Robert A. Mundell's Nobel Memorial Prize

Abstract

Mundell's central claim to fame is to have recast entirely the way we think about the functioning of an economy with an open capital account, including the stark implications for policy. That is the purely intellectual part. But there is also the marketing department: the wonderful skill to capture the story in a few equations, a simple diagram. Just as John Hick's Mr. Keynes and the Classics (1937)1 brilliantly summarized the essence of Keynesian economics in the IS-LM diagram, Mundell's models likewise reduce to the textbook level a dramatically new view of the open economy. For that reason, his ideas have become and remained the central part of macroeconomics in the open economy, today as much as 30 years ago. With the Nobel Memorial Prize in Economics for Robert Mundell, the committee has recognized the stunning break in open economy macroeconomics brought about by his work. Of course, every scholar stands on the shoulders of generations of brilliant thinkers before him who have advanced knowledge in their turn. But it is no exaggeration to claim that after Mundell, it is difficult to go back to any of the previous writing in the field and find much inspiration, except from the perspective of the history of thought. And that is claiming very much, indeed, because it delegates to the upper bookshelves the work of James Meade (The Balance of Payments, 195 la and 1951b), the writings of Ohlin and Hawtrey, the great scholar Jacob Viner, Charles Rist, Gottfried Haberler, Charles Kindleberger and Robert Triffin, and all the other authors who represented the cream of the middle of the twentieth century. Most assuredly, none of them figures prominently in current international economics, quite unlike Mundell whose models continue to be the standard fare or, at least, a common benchmark. There is Keynes of the Treatise, but he himself soon left for different grounds. Great as the twentieth-century predecessors were, their lasting impact is mostly in the building stones they created for others. If there might have been a competitor at all, it would have been Lloyd Metzler (1973), that fonnidable scholar who was robbed of a great career by brain cancer. And