Emmanuel Farhi: Too young to say goodbye

I didn’t know Emmanuel Farhi except as someone invested in economics and the scholarship of economists. But his death has left me with several pressing thoughts. In an earlier post on this blog written immediately after his death, I had laid out the condolences and conspiracy theories around his death. Today, I am writing more to reflect on his death and why it’s sparked such sorrow and curiosity.

Emmanuel Farhi was just too young to die. To make it harder on people who were familiar with his work, he was brilliant. It is the coming together of both that makes his death so tragic.When you are barely 40 something, you are at once old enough to be respected for your ideas and young enough for the world to expect more from you. You are somewhere between accomplishment and greatness, shining bright enough for the world to almost picture you with your pioneering contributions in the future. At such a young age, his contributions carried a unique diversity of thought and depth of scholarship – from fiscal policy, public finance, exchange rates, to international macro and monetary systems, productivity and international trade. He transformed the theory of taxation, macroeconomics, and international finance.

In a column in Mint, economist Ajit Ranade wrote:

He challenged the notion of the “liquidity trap”, made famous by Keynes during the Great Depression. Keynes had said monetary policy would be ineffective in spurring investment during deep recessions. Farhi said that in the modern context, especially after the crisis of 2008-09, we have a “safety trap”. The world is facing a shortage of safe assets such as US Treasury bonds. And yields cannot go any lower, since zero is an effective lower bound. How do you deal with this? With the unorthodox monetary policy of creating new “safe assets”; i.e. central banks buying AAA-rated corporate bonds. The European Central Bank is already doing so. The second example is of the impossible trinity in macroeconomics, which says you cannot simultaneously control interest and exchange rates if your capital account is open. Farhi’s insight was that partial capital controls are a solution for open economies fighting an onslaught of inflows and battling volatility in exchange rates—a practical guide to countries like India. A third example is Farhi’s boldness in taking on an old debate called the “Cambridge capital controversy”. This was a critique by Joan Robinson of Robert Solow, Paul Samuelson (both Nobel winners) and others that you can’t describe an entire economy’s aggregate production function in terms of “capital stock”; buildings and machinery cannot be aggregated into one number. This debate fizzled out in the 1960s, but Farhi’s work has reopened it, examining it rigorously from the very foundations.

In the bright world of academia where brilliance is never in short supply, Farhi also symbolized the pinnacle of attainments one could achieve in his field – he was tenured at Harvard within five years of defending his PhD at MIT and his admirers called him a future Nobel winner. Being young and bright is a promise to not just people who want you to succeed, but to the field you contribute to. Bring all these together and you have the picture of a success story. Yet, Farhi was humble and generous and open to collaborations more than anyone of his intellectual stature would admit to. He published a significant number of his papers as a co-author.

Success, recognition and superlative achievement may not always translate into joy or happiness or attainment of whatever it is that holds one together, though. With strictly limited coverage of Farhi’s death, we don’t know what it is that he wanted or what it was that he could no longer bear. Perhaps, at such a young age, we are still figuring out life stuff, even though academically or professionally, it may be possible to excel and lead.

Here is a detailed interview with Emmanuel Farhi and another obit that I strongly recommend to understand his work.