Robert Mundell, a Nobel Prize-winning economist who helped shape economic policy on both sides of the Atlantic as an intellectual architect of the euro and President Ronald Reagan’s supply-side tax cuts, died April 4 at the 16th-century palazzo where he lived in the countryside near Siena, Italy. He was 88.
The cause was cholangiocarcinoma, a cancer of the bile duct, said his wife, Valerie Natsios-Mundell.
Dr. Mundell was widely regarded as one of the most consequential economists of the late 20th century, his work often compared or even equated with that of John Maynard Keynes and Milton Friedman. Born in Canada, he spent much of his career in the United States, teaching at Columbia University and cultivating influential admirers among the Wall Street Journal editorial board, the Reagan administration and beyond.
He “shaped the way we think about economics,” Vivek Dehejia, a professor at Carleton University in Ottawa and a former student of Mundell, said in an interview, as well as “the way governments do macroeconomic policy.”
Mundell received the Nobel Memorial Prize in Economic Sciences in 1999, months after the countries of Europe began the complex process of abandoning the German mark, the French franc, the Italian lira, the Dutch guilder and other individual currencies in favor of the euro, which was to be used across the continent.
The prize did not specifically recognize Mundell’s work in that area – he had called for Europe to adopt a unified currency decades before policymakers would even consider such an idea, Dehejia said – but rather his broader contributions to international macroeconomic policy and particularly to the understanding of exchange rates and the flow of capital between nations in an open economy.
Mundell’s “research has had such a far-reaching and lasting impact because it combines formal – but still accessible – analysis, intuitive interpretation and results with immediate policy applications,” the Royal Swedish Academy of Sciences declared in an announcement of the award.
“Above all,” the announcement continued, he “chose his problems with uncommon – almost prophetic – accuracy in terms of predicting the future development of international monetary arrangements and capital markets. [His] contributions serve as a superb reminder of the significance of basic research. At a given point in time academic achievements might appear rather esoteric; not long afterwards, however, they may take on great practical importance.”
Mundell’s name was forever linked to an economic concept known as the Mundell-Fleming model, which he developed with another economist, Marcus Fleming, in the 1960s. Unlike earlier prevailing models, it allowed for the complexity of open economies, in which capital moves among nations and exchange rates are flexible rather than fixed.
Mundell was skeptical of systems with flexible exchange rates, regarding them as too vulnerable to volatility. But he otherwise supported the notion of open economies and was credited with providing economists with some of the most useful theoretical tools to make sense of the one that exists today.
“Mundell was a prophet of this globalized world we live in,” Dehejia said.
In the United States, Mundell was best known for his role, alongside economists including Arthur Laffer, in promoting the combination of tax cuts to spur spending and interest-rate hikes to curb inflation that defined the economic policy known as Reaganomics.
“His work really began to give intellectual firepower to the supply-side tax cuts movement,” former U.S. Rep. Jack Kemp, R-N.Y., a leading supply-sider in Congress, told the New York Times after Mundell’s Nobel Prize was announced. “By 1980, then-candidate Ronald Reagan had become persuaded about what Robert Mundell was saying – and the rest is history.”
Four decades later, the principles of supply-side economics remain deeply controversial, attracting fervid disciples as well as critics. Mundell professed to care little about the size of his following.
“Maybe it is just a tiny sect,” he told the Ottawa Citizen in 1998. “But how many Christians were there before Jesus Christ? How many Jews were there before Moses? How many people believed in electricity before Edison?”
“If one person believes he is right, everyone else in the world may be wrong,” he added. “The issue in economics is, does it work?”
Robert Alexander Mundell, the third of four sons, was born in Kingston, Ontario, on Oct. 24, 1932. His father was an officer in the Canadian army. His mother inherited a castle that she then had to surrender because of the tax burden that came with it, a memory he carried with him into his career.
Mundell spent the early years of his boyhood on a farm in Latimer, a small town in Ontario. After his father’s military retirement, the family moved to British Columbia in the far west of Canada, where Mundell told the Ottawa Citizen he became enamored of “a cult of rugged individuality.”
He was 12 when World War II ended and watched with fascination and bewilderment as Europe and Japan began the complicated task of rebuilding their economies and currencies, as well as their cities.
“I asked my high school teacher what the devaluation meant, and he gave me such a contorted and hopeless explanation that it piqued my curiosity,” Mundell told the Ottawa Citizen. “The newspapers carried such a jumbled discussion.”
Mundell studied economics and Slavonic studies at the University of British Columbia, where he received a bachelor’s degree in 1953, and then received a master’s degree from the University of Washington in 1954. He received a PhD from the Massachusetts Institute of Technology in 1956, also studying at the London School of Economics.
In the early years of his career, Mundell worked for the International Monetary Fund and taught at the University of Chicago, where he edited the Journal of Political Economy in the late 1960s. He also taught at institutions including the University of Waterloo in Ontario. In 1974, he joined Columbia University, where he became a professor emeritus.
After the announcement of his Nobel, Mundell told the Times that he planned to spend much of the nearly $1 million prize money on the restoration of his Italian palazzo, which he had purchased years earlier for $10,000 and, along with his wife, painstakingly restored to its Renaissance splendor. In his spare time, he enjoyed painting.
Mundell’s first marriage, to Barbara Sheff, ended in divorce. He and Valerie Natsios were married in 1998. Survivors include his wife and their son, Nicholas Mundell, both of whom reside at the palazzo; two children from his first marriage, Bill Mundell and Robyn Mundell, both of Los Angeles; and eight grandchildren. A son from his first marriage, Paul Mundell, died in 2018.
Mundell gave one of the more unusual – and crowd-pleasing – acceptance speeches in the history of the Nobel Prize. He ended his remarks by singing a few bars of the hit Frank Sinatra song “My Way,” an allusion to the independent-minded approach that he brought to his life and work.
In a 2006 interview with the Journal of Economic Perspectives, he reflected that the Nobel was “particularly pleasing” to him because it recognized the significance of his career, one in which, by his own account, he had “no doubt stepped on a lot of intellectual toes.”
“It’s also been very important from a practical standpoint because it created access to people I would not have otherwise met,” he added. “Instead of ministers of finance, I now as often as not meet heads of state. Even more than that, when I say something, people listen. Maybe they shouldn’t, but they do.”