“Economists Don't See Tariffs as a Good Idea”: Nobel Laureate Robert Merton

Adda Avendaño

In the waiting room of the General Directorate of the Instituto Politécnico Nacional (IPN), Dr. Robert C. Merton—recipient of the 1997 Alfred Nobel Prize in Economic Sciences alongside Myron Scholes for their model on asset valuation and risk management—speaks thoughtfully, responding to journalists' questions with care and clarity.

During the interview, Merton discusses concerns over global pension systems and the risk of a long-term crisis, which he says looms even in the world’s wealthiest countries.

Before heading off to deliver a keynote lecture at the IPN’s “Jaime Torres Bodet” Cultural Center, he encourages young students interested in these issues to rise to the occasion. “We’re at a crucial moment,” he says.

What is your view on former President Donald Trump’s tariff policies?

Most economists—conservative, liberal, or centrist—do not believe tariffs are a good idea. There may be exceptional cases where they prove useful, but in general, they fail to achieve their intended goals. It’s important to clarify that this is not a political opinion but an academic one. The top economists who study the global history of tariffs rarely support such measures.

What challenges does Mexico’s pension system face?

Around the world, even the most robust pension systems are under pressure from the risk of long-term financial shortfalls. This is a global issue—not just in Mexico and the United States, but also in the Middle East and beyond. It’s tied to demographic trends and increased life expectancy, which puts greater pressure on government resources. These aren't bad developments—on the contrary, they reflect progress. I’m a rational optimist, and I believe these challenges can be met through the creation of long-term structures and organizations.

What do you mean by “rational optimism”?

Humanity has made great strides in science and technology, giving us the tools to make pension systems more efficient and cost-effective. Meeting this challenge will require public-private collaboration to redesign retirement systems and innovate in a way that benefits all sectors of society—both formal and informal.

What’s your proposal to address this challenge?

We must build sustainable, flexible retirement systems that are resilient enough to endure unforeseen or inevitable events, such as economic crises.

This marks Merton’s second visit to the IPN—his first was in 2016, when he was awarded an Honorary Doctorate during the institution’s 80th anniversary celebrations. This time, he returned to commemorate the 73rd anniversary of the IPN’s Escuela Superior de Economía (ESE), delivering a lecture titled New Challenges of the Mexican Pension System in the Alejo Peralta Auditorium at the Jaime Torres Bodet Cultural Center, where he donned an IPN jacket and joined in the celebration.

How can more robust pension systems be built?

One challenge in designing strong retirement systems is encouraging individuals to take more responsibility for their retirement. That doesn’t mean everyone has to become a financial expert. It’s like driving a car—you don’t need to understand how an internal combustion engine works to drive.

Instead, we need experts to create solutions and products based on their specialized knowledge and present them in a way the general public can understand—using the right format and language—so people can make informed, confident decisions. Only then can we establish sustainable, long-term pension systems.

What is the challenge for IPN economics students today?

More than a challenge, I see it as a golden opportunity—especially for those passionate about financial economics. These students can help develop impactful proposals that begin in Mexico and potentially spread worldwide. We are living through a decisive moment. Financial science has yielded powerful knowledge, and when combined with fintech and strong leadership, it can drive innovations to solve human needs—like retirement—and deliver widespread benefits.

Dr. Merton is currently Professor Emeritus of Finance at MIT’s Sloan School of Management and the John and Natty McArthur University Professorship at Harvard University.

His contributions to economic theory—including the equation for valuing financial derivatives—are often compared to the discovery of DNA in life sciences, making him a global reference in finance and risk management.

He is the author of Continuous-Time Finance and co-author of Cases in Financial Engineering: Applied Studies of Financial Innovation, The Global Financial System: A Functional Perspective, and Finance and Financial Economics, works through which he has brought financial science into real-world practice.