Who are we?
By Scott Sumner
Most of all, I hope this puzzle will be fun, but I also hope it will somehow be a bit enlightening.
It’s a sort of “who am I?” puzzle, but with a twist:
Back in the interwar period, a famous British economist modeled a problem that can occur at certain times and places. He then suggested what sort of public policies could address this problem.
Many decades later, another brilliant economist saw that the early theory had misconstrued the actual nature of the problem. He wrote a paper re-conceptualizing what the problem was actually all about.
Along with this new formulation came a new a new policy approach, which might not involve as much government action. However this brilliant economist did not stop there, he also recognized that this “first best” solution might also be impractical in many situations, and that the original policy proposals recommended during the interwar period might actually be appropriate in many cases, as a sort of second best option.
I suppose this puzzle is not all that difficult for someone familiar with economics. But let me make it a bit more difficult by asking for two answers to the puzzle. I want the names of two modern economists who each have first-rate intuition, and who each radically transformed our understanding of a longstanding problem in the way I just described, not just one economist.
Note to commenters. I’m going to make an unusual request, and ask people to hold off on naming just a single person for a day, until we give people a chance to find both names at once. So please only leave a comment if you have both names. I’d rather have the puzzle not be solved “by committee”, if possible. It makes it more challenging.