Robert Merton Solow
Robert Solow was awarded the Nobel Prize in 1987 “for his contributions to the theory of economic growth.” His first major paper on growth was “A Contribution to the Theory of Growth.” In it he presented a mathematical model of growth that was a version of the Harrod-Domar growth model (see roy f. harrod). The main difference between his model and the Harrod-Domar model lay in Solow’s assumption that wages could adjust to keep labor fully employed. Out the window went the Harrod-Domar conclusion that the economy was on a knife edge.
Solow soon followed that paper with another pioneering article, “Technical Change and the Aggregate Production Function.” Before it was published, economists had believed that capital and labor were the main causes of economic growth. But Solow showed that half of economic growth cannot be accounted for by increases in capital and labor. This unaccounted-for portion of economic growth—now called the “Solow residual”—he attributed to technological innovation. His article originated “sources-of-growth accounting,” which economists use to estimate the separate effects on economic growth of labor, capital, and technological change.
Solow also was the first to develop a growth model with different vintages of capital. The idea was that because capital is produced based on known technology, and because technology is improving, new capital is more valuable than old capital.
A keynesian, Solow has been a witty critic of economists ranging from interventionists like Marxist economists and john kenneth galbraith to relatively noninterventionist economists such as milton friedman. Solow once wrote that Galbraith’s disdain for ordinary consumer goods “reminds one of the Duchess who, upon acquiring a full appreciation of sex, asked the Duke if it were not perhaps too good for the common people.” Of Milton Friedman, Solow wrote, “Everything reminds Milton of the money supply. Well, everything reminds me of sex, but I keep it out of the paper.”
Solow earned his Ph.D. from Harvard, where he studied under Wassily Leontief, and has been an economics professor at MIT since 1950. From 1961 to 1963 he was a senior economist with President John F. Kennedy’s Council of Economic Advisers. In 1961 he received the American Economic Association’s John Bates Clark Award, given to the best economist under age forty. In 1979 he was president of that association.