Edmund Phelps at lunch with the FT

Martin Wolf interviews Columbia University economist Edmund (Ned) Phelps. Mr Wolf’s report is peppered with comments that Phelps made during their long conversation. Here is a small sample.

“[To stimulate innovation] it’s necessary to start with a national conversation on the importance of creativity and discovery …. I’m not against a big government. I’d love to have colossal employment subsidies, to revolutionise the terms on which low-wage workers are employed, and, if there are some exciting initiatives that the government could take to open the way for more innovation, that would be great. But we’ve got to stop all this social protection. We’ve got to use that tax money for things like low-wage employment subsidies – subsidising work, subsidising innovation maybe, subsidising investment maybe.”

What about unemployment benefit? Medicare? “I’m not against social insurance. In my ideal world, wage rates would be so pulled up at the bottom by employment subsidies that everybody would be able to afford good levels of medical and retirement insurance in private markets. But we don’t live in that world. So, I would be loath to crusade against social insurance.”

I suggest that it is difficult to draw the line between the “social insurance” he favours and the “social protection” he condemns “Yes. We have got to protect the indigent. But social protection is out of control now.”

Wouldn’t he also accept that government can provide unemployment insurance and health insurance better than the private sector can?

“Yes, I understand there are flaws in private insurance markets. But the balance of advantage might have been in favour of private insurance if we had distributed the fruits of work more justly.” ….

Phelps believes passionately that creativity allows individuals to live fuller lives and remake the world. He is a true American, in a good way.

Martin Wolf, “Lunch with the FT: Edmund Phelps“, Financial Times, 14 June 2014.

Edmund Phelps (born 1933) won the 2006 Nobel Memorial Prize for “his analysis of inter-temporal tradeoffs in macroeconomic policy”. TdJ has highlighted aspects of his work on previous occasions, for example here, here, and here.

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