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STANFORD -- Edward S. Shaw, professor emeritus of economics, died Wednesday, June 15 at Stanford Hospital. He was 85.
An expert on monetary policy and theory, Shaw served as a high-level consultant to the South Korean government in the 1960s and "was responsible for the monetary reforms which set South Korea on the road to prosperity," said Moses Abramovitz, a Stanford professor emeritus of economics.
Shaw came to Stanford in 1925 as an undergraduate and, as he once said, "loved it and stayed on," earning bachelor's , master's and doctoral degrees. He began teaching at Stanford in 1929 and was named a full professor in 1941. He chaired the university's economics department for 10 years at three different periods beginning in 1940.
He did postgraduate work at Cambridge University and the London School of Economics and took a leave during World War II to do research for the Office of Price Administration and then to serve as a lieutenant in the U.S. Navy. Except for these intervals, he spent his entire career at Stanford, from which he retired in 1974.
Shaw, the author and co-author of several books on economics, served as a consultant to foundations, and state and federal governments, including work with the central banks or finance ministries of Brazil, Colombia, Uruguay, Iran, Afghanistan, Korea, Malaysia and Ghana.
He first went to South Korea in 1965 to advise the government on the use of monetary policy to fight runaway inflation, said his former colleague, Tibor Scitovsky, a professor emeritus of economics. At the time, Scitovsky said, Korea's interest rates were so low compared to inflation that borrowers were paying no real interest on loans. Shaw advised Korea's top leaders to raise the interest rates.
"They didn't want to follow his advice, so he suggested they fly over to Taipei in Taiwan and see how it worked there," Scitovsky said. "They took that advice, came back and made the changes, which did absolute wonders for their economy very quickly."
Unfortunately, he said, the South Koreans eventually abandoned this policy "because it made it much more difficult for the government to have an authoritarian control over the country's investment policy." With very low interest rates, he explained, demand for loans outstrips the supply of savings, which permits the government to ration loans, steering them to the types of investments it wants.
Shaw's former colleagues also credited him, along with the late Bernard Haley, with building the reputation of Stanford's Economics Department from "nothing to write home about in the early 1940s," Scitovsky said, to "now one of the best in the country." Shaw recognized the talent of young economists, he said, including Kenneth Arrow, who went on to win a Nobel Prize.
"Together with Bernard Haley, he founded what you might call the modern economics department here at Stanford," Abramovitz agreed.
Stanford Professor Alain Enthoven, who was a student of Shaw's in the early 1950s, said students then regarded Shaw as a "great, bright and demanding teacher." As a sophomore, Enthoven said, "I asked gradaute students who was the toughest professor [in economics] and how do you prove yourself. They all said, take Ed Shaw's course on money and banking and monetary theory. He demanded high performance,and his courses were very good, beautifully explained."
Among his many honors, Shaw once said he was proudest of his 1959- 60 Ford Foundation faculty fellowship and his 1966 election to the American Academy of Arts and Sciences.
Shaw was born on Dec. 19, 1908, in Albuquerque, N.M., and was graduated from Kennewick, Wash., High School. He is survived by his wife Elizabeth Shaw of Stanford and daughter Janet Shaw of Palo Alto. No service is planned.
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