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I cannot end this reminiscing on my years at Harvard without making a reference to one of the greatest minds in economics of the last century, Joseph Aloysius Schumpeter, author of the most complete volume on the History of Economic Analysis and famous for his entrepreneurial theory of economic development. Schumpeter died nine years before I started my studies at Harvard in 1959. His influence on the entire economics department was, however, very palpable not only for his deep insights into the process of economic development but also because of his magnetic and colorful personality. He has been referred to as one of the 20th Century’s greatest intellectuals at par with the great John Maynard Keynes. In fact, one of my professors commented that he would have been more famous than Keynes if he had been able to publish his “Theory of Economic Development” before Keynes’ magnum opus “Theory of Employment, Interest and Money.” As a graduate student coming from a less developed economy at that time (although then we considered next only to Japan in industrial development in the whole of East Asia), I found the Schumpeterian theory a lot more relevant to the Philippines than Keynesian economics which is more for already developed countries like the United States.
The key player in the theory of development of Schumpeter is the entrepreneur who is willing and able to convert a new idea or invention into a successful innovation. According to Schumpeter, development occurs through a process of “creative destruction” which refers to the incessant product and process innovation mechanism by which new product units replace outdated ones. This “creative destruction” is even more evident now as one product replaces another with unbelievable speed during the ongoing fourth industrial revolution. The entrepreneur introduces an innovation in any of the following ways: a) the introduction of a new product; b) introduction of a new method of production; c) the opening of a new market; d) conquest of a new source of supply of raw materials or semi-manufactured goods; and e) the carrying out of a new way of organizing work, including the creation of a monopoly. The entrepreneur is considered as the hero in Schumpeterian development. It was my vivid memory of what I heard from his Harvard colleagues about the Schumpeterian theory of development that inspired me to establish the Entrepreneurial Management Program in 1989 when I became the first Dean of the CRC College of Arts and Sciences, the precursor of the University of the Asia and the Pacific. We were convinced then and now that the nurturing of future entrepreneurs, chosen from adolescents who manifest a psychological propensity to innovate and take risk, can be a major contribution to economic development of a country. UA&P is still the only educational institution that has been able to systematically produce college graduates who from day one of their college years were already committed to starting a business of their own instead of being employed by somebody else.
In my last sentimental journey to Littauer Center, I was impressed to know that three other Nobel Laureates (in addition to Kuznets, Arrow, and Leontief) are part of the Harvard economics faculty, i.e. Amartya Sen (1998), Eric Maskin (2007); and Oliver Hart. Harvard, after my time, built a strong team of econometricians. Alongside econometrics, the Department also developed enormous strength—as reported in the Littauer Letter—in economic theory. Kenneth Arrow’s appointment in 1968 was so pivotal that “many of the next generation of economists were attracted to Harvard solely by the prospect of working with him,” says Professor Jerry Green, who joined the Department in 1970. During 1968 to 1979, Arrow’s presence at Harvard—together with the many young talented economists who were attracted to work with him—inspired much of modern economic theory. From my personal point of view, I would also cite Amartya Sen as another luminary since he, too, like a good number of my professors then in early 1960s, never hesitated to bring to bear philosophical thinking as well as other sciences, both speculative and practical, to the study of the problem of scarcity, the key subject matter of economic science. May his tribe increase!
I began this account of my Harvard years (1959 to 1963) by referring to Martin Feldstein who was my schoolmate then. Let me end with a reference to his lasting influence on the present and future generations of economists at Harvard. In 1977, again as reported in The Littauer Letter, the late Dr. Feldstein became President of the National Bureau of Economic Research (NBER), then headquartered in New York City. Many are of the opinion that his decision to move the NBER to Cambridge, Massachusetts was a game changer for the economics profession in Cambridge (which is also the site of the famous MIT) and at Harvard specifically. The NBER’s move to Cambridge brought about a change in economics research—particularly empirical research. Since that period, the Harvard Economics Department has gone from strength to strength in applied work in international economics, labor economics, economic policy, and finance. Predictably, in these days of Big Data, the Harvard economics faculty is also a leader in studying places and topics that were previously understudied because of data constraints. Some shining examples of this new frontier are research on the impacts of weather on economic growth and the long-run effects of historical policies and institutions. I can only hope that some of our most talented youth can continue to qualify for the Ph.D. program at the Economics Department of the oldest university in the United States, my alma mater Harvard University. For comments, my email address is firstname.lastname@example.org.