As junior recruiting approaches, we cannot help but speculate on the optimal way to compare apples to oranges – candidates across different fields (e.g. micro vs macro) and across universities.  I speculated a while ago that a “best athlete” recruiting system across fields is prone to gaming.  Each field might simply claim its candidate is great.  To stop that happening, you might have to live with having slots allocated to fields and/or rotating slots over time.

It turns out that Yeon-Koo Che, Wouter Dessein and Navin Kartik have thought about something much more subtle along these lines in their paper “Pandering to Persuade“.  They consider both comparisons across fields and across candidates from different universities.    I’m going to give  a rough synopsis of the paper.

Suppose the recruiting committee in an economics department is deciding whether to hire a theorist or a labor economist.  There is only one labor economist candidate and her quality is known.  There are two theorists, one from University A and one from University B.  The recruiting committee would like to hire a theorist if and only if his quality is higher than the labor economist’s.     Also, the recruiting committee and everyone else believes that, on average, candidates from University A are better than those from University B.   But of course this is only true on average.  Luckily some theorists can read the paper and help fine tune the committee’s assessment of the theory candidates.  They share the committee’s interest in hiring the best theorist but they are quite shallow and hence uninterested in research outside their own field.  In particular, theorists do not care for labor economics and always prefer a theorist at the end of the day.

So, the recruiting committee must listen to the theorists’ recommendation with care.  First, the theorists have huge incentives to exaggerate the quality of their favored candidate if this carries influence with the committee.  Hence, quality evaluations cannot be trusted. All the theorists can credibly do is say which candidate is better but not by how much.  But there is a further problem: if the theorists say candidate B is better, given the committee’s prior, they might think better of candidate B and yet prefer to hire the labor economist!  Being theorists, the sender(s) can do backward induction and they know the difficulty with their strategy if it is too honest.  The solution is obvious to the theorists:  extol the virtues of candidate A even when candidate B is a little better.  Hence, in equilibrium, the candidate from the ex ante better university gets favored. But candidate B still has a shot:  if they are sufficiently good, the theorists still recommend them.  The committee may with some probability still go with the labor economist so it is risky to make this recommendation.   But if candidate B is sufficiently good, the theorists may want to run this risk rather than push the favored candidate A.  I refer you to the paper for the full equilibrium(a) but, as you can see, the paper is fun and interesting.

There are some extensions considered.   In one, the authors study delegation to the theorists.  Sometimes the department will lose out on a good labor economist but at least there is no incentive for the theorists to select the worst candidate.  This is the giving slots to fields solution I wondered about and it is derived in this elegant model.