The Top 20 Committee, consisting of Arrow,  Bernheim,  Feldstein,  McFadden,  Poterba, and  Solow, was appointed with the task of selecting the “Top 20” articles published in the American Economic Review during its first hundred years… here they are:

Alchian, Armen A., and Harold Demsetz. 1972. “Production, Information Costs, and Economic Organization.” American Economic Review, 62(5): 777–95.

This article explains why production processes takes place within the firm as opposed to within the market, mainly it is the result of the greater ability of the firm to better allocate the inputs.

Arrow, Kenneth J. 1963. “Uncertainty and the Welfare Economics of Medical Care.” American Economic
Review, 53(5): 941–73.

There are significant market failures in the market for medical care which results from the presence of uninsurable risks, moral hasard, and consumers’ lack of information as well as expertise.

Cobb, Charles W., and Paul H. Douglas. 1928. “A Theory of Production.” American Economic Review,
18(1): 139–65.

Originally a theoretical framework for production possibilities as a function of labour and capital, it has also been widely used for utility functions of individuals.

Deaton, Angus S., and John Muellbauer. 1980. “An Almost Ideal Demand System.” American Economic
Review, 70(3): 312–26.

This article presents a system of demand equations consistent with preference maximisation which makes it possible to assess the welfare impact of different policies

Diamond, Peter A. 1965. “National Debt in a Neoclassical Growth Model.” American Economic

Review, 55(5): 1126–50.

Using the Overlapping Generation Model with capital goods, it shows the impact of debt on the capital stock.

Diamond, Peter A., and James A. Mirrlees. 1971. “Optimal Taxation and Public Production I: Production

Efficiency.” American Economic Review, 61(1): 8–27.

Diamond, Peter A., and James A. Mirrlees. 1971. “Optimal Taxation and Public Production II: Tax

Rules.” American Economic Review, 61(3): 261–78.

These two parts paper provides the foundation for optimal taxation theory and public production.

Dixit, Avinash K., and Joseph E. Stiglitz. 1977. “Monopolistic Competition and Optimum Product
Diversity.” American Economic Review, 67(3): 297–308.

Analysis of product differentiation under monopolistic competition with differentiated goods and increasing returns to scale. 

Friedman, Milton. 1968. “The Role of Monetary Policy.” American Economic Review, 58(1): 1–17.
There exists a natural rate of  unemployment defined as the only rate consistent with the coincidence of actual and expected inflation. Thus, the phillips curve is vertical in the long run and hence the trade off between unemployment and inflation is only short lived.

Grossman, Sanford J., and Joseph E. Stiglitz. 1980. “On the Impossibility of Informationally Efficient
Markets.” American Economic Review, 70(3): 393–408.
“if some individuals can acquire perfect information at a finite cost, then no equilibrium exists, since, if information is acquired by some, it will be reflected in the price and so can be acquired costlessly by others, while if no one acquires information, it will pay any individual to acquire it.”


Harris, John R., and Michael P. Todaro. 1970. “Migration, Unemployment and Development: A Two-
Sector Analysis.” American Economic Review, 60(1): 126–42.
The distribution of workers bewteen urban and rural areas is a function of the agricultural marginal product of labour and the minimum wage in urban areas times the probability of finding employment in urban areas.

Hayek, F. A. 1945. “The Use of Knowledge in Society.” American Economic Review, 35(4): 519–30.
The price system through its informational content is essential to coordination and efficient use of resources.


Jorgenson, Dale W. 1963. “Capital Theory and Investment Behavior.” American Economic Review,
53(2): 247–59.
Theoretical framework for investment behavior based on a neoclassical theory of optimal capital accumulation.

Krueger, Anne O. 1974. “The Political Economy of the Rent-Seeking Society.” American Economic
Review, 64(3): 291–303.
Government policies create rents for some market agents, which thereby have an incentive to undertake rent seeking activities. This results in further (i.e.: in addition to the costs of rents themselves) welfare costs.

Krugman, Paul. 1980. “Scale Economies, Product Differentiation, and the Pattern of Trade.” American
Economic Review, 70(5): 950–59.
Comparative advantages fails to account for some of the trade taking place, not least within the same industry. Introducing increasing returns, imperfect competition and product differentiation, an alternative model is developped.

Kuznets, Simon. 1955. “Economic Growth and Income Inequality.” American Economic Review,
45(1): 1–28.
Initial phases of economic development generate inequality, as the modern sector expands taking labour from the traditional sector. Inequality reaches a peak as most workers are now in the modern sector which also allows for redistibutive activities.

Lucas, Robert E., Jr. 1973. “Some International Evidence on Output-Inflation Tradeoffs.” American
Economic Review, 63(3): 326–34.
Natural rate model in which the ratio of ‘real-output changes o price-level change’, in response to exogenous shifts in aggregate expenditure, depends on the relative variance of those processes.

Modigliani, Franco, and Merton H. Miller. 1958. “The Cost of Capital, Corporation Finance and the
Theory of Investment.” American Economic Review, 48(3): 261–97.
In a setting with complete capital markets and in the absence of tax-induced distortions, a firm’s total market value is invariant to its borrowing behavior.

Mundell, Robert A. 1961. “A Theory of Optimum Currency Areas.” American Economic Review,
51(4): 657–65.

Macroeconomic stability is enhanced if the currency area has a high degree of internal factor mobility relative to the cross-border factor mobility. But there are substantial transaction costs and valuation costs involved in making cross-area purchases.

Ross, Stephen A. 1973. “The Economic Theory of Agency: The Principal’s Problem.” American Economic
Review, 63(2): 134–39.
Introduced the Principal agent problem with moral hasard where the interests of the agent and the principal may not be aligned.

Shiller, Robert J. 1981. “Do Stock Prices Move Too Much to Be Justified by Subsequent Changes in
Dividends?” American Economic Review, 71(3): 421–36.
The historical stock price volatility was much greater than the volatility of dividend payouts would appear to warrant. This challenges the traditional view that the value of a share of corporate stock equals the present discounted value of that stock’s expected future payouts.

As  Krugman argues, the double entries go to Peter Diamond and Stiglitz…. For more information and details on the importance of each article.