George Akerlof joins Economics Department – We are delighted to announce that George Akerlof is now a member of the Georgetown University Economics Department in addition to his continuing role at the McCourt School of Public Policy, which he joined last year. Frank Vella, Chair of the Department and Edmond V. Villani Professor, commented: “We are all thrilled to have George join the department. We are all great admirers of his path-breaking work, and many of us already consider him a friend. To have him as our colleague represents both a remarkable outcome and an extraordinary opportunity for the department and our students.”
Professor Akerlof earned his BA at Yale in 1962 and his PhD at MIT in 1966. Before joining the McCourt School in 2014, he had been a faculty member at Berkeley and the London School of Economics.
Professor Akerlof most celebrated work is undoubtedly the “Market for Lemons,” in which he explores the effect of quality uncertainty on market mechanisms. In Akerlof’s own words: “Lemons deals with a problem as old as markets themselves. It concerns how horse traders respond to the natural question: `if he wants to sell that horse, do I really want to buy it?’ Such questioning is fundamental to the market for horses and used cars, but it is also at least minimally present in every market transaction.” His work shows that asymmetric information can cause markets to shrink dramatically because low quality goods drive out high quality ones, until only “lemons” are traded. The literature on asymmetric information has been immensely influenced by Professor Akerlof’s work. In 2001 (together with Michael Spence and Joseph Stiglitz) he was awarded the Nobel Memorial Prize in Economic Sciences for “analyses of markets with asymmetric information.”
More recently Professor Akerlof has pursued a broad portfolio of interests that range from the role of “efficiency wages” in the labor market, to the effect of the “reproductive technology shock” of the 1960s on family demographics, to the incentives that managers sometimes have to “loot” their companies into bankruptcy for their own personal gain. He has also contributed to the emerging field of Behavioral Economics. In his Nobel lecture and in numerous other contributions he showed that the introduction of certain behavioral traits could rescue New Classical Macroeconomics from its failure to explain central economic phenomena like involuntary unemployment, under-saving for retirement, the equity-premium puzzle, and the existence of a persistent economic underclass. Professor Akerlof’s most recent book, co-authored with fellow Nobel Laureate Robert Shiller and published by Princeton University Press, is entitled “Phishing for Phools: The Economics of Manipulation and Deception.”