In Honor of William Brainard and George Perry

The Brookings Papers on Economic Activity is a unique and amazing institution, created by three visionaries, two of whom we thank and appreciate in this volume, George Perry and William Brainard. We should not, however, forget the founding contributions of Arthur Okun, who died in 1980, even though many readers know them only from the classic Brookings Papers of the 1970s, still full of wisdom.

The Brookings Papers was much more unique at its inception in 1970 than it is today, because it has inspired imitation and because Okun and Perry were the first to understand the value of a field-oriented, ongoing, academic conference series. In the 1960s there were no conference series in economic specialties. One went to the annual American Economic Association meetings and the Econometric Society meetings and to department seminars, but nothing else. How did we survive? The fixtures of the macroeconomics conference circuit all started later: the Carnegie Rochester series in 1973; the National Bureau of Economic Research's economic fluctuations program and its International Seminar on Macroeconomics and Summer Institute in 1978; the NBER Macroeconomics Annual in 1986 (a self-conscious copy of the Brookings Papers, I can say from firsthand knowledge); and the Minnesota Workshop in Macroeconomic Theory in 1990.

The world was different in 1970, when the Brookings Panel first met. The Brookings special room rate at the Dupont Plaza for the first meeting was $14 a night. Central cities, including the Dupont Circle area of Washington, seemed doomed. For the first decade of the Panel's existence, we would not have dreamed of crossing the center of the circle after 6 p.m., and we could have bought a spectacular house in Kalorama for $25,000.

I think some people feel that the Brookings Papers missed something in that two prominent developments in macroeconomics over the period of its existence—the rational expectations revolution and the simple general-equilibrium real business cycle model—did not figure prominently in the Panel's discussions. Or, to be more candid, they were more often criticized than advanced at the Panel. With respect to rational expectations, the editors did try to bring it within the Panel's ambit. Thomas Sargent, a leading proponent, was a member of the Panel in 1973 and wrote a significant Brookings Paper,¹ and Rudiger Dornbusch, who in 1976 became an instant star when he explained that rational expectations resulted in the overshooting of exchange rates,² was active here for many years. It did not take long for the Panel to follow the macroeconomics profession in absorbing rational expectations into its daily thinking.

The Brookings Papers' hostility to the real business cycle model and its many progeny, the dynamic stochastic general-equilibrium models, is easier to explain and reflects well on the editors. When the panel was launched, big econometric models reigned over macroeconomics. The Brookings Institution had lent its name to a huge effort to produce one such model. But a strict founding principle of the Brookings Panel was no big models, and it would be hard to exaggerate how important this was for the intellectual contribution of the Brookings Papers. Big models were a dead end. I do not personally think that the smaller general-equilibrium models are a dead end, but it was an easy and understandable transition from hostility to the big models to hostility to the smaller ones when they sprang up from Minnesota. From the start the Brookings Papers was about sectors, equations, and phenomena, and not about general equilibrium. I think this was and is a great strength.

In preparing these remarks, I went through the tables of contents of the Brookings Papers for its entire history—three issues a year in the first few years and two issues a year ever since, not counting the splinter publication, the Brookings Papers on Microeconomic Activity, which ran from 1989 to 1998. The two main conclusions I reach from my survey are the following: first, that the Brookings Papers has published a considerable number of papers that changed the direction of thinking in many different branches...