Tuesday, March 6, 2007

Inside the Mind of a Master Macroeconomic Theorist


“…if there was a single "person responsible for bringing modern economics to bear on the problems of the nations south of the Rio Bravo, that person is Guillermo Calvo." - Andrés Velasco, Chile's finance minister

From an interview with Guillermo A. Calvo;

“When I was finishing High School in Buenos Aires, there was no school of economics to speak of. However, I was very lucky because my father, wh worked at the central bank, brought me economics books from the library there, under the advice of some of his friends who had worked with Ra´ul Prebisch. I found the material strange and fascinating at the same time. One day, he brought me the General Theory and I almost decided that economics was not for me! Fortunately, in school there was a course called Economics. As programmed, it consisted of some kind of history of economic thought, but, once again, I got lucky. The course was taught by Julio Olivera who had a passion for Walras. As a result, we spent the whole semester discussing the Walrasian system. I could hardly believe that a subject that appeared impossible to tackle reading Keynes, suddenly became so clear and elegant. One year later, I joined the central bank and worked under his son, Julio H.G. Olivera, whose orders to me were, essentially: Go to the library, get a copy of Allen’s Mathematics for Economists and Hicks’ Value and Capital and don’t leave your room until you are done with them. I felt like I had reached Nirvana! In addition, there was a seminar series in which we discussed some key papers coming out in journals like the JPE. One of the first such papers was Samuelson’s overlapping generations model. Quite frankly, I must say that I became a little dizzy trying to read papers on the frontier of economics, but I found it very encouraging that everything we read had a solid mathematical basis. Thus, even though the deeper economics often escaped me, I felt I had a firm grasp of the reasoning in each one of the papers, and that, I felt, was good enough. Did growing up in such a fascinating economic laboratory, Argentina, influence my decision to go into economics? Maybe, because before I learned economics it was very hard for me to follow the public debate, which was heavily peppered with economic terms. But I believe that what really hooked me at the beginning was the beautiful theory, and finding out that “emotion” could be subject to mathematical analysis.

I had practically no college years because, as I told you, when I started there was no school of economics. Thus, I enrolled in accounting (which I found quite uninteresting). However, at the University of Buenos Aires, where I attended, Professor Julio H.G. Olivera ran a series of seminars that his best students attended, and I was accepted because I worked with him at the central bank. (By theway, Rolf Mantel and Miguel Sidrausky also attended those seminars.) In those seminars, we read Hicks’ Value and Capital, Samuelson’s Foundations, and Koopmans’ Three Essays on the State of Economic Science. With a group of adventuresome classmates, I also independently read the recently published Debreu’s Theory of Value (which required learning some basic topology). The Koopmans-Debreu duo
(both of whom were at Yale at the time) put Yale among my favorite places to go, and made me think of graduate school, not as the next step in a professional career, but as a door to heavenly intellectual delights! However, scarcely having one-third of college under my belt made my chances of acceptance in graduate school extremely slim. Moreover, my willingness to learn the intricacies of accounting was declining at an alarming speed. Thus, there came a time when I felt that I had fallen into a cruel trap, no exit in sight. However, once again my good fortune gave me a hand this time in the form of the USAID (United States Agency for International Development), which offered scholarships in a program at Yale! This was an M.A. program but the best students had a chance of being considered for their Ph.D. program. I was accepted on the basis of recommendation letters, and nobody seemed to care that I was far from graduation. As I was later told, this had been simply an oversight of the Admissions Committee!”

Related;
A Master of Theory and Practice- Calvo interview in F&D
Interview with Calvo in Richmond Fed
Guillermo А. Calvo- Op-eds
Policy Papers by Calvo
Rules for Monetary Policy
Modern Macroeconomics in Practice: How Theory is Shaping Policy
IMF Conference in honor of Guillermo A. Calvo
Spurring Equitable Growth and Empowering People -- What went wrong and what did we learn? (webcast)

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