When Econ Comes to Life by Chris S. '11

During your first day at MIT, after you check in for Orientation, there’s usually a table in the back of the room that’s piled full of “helpful handouts.” Although I’ve since forgotten what most of the papers were, there’s always big white poster entitled “One Hundred and One Things to Do Before You Graduate.”

It’s a shame that I actually misplaced my poster and have to rely on the copy that my friend Anna has hanging up in her room. At last count (beginning of the year this year), I’ve done just over half of all the items on that chart. One item that I particularly remember, however, is “Attend a Nobel Laureate Lecture.”

I think it was in the comments of these very blogs that I remember a poster saying, “I can’t wait until I get to MIT and brush shoulders with Nobel Prize laureates and study their theories in the lab.” Although at last count, there’s 7 active Nobel laureates* on the MIT faculty, it’s definitely possible to run into esteemed faculty who have won National Medals of Science**, Pulitzer Prize***, and other prestigious honors in the Infinite, at Stata Center, or more commonly, in lecture halls.

(* Professor Robert Horvitz, who won the 2002 Nobel Prize for Medicine for his work with the genetics of C. elegans, works in the lab right next to my UROP with the same worm. I attended a couple of Horvitz lab meetings!

** Professor Robert Weinberg, co-professor of the fall introductory bio class, 7.012, and Robert Langer, head of the huge Langer Lab on campus (where many undergrads such as Paul worked at for UROPs), won the National Medal of Science in 1997 and 2006, respectively.

(why are these distinguished scientists all “Robert/Bob”‘s?)

*** Professor Junot Diaz, associate professor in Course 21W (Writing and Humanistic Studies), was awarded the Pulitzer Prize just this year for his novel The Brief Wondrous Life of Oscar Wao.)

To date, I had attended three lectures given by Nobel Prize laureates, and I had the pleasure of attending another such lecture on Thursday afternoon, given by Harvard Professor Gregory Mankiw (but MIT PhD. ’84) and Professor Emeritus Robert Solow (Nobel Laureate in Economics, 1987 – another Robert!!).

Photo credit: MIT News Office. Professor Mankiw is on the far left and Professor Solow is on the far right.

I especially wanted to blog about this because:

-I’m very interested in Economics (or Course 14), and I am considering it as a minor or a potential double major.

-The world is going through a global financial crisis, and it’s a dynamic time to be studying economics.

-Both Mankiw and Solow are now extremely familiar names to me through studying Macroecon (14.02) this semester.

So here’s the deal: Mankiw is the person that wrote my 14.02 textbook, and Solow is the person that developed the Solow Growth Model which dominated Chapters 7 and 8 of the said book. Anyhow, it was quite exciting to be in such distinguished company since it was like a “omg-I-can’t-believe-these-people-are-live!” kind of feeling (kinda like a kid seeing Mickey Mouse the first time at Disneyland, if you get my gist =p).

The seminar itself was pretty interesting. It’s helpful to know that actually Mankiw is a Republican, and was one of President Bush’s economic advisers from 2003 to 2005. While Solow, on the other hand, explicitly stated that he didn’t even consider voting for anyone other than Obama. It’s also interesting to note that Mankiw was a MIT grad who spent his teaching career at Harvard, while Solow was a Harvard grad who spent his teaching career at MIT (this comment brought hearty laughter from the audience).

Both professors opened the session by providing a 20-minute outline of issues and topics that would be of concern in the future Obama administration, while taking questions from the audience for the remaining 20.

Both professors, in their initial discourse, discussed the current financial crisis, with Mankiw pointing out that the financial crisis precipitated from a mis-management in the housing market. Solow followed this up by saying that now, what is most important for the US to do is to prevent the loss of total output which is inherent in a recession (for example, like what happened during the Great Depression – the theory is that as long as productivity levels do not decrease, the economy isn’t truly in a recession and there’s still ways to alleviate the problem). Also, since Fed chairman Bernanke had already “loaned where no man had loaned before,” this crisis cannot be resolved solely through monetary policy, since that channel has already been exhausted. Furthermore, Solow calls for the distribution of large federal grants to state/local governments, extending unemployment insurance, and promoting infrastructural spending as pointers for the new government. However, the challenge is doing all of these while closing the national deficit. He directly pointed out that the reason why the United States has such a big deficit is because the public doesn’t save, but the government consumes a lot.

In addition, both professors discussed the increasingly controversial topic of health care, with Mankiw supporting the $5000 tax credit plan proposed by McCain through the campaign (McCain promised a return of $5000 in tax credit to individuals for the use of items such as health care), while Solow pointed out that $5000 hardly covers the aggregate cost of medical treatment nowadays for any significant disease. Instead, he proposed a bottom-up approach – seeking an alternative of creating an external agency in evaluating the pricing of new medical products in an effort of keeping medical costs down, in the same way that Great Britain had attempted to deal with its health care.

Solow further calls for a growing recognition of the problem of increased inequality in the current American society. Especially, he calls for the government to stop favoring the high income earners because what is essentially happening in America now is that the rich are getting richer while the poor are getting poorer. Mankiw agrees, stating that the current system which strongly favors the income of the financial sector is not going to resolve the wealth disparity.

In Q/A section at the end, one interesting question that was posed was whether the government should bail out General Motors, in the same way that the government intervened with Wall Street. Solow stated that there isn’t a point pouring money into a system that’s already broken – what’s important is getting to the root of the problem in the system and fixing it. Mankiw replied in the affirmative to the question posed, but given that private investors would be willing to sponsor the action, since there’s also no point in investing in a company that had already lost its investment return viability.

Again, I think this is one of the most amazing things about MIT – that classroom learning doesn’t just occur in the classes, but also carries over to current issues in the field. You see it everywhere – students doing UROP work on cutting-edge research topics just like any other researcher in the field, colloquiums featuring outstanding scientists from around the world discussing their research (that is, if you can even understand the extent of their work), and accomplished faculty taking time away from their research to teach undergraduate classes (just last week I discovered the lecturer for 7.03, Professor Fink, is actually one of the world’s most renowned yeast geneticists!).

I guess I really have to work harder. ^_____^