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MIT Prof. Robert Solow Wins Nobel Prize in Economics

October 22, 1987|RALPH VARTABEDIAN | Times Staff Writer

American Robert M. Solow won the Nobel Memorial Prize in Economic Sciences on Wednesday for his pioneering work in showing how technological change affects long-term economic growth.

Solow, a professor at the Massachusetts Institute of Technology, won the prize for a mathematical model of the economy demonstrating in explicit terms that technology is the driving force of economic development.

Although Solow's work had not earned him wide public recognition until Wednesday, it has been responsible for spurring industrial countries to allocate more resources to higher education and research.

"Everybody knew that the important factor in economic growth was improved technology," Solow said in a telephone interview at his MIT office. "The analytical job was to describe the interaction of population growth, capital formation and technological change."

His work showed that technology was far more important than capital investment and labor supply in generating growth. He cited the boom of Silicon Valley as an example of how technology can overwhelmingly spur such growth.

Critic of Reaganomics

Solow was the 15th American to win the economics prize since it was created by the Bank of Sweden in 1968. With Solow's award, MIT has three Nobel economists on its faculty.

Solow, who served on the Council of Economic Advisers during the Democratic administration of John F. Kennedy and subscribes to economic thinking embraced by many liberals, offered some harsh criticism Wednesday of President Reagan's handling of the economy.

"The best thing you can say about Reaganomics is that it probably happened in a fit of inattention," he said.

Solow was critical of America's budget deficit and the Reagan Administration's opposition to a tax increase.

"We're going to be a number of years digging ourselves out of a hole that we dug for ourselves over the past six or seven years," he said.

The Nobel prize was awarded to Solow amid a world financial crisis, a week in which financial markets in major industrial countries have been wildly unstable. "The stock market has plenty to be worried about, but it took me by surprise that it suddenly worried about it Monday," Solow said.

Solow is a Keynesian economist, a school of thought that holds government can smooth out business cycles by controlling the economy's overall demand for goods and services through tax policy and spending levels. According to the theory, when an economy enters a downturn, higher government spending and reductions in taxes can boost economic activity.

But the academic work that won Solow the Nobel, which includes two key papers published in the 1950s, were not related to Keynesian theories. When Solow's "Contribution to the Theory of Economic Growth" was published in 1956, he was already a leading economist on the subject of economic growth.

Solow, 63, was born in the New York City borough of Brooklyn. He received a bachelor's degree from Harvard University in 1947, a master's in 1949 and a doctorate in 1951.

Solow joined the MIT faculty as an assistant professor of statistics in 1950, became associate professor in 1954 and professor of economics in 1957.

John G. Riley, chairman of the economics department at UCLA and a former student of Solow's, recalled the professor "as the kind of guy that despite the fact you were filled with awe you felt you could wander into his office any time and sit down and talk."

Riley recalled one occasion in the early 1970s in which Solow invited him and his girlfriend for a trip to Martha's Vineyard on Solow's boat. But rather than talking about economics, the talk was of "where the wind was coming from, the last game at Fenway Park and next winter's skiing," Riley recalled.

Solow has long been a research partner and friend of Nobel laureate Paul A. Samuelson, also of MIT, who won his economics prize in 1970.

"The intellectual partnership of Solow and Samuelson must rank among the most productive of such relationships in the history of economics," said Solow's citation when he won MIT's Faculty Achievement Award in 1978, an award voted by his fellow professors.

MIT said Solow was especially valuable to the school because he had continued to provide equal time to undergraduates, graduate students and his own research. For years, Solow has continued to deliver introductory economics lectures.

"Everybody knew technology was important, but nobody knew how to bring it into our analysis and how important a factor it was," Richard Eckaws, an MIT professor, said in a telephone interview. "Solow has made fundamental contributions in a number of fields."

James Tobin, a Yale University professor who won the Nobel economics prize, also praised Solow for making "basic contributions in both theoretical and empirical studies."

"What Bob Solow did was quantify how much the improvement in labor productivity is attributable to capital investment and technological change," said Tobin, who attended Harvard at the same time Solow did.

The Nobel Foundation, a legacy of Swedish industrialist Alfred Nobel, sponsors annual prizes in medicine, literature, physics, chemistry and work for peace. The prizes were established by Nobel's 1895 will.

The economics award was established in 1968 by the Bank of Sweden as a memorial to Nobel. The winner of the prizes receives the equivalent of about $343,000. Speaking of his frustrations and joys over his academic career, Solow said he remains disappointed at the superficiality of discussion about economics in government.

"The most frustrating thing is how difficult it is for academic economic thinking to penetrate the everyday workings of government," Solow said.

Times Staff Writer Jonathan Peterson in Los Angeles contributed to this story.

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