Wynne Godley, Norma Beazley

Embracing Wynne Godley, an Economist Who Modeled the Crisis

By JONATHAN SCHLEFER

Mr. Godley, a British economist who died in 2010, helped develop formal models that foresaw the financial crisis of the late 2000s, but underestimated its depth.

Embracing Wynne Godley

By Cullen Roche · Comments (4) · Wednesday, September 11th, 2013

Good read here from today’s NY Times.  The article discusses Wynne Godley’s approach to economics and his use of modelling through understanding double entry bookkeeping and sectoral balances.  Godley was one of the first economists to predict the flaws in the Euro and although he was known as a permabear, his analysis leading up to the Nasdaq bubble and the Great Financial Crisis were dead on.  Godley adhered to an approach that I have referred to as stylized facts.  In other words, he relied on things we could prove and model through actual accounting rather than theoretical equations and economic models based in large part on hypothetical views.  Godley has been central in the understandings that formulate Monetary Realism.
Here’s a brief snippet:

“Marc Lavoie of the University of Ottawa collaborated with Mr. Godley to write “Monetary Economics: An Integrated Approach to Credit, Money, Income, Production and Wealth” in 2006, which turned out to be the most complete account he would publish of his modeling approach.

In mainstream economic models, individuals are supposed to optimize the trade-off between consuming today versus saving for the future, among other things. To do so, they must live in a remarkably predictable world.

Mr. Godley did not see how such optimization is conceivable. There are simply too many unknowns, he theorized.

Instead, Mr. Godley built his economic model around the idea that sectors — households, production firms, banks, the government — largely follow rules of thumb.”

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Wynne Godley (2 September 1926 – 13 May 2010) was an economist famous for his pessimism toward the British economy and his criticism of the British government.

Contents

• 1 Life
• 2 Books
• 3 References
• 4 External links

Life

Born in London, he went to Rugby School then read politics, philosophy and economics at New College, Oxford where Isaiah Berlin was one of his tutors, and trained to become a professional musician, studying at the Paris Conservatoire for three years, and then becoming principal oboist at the BBC Welsh Orchestra. He was however continuously nervous about performing in public, and gave up this career, although he remained interested in music and was director of the Royal Opera from 1976 to 1987.

St Michael's Victory over the Devil, by Sir Jacob Epstein, the head of which was modelled on Wynne Godley

In 1955 he married Kitty Epstein, daughter of Jacob Epstein the sculptor, who used his head as the model for his statue of St Michael at the rebuilt Coventry Cathedral.
After his musical career ended he became an economist at the Metal Box company, and then from 1956 to 1970 he worked at the Treasury where he worked in macroeconomic policy issues and short term forecasting, bridging economic and policy issues, including the 1967 devaluation of the pound under Harold Wilson.^[1][2]
While at the Treasury he met Nicholas Kaldor, who persuaded him to move to Cambridge University where he became a fellow of King's College and director of the department of applied economics, although he continued to work as a government economic advisor at times, and was appointed as one of Norman Lamont's 'seven wise men'^[3] external economic advisors after Black Wednesday.
He predicted that the 1973-74 economic boom would end, and that unemployment would hit 3 million in the 1980s. As one of his proteges noted, these dire warnings "… earned him the title 'Cassandra of the Fens' and were derided – until they came true".^[4] His contributions to Treasury policy thinking over the years were acknowledged by Dave Ramsden, chief economic advisor to the treasury: "In the 2000s, much of which coincided with a period of apparent and widely researched stability, what stands out is his distinctive analysis and his prescience about the looming financial and economic crisis, and the potential role for what had become by then innovative policies in responding."
He also wrote an Monetary Economics: Integrated Approach to Money, Income, Production and Wealth (2007) with Marc Lavoie, a book which deals with the stock-flow consistent model.
In 1992 he warned that without shared fiscal policy to replace currency movements there would be problems with monetary union in Europe.^[5]

Books

• Wynne Godley and Marc Lavoie, 2007. Monetary Economics: An Integrated Approach to Credit, Money, Income, Production and Wealth, Palgrave MacMillan. ISBN 0-230-50055-2 Description.
• Wynne Godley and T. Francis Cripps, Macroeconomics, ISBN 0-19-215358-7

References

1. ^ "Obituary: Professor Wynne Godley". London: The Daily Telegraph. 2010-05-21. Retrieved 2010-05-29.
2. ^ Henderson, Mark (2010-05-17). "Professor Wynne Godley: economist". London: The Times. Retrieved 2010-05-29.
3. ^ Chote, Robert (1993-03-07). "Lamont's 'seven wise men' fall out as professor goes on the attack". The Independent (London).
4. ^ "Wynne Godley obituary: Economist with a flair for anticipating and responding to crises". The Guardian. 20 May 2010. Retrieved 2013-04-22.
5. ^ "Maastricht and All That". London Review of Books. 8 October 1992. Retrieved 2011-11-05.

External links

• Fiscal Policy in a Stock-Flow Consistent Model by Wynne Godley and Marc Lavoie
• Wynne Godley interviewed by Alan Macfarlane 16th May 2008 (film)

Eric Kayne for The New York Times

Savoring a Bygone Splendor

By KATE MURPHY

Norma Beazley with her collection of vintage cruise-ship menus, which point to an era before the cruise buffet, is likely the largest (and only) one of its kind in the world.