Re: [A-List] Rudiger Dornbusch

["Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>]

There is a difference between being intellectually owerful and operationally powerful.  Dornbusch belonged to the latter category inthe manner of Herbert Spencer, the powerful social Darwinist.  Dornbusch and his lot promoted the Capitalist's Burden the same way Kipling promoted the White Man's Burden.  There is only one problem. Events disproved their theories.

Market fundamentalism is a sham theory because its logic is based  on the possibility of a "free" market. Neoliberals define "free" as unregulated, meaning free for the strong to abuse the power legitimately and legally. After two decades of "free" markets. government intervention is again hailed in the mainstream as the savior of market excess and failure.  The legacy of the Chicago School will be an unprecedented global depression.

Henry C.K. Liu

Keaney Michael wrote:

> Few economists illustrated better the ideological function played by their profession in the buttressing of the institutionalised plunder and despoliation of planet earth than Rudi Dornbusch. The co-author of a grotesque text book inflicted upon thousands of students worldwide who learn its free market mantras, Dornbusch was also a regular on US television as a pundit cheering the advance of those same "free markets" as in the Asian crisis of 1997/8, when he was publicly applauding the surrender of Korean autonomy to the US Treasury and IMF. He was also a semi-regular contributor to the Financial Times, who appear to have replaced him with Brad DeLong and UCLA Pinochet apologist Sebastian Edwards. Here's the official version of his obituary, but I expect some people here will have a few other details of their own to add.
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> Rudi Dornbusch
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> Understanding the volatility of currency markets
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> Richard Adams
> Thursday September 12, 2002
> The Guardian
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> The economist Rudi Dornbusch, who has died of cancer aged 60, was a rare combination of thinker and teacher. He not only tutored a generation of leading economists and policy-makers, but also gave economics one of its most important breakthroughs in the modern era.
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> Born in Germany, as Rudiger but forever known as Rudi, Dornbusch's name was best known as the co-author - with former International Monetary Fund deputy director Stanley Fischer - of the highly successful textbook Macroeconomics, now in its eighth edition.
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> For more than 20 years, copies of "Fischer and Dornbusch" have guided economics undergraduates through their introductory courses - with the textbook's lucid prose bringing understanding to the most perplexed student mind.
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> As an academic, Dornbusch's breakthrough came with the publication of his research paper Expectations And Exchange Rate Dynamics, in 1976, while he was an assistant professor at the Massachusetts Institute of Technology (MIT) in Boston. This, according to his former student, Paul Krugman, brought international macroeconomics into the modern world.
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> The standard model of exchange rates at the time - nicknamed Mundell-Fleming, after its inventors - suggested that exchange rates of currencies should gradually adjust after an economic event such as an interest rate cut. But - in a world where currencies were increasingly being traded on international markets - exchange rates instead swung violently and irrationally.
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> Dornbusch's paper was the first explanation that captured the volatility of currency exchange rates - it explained why free-floating currencies had a tendency to overshoot their "fair value" not because of events in themselves, but because of people's expectations of what might happen in the future.
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> Just as importantly, Dornbusch's work explained that delays in the exchange rate's impact on the economy were the reason exchange rates would continue to overshoot - and undershoot - their fair value, since financial markets adjust much more rapidly than wages and prices in the real economy.
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> In time Dornbusch's specific model proved to be less than accurate, but his 1976 paper remains the first big step towards current thinking that exchange rates reflect future expectations.
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> The timing of the paper was perfect, with the 1970s seeing the breakdown of the Bretton Woods system of pegged exchange rates that had been in place since 1945. The new world of floating exchange rates needed new models to provide grounds for analysis, which Dornbusch's paper provided.
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> His academic career - beginning as an undergraduate at the University of Geneva in 1966 - contained a great deal of other important work, including analysis of the economic problems of Asia and Latin America.
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> After Geneva, Dornbusch earned his doctorate at Chicago in 1971, when the faculty there was at the height of its powers during the reign of Milton Friedman. A spell of postdoctorate research at the London School of Economics was fol lowed by his first post at MIT - where he worked for the following 27 years.
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> Dornbusch helped turn MIT's economics department into the most respected in the world, a position it retains today. That reputation was bolstered by Dornbusch's accomplishment as a teacher.
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> By the time of his death he had supervised 125 PhD theses, and inspired thousands of other students through his seminars. "In my generation, almost everyone in macro or international [economics] who has since risen to some reputation was a Rudi Dornbusch student," writes Paul Krugman, who describes him as "one of the great economics teachers of all time".
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> Dornbusch frequently worked in a practical capacity, advising foreign governments on economic policy - and that gave him an enduring interest in policy issues. He correctly predicted the Mexican peso crisis in 1994, and was a vocal advocate of developing nations setting policy in a manner that would attract international investment - strong fiscal policy, low inflation and a stable currency.
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> The annual World Economic Forum in Davos was the scene for many of Dornbusch's lively policy prescriptions. During sessions in which he spoke, he ruled that anyone whose mobile phone rang would be required to ask a question - and would enforce the ruling on unlucky offenders.
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> Dornbusch classified economists as either goldsmiths, pigs or plumbers. Pigs would leap into a subject with vigour and wallow in it - Larry Summers, Dornbusch's student and a former US treasury secretary, was praised as a "fearful pig" - while his ire was reserved for plumbers, economists who were obsessed with constructing elaborate devices without a clear purpose.
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> Goldsmiths, however, were careful, meticulous researchers - the category Dornbusch most admired, and the one into which he best fitted.
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> He is survived by his wife, Sandra Masur.
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> ?Rudi (Rudiger) Dornbusch, economist, born June 8 1942; died July 25 2002