The 20 Most Influential Economic Papers

American Economic Review pageIt is Friday, and in London where I am today, it is one of the first weekends of autumn. What better then, than a good read to warm the spirit! Smile

Economic Papers provides a forum for the presentation of research and debate in applied economics and economic policy analysis. They are often published in academic periodic journals. Below are the (subjectively) 20 best of all time, as selected by the 


Click on the PDF-links to download and read the individual articles.

Friedrich Hayek“The Use of Knowledge In Society”

Publication: 1945

Author: Friedrich Hayek

Conclusion: Prices must be the focal point of all economic decisions.

Franco Modigliani

“The Cost of Capital, Corporation Finance and the Theory of Investment”

Publication: 1958

Authors: Franco Modigliani and Merton Miller

Conclusion: A firm’s total market value is invariant to its borrowing behavior.


“Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?”

Stephen A Ross

Publication: 1981

Author: Stephen A. Ross

Conclusion: Stock price volatility is far too great to be simply attributed to new information about future real dividends.


Angus Deaton“An Almost Ideal Demand System”

Publication: 1980

Authors: Angus S. Deaton and John Muellbauer

Conclusion: You can predict household demand based on the relative costs of “subsistence” versus “bliss”.


Kenneth Arrow“Uncertainty and the Welfare Economics of Medical Care”

Publication: 1963

Author: Kenneth J. Arrow

Conclusion: The health care market is too plagued by moral hazard and consumers’ lack of information to be viewed as free.

Robert E Lucas“Some International Evidence on Output-Inflation Tradeoffs”

Publication: 1973

Author: Robert E. Lucas, Jr.

Conclusion: You can model what happens when consumers make decisions without knowing whether a price change also signals a relative price change.


Milton Friedman“The Role of Monetary Policy”

Publication: 1968

Author: Milton Friedman

Conclusion: There exists a “natural rate of unemployment,” or the number of jobs a given economy can support.





Joseph Stiglitz“Monopolistic Competition and Optimum Product Diversity”

Publication: 1965

Authors: Avinash K. Dixit and Joseph E. Stiglitz

Conclusion: Product variety can influence the way the market dictates resource allocation. The market considers profits, while a social optimum takes into account the consumer’s surplus.

Charles W Cobb“A Theory of Production”

Publication: 1928

Authors: Charles W. Cobb and Paul H. Douglas

Conclusion: You can figure out how much production a given amount of capital and labor can yield.





Peter A Diamond“Optimal Taxation and Public Production”

Publication: 1971

Authors: Peter A. Diamond and James A. Mirrlees

Conclusion: It is possible to set taxes that minimize distortions and disincentives, and eliminate production inefficiencies.

Dale W Jorgenson“Capital Theory and Investment Behavior”

Publication: 1963

Author: Dale W. Jorgenson

Conclusion: Cost-of-finance (interest rates and equity yields) and taxes should drive investment decisions.





Alchian - Demsets”Production, Information Costs, and Economic Organization”

Publication: 1972

Author: Armen A. Alchian and Harold Demsetz

Conclusion: Firms must continuously measure productivity. The market alone is not enough to generate peak output — strong management is also required, and firm’s will benefit from devoting resources to it.


sanford Grossman“On The Impossibility Of Informationally Efficient Markets”

Publication: 1980

Authors: Sanford Grossman

Conclusion: In a world of dispersed information, the equilibrium price can itself be a source of information to consumers.


Paul Krugman“Scale Economies, Product Differentiation and the Pattern of Trade”

Publication: 1980

Author: Paul Krugman

Conclusion: Standard comparative cost theory doesn’t sufficiently explain trade.






John R Harris“Migration, Unemployment and Development”

Publication: 1970

Authors: John R. Harris and Michael Todaro

Conclusion: In poor countries, individuals migrate from rural to urban areas.





Anne O Krueger“The Political Economy of the Rent-Seeking Society”

Publication: 1974

Author: Anne O. Kreuger

Conclusion: Tariffs are better for countries to enact than import quotas.






Simon Kuznets“Economic Growth and Income Inequality”

Publication: 1955

Author: Simon Kuznets

Conclusion: Earlier phases of economic development are characterized by increasing income inequality.





Peter A Diamond“National Debt In A Neoclassical Growth Model”

Publication: 1965

Author: Peter A. Diamond

Conclusion: External and internal government debt can potentially reduce capital stock in the long-run.





Robert A Mundell“A Theory of Optimum Currency Areas”

Publication: 1961

Author: Robert A. Mundell

Conclusion: You can figure out the optimal number of entities for a given currency areas.


Stephen Ross“The Economic Theory of Agency: The Principal’s Problem”

Publication: 1973

Author: Stephen A. Ross

Conclusion: There is a way to avoid moral hazard when you’re paying people a lot of money.


  1. Thanks for posting this – these articles are a great resource! The Jorgenson link connects to the Hayek paper, however.

  2. Of course it is very much subjective at the end of the day … but I would most definitely include Bela Balassa’s 1961 seminal paper ‘Towards a Theory of Economic Integration’ wherein he predicted most accurately the path towards full economic integration as charted by the European Union … until it was distorted into an untenable political union.


    University of Malta

Leave a comment

Your email address will not be published.

one × five =