David Rosenberg gives the Ninth Annual Michael Berkowitz Lecture
Austerity, A Dangerous Idea: The 2013 Malim Harding
Lecture by Mark Blyth
What's Happening in the Department of Economics
by Arthur Hosios, Chairman of the Departmemt
On March 7, 2013, the annual Michael Berkowitz Lecture was given by David Rosenberg,
Chief Economist and Strategist, Gluskin Sheff + Associates Ltd. The event is organized
and sponsored by the Master of Financial Economics Program with all details and arrangements
wonderfully handled by Ayesha Alli, the MFE Program Administrative Coordinator. The
lecture was attended by many faculty, alumni and students. After drinks and food, and amusing
discussions of David's experiences here as a student in 1983 taking courses taught by attending
faculty members, Andreas Park, Chairman of the Session, called upon Jonathan
Kahn, one of our MFE graduates now with the Bank of Nova Scotia, to introduce the
speaker, and the lecture Investment Outlook for 2013: Income Outcome began.
David began by noting that as the current downturn has proceeded he has become more bullish
and less bearish and physically lost considerable weight. Turning then to the U.S. situation,
he posed the question as to why people criticize Ben Bernanke, the Chairman of the Federal
Reserve, for causing a negative return on cash, allowing for the inflation he will produce with
his policy of keeping the Federal Funds Rate near zero and creating higher inflation
expectations while reducing unemployment.
The Rosenberg response to these criticisms was to note that the recent decline in the U.S.
umeployment rate has resulted entirely from a decline in the participation rate without which
unemployment would currently be 9.8 percent. David then argued that the desired rate of 6.5
percent, which must be reached before the Fed. will start raising interest rates, will not
likely be reached until January 2018 so we should assume that short rates are unlikely to
go up any time soon. David agreed that the expansionary policy is justified on grounds that
the level of U.S. real GDP, while growing on average at only 1.3 percent four years into the
recovery, is clearly 5.7 percent lower than its potential. Furthermore, according to the
Taylor Rule, the Federal Funds Rate should be a negative 2.2 perent. The current policy of
Quantitative Easing via. Fed purchase of mortgage-backed securities and long-term government
bonds is therefore appropriate, driving bond, stock and home prices up. Interest income is
going down and dividend income is going up reflecting major capital gains on equities. Given
low interest rates, David argued, investment in corporate bonds that still yield a premium
over government bonds of equal maturity, or in stocks that pay a high dividend yield with room
for even a higher payout ratio is a good low-risk way to play the market.
David concluded his excellent presentation by noting that he thinks we will be in a
deflationary environment for some period of time although inflation cannot be completely ruled
out as a future problem.
On March 14 the Department was very fortunate to attend the annual Malim Harding lecture
given by Mark Blyth, Professor of International Political Economy at Brown University.
The lecture was a summary of Blyth's recent book Austerity: The History of a Dangerous
Idea, published by Oxford University Press. We were pleased that Victor Harding, Malim
Harding's son, was in the audience. After an introduction by Louis Pauly, Chairman of the
Political Science Department, which is our co-sponsor of the Malim Harding Lecture, Mark's
presentation began.
Mark Blyth's basic argument is that austerity is a very dangerous idea. He shows using
evidence from the past few years and an historical analysis of the past 100 years, that
austerity does not work as a method of promoting growth. The historical basis for the
idea is the notion that economic growth is produced by savings channelled into investment,
whereby the capital stock and income increase through time. This argument goes back to
Adam Smith and, earlier, Locke and Hume. The weakness of this view is evident from the work
of John Maynard Keynes. While an increase in investment will increased growth, an increase
in savings involves a reduction in consumption which has a negative effect on output for some
time thereafter. The current situations of the EU countries in crises and the United States,
which were caused by banking overextensions of credit and resulting failures involve the
presence of government debts that are of critical magnitudes in relation to real GDP. The
attempts to reduce these debts by government expenditure reductions in the EURO countries,
have resulted in negative effects on output and employment and an accentuation of economic
downturns. In the U.S., the procedures to get the public debt under control, if allowed to
occur based on past government established requirements, will make the current downturn worse
and will have world-wide negative effects.
Because Mark was presenting a lot of material, his presentation tended to be collection of
short, seemingly political, assertions that could be at times irritating. A careful read of
his book, however, clearly indicates the detailed and scholarly nature of the work on which
his arguments are based---an excellent study in political economy. Working through his material
is well worth the effort!
Our annual undergraduate awards reception was held on November 19, 2012 to honour the
accomplishments of our best undergraduates. As usual, many of our faculty attended. Also,
we were pleased to have present Joan Safarian to give out the award endowed by her husband,
Emeritus Professor Ed Safarian, together with William Wolfson who also endowed an award,
and Professor Don Dewees, who is honored by the creation of a new award in recognition of
his many years of service to the Department, was also present, accompanied by his wife Ann.
Food and Beverages, arranged for and organized by our Undergraduate
Program Administrator Robbie Innes, were enjoyed by all both before and after the presentation
of the Awards. Following introductory remarks by our Chair, Arthur Hosios, our Associate Chair
responsible for the Undergraduate Program, Dwayne Benjamin, and announced the award recipients
who then received their awards. We are very proud of these students and extremely grateful to
the individuals and institutions that endowed these awards. The awards and their recipients
are as follows:
The Mary Keenan Award (to two students who have successfully completed the first
year in the Faculty of Arts and Science and who have enrolled in a specialist program
in Economics) --- Mr. Joshua Caron who is a student in the Mathematical Applications
in Economics and Finance Program and Ms. Christine (Heting) Yu who is a double
major in Economics and Neuroscience.
Ths Smith Family Scholarship in Economic Policy (to a student in Economics
who intends to focus his or her studies on Economic Policy or Economic History and
submits a short essay analyzing a current policy issue) --- Mr. Dylan Moore who
is a specialist in both Economics and International Relations and is taking courses in
Economics, Mathematics and Political Science.
The Safarian Scholarship in Economics (to an outstanding student in a specialist
program in Economics) --- Ms. Kuleen Katuria who is enrolled in the fourth year
of our Economics and Finance Specialist Program.
The Frederick G. Gardiner Scholarship in Economics and Political Science (to an
outstanding student enrolled in two of the specialist programs in Economics, Political
Science and Public Policy) --- Mr. Nabeel Thomas who is currently a fourth year
student majoring in Economics and Political Science.
The Noah Meltz Undergraduate Award in Labour Economics (Awarded in Memory of our
Colleague Noah Meltz who passed away in 2002) (to an outstanding student in our third-year
course in the Economics of Labour) --- Ms. Kuleen Kathuria who also won the Safarian
Scholarship and was the top student in the above course.
The Economics Graditude Scholarship endowed with donations from graduating students
during the annual GRADitude campaign (awarded to a student in a major or specialist
program in Economics) --- Ms. Xueying Liu who is in the fourth year of the
Financed and Economics Specialist Program.
The Ramsay Scholarship in Economics, funded with a bequest of the late William Ramsay
of Bowland Scotland (to an outstanding student whose program of study includes at least
three courses in Economics) --- Ms. (Sissi) Yun Yang.
Institutional Equity Traders Association Scholarship in Economics (to an outstanding
student in a major or specialist program in Economics) --- Ms. Nina Balkhtina who
is in the fourth year of our Economics and Finance Specialist Program.
Alexander Mackenzie Scholarship in Economics (to a student enrolled in an Economics program
who has completed at least two full courses in Economics) --- Ms Jiarui Zhao who is in
the fourth year of our Specialist Program in Financial Economics.
The Donald Dewees Undergraduate Award (to students demonstrating excellence in
the economic analysis of Law, and the economics of energy and the environment) ---
Mr. Anthony Vaz who has completed is degree in Economics and Finance.
Photo of Dwayne and the Recipients
At the end of the Spring Term in 2013, our distinguished colleague, Professor Jack
Carr, retired. Jack joined the Department in 1968 as an assistant professor
following his graduate study at the Univerity of Chicago which earned him an M.A.
and PhD. in economics under the supervision of Milton Friedman. While he retires as
a full professor forty-five years later, he really was part of the Department family
for fifty years, having done his undergraduate work here, obtaining his B.Comm in 1965.
Over the years, Jack produced a large number of publications including many articles
in major journals along with a number of books. He is listed in Who's Who in
Economics and in A Biographical Dictionary of Major Economists,
1700-1986, and won a number of awards. And he served as Acting Chairman of the
Department in 1987-88 and as Associate Chairman and Director of Graduate Studies in 1983-85.
The Department celebrated Jack's accomplished career on April 2, 2013 in an event
attended by his wife Honey and family. His son David is a medical doctor and an
assistant professor of Medicine in the University of Toronto Health Network, his son
Adam is CEO of an international food company Boston and his daughter Elana is
Development Officer in Canada for Bar Ilan University in Israel. Also present
were Paul Halpern, former Dean of Rotman School of Management and Arnie Aberman,
former Dean of Medicine at U. of T.
After a brief introduction by our Chairman, Arthur Hosios, and remarks by
Frank Mathewson and Jack's sons David and Adam, followed by an interesting reply by Jack,
who likened the Department to a family and praised its success over the years, the party
continued, with everyone enjoying a couple of hours of fine food, drink and conversation.
It was an event and career to remember!
Department of Economics
Welcome Page
Introductory Remarks
David Rosenberg gives the Ninth Annual Michael Berkowitz Lecture
Austerity, A Dangerous Idea: The 2013 Malim Harding
Lecture by Mark Blyth
What's Happening in the Department of Economics
Undergraduate Awards Reception in 2012
Brian Mulroney Award, endowed by Gerry Schwartz (to the student with highest mark in ECO230Y
(International Economic Institutions and Policy), HIS263Y (Introduction to Canadian History),
or POL214Y (Canadian Government and Politics)) --- Ms. Angela Wiggins, who graduated
this year with a major in Political Science, and Ethics, Society and Law.
Mary Child Scholarship in Economics (to an outstanding graduating student in an
Economics Specialist Program, based on the average mark in courses that are required in
the program. --- Ms. Jiaqui Lu who graduated this year from our Specialist Program
in Financial Economics.
Banker's Scholarship in Economics (to the student with the highest standing in the
intermediate macroeconomics course) --- Mr. Simon Quach who is in the third year of
our Joint Specialist Program in Economics and Mathematics.
Nanda Choudhry Prize in Economics, Second Year, established with a gift from the
late Professor Emeritus Nanda Choudry who retired in 1996 (to the student in a specialist
program in Economics who has obtained the highest average mark in at least two of the second year
courses in microeconomics, macroeconomics and quantitative methods) --- Mr. Jae Hyun Cha
who is enrolled in the Finance and Economics stream of our Commerce Program.
Nanda Choudhry Prize in Economics, Third Year (to the student in a specialist program in
Economics who has obtained the highest average mark in at least two full Economics courses
at the 300 or 400 level) --- Ms. Chen Qu who is in the fourth year of our Financial
Economics Specialist Program
Paul L. Nathanson Scholarship in Economics, established in memory of Paul Nathanson who
was the founder of the General Theater Investment Company (to an outstanding student whose program includes
at least three courses in Economics) --- Ms. Chunyue Joyce Yin who is in the fourth
year of our Financial Economics Specialist Program, with a minor in Statistics.
Reza Satchu Award for Excellence in Economics (to the best student
in the course on the economics of entrepreneurship) --- Mr. Eric Sarkisyan who
won the Noah Meltz award last year and, after graduating with a Bachelor of Commmerce
and specializing in Economics and Finance with a perfect 4.0 GPA, is now attending Law School
at the University of Toronto.
William G. Wolfson Scholarship in Economics (to an outstanding Economics
major who has completed second year and taken intermediate microeconomic
and macroeconomic theory) --- Ms. Christine Farquharson who is a double major
in Economics and European Studies with a Minor in Political Science.
The Lorne T. Morgan Gold Medal in Economics (to the leading graduating
student in a specialist or joint specialist program in Economics, based on
performance in fourth year) --- Melissa Gregoire who graduated this year with
a Bachelor of Commerce specializing in Economics and Finance.
Jack Carr Retires after Forty-Five Years of Teaching
