IN MEMORIAM
SCOTT FREEMAN
Scott Freeman, a renowned monetary economist and brilliant teacher,
died on July 23, 2004, at the age of 50, after a long and courageous
battle with amyotrophic lateral sclerosis (ALS or Lou Gehrig’s
disease). Scott was well known for his research in monetary economics.
Beginning with his dissertation and throughout his career, he
was interested in understanding the roles that money and monetary
policy play in the economy. He held very high standards of intellectual
integrity, which always led him to turn to model environments
that combined important institutional details with the rigor
of general equilibrium analysis. In these theoretical models
he asked questions such as, “What determines the optimal
quantity of money and the optimal conduct of monetary policy?”, “How
should the payment system be designed and what role should the
Federal Reserve play in smoothing out its natural fluctuations?”, “Should
bank reserves earn interest?”, and “Should private
banks be allowed to issue bank notes?” Scott was born on June 9, 1954, and grew up in West Bend, Wisconsin.
He was the oldest of three children. His parents, Robert and
Ethel Freeman, instilled in Scott a love of learning, discovery,
and teaching. Scott graduated from West Bend High School, where
his father was a teacher for many years, before attending the
University of Wisconsin at Madison. After graduating with a B.A.
in economics in 1976, Scott joined the Peace Corps and spent
two years teaching in Zaire. Upon returning to the United States,
Scott enrolled in the Ph.D. program in economics at the University
of Minnesota. It was here that Scott worked with Neil Wallace,
who had a profound influence on his career, and where he became
friends with Bruce Champ, who would later become Scott’s
co-author for a textbook on monetary economics, Modeling
Monetary Economies. Scott’s academic career began as an assistant professor
at Boston College (1982-88), where he was awarded tenure. It
was during this time that Scott spent a year as a visiting assistant
professor at the University of Western Ontario. During his year
in London, Ontario, Scott developed a number of friendships that
would last throughout the remainder of his life, most notably
with R. Preston McAfee. In 1988, Scott left Boston for the University
of California at Santa Barbara, where he spent three years, before
moving to The University of Texas at Austin. At UT, Scott was
promoted to professor, and in 2000, he was named the Rex A. and
Dorothy B. Sebastian Centennial Professor in Economics. Scott
remained active in the economics department, as a teacher and
scholar, years after he was diagnosed with ALS. His courage,
dedication, and unwavering determination to teach others, in
spite of his struggle with his disease, was an inspiration to
all faculty, students, and staff at UT. In Texas, Scott developed a working relationship with scholars
affiliated with the Federal Reserve Bank of Dallas, including
future Nobel Prize winner Finn Kydland. Although Scott did not
live to see his friend win the Nobel Prize, Kydland featured
their joint work prominently in his acceptance speech in Stockholm.
Finn showed the audience photographs of Scott, described their
pioneering work [23], and mentioned that Scott was one of two
people (including Kydland’s father) who Finn deeply regretted
were unable to be present for the ceremony. Scott’s research always confronted the question of what
distinguishes money from other assets before he could use these
models for asking the real questions that he was interested in.
In the Minnesota tradition, he could not sidestep this issue
with some “ad hoc” assumption about how fiat money
facilitates transactions. He invented numerous clever environments
in which information asymmetries and frictions built into the
setup provided the microfoundation for the role of money [1,
6, 18]. He also advocated the importance of understanding the
banking system for understanding money [4, 7, 18, 9] – perhaps
an obvious requirement from the perspective of non-economists
but actually rarely acted upon by economists. Some of Scott’s papers contain forerunners of ideas that
later became widely accepted theories. His work on search and
the exchange process [6] foreshadows the Kiyotaki-Wright line
of research on the transactions role of currency. His paper on
transaction costs and the optimal quantity of money [1] models
the difference between privately issued IOUs and central bank
money as a moral hazard problem on the part of private agents
well before the literature on contract enforcement became mainstream.
His work on the optimality of nominal contracts [19] points out
a connection to risk-sharing and insurance, which is not widely
recognized yet but promises to grow in importance. Scott believed that high quality research in monetary economics
could be explained to undergraduates. He was not satisfied with
feeding young minds on traditional theories that had been rejected
by scholars working at the frontier of monetary research. So
he enlisted Bruce Champ to co-author a book, Modeling Monetary
Economies [24], in which they explained in an accessible
way the major developments in monetary economics that grew out
of the general paradigm shift in macroeconomics, known as the “rational
expectations revolution.” Anyone who reads that textbook
will be struck by Scott’s intellectual depth and his phenomenal
ability to communicate the main point simply but without compromising
accuracy. Throughout his career, Scott was interested in one of the classic
questions of monetary economics: the relationship between money
and output and the question of whether monetary policy can influence
real economic activity. The papers he wrote on the subject with
various co-authors [9, 23] show that much of the apparent correlation
between the nominal and the real side of the economy is due to
the endogenous response of money created by banks to fluctuations
in real activity. Once the role of deposit banks in the monetary
system is taken seriously, not much is left to be explained.
The implication is the influence on the economy of the central
bank, or of money created by the central bank, is smaller than
most economists believe. It is perhaps not an oversimplification to say that most monetary
theories are exposited in one of two general equilibrium environments:
the so called “representative agent” model or the “overlapping
generations” model. It turns out that the predictions of
the two classes of models can be quite different for some important
questions. Scott’s exposition of the reasons for these
differences [12] is one of the fine examples of how he always
sought intellectual clarity. Interestingly, he understood these
differences because he thought hard about other applications
of these models in macroeconomics. In particular, Scott was very
interested in a seemingly unrelated topic, the distribution of
resources between people [14]. Scott understood clearly and explained
eloquently that the way society values the well-being of different
generations affects the desirability of alternative policies,
including alternative ways of conducting monetary policy.
Scott Freeman is a hero to his colleagues and friends. Before his
illness, he was well liked and respected. He was always ready to
engage in intellectual discourse about his research and yours,
and he was often ready to go to a local music venue after work
to enjoy a few beers and Austin blues. (See www.scottfreeman.us for
the remarkable story of his life.) After his illness, we saw the
full dimensions of his character. Scott did not flinch as his body
progressively declined. He continued to teach his courses, conduct
his research, and supervise his graduate students – all with
extraordinary clarity and vigor. There simply was no “quit” in
him. We could barely hear his voice towards the end, but he was
speaking to us in loud clear ways about human dignity and purpose.
He was a rare individual who left a lasting light.
<signed>
Larry R. Faulkner, President
The University of Texas at Austin
<signed>
Sue Alexander Greninger, Secretary
The General Faculty
This memorial resolution was prepared by a special committee consisting of Professors
Stephen Bronars (chair), Vince Geraci, and Beatrix Pal.
THE PUBLISHED WORK OF SCOTT FREEMAN
Journal articles
[1] “Transaction
Costs and the Optimal Quantity of Money,” Journal of Political Economy,
February 1985.
[2] “The
Optimal Quantity of Money: A Reconciliation,” Economics Letters,
1985, Vol. 4.
[3] “Inside
Money, Monetary Contractions and Welfare,” Canadian Journal of Economics,
February 1986.
[4] “Reserve
Requirements and Optimal Seigniorage,” Journal of Monetary Economics,
March 1987.
[5] “Banking
as the Provision of Liquidity,” Journal of Business, January
1988.
[6] “Fiat
Money as a Medium of Exchange,” International Economic Review,
February 1989.
[7] “Inside
Money and the Open Economy,” Journal of International Economics,
February 1989 (with Robert Murphy).
[8] “Money,
Output, and the Nominal National Debt,” American Economic Review,
June 1990 (with Bruce Champ).
[9] “Inside
Money, Output, and Causality,” International Economic Review,
August 1991 (with Gregory Huffman).
[10] “Knowledge-Based
Growth,” Journal of Monetary Economics, October 1992 (with Stephen
Polasky).
[11] “Money
and Output: Correlation or Causality?” Economic Review Federal Reserve
Bank of Dallas, Third Quarter 1992.
[12] “Resolving
Differences over the Optimal Quantity of Money,” Journal of Money,
Credit, and Banking, November 1993.
[13] “Should
Bank Reserves Earn Interest?” Economic Review Federal Reserve Bank
of Dallas, Fourth Quarter 1995 (with Joseph Haslag).
[14] “Equilibrium
Income Inequality among Identical Agents,” Journal of Political Economy,
October 1996.
[15] “On
the Optimality of Interest-Bearing Reserves in Economies of Overlapping Generations,” Economic
Theory, 1996 (with Joseph Haslag).
[16] “The
Spatial Concentration of Crime,” Journal of Urban Economics, 1996,
Vol, 40, (with Jeffrey Grogger and Jon Sonstelie).
[17] “Clearinghouse
Banks and Banknote Over-issue,” Journal of Monetary Economics,
August 1996.
[18] “The
Payments System, Liquidity, and Rediscounting,” American Economic
Review, December 1996.
[19] “The
Optimality of Nominal Contracts,” Economic Theory, May 1998,
(with Guido Tabellini).
[20] “Rediscounting
under Aggregate Risk,” Journal of Monetary Economics, February
1999.
[21] “Endogenous
Cycles and Growth with Indivisible Technological Developments,” Review
of Economic Dynamics, April 1999 (with Dan Peled and Dong-Pyo Hong).
[22] “Redemption
Costs and Interest Rates under the U.S. Banking System,” Journal
of Money, Credit and Banking, August 1999, Part 2, (with Bruce Champ and
Warren Weber).
[23] “Monetary
Aggregates and Output," American Economic Review, December 2000,
(with Finn Kydland).
Book
[24] Modeling
Monetary Economies Wiley, 1994; Second Edition, Cambridge University
Press 2001, (with Bruce Champ).
|
