Senior Fellow, Gorbachev Foundation of North America Senior Fellow, Milken Institute Editor-in-Chief, Handbook of Economics Series	September 2004
	"At a recent Marschak memorial we had Paul Samuelsen, one of my teachers at MIT, give his lecture. He was the first American to win the Nobel Prize in Economics. He gave a very interesting talk because he was constantly being deluged by people applying the principles of physics to economics, and he decided to reverse the trend and start applying the laws of economics to those of physics. You can derive a lot of thermodynamics from basic economic principles. People are surprised by that."

Have you found that the field of economics has grown to be more interdisciplinary?
Economists tend not to be interdisciplinary, but Marshak was an exception; maybe I'm an exception too. Marshak's wife was a psychologist and he stayed aware of what was going on in his own field as well as what was going on in psychology. He had a broad interest in a wide range of academic pursuits, and so did I. I try to publish in political science journals, international relations and policy journals, not just strictly economics journals. Most economists stick to their very narrow field of economics.

How did the Handbook of Economics series get started?
Case Vheilsen was running the economics program at Elsevier many years ago. He approached me at dinner one time, and we got to talking about the German Handbuch der Physik published by Springer Verlag. He approached me because I had edited the three books in the economic analysis series, and they did well. He suggested that we should do something similar in economics and I thought it was a terrific idea.

He wanted to start with the handbook of mathematical economics and econometrics, two of my fields. I had worked in many fields, but those are two I had published a lot in, so he invited me to be an editor. I thought that we should separate the two since there is a real dividing line between them. I accepted the position but said I wanted somebody else to work with as coeditor. That is when I suggested the best possible person for this project would be Kenneth Arrow.

I know Ken because I spent part of my sabbatical at Stanford and got to know him there. I got in touch with Ken and he said that it was impossible, that he was already over-committed. We kept talking about who might contribute to it and where we could go with it, etc. and the more we talked, the more he liked the idea, until he finally said "OK let's do it." He convinced himself with the argument that sooner or later he would have to read this book, so why not have a role in its creation. He knew it was going to be a big deal.

That was the key branching point that really guaranteed success, because once he signed on, everybody wanted to be in on the project. We had absolutely no problem getting a dream team of people together. We could have anybody we wanted. Arrow is so well known and so highly respected by his colleagues… he has truly revolutionized the field of economics… many fields within economics actually.

How would you describe Arrow's impact on the discipline?
Well, he's a Nobel Prize winner, but in my mind and in the minds of so many others, he's really above all the other Prize winners. Mainly it's the quality of his work, but what's so impressive is the breadth of his work. He has reinvented so many areas of economics that it is just amazing. To give you an idea, when I was writing my first book, which was a book of mathematical economics, I was revising my first draft and I was reviewing the literature around my work as part of the revision process. I kept finding that Arrow had written the seminal work for every topic I was looking into: general equilibrium (GE), social choice, dynamic economics, and game theory. It was uncanny; I hadn't realized how important he was. If you know one or two Nobel Prize winners in Economics he should be one of them.

One of the things that I was saying about Arrow at a testimonial is that I really love working with him because he's such a true renaissance man. We'll be on the phone or conversing in email about the business of our handbook series, but we end up discussing everything else; music, current events, cathedrals. He can talk about anything because he is such a knowledgeable man. It's a joy to know him and working on the series has given me a great excuse to stay regularly in touch with Ken.

Do you find a lot of people like Arrow, with wide-ranging interests drawn to economics? No, not really, he's more of an exception. Most economists start in math or physics, or engineering in some cases, and stay the course. Many people think "Oh, I'll just solve all the economics problems if I apply solutions and theories from physics". There have been innumerable papers written on applying the principles of thermodynamics to the problems of economics.

Years ago, we had Paul Samuelson (the first American to win the Nobel Prize in economics) give a lecture at MIT. He gave a talk that was very interesting. In the talk, he was deluged by questions from people applying the principles of physics to economics. He then decided to reverse the trend and start applying the laws of economics to those of physics. You can derive a lot of the principles of thermodynamics from basic economic principles. Role reversal. There are a large number of people who came in to economics from mathematics and physics.

Is the field branching out beyond conception?
There are so many different fields of study within economics these days, and we really try to cover them all in our handbook series. There's one coming out soon on organization theory and we're talking about doing a handbook on transition economics (the transition of countries going from socialist economies to market-based economies). We have a handbook of economic forecasting edited by Clive Granger down at UCSD, another Nobel Prize winner. He's done a lot of work on forecasting and we were able to sign him up to do a handbook on forecasting before he got his Nobel Prize, so that was good. This has happened to us several times where we would sign up an editor and later they would get the Nobel Prize. Anyway, there's a lot of interest these days in forecasting. There's also a lot of interest in game theory, we did a big three-volume handbook of game theory.

There are so many branches and sub-branches of economics, you can basically follow the list of handbooks we produced over the years and get a real feel for the subject and all of its many fields. You will see by looking over the series that we started early on with fairly traditional standard fields that graduate students would take—microeconomics, econometrics, macroeconomics—and branched out from there. Actually, macroeconomics was delayed for several years as Ken and I had a lot of doubts about whether it would make a good handbook, but finally we decided it would. All the standard classical fields of economics—labor economics, public economics etc.—we did all of those handbooks early on.

How would you describe the impact of this series?
Huge. One of the former editors of the "Contributions in Economics" series, Dale Jorgensen, who edited the series for many years, said to me "That series has done so well, it's a real publishing phenomenon" which is how I would really put it from my point of view because we started with nothing and rose to become highly influential.

One of the things we do in our brochures is compare the number of citations for our handbook with citations for popular journals. Using the ISI citation index, we find that there is a higher impact factor for the Handbook of Economics than to many other journals, apart from the Journal of Economic Literature, which is really in a category all of its own as a review article journal. We also get glowing reviews for our handbooks; it's amazing the way people praise us. All of the successes for Handbook of Economics go back to that original decision to get Arrow involved. We got everybody we wanted to edit that first handbook because of Arrow and then in subsequent editions, those choice editors got all of the authors they wanted because of Arrow and the success of those first volumes, so it kept building on itself and unfolding. I'm pretty proud of it. I've written several books, edited several books, published over 200 articles, became a Fellow with the Econometrics Society and all these things... but my greatest professional contribution has been working with Arrow and producing this series. It is my greatest professional achievement.

When we first begun working on this series, following the model of Springer's Handbuch der Physik, we thought nobody was going to buy these things: they are too big and expensive, these are going to be reference works that sit in a library. We were stunned by a load of individual sales. We first interpreted the sales as senior academics that may have bought these titles once, but there aren't going to be repeat sales. We get repeat sales every year. Why is that? If a grad student is in an industrial organization and studying econometrics or whatever, they have to have it. We never imagined it would work out this way, but it has succeeded beyond all that. Especially for the poor graduate students, it's part of their professionalism of giving lectures and preparing to teach courses and such. They need to have it on their shelf, so they can just pull it off anytime and have it right there, so we're selling more & more of these books to graduate students.

What are you doing these days?
Ten years ago, UCLA offered me a very generous early retirement package, so I took it. I have been formally retired for ten years but still maintain an office at UCLA. The first five years, I had a deal with my dean that I would continue to teach two courses and run the Marshak Colloquium. I was teaching one course in economics and one course that is cross-listed in policy studies and political science. This is an unusual course called "Nuclear Weapons, the Critical Decision." It is a very interdisciplinary course that really doesn't involve economics, but I bring in certain economic techniques like game theory, decision theory, and expected utility theory, and try to apply these to decisions that are made in nuclear weapons issues. The course starts with Roosevelt, Truman, and Stalin and moves on to the current situations, through all of the episodes of the Cold War and post Cold War world. I have been teaching that course for the past four years; this year I was supposed to teach the course again, but between all of my other ongoing commitments in my writing and teaching and conferences, I realized that I no longer have time to teach. This is the first year in some forty odd years that I won't be teaching. I may go back to teaching next year if I can work it out.

What do you do in your spare time?
I like to read mystery novels when I get a chance to read, but what I love even more is going to the opera. Music is one of my passions; even more than economics, I should say. I was just in Sydney, what a lovely opera house that is! I went to the opera house, but it wasn't opera season so I saw a ballet instead, which was very good. The New York Times architecture critic recently made an interesting comparison - he said the greatest building of the 19th century was the Paris Opera house; the greatest building of 20 century was the Sydney Opera House, and the greatest building of the 21st century is the Disney concert hall in Los Angeles. I just saw the Disney concert hall for the first time not too long ago, and I couldn't resist going in.

What drew you to the study of economics?
When I was an undergraduate as a math major, I found it too abstract, not substantial enough. I needed something a little more tangible, something a little more policy related. I was taking a course in the economics department looking at 20th century economists taught by a very interesting woman, Elspeth Rostow (Walter Rostow's wife). We read this book on the life of Keynes by Roy Harrod, and it blew my mind, what this guy accomplished and all the rest. He basically reinvented economics with his general theory, built up the treasury of Kings College Cambridge, married a Russian Ballerina, created the IMF and World Bank, created the arts council of great Britain: an amazing man. He had so much impact nationally and internationally, so I said "boy that's the life for me."

Any thoughts on the current economy and market situation?
Well, I was just finishing up an op/ed piece this morning on how to get out of Iraq, which is the question of the day: how to deal with the Iraq situation. As far as the economy is concerned, I'm fairly pessimistic about what's going to happen to this economy. There's been an acceleration of government spending, and as we've seen that's had a bit of an impact.

These rising interest rates are going to have a huge effect on the economy because these young people go to the malls get over-extended on their credit cards, then pull equity out of their homes to pay for it because of low interest rates. But the interest rates are creeping up from the basement where they've been for some time, and we're going to be seeing a lot more bankruptcies. For example, and two-thirds of the economy is consumer spending, so when consumers stop going to the malls because they're over-extended, then what happens? They owe so much money to their credit cards that they're taking out good portions of the mortgages on their house to pay the bills. Add oil prices, which are going to go through the roof and you've got a very dire situation with a profound effect. Oil prices will have a negative effect on industry as well as consumers. Meanwhile, we're entering a time of intense competition with other countries.

Is that the general consensus of your colleagues?
No, I think I tend to be on the more pessimistic side of things. Most people take a more moderate position, but I'm not seeing much to be hopeful about out there.

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This article by Joe Martis
j.p.martis@elsevier.com