1Edmund Phelps is undoubtedly one of the most important figures in the history of macroeconomics in the closing decades of the twentieth century, receiving the Nobel Prize for this work in 2006. A good case could be made that he has been the most influential figure in relation to academic macroeconomic theory. The reason is his persistent advocacy, leading by example, of the need to ground macroeconomic theory on a microeconomic foundation. My Journeys in Economic Theory provides a very readable account of how his theorizing evolved from his early years, working on logistic problems at RAND, through his years in Yale (the Cowles Commission) and the University of Pennsylvania, with significant visiting appointments at MIT, the University of Cambridge and the London School of Economics, to Columbia, where he spent the bulk of his academic career.
2For many people he will be best known for his role in creating the so-called “Phelps-Friedman expectations-augmented Phillips curve”, but for those who studied growth, he was already famous for his article on the optimal rate of growth and the proportion of income that needs to be saved to maximize per capital consumption in the Solow growth model, a result derived simultaneously by Joan Robinson. At Yale he continued to work on growth and tackled the problem of public debt. However, the beginning of his analysis of expectations and unemployment came not there but at London School of Economics, during a seven-month interlude between leaving Yale and starting his position at the University of Pennsylvania, when he began to think about the role of expectations in wage setting. His theory has often been bracketed with the theory Milton Friedman outlined in his American Economic Association Presidential Address, but Phelps draws a clear distinction between their respective aims. Whereas Friedman advocated a monetary rule to stabilize inflation, Phelps sought an optimal policy taking into account its implications for both inflation and unemployment; wild swings in inflation and in unemployment were both problematic. He claims that although in his book, Inflation Policy and Unemployment Theory, Phelps (1972) “did not deliver a workable manual for the conduct of monetary policy” and he came “closer to what an optimal monetary policy is about than Milton Friedman did when he advocated for a passive monetary policy and reliance on the market” (66).
3There is a widespread practice of analysing the macroeconomics that emerged once economic theorists had responded to Phelps’s call for microfoundations in terms of a debate between “New Classical” and “New Keynesian” schools of thought, with Phelps, who never accepted key proposition of New Classical macroeconomics, usually being classified in the latter. However, this book makes it clear that such an approach is problematic. Phelps was very obviously not a New Classical economist, for he was never attracted by the notion of rational expectations. He attributes this to his reading of the writings of Frank Knight, John Maynard Keynes, and Friedrich Hayek (three economists not often bracketed together) which stressed the importance of uncertainty in economic life. Here, he had in mind the radical uncertainty found in Knight’s Risk, Uncertainty and Profit and Keynes’s Treatise on Probability which cannot be reduced to numerical probabilities: people simply do not know.
4And yet, neither was he a straightforward Keynesian, despite his admiration for some of Keynes’s ideas, for he attached greater importance than Keynes to the supply side. Here, a crucial collaboration was with Robert Mundell. This work culminated in Structural Slumps, in which he further differentiated his thinking from Friedman’s in that he argued that models of stabilization policy had to incorporate changes in the natural rate of unemployment. This work took account of not only the operation of the labor market under conditions of uncertainty, but also the consequences of changes in public debt for interest rates. In the book he describes his disappointment that these ideas were met with resistance (though falling short of outright opposition) and that policy makers did not allow for the importance of structural forces influencing the path of unemployment.
5Phelps is best known for his use of microeconomic theory to underpin macroeconomics but, as he makes clear, there is another side to his work that he considers as important, if not more important: his work on altruism and justice. In 1972, together with the philosopher Thomas Nagel, he organised a conference on the topic of altruism, bringing together a large and very eminent interdisciplinary group. This showed that altruism could be helpful (Phelps, 1975). Though reviews of the resulting book were sparse in the extreme (a single review by Peter Howitt, 1976), these ideas attracted the attention of Chicago economists and were strongly opposed by George Stigler, Gary Becker, and Richard Posner. However, the main stimulus to this work came from his engagement with Amartya Sen and the philosopher, John Rawls, whom he first met during a spell at the Center for Advanced Study in the Behavioral Sciences. He worked out the implications of Rawls’s ideas about fairness and justice for taxation, challenging the notion of a Universal Basic Income as a device for ameliorating the condition of the worst-off members of society. A key idea was that work was, for most people, more than a source of income, and this was developed, in a sense extending Rawls, in Rewarding Work (1997) and Mass Flourishing (2003).
6An ongoing theme in the book is creativity. It might seem slightly arrogant to focus so much on his own creativity and to celebrate his own success, but one of his themes, alongside the importance of uncertainty, is his belief that creativity is found everywhere. For example, he objects to Schumpeter’s theory of innovation on the grounds that it is not just a small cadre of entrepreneurs who innovate, but that creativity and the ability to innovate are spread much more widely.
7On the back cover, Lawrence Summers describes Phelps as “a renaissance intellectual among economists.” Clearly, no-one’s autobiography, inevitably written from its subject’s perspective, can be the last word on his or her achievements, but this book, demonstrating the way in which Phelps, like his friend Amartya Sen, helped bridge the gap between economists and philosophers, trying to pull economic theory in new directions, does much to justify that claim. Phelps is well known but it is likely that most readers will discover things about him that they did not previously know. In addition to introducing the ideas he considered most important, the book provides important insights into some of the networks and connections that were important to him. It is an enjoyable read and contains much that should interest historians of modern economics.