Obituary: Patrick McMahon
Tuesday 03 August 1993
PATRICK McMAHON worked for almost 30 years as a teacher and researcher in economics. An applied economist, he produced studies on inequality, inheritance and wealth in Britain which are still regarded, some 20 years on, as classic works.
McMahon's work showed that the distribution of wealth in Britain was extremely unequal compared to other advanced countries. By means of careful statistical analysis of different cohorts of wealth leavers, his work with Colin Harbury (in the Economic Journal, 1972), emphasised the continuing lack of economic and social mobility in Britain, the importance of inherited wealth and the comparative rarity of the 'self-made' person.
In the early 1980s he turned his attention to financial markets. His work in Econometrica, 1983, with myself and Bob Lippens, established the existence of a predictable bias between the forward rate for foreign exchange and the subsequent spot rate. The corollary of this work was that certain financial markets were either inefficient processors of information and/or that risk premium were important. Consequently, McMahon made other contributions to understanding the determinants and size of risk premium in forward contracts for foreign exchange. He completed related work on the impact of monetary conditions on floating exchange rates within different historical exchange-rate regimes. Some of this work was included in his book The Foreign Exchange Market: theory and econometric evidence (1988), which we co-wrote.
He also made several contributions to the understanding of consumers' behaviour and published studies on saving and investment in Germany. His great strength as an applied economist was his balanced view of the subject and his judgement in terms of how to use institutional knowledge, economic theory and when to apply statistical or econometric techniques. A rare combination of talents.
Patrick was the eldest of a family of seven and was brought up in relatively humble origins in Limerick, west Ireland. Educated at Trinity College, Dublin, he later did graduate work at Oxford University and obtained a Ph D at Birmingham University. He was a member of the faculty at Birmingham University as a Senior Lecturer and was subsequently Professor of Economics at Tulane University in New Orleans. He held visiting professorships at Kyoto University in Japan, at numerous universities in Germany including Mannheim and Saarbrucken, and was also Houblon Norman Fellow at the Bank of England.
In a sense he emigrated twice in his life. After a brief period of school teaching in Dublin, he decided to leave to study in England once his request for aid for part-time study had been denied by the Dublin school authorities. Later, he left Birmingham University for the United States in the wake of government policy which led to the inexorable decline of British universities in the 1980s. Although he joined the growing ranks of the brain drain, he nevertheless continued to spend some time in Birmingham and also maintained contact with many co-workers in France and Germany.
McMahon always had a deep respect and appreciation for all forms of scientific discovery, and for learning in general. He was able to transmit these feelings to others and could be an inspiring teacher and colleague. He was also enthusiastic and immensely knowledgeable on a wide range of subjects including music, theatre, art and wine. One of his most memorable characteristics was his sense of humour; he was blessed with a combination of eccentricity, Gaelic charm and a certain ability in mimicry, employed in a kindly manner. Despite various health problems over the last 10 years or so, his sense of humour, often directed at himself, was always visible. His continual battle with diets to reduce weight and hopefully lower his blood pressure became a source of fun to both himself and his friends.
He had a sweet tooth and he delighted in discussing economics in coffee houses which were well stocked with desserts. These conversations were invariably stimulating and a great pleasure for the many friends, students and colleagues who were profoundly affected by him over his career.
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