I just heard the sad news that one of my truly extraordinary economics teachers, E. Philip Howrey, recently died in a biking accident. When I was an undergraduate, Phil taught me an approach to macroeconomics—very new at the time—which has served me well throughout my career, and for which I will forever be grateful. Several years ago Robert Leeson asked me “Who influenced you most when you were an undergraduate at Princeton? What sparked your interest in policy rules?” I talked mostly about Phil in my answer.
Looking back I would say that Phil Howrey had the most influence on me, at least in areas that turned out to be closely related to my career as an economist. Phil had a great deal of interest in time series analysis as it applied to macroeconomics. For example, he had written an important paper on the “Long Swing” hypothesis with Michio Hatanaka. Hatanaka had published a book in 1964 with Clive Granger on Spectral Analysis of Time Series. Granger visited Princeton at the invitation of Oscar Morgenstern who had an interest in applying frequency domain techniques to economic data. While I met Morgenstern then, I did not meet Granger until many years later.
I think my initial interest in policy rules goes back to a course I took from Howrey. Except for Economics 101, it was probably my first introduction to macroeconomics. But we didn’t study ISLM or the other textbook models of the time; instead we studied dynamic models of the economy, with equations that included lags and shocks defining the stochastic processes. In retrospect it was quite unusual that I had the opportunity to learn about these methods as an undergraduate, but at the time I had no idea that it was unusual. The methods forced me to think of the economy as a moving dynamic structure. So the only way one could think about policy was with some kind of policy rule. You couldn’t say let’s shift the LM curve by increasing the money supply by one unit or do whatever people would be doing at the time. Instead you had to have some kind of policy rule. So to me it was natural. I couldn’t think of how else you would do it in those models.
When it came time to choose a topic for a senior thesis, I approached Phil Howrey saying that I was interested in macroeconomic policy issues and wanted to work with the types of models we studied in his course. He suggested that I look into stabilization policy in a model that combined economic growth and the cycle, which we called “endogenous cyclical growth” at the time; he said that no one had done this before, and so it sounded like a great topic and that is what I did. In the preface to my senior thesis I thanked Phil “for suggesting the topic and indicating how I might proceed.” In the end the thesis was about simulating different types of monetary policy rules.