David I. Meiselman

David I. Meiselman
Born 1924
Boston, Massachusetts, U.S.
Died 2014
Baltimore, MD
Residence U.S.
Nationality American
Fields Economics
Alma mater University of Chicago MA 1951, PhD 1961
Boston University A.B. 1947
Doctoral advisor Milton Friedman

David I. Meiselman (1924 - December 3, 2014) was an American economist. Among his contributions to the field of economics are his work on the term structure of interest rates, the foundation today of the implementation of monetary policy by major central banks, and his work with Milton Friedman on the impact of monetary policy on the performance of the economy and inflation.

Life

Education

Meiselman completed his B.A. in Economics at Boston University in 1947, and his MA in Economics in 1951 from the University of Chicago. He received his Ph.D. in Economics from the University of Chicago in 1961 for his thesis "The Term Structure of Interest Rates" for which he received The Ford Foundation Doctoral Dissertation Series award.

Work History

Teaching

Board Memberships and Affiliations

Work

Meiselman's key contributions to economic research include his dissertation, "The Term Structure of Interest Rates" (1962), and his collaborative study with Milton Friedman, "The Relative Stability of Monetary Velocity and the Investment Multiplier in the United States, 1897-1958" (1963).

Term Structure

Meiselman's thesis "The Term Structure of Interest Rates" integrated evidence from cash markets and futures markets into a unified theory of how interest rates may behave over time. He documented empirically that the markets are forward looking, and demonstrated the relationship between short-term and long term interest rates, the link being forward short-term rates based on the path of expected short-term interest rates over the maturity of the expected long-term asset.[1] This framework is widely used by analysts in dealing with term structure issues, and is the framework used by central banks in the implementation of their policies aimed at affecting aggregate spending through the level of long-term interest rates.[2]

This contribution was made at a time when economists had come to attach growing importance to the role of expectations and the expectations-formation process to a variety of key types of economic behavior. It was becoming commonplace to view consumption as based on permanent or life-cycle income instead of only current income, unemployment as dependent on inflation expectations, and business investment as dependent on expected path of sales and profits. In the financial realm, share prices were viewed as being based on expected earnings and fixed-income prices as dependent on expectations of short-term interest rates. Translating these concepts into operationally tractable measures required that the expectations formation process be specified. Meiselman articulated this in the term structure realm using an error-learning process.[3]

Impact of Monetary vs. Fiscal Policy

His empirical studies with Milton Friedman in the early 1960s[4] indicated a greater role of the money supply over investment and government spending on inflation. Up to the time of this report, the widespread belief among economists was that fiscal policy (federal spending and taxation) was a much more effective stabilization tool than monetary policy.[5]

Influence on Policy

In 1968, Meiselman was asked by the Richard Nixon presidential campaign to chair a Task Force on inflation.[6] This Task Force focused on inflation as being caused by overly expansive monetary policy, and prescribed setting limits on monetary growth.

It wasn't until another decade passed before Congress took action to clarify the goals of monetary policy and to increase accountability. Acknowledging that inflation was caused by monetary forces, The Full Employment and Balanced Growth Act of 1978 (commonly known as the Humphrey-Hawkins Act after its key sponsors in the Senate and House) specified the dual mandate of stable prices and maximum employment as the primary goals of monetary policy.[7]

While the role of the monetary aggregates in the conduct of monetary policy has diminished a great deal over recent decades owing to a pronounced deterioration in the predictability of monetary velocity,[8] the focus on the Fed as the entity responsible for inflation has, if anything, intensified.[9] The Fed, in recognition of this responsibility, has set a target for low inflation—2 percent per year. In other words, there is no longer a battle over the causes of inflation and responsibility for keeping inflation low. The monetarists, of which Meiselman was a key member, prevailed, but the methods being used by central banks have evolved from achieving price stability through monetary aggregates to pursuing this goal through other means.

Beyond monetary policy, Meiselman made contributions to policy in the areas of futures contracts,[10] debt management,[11] and taxes. In all cases, his policy recommendations respected the role of market-driven processes as solutions to problems facing the economy, and he was highly skeptical of governmental involvement in the economic sphere.[12]

Publications

Books

Articles

See also

References

  1. ↑ Who's Who in Economics, A Biographical Dictionary of Major Economists 1700-1980. MIT Press. 1982.
  2. ↑ King, Robert G.; Kurmann, André (Fall 2002). "Expectations and the Term Structure of Interest Rates: Evidence and Implications" (PDF). Federal Reserve Bank of Richmond Economic Quarterly. 88 (4): 49.
  3. ↑ Telser, Lester (1966). "A Critique of Some Recent Empirical Research on the Explanation of the Term Structure of Interest Rates". Journal of Political Economy. 75 (4, Part 2: Issues in Monetary Research): 551. JSTOR 1832164.
  4. ↑ Friedman, Milton; Meiselman, David (1963). "The Relative Stability of Monetary Velocity and the Investment Multiplier in the United States, 1897–1958.". Commission on Money and Credit: Stabilization Policies. Englewood Cliffs, NJ: Prentice-Hall: 165–268.
  5. ↑ Simpson, Thomas (2015). "Contributions of David Meiselman to the Field of Economics". David I. Meiselman, Memorial Book, 2nd Edition.
  6. ↑ "Pre-Presidential Task Force Reports". www.nixonlibrary.gov.
  7. ↑ Steelman, Aaron. "Full Employment and Balanced Growth Act of 1978, commonly called Humphrey-Hawkins". Federal Reserve History.
  8. ↑ "What Does Money Velocity Tell Us about Low Inflation in the US". www.stlouisfed.org.
  9. ↑ "Fed should focus on inflation, not jobs". Fortune. 5 April 2011.
  10. ↑ Crow, Robert (Apr 8, 2016). The Best of Business Economics: Highlights from the First Fifty Years. Springer. p. 214.
  11. ↑ "Public Debt and the Budget: Hearings Before the Subcommittee on Taxation and Debt Management Generally of the Committee on Finance, United States Senate" (PDF). 1978.
  12. ↑ Simpson, Thomas (2015). "Contributions of David Meiselman to the Field of Economics". David I. Meiselman, Memorial Book, 2nd Edition.
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