Michael Magill

Professor of Economics
Email magill@usc.edu Office KAP 316B Office Phone (213) 740-2104

Research & Practice Areas

Financial markets, economics of uncertainty, dynamic economics,general equilibrium with incomplete markets, monetary policy and the term structure of interest rates, deomography and the stock market


  • Ph.D. , Brown University, 1/1970
  • B.A. , Cambridge University, 1/1964
  • Tenure Track Appointments

    • Professor, University of Southern California, 1981 –
    • Associate Professor, University of Southern California, 1979 – 1981
    • Associate Professor, Indiana University, 1976 – 1979
    • Assistant Professor, Indiana University, 1968 – 1975

    Visiting and Temporary Appointments

    • Visiting Professor, Paris School of Economics, 05/2010-07/2010
    • Visiting Professor, Swiss Finance Institute, University of Zurich, 07/2009-12/2009
    • Visiting Professor, Cowles Foundation, Yale University, 08/2002-12/2002
    • Visiting Professor, Cowles Foundation, Yale University, 08/2000-12/2000
    • Visiting Professor, CORE, Louvain La Neuve, Belgium, 08/1994-10/1994
    • Visiting Professor, Department of Economics, University of Bonn, 08/1994-12/1994
    • Visiting Professor, University of Paris II, 1990-2000
    • Visiting Professor, Department of Economics, University of Bonn, 08/1990-12/1990
    • Visiting Professor, Institute of Economics, University of Copenhagen, 01/1990-03/1990
    • Visiting Professor, University of Paris IX, Dauphine, Paris, 1986-1988
    • Visiting Research Fellow, Laboratoire d’Ecomometrie de l’Ecole Polytechnique, 1985-1988
    • Visiting Research Fellow, CEPREMAP, Paris, 1985-1986
    • Visiting Professor, University of Paris II, 1985-1986
    • Visiting Associate Professor, Stanford University, 1978-1979
    • Visiting Associate Professor, Northwestern University, 1977-1978
    • Milton Friedman Fellow, University of Chicago, 02/1977-07/1977
  • Summary Statement of Research Interests

    Professor Magill does research on the economics of financial markets, monetary theory, economics of uncertainty, dynamic economics and theory of incomplete markets. Some of his most recent work explores the link between long-term economic fluctuations in the stock market and demographic cohort structure, showing that the baby boomers have been an important causal element in stock market fluctuations over the last twenty five years. His recent work on monetary theory has shown the importance of using interest rate policy for both long and short term bonds to influence agents expectations of inflation: announcements by the Fed of the future course of the short term interest rate is another way of influencing agents expectations of inflation. His theoretical model shows that an important role of monetary policy is to guide agents expectations of inflation which would otherwise be “indeterminate” and such indeterminacy is dangerous because inflationary expectations can become self-fulfilling.

    Research Keywords

    theory of incomplete markets, dynamic economics, economics of uncertainty, monetary theory, economics of financial markets

    Detailed Statement of Research Interests

    The general objective of my research program continues to be an exploration of the way the theory of incomplete markets can provide a unified theoretical framework for analyzing the real, financial, and monetary sectors of the economy. I am currently focusing on three questions: obtaining a better understanding of the recursive inter-temporal structure of incomplete market models (there are some surprises here since models with “infinitely lived” agents behave very differently from those with explicitly “finite lived” lived agents, as in the overlapping generations model: for the latter type of model I am finding that the pricing of securities behaves very differently from that which underlies the received theory of finance ), studying how far markets can cope with problems of incentives ( a recent paper shows that equity when combined with options can provide excellent risk sharing and incentives in a general equilibrium model with managerial firms) and motivated by the controversies over the funding of the social security system, how changes in demographic structure (in particular, the age composition of the population) affect the stock market.

    The focus of my most recent work is to show how equilibrium theory can be used to obtain a better understanding of monetary theory. The new approach that I have recently developed for analyzing equilibrium under uncertainty involves using what I call the probability approach: remarkably this leads directly to new insights into modeling monetary economies under uncertainty: I show that the current practice of using only the short-term interest rate to try to control agents expectations of inflation, can not be expected to work: rather monetary policy should control interest rates on a much broader spectrum of the maturity distribution which includes long term bonds. The reason is that longer term bonds reflect agents expectations of inflation in the longer term and hence must be controlled if the agents expectations are to pinned down.

    • Book, Incomplete Markets, Volume 1, Finite Horizon Economies, with Martine Quinzii, International Library of Critical Writings in Economics, 2008, Edward Elgar Publishing Company, 2009-2010
    • Book, Incomplete Markets, Volume 2, Infinite Horizon Economies, with Martine Quinzii, International Library of Critical Writings in Economics, 2008, Edward Elgar Publishing Company, 2009-2010
    • Fellow of Society for Advancement of Economic Theory, 2011
    • Fellow of Econometric Society, 2000
    • Earhart Foundation Fellowship, 1966
    • National Association of Mutual Savings Banks Award, 1965
  • Editorships and Editorial Boards

    • Associate Editor, Mathematics and Financial Economics”, 2006 –
    • Associate Editor, Economic Theory”, 1997 –
    • Associate Editor, Journal of Mathematical Economics”, 1984 –
    • Associate Editor, Acta Applicandae Mathematica”, 1982 –
    • Associate Editor, Journal of Mathematical Analysis & Applications”, 1982 – 1995