David Warsh: Addition by subtraction in climate debate

SOMERVILLE, Mass.

An op-ed in The Wall Street Journal last week, “Economists’ Statement on Carbon Dividends,’’ appeared under a headline reflecting the latest conventional wisdom on how to frame the issue of coping with atmospheric pollution (don’t call it a “carbon tax”). The bipartisan endorsement called for a revenue-neutral tax on carbon emissions, its proceeds to be returned to citizens in equal quarterly rebates, ensuring a progressive structure, administered by the Social Security Administration as an entitlement.

The proposal was signed by 27 laureates, including Robert Solow, Robert Lucas, Amartya Sen and Thomas Sargent; all four living chairs of the Federal Reserve Board (Paul Volcker, Alan Greenspan, Ben Bernanke, and Janet Yellen), and fifteen former chairmen of the Council of Economic Advisers, including Michael Boskin, Martin Feldstein, N. Gregory Mankiw, Glenn Hubbard, Jason Furman, Austan Goolsbee, Christina Romer, and Laura Tyson. Former Treasury Secretary Lawrence Summers signed on as well.

Too fresh from their recognition last month to join in (or too obvious) were William Nordhaus and Paul Romer, both supporters. The signatories thus joined forces with a blue-ribbon group of multinational corporations and public interest organizations formed last summer as a Climate Leadership Council.

The economists’ list naturally invited a search for the missing.

Conspicuous by their absence among laureates were Joseph Stiglitz and Paul Krugman. Krugman earlier explained that he favored more salable policies. That the plan for carbon taxation was devised by George Shultz, Secretary of State under Ronald Reagan, and James Baker, who succeeded him under George H. W. Bush, may also account for some of their lack of enthusiasm.

A little less obviously missing were laureates James Heckman (absorbed in early childhood investment), and Vernon Smith (energy saving and CO2 sequestration, per the recommendation of the Copenhagen Consensus Center). Oliver Williamson, approaching 90, is less of a force than formerly. Christopher Pissarides and Jean Tirole stayed away from the issue, Tirole because he favors regulation by systems of cap-and-trade.

That leaves Robert Mundell, of Columbia University, recognized in 1999 for his work on exchange rates regimes and currency areas; and Edward Prescott, of Arizona State University and the Federal Reserve Bank of Minneapolis, who shared the economics prize in 2004 for work on business cycles. Both are favorites of the WSJ, having often expressed the view that raising taxes discourages economic growth, but neither has been involved to any great extent in the climate controversy. That leads in turn to WSJcolumnist Holman W. Jenkins, Jr., who has taken on the job of skeptic-in-chief.

Jenkins, 59, is a dependably lively presence on the editorial pages, a frequent skirmisher against views on climate change he considers wooly-headed or worse. Last week he was at it again, under the headline Big Names Bake a Climate Pie in the Sky. He disparaged the view that carbon emissions pose an immediate threat to global well-being; expressed skepticism of the motives of politicians and corporate lobbyists alike; and hinted at the existence of a proposal for tax reform, including a carbon tax, “to replace taxes that depress work, saving,” such that new technologies would develop to do things in less carbon-intensive ways. Presumably that is the subject of a future column.

At the moment, the editorial board of the WSJ is pretty much the only voice among the mainstream press, of skepticism about climate change in general; in opposition to carbon tax proposals in particular. In The Global Tax Revolt last month, the editorialists took note of the rejection of various attempts to impose a local carbon tax – in France, in Canada, in Washington State – and concluded,

[A]fter decades of global conferences, forests of reports, dire television documentaries, celebrity appeals, school-curriculum overhauls and media bludgeoning, voters don’t believe that climate change justifies policies that would raise their cost of living and hurt the economy.

On its weekly show on Fox New, editorial page editor Paul Gigot went further: he acknowledged elliptically that that “some of our friends” think that strong measures are required to address atmospheric pollution, “and even in theory, if you think about it from a free market point of view, a carbon tax would be the most efficient way of trying to actually slow down carbon emissions… but that seems to be something that the public really isn’t buying.” There is, he said, “a disconnect between elites and average voters that don’t trust the elites”

As usual, editorial page columnist Kimberly Strassel went further still. “Yes, intellectually, from a very wonky point of view,” she said, a carbon tax “may be an efficient way of raising revenues. But no one buys that you are actually get rid of other taxes if you institute a carbon tax, so they see it as an additional tax … There also not a belief that money raised from such a tax would actually be put into any kind of renewable energy or investment strategy for a smarter climate; they know it going to get redistributed and be a new pot for the Washington spenders to put into their own priorities…

What would a carbon tax actually cost ordinary consumers? That’s a question for another day – for many other days, starting with the 2020 elections, and in the decade beyond. In the meantime, the populist editorial page of the WSJ stands pretty much alone amongst elite opinion in America against carbon taxation as the major instrument of climate policy. Over the long haul, we’ll see what difference that makes. Reports of the demise of the establishment Republican Party may have been exaggerated.

David Warsh, an economic historian and veteran columnist, is proprietor of Somerville-based economicprincipals.com, where this first ran.

David Warsh: Kasich's time may have come

SOMERVILLE, Mass.

Readers have wondered when I might back off the hunch I voiced a year ago, and reiterated as recently as December, that Jeb Bush still could eventually win the presidency.  Here goes:

Bush clearly no longer has a chance of winning the nomination. It is Ohio Gov. John Kasich who appears ready to seize the role of a plausible competitor to the eventual Democratic nominee. There appears to be almost no political difference between the two men, except the heavy baggage connected with the former’s name. Kasich is running second to Donald Trump in New Hampshire in the polls.

Nobody said it would be easy, but the logic of Kasich’s candidacy is simple:  If he polls strongly on Feb. 9 in New Hampshire; if he gains enough traction in February to score some successes in the Super Tuesday primaries on March 1; if he wins Ohio’s winner-take-all primary on March 15; if he gains the nomination of the Republican Party at its convention in Cleveland in July – then he stands a good chance of being elected president in November.

Why?  Because he is good at appealing to voters who consider themselves independent of either party’s establishment.  And it takes 270 votes in the Electoral College to win the presidency.  And it’s a stubborn fact of present-day U.S. politics that most states are virtually certain to wind up in one column or another.

Kasich would seem to be competitive with the Democratic nominee, whether it is Hillary Clinton or someone else, in all 10 states that seem likely to be up for grabs in the fall – Nevada, Colorado, Iowa, Wisconsin, Ohio, Pennsylvania, Virginia, North Carolina, Florida and New Hampshire.

I have been as surprised as everybody else by events of the last year. Let’s review:

It was barely a year ago that Mitt Romney announced that he was mulling a third presidential bid. The establishment wing of the Republican Party swiftly overruled him, indicating a preference for Jeb Bush, who in December 2014 had mentioned on his Facebook page that he was considering a run. Supposedly preemptive sums of money flowed to Bush’ s Super PAC, Right to Rise, run by political consultant Mike Murphy. Romney quickly steered off.

What happened next was that,  unfazed, 15  other persons declared their candidacy for the Republican nomination, one after another, along with Bush: Ted Cruz (March 23), Rand Paul (April 7), Marco Rubio (April 13),  Ben Carson (May 4), Carly Fiorina (May 4), Mike Huckabee (May 5), Rick Santorum (May 27), George Pataki (May 28), Lindsey Graham (June 1), Rick Perry (June 4), Bush (June 15), Donald Trump (June 16), Bobbie Jindal (June 24), Chris Christie (June 30), Kasich (July 21), and Jim Gilmore (July 30).

Among the Democrats, Hillary Clinton declared her candidacy on April 13, Bernie Sanders on April 20, former Maryland Gov. Martin O’Malley on May 29, and former Rhode Island Gov. Lincoln Chafee on June 3. Sanders has recently swept ahead of Clinton in polls in both Iowa and New Hampshire.

Why such pandemonium?  The over-arching explanation seems to be Bush-Clinton fatigue after so many years of their presence in presidential politics.

Without a single vote being cast, real-estate baron and reality-television star Trump vaulted to front-runner status in most polls of Republican voters.  It’s getting a little late to explain U.S.  outcomes in terms of the aftermath of the 2007-09 financial crisis; Europe is another matter: most likely the Trump phenomenon is an expression of ephemeral contempt for dynastic politics. 

Trump is not the first self-financed celebrity candidate to seek the presidency.  He’s just the one with the fewest principles.  Software entrepreneur H. Ross Perot ran as an independent candidate in 1992, upstaging incumbent George H. W. Bush and enabling Bill Clinton to win the presidency with just 43 percent of the vote (Perot received 19 percent and Bush 37 percent, but electoral vote totals were 370, 168, and 0.) 

Former New York City Mayor Michael Bloomberg is threatening to enter the race as an independent if Sanders gets the better of Hillary. An interesting questions have to do with Trump’s options once his star begins to fade. Eventually he presumably will become a commentator. Better for everyone if it were sooner rather than later.

Bush could do everyone a favor by quickly stepping out of the campaign if his New Hampshire totals are disappointing and urging his massive organization to support Kasich.  As far as I can tell, his politics are little different from those of the Ohio governor, except on foreign policy. Still, Bush would make a very good secretary of state in a Kasich administration.  The silly negative ads with which the two campaigns are attacking one another in the final days of New Hampshire should stop.

I have no idea how likely any of this might be. I do know an incredibly interesting political season looms.  There is a real possibility that the election of a moderate Republican would be good for the country, mainly for the obvious reason:  Kasich’s success would dampen the amplitude of extreme opinion on the right.

You might wonder, whence stems my license to pronounce on these matters?  I have, after all, never covered a campaign. All I can say is that these arguments are deeply grounded in concern for economic affairs over the long run, and you will never hear them from my old friend and fellow economics columnist, Paul Krugman, of The New York Times.  He thinks that there are no moderates in the Republican Party primaries, and that even if there were, they wouldn’t stand a chance.

David Warsh, an economic historian and a long-time financial journalist, is proprietor of  economicprincipals.com.

David Warsh: Globe arts revival and my migration

SOMERVILLE, Mass. Boston is slated to regain a battered badge of its identity next month, when arts coverage is expected to return to the daily broadsheet editions of The Boston Globe. To be sure, the return of a “Living/Arts” section is apparently a consequence of an expanding business coverage. Details are still unclear. It is a heartening development nevertheless.

Distinctive criticism has been a hallmark of Boston’s newspapers since 1830, when the Boston Evening Transcript opened for business. (It closed in 1941.) Thirteen years ago, to save some money in production costs, at a time when the paper was still highly profitable, The Globe banished its critics, along with its coverage of food and personal health, to a tab section it called “G,” printed a day in advance.

That robbed dignity and immediacy from criticism by such distinguished contributors as Mark Feeney, Robert Campbell, Richard Dyer, Gail Caldwell, Ed Siegel, Sebastian Smee, Jeremy Eichler, Wesley Morris and Ty Burr. (Five Pulitzer Prize winners are on that list.) Dyer, Caldwell, Siegel and Morris have left the paper. The tab was among the worst of a long series of bad ideas from the New York Times Co., which bought The Globe for $1.13 billion in 1993 and sold it last year for $70 million.

Google didn’t do that. New York did.

Another mistake, not on the same scale, was shutting down my column "Economic Principals'' {since transformed into www.economic principals.com}. Editor Martin Baron said he wanted technical economics only, no politics. But even if economists sought to strip their discipline of its inevitable political overtones (and most no longer bother to try), it was a terrible idea for newspapers to go along. So EP quit and moved to the Web.  (On the other hand, Baron subsequently hired the last four of those critics.)

Thirteen years later, EP has amply proved its point.  Its coverage of Harvard’s Russia scandal ran circles around that of The Globe, The Times  and The Washington Post (where Baron is now editor). Its reporting on trends in growth economics was praised in  The Times by columnist Paul Krugman (and, a few years later, dismissed on his blog!). Its coverage of the financial crisis has been more penetrating than that of The Times; of the fortunes of the Obama economic team, more realistic; of  U.S.  policy toward Russia, more skeptical; of the competitive situation of print newspapers, less panicky. Like  The Times,  EP made a  dreadful mistake in supporting the U.S. invasion of Iraq,

Moreover, EP’s public broadcasting model has proved out. A relative handful of readers support the enterprise with an annual subscription of $50, in return for an early email version on Sunday morning (Eastern Standard Time), with another 20,000 or so reading, over the course of a quarter, the online version for free.

How many pay? From year to year, it’s hard to know, renewal rates being hard to predict – somewhere between 250 and 500, fewer, perhaps, than had been hoped, but enough to keep EP in business.  Subscribers include civic-minded citizens from all walks of life in the four corners of the world.

Others who left The Globe have founded successful public radio talk radio shows: former foreign editor Tom Ashbrook started “On Point;” Steve Curwood, “Fresh Air.”  Bruce Mohl edits Commonwealth magazine.  EP goes it alone, with only its surpassingly loyal copy editor to correct infelicities and, occasionally, restrain enthusiasms. The payroll consists of vegetables, fruit and ice cream

The Times is in the throes of change, but it remains a great newspaper (as do the Financial Times and the The Wall Street Journal, the other papers to whose print editions EP subscribes). You can learn a million things from  The Times that you’ll never see here.

But EP regularly provides a parallax view of developments in economics and politics, as seen from Boston, much the same as it once did at the newspaper itself.

I look forward to many more years of doing the same.

I expect, too, to write slightly more frequently about Boston. The New York Times Co. occupation is ended, but  The Globe  is damaged and the Herald is a shadow of its former self.  The sphere of news-gathering and discussion is considerably attenuated.  The conversation about Boston needs to include many voices.

David Warsh is proprietor of www. economicprincipals.com and an economic historian and longtime financial journalist -- so longtime,  indeed, that he worked at The Wall Street Journal back  in the early '70's, when the overseer of newenglanddiary.com, Robert Whitcomb, was there.

David Warsh: Nobel Prizes and macro vs. growth

  BOSTON

It was about a year ago that Paul Krugman asked, “[W]hatever happened to New Growth Theory?”  The headline of the item on the blog with which the Nobel laureate supplements his twice-weekly columns for The New York Times telegraphed his answer: The New Growth Fizzle.  He wrote:

''For a while, in the late 1980s and early 1990s, theories of growth with endogenous technological change were widely heralded as the Next Big Thing in economics. Textbooks were restructured to put long-run growth up front, with business cycles (who cared about those anymore?) crammed into a chapter or two at the end. David Warsh wrote a book touting NGT as the most fundamental development since Adam Smith, casting Paul Romer as a heroic figure leading economics into a brave new world.

''And here we are, a couple of decades on, and the whole thing seems to have fizzled out. Romer has had a very interesting and productive life, but not at all the kind of role Warsh imagined. The reasons some countries grow more successfully than others remain fairly mysterious, with most discussions ending, as Robert Solow remarked long ago, in a “blaze of amateur sociology”. And whaddya know, business cycles turn out still to be important.''

Krugman’s post raised eyebrows in my circles because many insiders expected that a Nobel Prize for growth theory would be announced within a few weeks. A widely noticed Nobel symposium had been held in Stockholm in the summer of 2012, the usual (though not inevitable) prelude to a prize.  Its proceedings had been broadcast on Swedish educational television.  Romer, of New York University, had been the leadoff speaker; Peter Howitt, of Brown University, had been his discussant; Philippe Aghion, of Harvard University and the Institute for International Studies, the moderator of the symposium.

Knowing this, I let Krugman’s gibe pass unchallenged, even though it seemed flat-out wrong. These things were best left to the Swedes in private, I reasoned; let the elaborate theater of the prize remain intact.

Then came October, and a surprise of a slightly different sort.  Rather than rousing one or more of the growth theorists, the early morning phone calls went to three economists to recognize their work on trend-spotting among asset prices and the difficulty thereof – Eugene Fama, Robert Shiller and Lars Hansen.  Fama’s work had been done 50 years before; Shiller’s, 35. Two big new financial industries, index funds and hedge funds, had grown up to demonstrate that the claims of both were broadly right, in differing degrees. Hansen had illuminated their differences. So old and safe and well-prepared was the award that its merit couldn’t possibly be questioned.

What happened?  It’s well known that, in addition to preparing each year’s prize,  prize committees work ahead on a nomination or two or even three, assembling slates of nominees for future years in order to mull them over. Scraps of evidence have emerged since last fall that a campaign was mounted last summer within the Economic Sciences Section of the Academy, sufficient to stall the growth award and bring forward the asset-pricing prize – resistance to which Krugman may have been a party.

These things happen.  The fantasy aspects of the Nobel Prize – the early-morning phone call out of the blue – have been successfully enough managed over the years as to distract from the “hastily-arranged” press conferences that inevitably follow, the champagne chilled and ready-to-hand. Laureates, in general, are only too happy to play along.  Sometimes innocence may even be real. Simon Kuznets, on his way to visit Wassily Leontief in New York in 1971, told friends that he overheard heard only that “some guy with a Russian name” had won, before stepping into the high-rise elevator that would carry him to his friend’s apartment. It was, he said, the longest ride of his life.

As described on the Nobel website, the committee meets in February to choose preliminary candidates, consults experts in the matter during March and April, settles on a nomination in May, writes up an extensive report over the summer, and sends it in September to the Social Science class of the Royal Swedish Academy of Sciences – around seventy professors, most of them Scandinavians – where it is widely discussed. Thus by summer, the intent of the committee is known, if very closely held, by a fairly large fraternity of scientists. The 600-member Academy then votes in October.

There is nothing obvious about the path that the economics prize award should take; even within the Academy there are at least a couple (and probably more) different versions of what the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, established in 1969, is all about. Wide-ranging and free-wheeling discussion among the well-informed is therefore crucial to its success; so is dependable confidentiality. Nominations and surrounding documentation are sealed for 50 years, so none of this has been revealed yet since the economics prize was established less than 50 years ago.

Over the years, however, scraps of information have leaked out about struggles that have taken place behind the scenes, in areas where sharp philosophical disagreements existed. For example, Gordon Tullock, of George Mason University, a lawyer and career diplomat with no formal training in economics,  told me years ago that  he woke in 1986 expecting to share the prize for public choice with James Buchanan.  He didn’t.  In her biography of game theorist John Nash, A Beautiful Mind, Sylvia Nasar reported that Ingemar Ståhl had sought to delay an award to Nash by moving up the prize prepared for Robert Lucas.  He didn’t succeed, and Lucas was honored, as had been planned, the following year. (Harold Kuhn, the Princeton mathematician who tirelessly insured that Nash’s story would be told, died last week, at 88.)

Something of the sort may actually have happened in 2003: preparations were made in Minneapolis for a press conference for Edward Prescott, then of the University of Minnesota; the prize went instead to a pair of low-key econometricians, Clive Granger and Robert Engle, both of the University of California at San Diego. Prescott and Finn Kydland, of the University of California at Santa Barbara, were cited the following year, “for their contributions to dynamic macroeconomics: the time consistency of economic policy and the driving forces behind business cycles.”  The latter award remains even more controversial today than it was then.

Indeed, Krugman’s own prize may have been moved up, amidst concern in Stockholm for the bourgeoning financial crisis of 2008.  As late as that October it was believed, at least in Cambridge, Mass., that the committee recommended that a prize be given for measurement economics, citing Dale Jorgenson, of Harvard University; Erwin Diewert, of the University of British Columbia; and Robert Hall, of Stanford University. It would have been the first prize for empirical economics since the award to Richard Stone, in 1984, and only the third since Kuznets was recognized, in 1971.  Instead the prize was to Krugman, by then working mainly as a columnist for The Times, “for his analysis of trade patterns and location of economic activity.”

No one seriously disputes that Krugman should have been recognized at some point for the consensus-changing work he did, beginning in the late 1970s, on monopolistic competition among giant corporations engaged in international trade, though a common view in the profession is that two others, Elhanan Helpman, of Harvard University, and Gene Grossman, of Princeton University, should have shared in the award. Committees over the years have been very conscious of the emphasis conferred by a solo award – only 22 of 45 economics prizes have been “singletons.”

The deferral of the measurement prize, if that is what happened, suggests there must have been considerable tumult behind the scenes. The gravity of the global financial crisis was very clear in Stockholm in September 2008. What happened in those few months won’t be known with any certainty for another forty-four years. But the effect of the award in October 2008 was to empower Krugman as a spokesman for the tradition of Keynesian macroeconomic analysis.  He responded with alacrity and has employed his bully pulpit since.

So much, then for what is known and, mostly, not quite known, about the recent politics of the prize.  What about the contest between macroeconomics and growth?

Macro is the dominant culture of economics – the center ring ever since Keynes published The General Theory of Employment, Interest and Employment, in 1936. It is a way of looking at the world, “an interpretation of events, an intellectual framework, and a clear argument for government intervention,” especially in the management of the business cycle, according to Olivier Blanchard, author of an authoritative text, Macroeconomics. There are many other fields in economics, but macro is the one that seeks to give an overall narrative and analytic account of expansion and recession, of capacity and utilization, of inflation and unemployment.  Macro has had its ups and downs in the years since 1936. Today anyone who studies fluctuations is a macroeconomist; but not all macroeconomists acknowledge the centrality of Keynes.

In the 1950s and ’60s, a “neoclassical synthesis” merged Keynesian contributions with all that had gone before. New standards for formal models, plus national income and product accounts and measures of the flow of funds,  produced various rules of thumb for managing modern industrial economies: Okun’s Law (output related to unemployment) and the Phillips Curve (inflation to unemployment); and so on. By the end of the 1960s, many economists thought of their field as mature.

In the ’70s came the “expectations revolution,” a series of high-tech developments (most of them anticipated by low-tech Milton Friedman), in which economists sought to build accounts of forward-looking people and firms into the macro scheme of things. The effectiveness of monetary policy was debated, until the Federal Reserve Board, under Paul Volcker, gave a powerful demonstration of its effectiveness.   Reputation and credibility became issues; targets and new rules emerged.

Growth theory, on the other hand, has a less clear-cut provenance.  There is no doubt that it began with Adam Smith, who, in the very first sentence of The Wealth of Nations, pronounced that the greatest improvement in the productive powers of humankind stemmed from the division of labor. Smith expounded for three chapters on the sources and limits of specialization, using a mass-production pin factory as his example, before dropping the topic in order to elucidate what  economists today call “the price system.” Interest in the kind of technological change that the pin factory represented faded into the background.

Karl Marx was a growth theorist (remember “Asiatic,” “ancient,” “feudal,” “bourgeois” modes of production and all that?), but he came late to economics and never found his way into the official canon. So was Joseph Schumpeter, who came closer to giving a persuasive account in economic terms but still failed to leave much of a mark. In the ’50s, MIT’s Robert Solow, a leading macroeconomist, ingeniously showed that most of the forces generating gains in wealth (gross domestic product/per capita) were exogenous, that is, outside the standard macro model, unexplained by it as the tradition stood. Macro debates continued to flourish. By end of the ’70s, interest in growth once had again faded away in technical economics.

In the ’80s, excitement over growth was suddenly rekindled in economics by three key papers, of which Romer wrote two and Robert Lucas wrote one. Romer’s primary interest was in “endogenizing” technology; that is, showing why governments, universities, corporations and entrepreneurs engaged in research. Lucas was intrigued by stories from international trade:  Asian trading nations such as Japan, Hong Kong, Taiwan, Korea and Singapore grew rich quickly while communist nations stagnated.  Where did the growth “miracles” come from?

As usual, the arguments of both men were intricately related to other on-going debates in technical economics. Lucas, a University of Chicago professor, was at pains to preserve, for convenience’s sake, the assumption of perfect competition.  Romer, educated at both Chicago and MIT and by then teaching at the University of Rochester, was intent on writing intellectual property into the act, employing the sixty-year-old convention of monopolistic competition.  Pure competition “spillovers,” meaning, roughly, the gains you reap from watching your neighbors, animated the first models that Romer and Lucas produced.  Romer’s second – and final – model depended on income streams that arose from new processes and new goods. The University of Chicago hired Romer; after a year, he moved to California where his wife had obtained a better job.

It seems clear that Romer won the debate. Aghion, then at MIT, and Howitt, then at the University of Western Ontario, quickly buttressed the case for viewing growth through the lens of monopolistic competition, but without producing the same clean convention as Romer’s “non-rival goods,” that is, know-how that can be possessed by more than one person at the same time. Helpman and Grossman obtained the same result.

Once it was established formally that privately appropriable knowledge was somehow involved in the process of growth – that ideas were economically important, as well as people and things – interest shifted quickly to the institutions and norms by which knowledge and the power to protect it were diffused.  A shower of interesting new work ensued. The effects on growth of patterns of suffrage, political governance, education, tax policy, land and immigration policy, laws, banking, religion and geography came under economists’ lenses.

The Nobel symposium in 2012 made it clear just how sprawling the “new” literature of growth and development has become. Presenters included a galaxy of stars, nearly every one of them players in the Nobel nomination league. They ranged from experts on technology, schooling, health, credit, geography and political and legal institutions; to empirical economists; and policy evaluation specialists.  So is it true, then, as Krugman asserted last summer, that “The reasons some countries grow more successfully than others remain fairly mysterious?” Only if you take the view from macro, and an extremely narrow view at that.

This is the sort of swirl that the Nobel program in economic sciences exists to rise above. It is true that Romer, 58, hasn’t made it easy for the Swedes. He stopped writing economics in the ’90s, started an online learning company, sold it, then quit economics altogether, leaving Stanford University’s Graduate School of Business and started a movement (which he announced in a TED talk) to create “charter cities” in less-developed countries around the world.

Charter cities?  By analogy to charter schools, these city-scale enterprise zones would spring up on greenfield sites, their police and legal systems guaranteed by volunteer foreign governments: perhaps Norway, for example, or Canada. “Opt-in colonialism,” say the critics.  After a couple of last-minute failures, in Madagascar and Honduras, Romer seems to be trying again, this time from the Urbanization Project at New York University’s Stern School of Business.

Second careers have become more common in recent years among economists whose early work has put them into the nomination for a Nobel Prize. Some intellects become bored by the chase.  A. Michael Spence became a business school dean; Krugman took up journalism.  Romer has become a reformer. But before he quit, he carefully dotted his i’s and crossed his t’s.  He added growth to economics’ agenda, once and for all. Its integration into macroeconomics has barely begun.

David Warsh, a longtime financial journalist and an economic historian, is proprietor of economic principals.com.