George A. Akerlof is a New Keynesian economist, writer, and Professor Emeritus at the Faculty of California, Berkeley. With A. Michael Spence and Joseph E. Stiglitz, he earned the 2001 Nobel Prize in economics for their analyses of information asymmetry.
Akerlof is the writer of Animal Spirits: How Human Psychology Drives the Monetary gadget, and Why It Problems for World Capitalism, and Identification Economics: How Our Identities Shape Our Art work, Wages, and Well-Being.
Key Takeaways
- George Akerlof is a New Keynesian economist and Professor Emeritus at UC Berkeley.
- He is renowned for his 1970 paper, The Market for Lemons, Top of the range Uncertainty and the Market Mechanism.
- Akerlof received the Nobel Prize in economics for his concept of markets beneath asymmetric knowledge.
- He is married to the former chair of the Federal Reserve, Janet Yellen.
Early Life and Coaching
George A. Akerlof used to be as soon as born on June 17, 1940, in New Haven, CT. He earned a bachelor’s stage from Yale Faculty and a Ph.D. at the Massachusetts Institute of Era in 1966. He joined the college at the Faculty of California, Berkeley, as an economics professor, where he remains this present day.
The Market for Lemons
George A. Akerlof offered his concept of markets beneath asymmetric knowledge in his paper, The Market for Lemons, Top of the range Uncertainty and the Market Mechanism, published in 1970.
Asymmetric knowledge exists when one celebration in an monetary transaction has additional info than the other. The Market for Lemons cites the example of a used automobile gain where the seller has additional info than the consumer in a market of every prime quality cars and “lemons.”
Akerlof claims that once a buyer isn’t in a position to distinguish between the prime quality automobile and the “lemon,” the consumer becomes unwilling to pay the actual price of the simpler automobile presented in the marketplace. On account of limited knowledge, the consumer assumes that the simpler automobile is also of lower prime quality and the consumer will in turn offer a lower price for even a prime quality automobile.
This causes all the automobile prices to fall, and creates a market of most simple lower-priced “lemons.” This perversely forces sellers of latest or prime quality cars to finally end up their product’s reliability, incessantly via insurance coverage insurance policies like warranties.
George A. Akerlof shared the 2001 Nobel Prize in economics with A. Michael Spence and Joseph E. Stiglitz for their analyses of markets with asymmetric knowledge.
Akerlof is especially credited together with his contribution to the learn about of markets where sellers of products have additional info than shoppers about product prime quality and showed that low-quality products would most likely squeeze out prime quality products in such markets and that prices of prime quality products would most likely go through as a result.
What Is Identification Economics?
In his 2011 e e-book, Identification Economics, George A. Akerlof captures the idea that that individuals make monetary possible choices in accordance with every monetary incentives and their identification and that people avoid actions that battle with their considered self.
What Is the Honest Wage-Effort Hypothesis?
In 1990, George A. Akerlof and his partner, Janet Yellen, former chair of the Federal Reserve, complicated the idea, “the fair wage-effort hypothesis.” Yellen and Akerlof argue that “staff proportionally withdraw effort as their actual wage falls temporary of their truthful wage.” Such behavior causes unemployment and is also consistent with observed cross-section wage differentials and unemployment patterns.
What Is Reproductive Era Wonder?
In 1996, Akerlof described a phenomenon that he labeled “reproductive generation wonder.” He argued that the new technologies that had helped to spawn the late twentieth-century sexual revolution, an identical to trendy beginning regulate and legal abortion, had not most simple didn’t suppress the superiority of out-of-wedlock childbearing, however moreover had worked to increase it.
The Bottom Line
A renowned economist and educator, George A. Akerlof is known for his learn about of asymmetric knowledge in markets. Awarded the 2001 Nobel Prize, he is Professor Emeritus at the Faculty of California, Berkeley.
