Jacques Melitz was a prolific and unusual economist. He received a BA and MA from UCLA and earned his PhD from Princeton University in 1963. After a few years on the faculties of Rice and Tulane, he moved back to France where he was born before his family emigrated to the US.
At that time, in France as in most of continental Europe, he was one the very few active economic researchers with some form of British or US training. Academic positions in France were subject to an idiosyncratic process that would have required him almost to start his formal education again from scratch. Fortunately, the official statistical office, INSEE, offered him a position in its research centre. For many years, he taught at Sciences Po, Paris, and other schools as a visitor. When he reached the mandatory retirement age, he moved to the University of Strathclyde in Scotland.
A brief summary of his career indicates that he was a most dedicated researcher, obviously fascinated with economics. I was lucky to meet him when I came back to France, for he was one of the very few researchers whose main field of interest was international macroeconomics and who worked with the formal tools of theoretical and empirical analysis in use in the US.
Together, we created a seminar in Paris, which attracted a small number of similarly minded researchers and developed links with colleagues from other European countries. For those who were not there, it is hard to appreciate how idiosyncratic and insular academic macroeconomics was in France at that time. Jacques thus played a key role in reintegrating France into the global community of macroeconomic research.
But Jacques was anything but ‘normal’. He was unimpressed by field boundaries and by conventional wisdom. He was always ready to challenge any contribution. I quickly realised that he was driven by a bottomless curiosity that led him to pursue his thoughts wherever they would drive him. I was regularly startled by the originality of his ideas, but each time I knew that soon enough he would come up with a fully worked-out paper that would soon be published.
The richness of his contributions earned him the respect of all those who were lucky enough to cross his path. What follows is a far from exhaustive sample of his contributions, which are far too numerous and varied to be described as they span more than five decades and cover a very wide range of issues.
European integration
A significant part of his work concerns European integration and the creation of the euro. He produced dozens of papers on this topic, many of which have been highly influential. Early on, he asked how shocks can be absorbed when countries give up monetary policy. With various co-authors, he explored the issue of risk sharing and of the role that fiscal policy and trade could play (e.g. Melitz and Zumer 1999, Melitz and Vori 1993, Masson and Melitz 1991, Melitz 1997b, 2004). He concluded that redistribution through the current account, capital flows or insurance schemes would not be enough, so national fiscal policies would have to play a much larger role. This view led him to argue that the European Commission’s white paper, “One Money, One Market”, was mistaken in suggesting to limit the use of fiscal policy – a prescient observation (Melitz 1997a).
More broadly, he offered an important criticism of the optimum currency area theory. He pointed out the absence of any formal framework, which leads to drawing up an intimidating list of criteria without ever attempting to evaluate the welfare effects of a monetary union. He had previously developed a game-theoretic model of the effects of the European Monetary System, which he applied to the monetary union, arguing that it was misleading to look at two countries. Instead, he looked at the impact on the welfare of joining a monetary union relative to a Nash outcome under national monetary policies, both in the relevant countries and in the rest of the world. He also showed that the order of admission into the union mattered (Melitz 1985, 1995a, 1995b). To this day, this work remains at the frontier of knowledge.
Money, language, trade, and history
Beyond his work on European integration, Jacques displayed a lifelong interest in two little-travelled topics: money and its history, and the role of language in economic relations. Much of his early work concerns money, which explains his subsequent contributions to the study of monetary integration.
He started out by asking the hard question of what money is – a question that is still not fully answered but usually ignored. He studied primitive money and coinage to conclude that money is an instrument of power (Melitz 1971, 1974, 1979, 1987). He rebuked anthropologists for a partial understanding of money (Melitz 1972a). He examined the scholastic views on usury. He evaluated money in the utility function and as a mean of production ((Melitz 1972b). He also produced several empirical papers on the demand for money and estimated an early micro-founded general equilibrium model of bank credit (Melitz and Pardue 1973). Unsurprisingly, several of these papers continue to be cited in research in progress today.
His interests in trade and history led him to explore the role played by language in economic relationships. Estimates of gravity models of trade usually include a language variable, but Jacques had to dig deeper. He showed empirically that the ability directly to talk the same language plays a larger role in establishing trade links than the use of translators.
Working in the opposite direction, he also found that trade encourages the learning of a foreign language (Melitz 2008). But Jacques expanded his work in language to other areas than trade. In a series of papers, he developed the view that the domination of English was tilting literature away from other languages and discouraged the transmission of languages spoken by small groups (Melitz 1999, 2015, 2018).
Jacques’ interests were even wider than indicated so far. He has made several contributions to the field of international trade, with applications to the European integration, as well to financial markets, exchange rates and various topical issues.
Just a few months ago, his latest paper was published. No doubt inspired by the Covid-19 pandemic, he revisited the effects of the Black Death in England. The summary of that paper refers to issues that have been at the centre of his work since he started, including the wealth effect, the subject of one of his first publications (Melitz 1967): “Based on price level evidence, this paper shows for the first time that the wealth effect of the Black Death on economic activity continued in England for generations. […] The separate effects of coinage, population, trade, wages and annual number of days worked for wages on the price level all also receive major attention”(Edo and Melitz 2023).
The long list of his co-authors is testimony to his ability to share his thoughts and his passion, and above all to develop lasting friendships. He will be missed by us all, including for his slight American accent, which underlined his innate gentleness.
Author’s note: I would like to thanks Barry Eichengreen and Marc Melitz for comments and suggestions on this column.
References
Edo, A and J Melitz (2023), “Wealth and shifting demand pressures on the price level in England after the Black Death”, Cliometrica 17(1): 91-124.
Ginsburgh, V, J Melitz and F Toubal (2014), “Foreign language learning: An econometric analysis”, CEPR Discussion Paper 10101.
Masson, P and J Melitz (1991), “Fiscal policy independence in a European monetary union“, Open Economies Review 2: 113-136.
Melitz, J (1967), “Pigou and the ‘Pigou Effect’: Rendez-Vous with the Author”, Southern Economic Journal 34(2): 268-279.
Melitz, J (1971), “Some Further Reassessment of The Scholastic Doctrine of Usury”, Kyklos 24(3): 473-492.
Melitz, J (1972a), “The Polanyi School of Anthropology on Money: An Economist's View”, American Anthropologist 72(5): 1020-1040.
Melitz, J (1972b), “On the optimality of satiation in money balances”, The Journal of Finance 27(3): 683-698.
Melitz, J (1974), Primitive and modern money: An interdisciplinary approach, Addison-Wesley.
Melitz, J (1979), “A Tool of Power: The Political History of Money”, History of Political Economy 11(2): 309-310.
Melitz, J (1985), “The welfare case for the European Monetary System”, Journal of International Money and Finance 4(4): 485-506.
Melitz, J (1987), “A model of the beginnings of coinage in antiquity”, European Review of Economic History 21(1): 83-103.
Melitz, J (1995a), “The current impasse of research of optimum currency areas”, European Economic Review 39(3-4): 492-500.
Melitz, J (1995b), “A suggested reformulation of the theory of optimal currency areas”, Open Economies Review 6: 281-298.
Melitz, J (1997a), “Brussels on a single money”, Open Economies Review 2: 323-336.
Melitz, J (1997b), “The Evidence about the Costs and Benefits of EMU”, Swedish Economic Policy Review 4(2): 191-234.
Melitz, J (1999), “English-Language Dominance, Literature and Welfare”, CEPR Discussion Paper No. 2055.
Melitz, J (2004), “Risk‐sharing and EMU”, Journal of Common Market Studies 42(4): 815-840.
Melitz, J (2008), “Language and foreign trade”, European Economic Review 52: 667-699.
Melitz, J (2015), “English as a global language”, in The Palgrave Handbook of Economics.
Melitz, J (2018), “English as a lingua franca: Facts, benefits and costs”, The World Economy 41(7): 1750-1774.
Melitz, J and M Pardue (1973), “The Demand and Supply of Commercial Bank Loans”, Journal of Money, Credit and Banking 5(2): 669-692.
Melitz, J and F Toubal (2014), “Native language, spoken language, translation and foreign trade”, Journal of International Economics 93: 351-363.
Melitz, J and S Vori (1993), “National insurance against unevenly distributed shocks in a European monetary union”, Louvain Economic Review 59(1-2): 81-104.
Melitz, J and F Zumer (1999), “Interregional and international risk-sharing and lessons for EMU”, Carnegie-Rochester Conference Series on Public Policy 51(1): 149-188.
