David Michael Garrood Newbery (1943—)

Michael G. Pollitt

Introduction

Starting with Alfred Marshall, Cambridge Economics has distinguished itself in the field of microeconomics at least as much as it has in macroeconomics or econometrics. David Newbery is one of the very best microeconomists that Cambridge has produced in recent decades. As recently as July 2014, he was the highest ranked of any Cambridge economist in the rankings of top UK economists (on RePEc),¹ even though he had retired (formally) from the Faculty in 2010.

David has made many contributions to economics over the years, in development economics, public economics, industrial organisation, economic regulation, transport, and energy economics. He has published over one hundred academic papers and been co-author or co-editor of eight books.² This makes summarising his work rather challenging!³ I am however grateful to the

The author acknowledges the very helpful comments of Robert Cord, Richard Green, and David Newbery.

1 http://ideas.repec.org/top/top.uk.html.
2 See http://ideas.repec.org/e/pne15.html.
3 I draw on the CVs available at: http://www.econ.cam.ac.uk/people/crsid.html?crsid=dmgn&group= emeritus and http://www.fondation.dauphine.fr/la-fondation/lequipe/personne/prof-david-newbery/.

M.G. Pollitt (h)

Professor of Business Economics, Judge Business School,

University of Cambridge, UK e-mail: This email address is being protected from spam bots, you need Javascript enabled to view it

R.A. Cord (ed.), The Palgrave Companion to Cambridge Economics,

DOI 10.1057/978-1-137-41233-1_51

guidance given by Richard Gilbert in his short (but very informative) tribute to David in the special issue of The Energy Journal that Richard Green and I edited in 2008 to celebrate David’s 65 th birthday (Gilbert 2008). In this issue, Stephen Littlechild also makes the point that as Professor of Applied Economics, David listed economic theory at the beginning of his (long) list of interests (Littlechild 2008: 43), emphasising that David’s micro-foundations are at the root of all his work.

David is a Cambridge economist through and through having studied economics at Cambridge and spent all of his working life as a member of the Faculty of Economics between 1966 and his formal retirement in 2010. Since then he has continued to serve as Director of the University’s Energy Policy Research Group and continues to have his main office in the Faculty of Economics. His intellectual inspiration at Cambridge was undoubtedly the great economic theorist Frank Hahn—they were both Fellows of Churchill College—of whom he wrote an affectionate obituary (Newbery 2013). However, Frank remained somewhat surprised by David’s development from a theorist into an applied economist!

David came up to Trinity College, Cambridge, in I960 and studied mathematics for two years (having skipped Part I and moved straight to Part II). Unsure of whether to continue to Part III in maths, he had a brief conversation with Jim Mirrlees, who fortunately convinced him to do an additional two-year Part II in economics. He graduated with a First in 1965. He subsequently received his PhD from Cambridge in 1976 (on the basis of published work). David was elected to a Teaching Fellowship at Churchill on graduation in 1965, but took up a one-year post in Tanzania, working in the Treasury on an Overseas Development Institute (ODI) Nuffield Fellowship. This was to prove a formative experience in his sustained interest in the application of sound economics to developing countries throughout his career. On his return to Cambridge, he became a Lecturer in the Faculty of Economics, rising to become Professor of Applied Economics in 1988. David served as the final Director of the Department of Applied Economics (DAE) from 1988 to 2003. Although continuously employed at Cambridge throughout his career, David had a highly significant two-year period at the World Bank between 1981 and 1983 as Chief of Public Economics. He has also had sabbaticals at Stanford, Yale, Princeton, the International Monetary Fund (IMF), and Berkeley.

David has worked with many great economists who passed through Cambridge at some point in their career. He is a co-author with two Nobel Laureates: Joe Stiglitz (2001 for analysis of markets under asymmetric information) and Eric Maskin (2007 for mechanism design theory). He was supervised by a third, Jim Mirrlees (1996 for theory of incentives under asymmetric information) and with Mirrlees had a fourth, Richard Stone (1984 for the development of systems of national accounts) as his PhD examiner. In addition, he has co-authored with Antony Atkinson, Richard Gilbert, Larry Karp, and Nicholas Stern. Joe Stiglitz refers to several of his joint papers with David in his Nobel Prize Lecture (Stiglitz 2002). David has held international honours as President of the European Economic Association (for 1996) and President of the International Association of Energy Economics (IAEE) (for 2013). In the Queen’s Birthday Honours of June 2012, he was awarded a CBE (Commander of the British Empire) for ‘services to Economics’. He was elected a Fellow of the British Academy (FBA) in 1991 and received his higher doctorate, a Doctor of Science (ScD), from the University of Cambridge in 2001. In 2002, he was the recipient of the IAEE’s Outstanding Contributions to the Profession Award.

He has helped develop generations of Churchill undergraduates, including Richard Smith who has been chair of the Faculty of Economics at Cambridge. His doctoral students have included Richard Green, Professor of Sustainable Energy Business at Imperial College, and Karsten Neuhoff, Professor of Climate Policy at DIW Berlin. He has played a formative role in the careers of many others who have worked with him at the early stages of their careers (including myself!). David was a popular University Lecturer, known for his stimulating but challenging lectures on topics in applied welfare economics, where he brought the joys of the Treasury’s Green Book on public project appraisal (and other topics which we will get to shortly) to successive cohorts of economics undergraduates.

David is an example, par excellence, of someone who has combined funded academic research and the production of high-quality papers in social science. In the 1980s, he was part of the highly successful Economic and Social Research Council (ESRC) research grant looking at risk, information, and quantity signals (the so-called Risk Project, led for 15 years by Frank Hahn up until 1991). From 1989 to 2010, he led ESRC-funded projects on utility and then electricity market reform, culminating in the award of ?2.38 million (in 2005) for the creation of the Electricity Policy Research Group (EPRG). In addition, David won several other competitive research grants, including from the Engineering and Physical Sciences Research Council (EPSRC) and the European Union. David has also contributed as an advisor to many government agencies and departments (most notably the regulatory agencies for energy, water, and railways, Department of the Environment, and the Department of Energy and Climate Change) and acted as a consultant on numerous projects. He served as a member of the Monopolies and Mergers Commission (the UK’s competition authority) from 1996 to 2002. In 2001, he helped establish a consultancy firm—Cambridge Economic Policy Associates (CEPA)—where he is currently acting Chairman of the Board of Directors and Vice President. David has also travelled to many countries to speak and advise: notably Hungary, Poland, the Czech Republic, Bulgaria, Russia, Kenya, Tanzania, South Africa, Brazil, Argentina, Bangladesh, and India. David’s capacity for economic work—theoretical, applied, and practical—is prodigious.

David has also made more than his fair share of contributions to the intellectual life of Cambridge, being a regular in the coffee room at the Faculty and at the lunch table at Churchill College. I have been in many a meeting which either began in or repaired to the coffee room on the fourth floor of the Austin Robinson Building because it was 11am or 4pm (i.e. coffee/tea time!), or whose beginning or end was defined by the need for David to cycle off to Churchill to be at lunch between 1pm and 2pm. David’s delight in the discussions which arise in those settings is and always has been obvious. His commitment to Churchill culminated in him being elected President of the Senior Common Room in 2010. My own experience as a fresh-faced Lecturer in the Faculty of Economics was David’s boundless enthusiasm about what he just learnt, and therefore had to share. It was David who taught me that the key to being a happy (and productive) academic was to find continuing joy in the latest factoid that one could glean about one’s topics of interest!

It is difficult to categorise David’s contributions to the literature, but I have divided this review into three parts.^[1] The first focuses on his early work, partly arising out of his ODI Fellowship in Tanzania and culminating with his period in Washington at the World Bank. This includes his work with Joe Stiglitz on commodity price stabilisation, with Richard Gilbert on patenting, and with Nicholas Stern on taxation in developing countries. The second looks at his work on the pricing of transport and energy, particularly with respect to efficient road pricing and optimal energy taxation. This includes work with Eric Maskin and Larry Karp. The final part reviews his work on electricity market design, in terms of both the operation of wholesale electricity markets and the regulation of network monopolies. This includes significant work with Richard Gilbert and work arising from his leadership of research projects at the DAE. I do not aim to be comprehensive (I ignore David’s work on Hungarian transition and his recent interest in the economics of wind farms!). I do aim to give a flavour of the significance of David’s thinking in these areas highlighted by his citation counts.

[1] I draw on the citation counts in Google Scholar (http://scholar.google.co.uk/) to identify David’s mostsignificant contributions to the literature.