A Keynesian in Our Midst

  • Pavlina Tcherneva (center) shares a moment between classes with Lily Diehl '11 (left) and Caitlin Weinstock '11 (right).  

The sudden economic downturn in late 2008 seemed to catch everyone unaware, but Pavlina Tcherneva was determined to make the best of it.

Her class on macroeconomic stability became a case study of Keynesian economics in action and what not to do to succeed in business.

As bankruptcies and bailouts began to dominate the news, Tcherneva told her students to put away the syllabus.

“The crisis completely threw off my course plan,” said Tcherneva, assistant professor in the Department of Economics at Franklin & Marshall College. “It was important to apply the theories we were talking about to a real-world example, as the crisis was unfolding.”

The approach paid dividends. In February, Tcherneva took four of her students to the Eastern Economic Association conference in New York City to present research they had conducted in her class.

These days, class discussions often turn to the Obama administration’s economic policies, which Tcherneva believes should work, as long as politics doesn’t get in the way.

Tcherneva joined the faculty at Franklin & Marshall in the fall term. Born in Bulgaria but educated in the United States, she earned a bachelor’s degree from Gettysburg College, where she studied mathematics and economics. She received her master’s and doctorate in economics from the University of Missouri-Kansas City.

“I have always wanted to return to a liberal arts environment. I find it much more rewarding because of the holistic approach to education and the close interaction between faculty and students,” Tcherneva said.

As a macroeconomist, Tcherneva specializes in monetary theory, financial instability and fiscal policy. She is a Keynesian economist. John Maynard Keynes was a British economist whose theories had an impact on New Deal programs, established during the Great Depression in the 1930s. Keynes believed that governments should intervene to alleviate the adverse effects of economic crises such as recessions and depressions.

“Needless to say,” Tcherneva said, “the current crisis has provided unique opportunities for teaching and research.”

After college, Tcherneva joined the staff at the Jerome Levy Forecasting Center, an economic research and consulting firm in Mount Kisco, N.Y. It was her job to forecast corporate profits and study the connection between balance sheets and investment fluctuations.

After her stint in financial forecasting, Tcherneva was recruited to serve as the associate director for economic analysis at the Center for Full Employment at the University of Missouri-Kansas City.

There she began researching the fiscal policies of the New Deal, as well as the modern-day employment policies of governments in countries around the world. In one particular study Tcherneva focused on the stabilizing effect of public works programs on the Argentine economy.

“It also became quickly apparent that they brought key benefits to the unemployed, and especially to women and minorities,” she noted.

The center offered research support for two policy proposals that were adopted by the Argentine government. One was for an increase in the minimum wage. The other was for a large-scale, public-service employment and infrastructure investment program that was credited with helping the country avert economic collapse in 2001 and 2002.

She has been surprised, she admitted, to see Americans embrace the same kinds of economic policies as the economic crisis deepens and unemployment begins to rise.

“While Argentina was receptive to New Deal-style programs, I never thought this would happen in the U.S. again. In fact, I am a little stunned by the quick resurrection of these types of policies by President Obama,” she said.

Tcherneva welcomes the shift, yet she worries Obama’s economic proposals may not be enough.

“His team is setting its sights too low,” she said.

The intention is to save or create 3.7 million jobs by the end of 2010, mostly by providing sufficient demand and incentives to the private sector to stop layoffs and hire back workers. The problem is that economic expectations and business conditions are so poor that it may take far too long and a much greater stimulus for the private sector to recover, Tcherneva explained.

The economy has lost more than 4 million jobs in the last 12 months, leaving 12.5 million people officially unemployed. “We really should be creating far more jobs than the administration is planning. A bolder and more audacious new New Deal is necessary,” she said.

Tcherneva clearly enjoys her work. It’s what she always wanted to do. “My eyes were always set on academia. I thought it offered the best environment for combining my interests in teaching and research,” she said.

While in graduate school and working full time, Tcherneva taught economics at the University of Missouri. For two years she taught at Bard College in New York before joining the faculty at F&M.

When she is not teaching or researching, Tcherneva and her husband, Douglas Johnson, spend as much time as possible restoring their home in Newburgh, N.Y. “So when I’m not studying policy, I’m digging into the history of my house.”

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