beginning of the century, early institutionalists like Thorstein Veblen, Robert F. Hoxie, Wesley C. Mitchell, and Carleton Parker employed instinct theory in their analysis of economic behavior. Their attention wasdrawn by the multiple layers of interaction between instinctive motivation and intentional economic behavior. Debates on the role of instinctsin economicswere not confined to the different souls of American Institutionalism, and many more “orthodox†figures, like Irving Fisher or Frank Taussig, actively participated.

Money Doctoring after World War II: Arthur I. Bloomfield and the Federal Reserve Missions to South Korea

We explore the foreign economic policy activities of Arthur I. Bloomfield, a prominent economist of the Federal Reserve Bank of New York in the 1940s and the 1950s. During the cold war, Bloomfield headed several missions to South East Asia, assisting local authorities in shaping new foreign exchange regimes and banking institutions. Bloomfields most successful mission concerned the constitution of a new central bank in South Korea, established in June 1950. In line with the Feds new strategy established by Robert Triffin, head of the Latin American section, Bloomfield moved away from the dogmatic style of Edwin Kemmerer that dominated U.S. overseas missions in the first half of the twentieth century; “Southern” economies, in fact, rather than benefiting from Kemmerers policies, had been increasingly hit by cyclical instability. According to Triffin and Bloomfield, U.S. overseas missions should loosen constraints on the activity of economic institutions and policy authorities, in order to increase their effectiveness as guarantors of financial stability and promoters of national development. We examine this episode in the light of the U.S. postwar foreign economic relations and the concept of “embedded liberalism.” The Bloomfield missions to South Korea show with great clarity the principal features of the Feds new foreign strategy and the need to examine the actual advisory activity of Fed economists during the 1940s: they were at the intersection between domestic and international political and economic systems. Ultimately, they played a major role in forging the actual foreign policy of the United States.

Lawrence Kelso Frank's Proto-Ayresian Dichotomy

For institutionalists working in theAyresian tradition, the dichotomy between technology and ceremony is still referred to as a “central analytical tool” (Waller 1982, 757). This dichotomous approach to the study of institutions considers technological advance as the most significant cause of social and institutional change. Peculiar to the institutional framework is an absolute and irreconcilable tension—the dichotomy— between the dynamic and progressive force of technology, and the static and conservative structure of ceremony and institutions. Clarence E. Ayres was the one who most systematically designed the dichotomy and elevated it to the status of paradigm, claiming that technological advances are the only way to undermine and modify the underlying value system within a culture. Accordingly, for Ayres, “deceremonialization, deinstitutionalization, and ‘institutional decomposition’ can occur only if there are advances in science and technology that are so rapid and pervasive that more and more people become increasingly occupied, in

A Scholar in Action in Interwar America: John H. Williams on Trade Theory and Bretton Woods

Interwar economic events were a powerful source of inspiration for those economists who studied the relation between theory and current problems with a view to prescribing original solutions for policy authorities. If we examine the presidential addresses at the annual meetings of the American Economic Association (AEA), we see that the difficulty in reconciling past economic doctrines with the events which were profoundly disturbing the working of the economic system was frequently deplored. Many scholars denounced the inherited corpus of economic theories as inadequate and misleading. Others asked whether the causes of economic maladjustments could exclusively be grouped in the short term of cyclical fluctuations which characterized the transition between equilibrium positions. Still others, more pragmatically, believed that there were major imperfections in economic policies and the institutional framework which needed to be profoundly rethought and redesigned.1

HARVARD MEETS THE CRISIS: THE MONETARY THEORY AND POLICY OF LAUCHLIN B. CURRIE, JACOB VINER, JOHN H. WILLIAMS, AND HARRY D. WHITE

The paper discusses the interpretation of the Great Depression and the policy decision making by four Harvard economists: Lauchlin B. Currie, Jacob Viner, John H. Williams, and Harry D. White. All were eminent scholars in the field of monetary and international economics, and were deeply involved in policy decisions during the New Deal. We will discuss how their Harvard training provided them with a common methodological and analytical perspective, and how this common perspective translated into specific policies when they moved from the academia to public service in the US administration. Their interpretation of the causes of the Great Depression and their policy proposals show the eclectic approach that these four economists had to monetary, fiscal, and economic analysis, and the points of contact with both the US monetarist tradition and the work of John Maynard Keynes. At the same time, this very eclecticism, far from making them part of the monetarist or the Keynesian schools, characterized them as a group of their own: a network of scholars who, by virtue of their studies and the evolution of their professional careers, developed a style of analysis and policy prescriptions that deeply influenced the nature of the New Deal.

The shaping of public economic discourse in postwar America: the 1947 meat shortage and Franco Modigliani's meat plan

Abstract This paper discusses the American debate over price controls and economic stabilization after World War II, when the transition from a war economy to a peace economy was characterized by bottlenecks in the productive system and shortages of food and other basic consumer goods, directly affecting the living standard of the population, the public opinion, and political discourse. Specifically, we will focus on the economist Franco Modigliani and his proposal for a “Plan to meet the problem of rising meat and other food prices without bureaucratic controls.” The plan prepared by Modigliani in October 1947 was based on a system of taxes and subsidies to foster a proper distribution of disposable income and warrant a minimum meat consumption for each individual without encroaching market mechanisms and consumers’ freedom. We will discuss the contents of the plan and its further refinements, and the reactions it prompted from fellow economists, the public opinion, and the political world. Although the Plan was not eventually implemented, it was an important initiative for several reasons: first, it showed the increasing importance of fiscal policy among postwar government tools of intervention in the economic sphere; second, it showed a third way between direct government intervention and full-fledged laissez faire, in tune with the postwar political climate; third, it proposed a Keynesian macroeconomic approach to price and income stabilization, strongly based on econometric and microeconomic foundations. The Meat Plan was thus a fundamental step in Modigliani’s effort to build the “neoclassical synthesis” between Keynesian and Neoclassical economics, which would deeply influence his own career and the evolution of academic studies and government practices in the United States.

Lawrence Kelso Frank's Proto Ayresian Dichotomy: A Note

This paper explores Lawrence Kelso Franks contribution to the evolution of the so called Veblenian dichotomy. According to this apprach, peculiar to the institutional framework of every economic system is an absolute and irreconcilable tension between the dynamic and progressive force of technology on the one side, and the static and conservative structure of ceremony and institutions on the other. The first section examines Franks adoption of behavioristic psychology in connection with the main changes which were taking place in the American social sciences during the first decades of the twentieth century. The second section describes Franks theory of institutional change, emphasizing its similarities with the brand of institutionalism developed by Clarence Ayres in the early 1940s. The third section compares Franks institutionalism with the contributions of Thorstein Veblen and the philosopher John Dewey. Our main conclusion is that, in many respects, Franks work represents a departure from Veblens and a step toward an Ayresian dichotomic analysis of institutional evolution.

His Fate in the US

Asso recounts the many difficulties De Viti de Marco met with over the translation of his book First Principles of Public Finance, the reviews expressing diametrically opposed opinions, from F.C. Benham on the German translation (1932) to H.C. Simons on the English translation (1936).

Studying institutional economics at chicago in the 1930s: The case of arthur bloomfield

Arthur Bloomfield (1914 1998) was a fine international economist and an original historian of economics. A native of Montreal, Bloomfield was educated at McGill University, where he studied under Joseph Hemmeon and Stephen Leacock and received his M.A. in 1936. His thesis was on Canadian wheat marketing policy during the Great Depression. Disappointed by the economics he had learned at Montreal, in the fall of 1936 he went to Chicago to begin postgraduate studies. There he studied under the guidance of some of the leading American economists of the age, several of whom would later be identified with the so-called first Chicago School of Economics. The crucial event that brought Bloomfield to the University of Chicago was a letter from Harry Millis, then the chairman of the Department of