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Robert Barro (1944 - )

Overview

Robert Barro is currently an economics professor at Harvard University, a senior fellow at Stanford University’s Hoover Institution, and a research associate of the National Bureau of Economic Research. He has a B.S. in physics from Caltech and a Ph.D. in economics from Harvard University. Before his appointments at Harvard University and the Hoover Institution at Stanford University, he was a professor of economics at the University of Chicago and a professor of economics at the University of Rochester. He is considered a new classical economist. His expertise is in the areas of macroeconomics, economic growth, and monetary theory. He has written many books and is a viewpoint columnist for Business Week and a frequent contributor to the Wall Street Journal. He is also associate editor of the Journal of Monetary Economics as well as the Journal of Economic Growth. Barro has also published many influential papers including Are Government Bonds Net Wealth? and Rational Expectations and the Role of Monetary Policy. Barro has often criticized Keynesian and new Keynesian economic theories and policy recommendations. Barro emphasizes the superiority of theories such as the business cycle theory and growth theory with endogenous factors. Barro was a candidate to win the Nobel Prize in Economics in 2003. At present, he is one of the most influential economists in the world.

Academic Works
During the 1970s Robert Barro, influenced by Robert Lucas, Jr., contributed extensively to the development of new classical economics. Are Government Bonds Net Wealth? was the title of Barro’s first widely read and influential paper. The paper was written in 1974. It was based on the Ricardian equivalence proposition, which suggests that to finance a particular government project, issuing bonds or raising taxes would be the same thing, since to repay the bonds the government would have to raise taxes in the future. Barro’s main argument in the paper was that it was mistaken to perceive governments bonds as net wealth and that fiscal policy would have no effect on aggregate demand, interest rates, or capital formation (Barro 1974). In 1976, Barro published Rational Expectations and the Role of Monetary Policy, which successfully integrated the role of money into the new classical economics. The paper, as the title suggests, is based on the rational expectations hypothesis, which says that we can assume that in average the predicted future values of a given variable are valid. The argument was that it was mainly the unanticipated or surprise part of monetary movements that mattered for real variables. Barro then focused his research on empirical determinants of economic growth.

Barro is a fervent critic of Keynesian economics. In the opening statements of an article titled New Classicals and Keynesians, or the Good Guys and Bad Guys, Barro clearly indicates his feelings towards the Keynesian framework:

"When I was a graduate student at Harvard in the late 1960s, the Keynesian
model was the only game in town as far as macroeconomics was concerned.
Therefore, while I had doubts about the underpinnings of this analysis, it seemed
worthwhile to work within the established framework to develop a model that was
logically more consistent and hopefully empirically more useful."

In regards to the famous quote that appeared in Time magazine in December 1965, Barro says:

“Milton is often cited, starting with Time magazine in December
1965, for the famous quote: “We are all Keynesians now.” However,
we learn from the Memoirs that the quote was taken out of context to
change the meaning. The full statement reconstructed by Milton in a
letter to Time in 1966 is: “In one sense we are all Keynesians now; in
another, nobody is any longer a Keynesian.” Milton explains that the
first sense refers to the rhetoric and style of macroeconomic analysis—
Keynes essentially invented macroeconomics as a distinct field.
The second sense applies to substantive implications; specifically, to
the idea that (almost) no one now advocates the simplistic policy activism recommended in Keynes’s General Theory. Although the
second observation is more significant, the first one got most of the press.”

Barro emphasizes the importance of aggregate supply in economic growth, in contrast to the emphasis given by Keynesians to the aggregate demand. He states how the stagflation of the 1970s discredited the Phillips model which was closely related to Keynesian economics. Barro also criticized the proposals made by the supporters of new Keynesian economics, to which Barro refers to with the acronym “NUKE”. Barro states that some of the areas that new Keynesian economics proposed could be better integrated to real business cycle models, and that it has not been successful in rehabilitating the Keynesian approach (Barro, New Classicals and Keynesians, or the Good Guys and the Bad Guys 1989). More recently, Barro wrote an article for the Wall Street Journal where he firmly criticized the notion of the multiplier effect of government spending, in the context of the fiscal stimulus proposal of the current federal government. In the article, Barro argues that the government spending multiplier is insignificantly different from zero and that the focus should be on incentives for people and business to invest, produce and work (Barro, Robert J. Barro: Government Sepending Is No Free Lunch 2009).

Personal Details
Few things can be found of his personal life. However, in an article he wrote for the Cato Journal in 2007 about Milton Friedman, Barro reveals some aspects of his personal life which he had in common with Friedman:

"I cannot resist noting some intriguing personal linkages between Milton and me. First, we both have Hungarian parental origins from territory that is now part of the Ukraine. (My mother was from Munkacs, now Mukacevo; Milton’s parents were from Beregszasz or Berehovo.) Second, I have the name Friedmann in my ancestry, although from my father’s origins in Transylvania. Finally, in 1982, at the start of my second faculty position at the University of Chicago, I purchased the house at 5731 S. Kenwood Avenue that Milton occupied from 1950 to 1962. (Milton once asked me about the fine workbench in the basement, and I told him that it was still there in 1984.) "

In the same article, Barro tells a story about a time that he was presenting his paper about government bonds in the University of Chicago. He tells how Milton Friedman, after Gary Becker and himself got into a heated argument about a point in the paper, surprisingly declared that Becker was wrong and he was right. Apparently, this was a big occurrence for Barro. He also says that various international organizations like the IMF, the World Bank, and the UN, “ought to fade away.” Furthermore, Barro shows an aversion to working with the government. In a witty comment to a statement in which Milton Friedman advised academic economists to not stay more than two or three years in Washington, Barro stated that “[his] only disagreement is that two or three years in Washington are too many.” (Barro, Milton Friedman: Perspectives, Particularly on Monetary Policy 2007)

Closing Comments
Barro’s work has been very influential, especially amongst the new classical economists. Currently, Barro’s research involves the role of religion and popular culture on political economy, and the impact of rare disasters on asset markets (Harvard University Department of Economics 2007). Even though he did not win the Nobel Prize in Economics in 2003, he is likely to get it in the future. Thanks to his publications and his continuous work defending neo-classical theories, Barro is considered one of the founders of new classical economics.

Works Cited

Barro, Robert J. "Are Government Bonds Net Wealth?" The Journal of Political Economy, 1974: 1095-1117.
Barro, Robert J. "Milton Friedman: Perspectives, Particularly on Monetary Policy." The Cato Journal, 2007: 127-134.
Barro, Robert J. "New Classicals and Keynesians, or the Good Guys and the Bad Guys." Swiss Journal of Economics and Statistics, 1989: 263-273.
—. "Robert J. Barro: Government Sepending Is No Free Lunch." The Wall Street Journal. January 22, 2009. http://online.wsj.com/article/SB123258618204604599.html (accessed November 27, 2010).
Harvard University Department of Economics. Harvard Econ Department. 2007. http://www.economics.harvard.edu/faculty/barro/bio (accessed November 27, 2010).