George Akerlof received his Bachelor of Arts from Yale in 1962 and his PhD from MIT in 1966. He has worked as a professor at UC Berkeley since 1966.  His areas of expertise are macroeconomics, poverty, family problems, crime, discrimination, monetary policy, and German unification.  Professor Akerlof received the Nobel Prize in Economics in 2001 for his research on asymmetric information in the “lemon” used car market.

        Currently George Akerlof is researching behavioral economics and economics and identity.  Akerlof believes that “if any subject in economics ought to be behavioral, it ought to be macroeconomics” and questions how psychology and sociology influence economics.  For example, it is difficult to explain unemployment in the absence of behavioral economics because in a market where people are “sold” as goods, the market clearing price (or wage) should prevail and unemployment should not exist.  The big questions in behavioral economics are why involuntary unemployment exists and why labor markets are sometimes bad.  The natural explanation for unemployment is that wages are higher than market clearing because workers are paid extra for high morale.  A possible implication of this research is that the long run Phillips Curve is not vertical.  George Akerlof and others have tested to see if the long run vertical Phillips Curve fits and have found that it does not exist in times of low inflation.  This finding is most apparent in the Great Depression when the unemployment rate was way above that seen as natural.  While accelerating deflation should have resulted, some other factor must have entered into wage considerations, and it is most likely that wages stayed up because workers are so resistant to nominal pay cuts.  Data used in this research includes surveys taken by the researchers and union data from the United States and Canada.

        George Akerlof’s other current research involves the study of identity in economic behavior.  He researches the circumstances under which people consider themselves an “I’ versus a “we”and whether behaviors reflect collective groupings.  Professor Akerlof recognizes the question of who one is to be an important decision related to who one groups oneself with.  These decisions are major components of the answers to many current questions, including those of gender and race discrimination, how those discriminated against react, what the division of labor in the house is, and how extensive an education one pursues.  This area of study allows for exploration into why educational interventions such as reduction of class sizes actually work.  Akerlof’s research offers an explanation for why small class sizes and excellent teaching particularly affect African American students and offers an argument for why schools for minorities are often under-funded. Data used so far in this research were obtained from “High School and Beyond.”

   Professor George Akerlof is the co-winner of the 2001 Nobel Prize in Economics.  He is awarded the prize for his pioneering work on the role of asymmetric information between sellers and buyers in the market for  "lemons."  Some of his past research topics include the long run Phillips Curve, unemployment, education, discrimination, and poverty.  During the interview, Professor Akerlof and I talked extensively on his work dealing with economics and identity.

    Professor Akerlof is currently doing his research on the role of identity in economics.  Most economists in the past have studied people's reaction to prices and often times neglected the importance of other factors in explaining people's motivation for many things.  Professor Akerlof believes it is important to take a second focus and look at identity because people care about who they are, and people care about how other people look at them.  In the paper, Professor Akerlof considers how identity influences economic outcomes.  He borrows concepts from sociology and psychology about identity and incorporates them into an economic model of behavior.  He adapts this model of identity to gender discrimination in the workplace, the economics of poverty, and the production division in the household.  In each case, he finds that the inclusion of identity significantly changes the conclusions of previous economic analysis.

    One way Professor Akerlof finds the data to support to his research on economics and identity is by reading a lot and going through many different sociological case studies.  These literatures detailed how individuals interact and in fact became the data sources for many of information he uses in the identity model.

    On a final note, Professor Akerlof recommends thinking about real questions that people have as a good starting point for developing a thesis topic.  He believes this is a good way to come up with a topic that is interesting to you and others.

    I think Professor Akerlof is very friendly and approachable.  He spent a lot of his valuable time discussing my potential thesis topics during the interview.  I believe he can offer great ideas and new perspectives for students interested in the areas of macroeconomics and labor issues.

      After a five year absence, during which he commuted to Brookings Institute while his wife sat on the Council of Economic Advisors, Professor George Akerlof returned to Cal this semester.  He is still unpacking his office while running a graduate departmental seminar.  Known for his theory about information asymmetry in markets, the problem of lemons, his focus is now on labor and employment issues.  In the past he has studied the Phillips curve, finding that full employment is best for the economy. He also has done research on the NAIRU.

     Currently Akerlof is working on a paper that looks at the role of identity in economics.  The paper combines sociological theory of discrimination with economics in an effort to create potential reforms for discrimination law.  According to Akerlof, within each social group in which a person can categorize himself there is a sense of identity.  When one group behaves contrary to its norms, other groups lose their identity and will take actions to restore that identity.  He uses this theory to provide a new perspective on minority poverty, sexual harassment, and education.  Akerlof began his research by asking why people wanted discrimination and observing people in their workplaces.  He also followed events that caused a loss of identity for a social group with a survey.

     A large part of his paper incorporates established sociological theory, something he has been interested in for many years. Before his research on identity and economics, Akerlof found that people who are happy at work are more productive than people who are not.  He sees his current research as an extension of this earlier study.

     Akerlof hopes that when his paper is published it will change the current laws on discrimination.  He feels that the laws now are too black and white to capture what is happening; they are too simple to understand the scope of discrimination and the way it is manifested in society.