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From a story about the NCAA trial:
Noll, like most of the expert witnesses here, was paid well for his testimony: $800 an hour. (James Heckman, an N.C.A.A. expert, received $2,300 per hour.)
“I think it’s like being a pro athlete,” Noll said. “Getting paid for something I love to do.”
“I think the rate of innovation is just getting faster and faster,” Mr. Mokyr said over noodles and spicy chicken at a Thai restaurant near the campus where he and Mr. Gordon have taught for four decades.
“What’s the evidence of that?” snapped Mr. Gordon. “There isn’t any.”
The men get along fine when talk is limited to, say, faculty gossip. About the future, though, they bicker constantly. When Mr. Mokyr described life-prolonging medical advances, Mr. Gordon cut in: “Extending life without curing Alzheimer’s means people who can walk but can’t think.”
Lots to argue about with both men in this article (e.g. arguments do not rise to level of logical structure and falsifiability normally required of academic discourse but hey this is a newspaper article after all).
Here is one other thing I disagree with:
Mr. Gordon, the more famous of the two men, has the credentials to buck conventional wisdom…..
Since when is Bob Gordon more famous than Joel Mokyr? I suppose it depends on the audience you ask – Joel is not known to journalists. But in academic circles, the fame ranking is reversed.
Just went to a talk by Jesse Shapiro where he gave an overview his work on the media, much of it joint with Matt Gentzkow. One theme is that competing newspapers with different party affiliations generate more information for the electorate. How fitting to return to my office and find this Guardian discussion (by Howard Reed) on FT takedown of Piketty (by Chris Giles). Main issue is that FT did not account for differences in way wealth is measured across separate series which are then merged into one time series:
To summarise, Chris Giles’s investigation of Piketty’s data has uncovered some errors and inconsistencies which Piketty will hopefully address in future work. This shows the importance of quality assurance and third party checking of all results from statistical analysis – particularly when they involve spreadsheets, where it is very easy to make errors.
However, Giles then goes on to make a very serious error of his own in handling the UK data: he treats changes in the way wealth inequality is measured over the decades as if they were real changes in the underlying distribution of wealth. This error leads him to the misleading conclusion that wealth inequality fell in the UK between 1980 and 2010, whereas in fact it has increased (although not by quite as much as Piketty’s published results would suggest).
In some ways, the Guardian discussion is even clearer than Piketty’s own response today. This reflects the universal truth that (good) referees and discussants can often explain your paper better than you can yourself.
But this all leaves one question unanswered: When is Piketty going to respond to Debraj? He disputed Piketty’s theory not his data.
Jean Tirole, chairman of the Foundation Jean-Jacques Laffont/Toulouse School of Economics and scientific director of the Institute for Industrial Economics, University of Toulouse Capitole in France, is the recipient of the 2014 Erwin Plein Nemmers Prize in Economics.
The prize carries a $200,000 stipend, among the largest monetary awards in the United States for outstanding achievements in economics. The 2014 prize marks the 11th time Northwestern has awarded the prize. The Frederic Esser Nemmers Prize in Mathematics and the Michael Ludwig Nemmers Prize in Music Composition will both be announced this spring.
The Nemmers prizes are given in recognition of major contributions to new knowledge or the development of significant new modes of analysis. Six out of the past 10 Nemmers economics prize winners have gone on to win a Nobel Prize. (Those who already have won a Nobel Prize are ineligible to receive a Nemmers prize.)
Looking forward to hanging out with Jean next year.
Here’s my accurate but unsubtle description of Coase’s methodology (listen to audio for my brief moment of fame). Reporter does a good job though.
Israel uses it, Saddam used it, the US uses it w.r.t. Taiwan vs China policy and now Larry Summers is using it – strategic ambiguity.
[W]ith a high-profile appointment like for Fed chair or the Supreme Court, vagueness becomes a virtue. When Senate confirmation is the goal, a candidate wants to maintain wiggle room and let people project upon you whatever their preference is.
What Summers is trying to do is to create a situation in which conservative senators view him as a tough, no-nonsense central banker who will maintain the integrity of the dollar against those dirty hippies who want to debase the currency. Simultaneously, he wants liberals to view him as someone who will do whatever he can to try to strengthen job creation and find creative ways to improve growth.
Now we pretty much know Israel is nuclear but at its strategy’s inception things were not so clear. The US has not had to openly side with Taiwan or China in a significant conflict etc. This is important because it is hard to maintain ambiguity about your true preferences or nuclear status if you have been forced to reveal them in the past. Larry Summers has revealed lots about himself in the past either through policies he has embraced or comments he has made. Even if these opinions were not necessarily about monetary policy, they reveal the intellectual framework and biases that inform his economic worldview. So it is impossible to maintain strategic ambiguity as a stance.
India’s two most prominent economists have never really seen eye-to-eye. Amartya Sen, a Nobel Prize-winner and Harvard professor, believes in public interventions to alleviate extreme poverty and reduce inequality while Jagdish Bhagwati, a professor at Columbia and author of the bestselling book In Defense of Globalization, favors a more free-market, growth-first approach.
In recent weeks, the two have caused something of an uproar — “Academic Brawl,” proclaims the Economic Times — with a terse back-and-forth in the letters page of the Economist.
What is it all about? For the answer, I turned to the blog of a third prominent Indian economist (and apparently excellent cook) Debraj Ray:
1. Economic growth is fundamentally uneven.
2. Looking at rates of growth per person will fail to reveal this basic fact. High growth and extreme inequalities can co-exist. Indeed, they often do.
3. There are a number of ways to deal with uneven growth. The most important of these is occupational choice: education and training to enter new sectors. But occupational choice is slow (it will often take a generation), and it is imprecise (by the time we’re done retraining, the economy may have hared off somewhere else).
4. So other ways need to be found to even out that unevenness.
5. But wait — why won’t the good old market take care of it? It might: if growth in one sector trickles to another via expanding demand. If software engineers like potatoes, the potato farmer stands to gain. Or the tourist industry. Or hairdressers. Just how strong these intersectoral bonds are is a profoundly empirical question. Is there enough work on assessing these strengths? The simple answer is no: not nearly enough. To simply hope that the bonds will work is no good.
We have now arrived at the heart of the matter: is (5) enough? That is what the debate needs to be about. Not about Bhagwati, and not about Sen.
6. And if (5) isn’t enough, what then? Then we are left with two alternatives:
7. Active and sustained government intervention to even things out. Social spending on education. On health. [On] nutrition. On transportation and communication networks. On minimal safety nets. The market can take care of the cool stuff. The public sector gets a less sexy role: getting the basics right. That is what Drèze and Sen (and frankly, many others) are about.
Failing (7) and provided that (5) fails as well, we have just one option:
8. Sustained, crippling social conflict, not just cutting across class lines but along any marker which can be arrogated for the purpose: religion, caste, geography, language.
When he left Rwanda that July, Mr. Tourre returned to the United States to enter the Ph.D. program at the University of Chicago. He also joined an intramural soccer team there, the Bootstrappers, until an Achilles’ tendon injury that required surgery sidelined him for a period of time.
As with many of the people who met him in Chicago, Nancy L. Stokey, an economics professor, initially had no idea of Mr. Tourre’s legal woes. She found out only after he had served as a teaching assistant in one of her undergraduate classes. “He was one of my best students,” she said.
Robert Shimer, another of Mr. Tourre’s economics professors, agreed. “He’s someone who, if he continues on the same track, is going to be one of our top job market candidates.”
Dani Rodrik will be the Albert O. Hirschman Professor of Social Science at the Institute for Advanced Study in Princeton as of July 1, 2013. Before then, he was the Rafiq Hariri Professor of International Political Economy at the John F. Kennedy School of Government, Harvard University. He has published widely in the areas of international economics, economic development, and political economy. His research focuses on what constitutes good economic policy and why some governments are better than others in adopting it.
Didn’t see anything on the IAS webpage announcing it as yet.
In a now annual event, economists at Kellogg and the NU Econ Dept have been polled for their forecasts of who will win the Econ Nobel Prize next Monday. Jeff and I forgot to vote for each other but the rest of the predictions are below (the full write up is on the Kellogg Expertly Wrapped blog):
The Thomson-Reuters citation based predictions are Steve Ross, Tony Atkinson and Angus Deaton, and Robert Shiller.
NU and Kellogg have a large group of IO specialists and theorists. There is also a rich tradition in innovative work in incentive theory – Myerson, Holmstrom and Milgrom were at Kellogg in my department and did some of their best work here in the early 1980s.
So, I am somewhat discounting the latter three candidates with one caveat below. Tirole is also a perennial favorite given the IO bias. While I think all these researchers will get this prize eventually, their age works against them – they are too young. they did seminal work at a time when Duran Duran ruled the airwaves or perhaps the Smiths in the case of Tirole. The Nobel Committee is still sorting out the time when ABBA was Number One and Bjorn Borg won Wimbledon. (Note Swedish influence on pop culture was high in the 1970s!)
Surely there is the odd foray into the 1980s when a field has been overlooked (e.g. Krugman for new trade theory). Mechanism design, incentives have won several times so this works against them. But one might argue Tirole is the Krugman of IO (or that Krugman is the Tirole of trade given that new trade theory used oligopoly models!).
So, that brings Tirole back in as a prediction.
The age factor also means Bob Wilson, an intellectual hero for all of us who do economic theory, is more likely than others on this list. Holmstrom and Milgrom (and Roth?) are his students and they were inspired by his tutelage and research agenda. He also worked with David Kreps. So, some prize organized around Wilson might be another possibility.
I am completely discounting the Thomson-Reuters predictions because (1) finance people can’t get the prize so soon after the financial crisis even if they do behavioral fiance like Shiller and (2) there was a recent Growth and Development Nobel Symposium and it is too soon to give a prize to Deaton or Atkinson after that – the Committee needs to think it over.
I personally think the prize will go to Econometrics because there hasn’t been one since Engel and Granger. I have no expertize in the field so I won’t hazard a guess.
Some economists toiled away in Stockholm on U.S. Labor Day. They were attending the Nobel Symposium on Growth and Development. This implies that the 2012 Prize cannot be in Growth and Development. The fallout from the symposium has to settle before a Prize is awarded. Next year is probably still too early so my guess is that a growth and development prize will be awarded in 2014 or later.
Looking at the program, a few people can be excluded as they are too young to get it now. The pivotal voter will be Robert Lucas who has enormous scientific credibility on this topic and is also attending the symposium.
Things are not going smoothly for Romney’s London trip. First, he criticizes secuirty and attendance at the London Olympics only to draw a rebuke from Prime Mister David Cameron. The Telegraph reports:
Mitt Romney is perhaps the only politician who could start a trip that was supposed to be a charm offensive by being utterly devoid of charm and mildly offensive.
And now it seems tickets are not selling for his fundraiser so he has been forced to cut prices. According to the Guardian:
The Mitt Romney Summer 2012 World Tour to Three Countries is apparently having trouble moving tickets.
The London blogger Guido Fawkes reports that organizers of a Romney fundraising reception in the city this evening have slashed the original $2,500 ticket price to $1,000 for “a few last minute guests,” in an effort to drum up participation.
From Matt Yglesias, an intriguing theory. In 2009:
Wealthy U.S. taxpayers, concerned about an Internal Revenue Service crackdown on the use of secret overseas bank accounts as tax havens, are rushing to meet a Thursday deadline to disclose those accounts or face possible criminal prosecution.
The concern was triggered this summer when Switzerland’s largest bank, caught up in an international tax evasion dispute, said it would disclose the names of more than 4,000 of its U.S. account holders.
Yglesias adds:
Romney might well have thought in 2007 and 2008 that there was nothing to fear about a non-disclosed offshore account he’d set up years earlier precisely because it wasn’t disclosed. But then came the settlement and the rush of non-disclosers to apply for the amnesty. Failing to apply for the amnesty and then getting charged by the IRS would have been both financially and politically disastrous. So amnesty it was. But even though the amnesty would eliminate any legal or financial liability for past acts, it would hardly eliminate political liability.
The American Economic Review publishes an unrefereed conference volume, Papers and Proceedings, in May of every year. Of course, the AER also a publishes a refereed journal which rejects more than 95% of submissions. Someone with an AER P&P might be tempted to pass it off as an AER on their CV. There is a possible gain in prestige at the cost of being found out and facing a social sanction. Snyder and Zidar call this the obfuscation theory. Alternatively, perhaps these AER P&Ps have real academic value and those who describe their own such papers as real publications should also cite other such papers more. Different conventions of citation may develop among different subgroups. This is the convention model. Snyder and Zidar find support for the convention model in the data. They mention that AER P&Ps had more citations that AERs in the past and hence older economists tend to see P&Ps as real publications while younger economists do not. This should imply that younger economists should be more careful about distinguishing P&Ps from AERs on their CVs.
I have two questions/comments.
An economist who lists a P&P as a refereed publication faces dissonance. On the one hand, they would like to see themselves as good people, on the other they know they are doing something shady. One way to resolve the dissonance is to cite other researchers P&Ps more. This helps propagate the self-deception that P&Ps are legitimate pieces of refereed research and hence listing them as such is justified.
Second, another possible paper: Do P&Ps have more errors than refereed publications? One job of a referee is to catch errors after all. If so, how many cites come from people pointing out mistakes?
(Hat Tip: MR)
In my search for examples for a paper, I found:
The context of our analysis is the laundry services industry because it is well suited for analyzing both
vertical integration and social networks. Each store makes two make-or-buy decisions: one for
drycleaning and another for laundry. These are the primary services offered by a store, and whether or
not they are produced in-house can easily be revealed. Furthermore, the industry has long been associated
with ethnic concentration, such that in the southern California region where we focus our analysis,
Koreans currently own more than 2,000 cleaners….The greater concentration of Koreans in Koreatown and the communication between them suggests
that “word-of-mouth” (or reputation effects) will spread faster within this area. An upstream cleaner
supplying a Korean cleaner in Koreatown recognizes that their conduct can affect their reputation
with their other Korean customers in Koreatown….Therefore, while a network of Korean cleaners outside Koreatown could yield some
network effects, we expect these to be smaller. Our analysis therefore concentrates on the network effects
of Koreatown relative to other small networks of Korean cleaners or the lack of networks.
The answer is tantalizingly close and yet just out of reach. An interested reader can find some of the relevant information here, in a Deutsche Bank prospectus for potential investors in Bain Capital. On pages 16 and 17, the prospectus lists all the investments made by Bain Capital from 1984-1998, roughly the time that Mitt Romney ran the company. For example, their 1984 investment of $2 million in Key Airlines led to an annual return of 52.9%. It does not tell you how much money investors made because you would have to subtract off Bain’s fees which this Table does not have (other parts of the prospectus may help you to do that). The thing that is impossible to work out is the employment impact of Bain’s investments. The prospectus does not say anything about that issue. But the names of the companies are listed in the left hand column. So, it might be possible to work out what happened to these companies via a web search and come up with some answers.
If someone had the time and the ability to do that, it would be very interesting I think. I’d certainly be interested in the answer.
Hot off the presses from the Hollywood Gossip:
[T]he rapper quickly accepted when a follower named MyBestAssets made him an offer regarding his hometown Giants and the New England Patriots.
It’s unclear who MyBestAssets is, what those assets are, and what the extent of her relationship with Chelsea Handler’s ex is. But she’s apparently a Pats fan.
“Lets bet. If the Giants lose the Superbowl, u must post ur d*ck on the twitter. If they win, I’ll post my boobs & face. Bet?” she wrote. 50 quickly went all in on that.
“Ok It’s a bet. See your d*ck on twitter Feb 5. Lol” she wrote.
LOL indeed. This is definitely the most unusual wager we’ve heard of, which is saying something, as certain THG staff members have bet on the coin toss. The coin toss.
Anyway, let’s go Giants. We really don’t need to see that.
I’m a Pats supporter but I now I have some reason to be happy if the Giants win.
They were all inspired by Isaac Asimov psychohistorian Hari Seldon:
The public interest, he said, added up to no more than the sheer number of copies the News of the World could sell. “Circulation defines the public interest” – which meant that everything was legitimate as long as the public bought the paper. “You have to appeal to what the reader wants – this is what the people of Britain wants. I was simply serving their need,” he said
Hence, if the people are willing to pay to read about Hugh Grant’s peccadilloes, then it is O.K. to hack into his phone etc. to give the people what they want. There is a flavor of a free market argument here. But we know that prices are necessary for the market to work efficiently – the market is not literally free in terms of commodities being free! There are no prices here so there is no reason why giving the public what they want leads to efficiency. Hugh Grant may value keeping the identity of the mother of his child secret at v while the public values the information at 0<v'<v . In the absence of a price, the information will get revealed even when it is inefficient (i.e it does not maximize social surplus).
Then there is the reverse scenario where details of Hugh’s shenanigans in L.A. are worth v’ to the public and secrecy is worth v to Hugh but v’>v>0. In this case the ex post efficient outcome will be implemented by the media. But there is ex ante inefficiency in gossip production. As Hugh does not capture any or the surplus he generates from cavorting with ladies of the night, he will not cavort at the socially optimal level. To fix this serious problem, Hugh and the Sun, Daily Mail etc have to begin by consulting the seminal work of Ted Groves and Myerson and Satterthwaite. A mechanism of some sort needs to be set up to maximizes second-best social welfare. I am sure someone has already worked this out in some abstract mechanism design context (Cole, Mailath and Postlewaite or Bergemann and Valimaki?). The basic idea should involve “selling the firm to the agent” or setting up transfers so each agent maximizes social surplus. This is hard to do for all agents simultaneously I would guess unless you accept some inefficiency in terms of dropping budget balance or accepting some underinvestment ex ante. But this is still better than the ad hoc mechanism we have right now where the court system makes transfers to Hugh. This wastes resources and does not result in the optimal scheme.
While we mull over what the answer might be, we can enjoy this McMullan performace:
Tom Sargent on why he joined NYU:
”I need other people to do my best work. Economics is like sports — the real stuff is being done by young guys, and you have to work hard to keep up with them. Old guys like me are like boxers — we’ve seen a lot of moves, but our reflexes are slower. There are a lot of young guys here to keep me sharp.”
To add to this: when someone comes up with some supposedly “new” moves, old guys can tell whether they are reinventing the wheel or whether it is a really new move. Zvi Griliches used to play this role at Harvard. Does this knowledge help you to come up with some really new moves yourself? I’m not sure.
From security analysts Raelynn Hillhouse and her blog The Spy Who Billed Me:
Sources in the intelligence community tell me that after years of trying and one bureaucratically insane near-miss in Yemen,the US government killed OBL because a Pakistani intelligence officer came forward to collect the approximately $25 million reward from the State Department’s Rewards for Justice program.
The informant was a walk-in.
The ISI officer came forward to claim the substantial reward and to broker US citizenship for his family. My sources tell me that the informant claimed that the Saudis were paying off the Pakistani military and intelligence (ISI) to essentially shelter and keep bin Laden under house arrest in Abbottabad, a city with such a high concentration of military that I’m told there’s no equivalent in the US.
The CIA and friends then set about proving that OBL was indeed there. And they did.
Next they approached the chiefs of the Pakistani military and the ISI. The US was going to come in with or without them. The CIA offered them a deal they couldn’t refuse: they would double what the Saudis were paying them to keep bin Laden if they cooperated with the US. Or they could refuse the deal and live with the consequences: the Saudis would stop paying and there would be the international embarassment…
The ISI and Pakistani military were cooperating with the US on the raid.
This is turning into a Tom Clancy novel
Counterfeiting money is the stuff of television, movies, and lore, but hardly seen by most of us – for only about one in ten thousand notes is found to be counterfeit annually. But long ago, it was a big deal – for instance, playing a major role in the Revolutionary and Civil Wars. And nowadays, while it only directly costs Americans about $60-$80 million a year, the Treasury acts as if it is a multibillion dollar potential crime. And of course, counterfeit checks is a major crime, and source of the Nigerian schemes that pepper our email spam boxes.
My coauthor, Elena Quercioli (visiting Bocconi, soon teaching at Central Michigan), experienced the reality of counterfeiting beyond our borders in Mexico City. A merchant once informed her that a few hundred dollars worth of pesos that she had just been issued at an ATM was all counterfeit. In the USA, she would have lost the money, and been questioned by police. But there, she retained her pesos, and proceeded to find a “greater fool” upon whom to unload her losses – the crime of “uttering” (which we are told is extremely hard to prosecute even in the USA).
Elena saw that her misadventure pointed to an interesting paper on counterfeit money that might atone for her mild transgressions. The small literature on this topic never modeled the costly vigilance choice of individuals in dealing with counterfeiting. She proceeded to convince the Secret Service to give her a data trove on counterfeit dollars. She pieced together a larger and hitherto partially unknown picture about the two flavors of counterfeit money – namely, seized money – that is confiscated from bad guys before it enters circulation – and passed money that is found at a later stage, and leads to losses by the public. Among her findings:
#1. The ratio of all counterfeit money to passed counterfeit money rises, but less than proportionately with the note.
#2. The per transaction passed rate (as a fraction of the circulation) is small for low notes, dramatically rises, and then levels off or drops. In Europe, for instance, the counterfeiting of the 500 Euro note is miniscule compared to the 200 Euro note.
(The Secret Service is under the mistaken impression that the $20 is the most counterfeit, as it fails to understand that the $50 and $100 notes circulate much less often. Go figure.)
#3. Since the 1970s, the ratio of all counterfeit money to passed counterfeit money has drammatically fallen about 90%.
#4. The fraction of counterfeit notes found by Federal Reserve Banks falls in the note.
I found these facts and intimations of a new theory very appealing. Our joint paper creates what may be the first multi-market “large game”, i.e. two interacting games each with a continuum of players. First, “bad guys” do battle with “good guys” in a massive game of cat and mouse. In it, good guys choose their vigilance effort and bad guys choose their counterfeit quality – where greater quality better frustrates counterfeiting efforts. Second, since some fake money inexorably passes into circulation, a collateral game is induced, this one pitting good guys against one another. Such a hot potato game is one of “strategic complements”: Fixing the counterfeiting rate, the more carefully I expect the next guy to examine his notes, the more carefully I must. We show that this second market fixes the counterfeiting rate.
The whole exercise has proved an exploration of nanoeconomics – for instance, we can deduce that individuals expend at most ¼ a cent of vigilance attention looking at the $100 note, and much less for lesser notes. I must say that the paper has reinforced my faith in economics. For despite such miniscule attention costs, the theory does a decent job of simultaneously explaining all the above patterns in counterfeiting – for instance, even the nonmonotone one emerges, that the passed rate rises and then falls. We even do a darn good job absolving the Secret Service of any incompetence in the plummeting seizure rates.
With Oliver’s speech, we got some insights into the inception and inner workings of the Grossman-Hart team. It was formed when both were put into the same session at the Stanford theory conference. Sandy was working on informativeness of rational expectations equilibria and Oliver on general equilibrium with incomplete markets so their combination in one session was not natural. But they hit it off famously, despite political differences. In his speech, Sandy said he was a moderate and Oliver was extremely left-wing and, when it was his turn, Oliver said he was a moderate and Sandy was extremely right-wing.
The Grossman-Hart team met intermittently in the various locations where the two members were located, with Grossman being the more peripatetic of the two. They risked life and limb and went for long walks in the dodgy areas of Philadelphia and Chicago. On one visit, Sandy suggested two topics they might work on, the “theory of the firm” and “supply function equilibria”. Not sure what the latter amounted to, but Oliver suggested that he might have become an auction theorist if he had chosen the latter topic. Fatefully, he decided on the former topic. They went back and forth several times for around ten days, coming up with models and then throwing them out till they finally honed in on the model that made its way into JPE. They actually had a second model based on incomplete information but they decided to delete it from the final version (it was published in a book).
All this information comes from Oliver’s dinner speech. He went on to say that Sandy has affected his thinking in many other ways. He had tended to separate his economics from his political beliefs. Once when Grossman was visiting London to work with Hart, there was a strike of some sort. Oliver instinctively supported the strikers but, in debate with Sandy, Oliver eventually changed his mind. He began integrating his politics and his economics. (Parenthetically, this suggests that both of them see theory not just as a mental-master-of-your-own-domain exercise.) Oliver ended though by defiantly returning to his own moderate or left-wing tendencies, depending on your point of view. He said that while the National Heath Service is not first-best or even the fourth best, it is definitely better than the US version which is tenth best. He added that Sandy had enjoyed the dental care given by the NHS on a Cambridge visit when he had a toothache.
Grossman offered some final remarks. He had come up with the question “what is firm” in response to arguments made by ATT to avoid vertical disintegration. They argued that if a non-ATTphone were plugged into the ATT network it might cause its complete collapse. Hence, they argued that non-ATT phones should not be allowed for use on the ATT network. Grossman thought this argument was crazy and started wondering about the proper definition of the firm. He ended by discussing his toothache. While a root canal was considerably cheaper in England, Grossman complained that the area administered to by English dentists was still sore. QED?
(A Fuzzy iPhone Picture of Sandy Grossman)
One reason I came to the Grossman Hart + 25 conference was to catch a glimpse of Sandy Grossman and see what he had to say about his research. Grossman resigned from Wharton and has been running his own hedge fund for the last 25 years. I have never met him and my generation and younger know him only from his fearsome reputation. I did not get to speak to him so I cannot testify to his testiness. But some sense of his breadth came across.
He offered his current view on ownership and control which was typically idiosyncratic. He pointed out that human beings cannot will themselves to stop breathing. A safety mechanism overrides the conscious, deliberate decision hence an individual who has “decision-rights” over his body does not have “control rights”. And what holds at the level of the individual holds a fortiori at the level of the firm – the owner of an asset does not have necessarily have control rights. Apparently, in his spare time, Grossman reads about the working of the brain and also theoretical physics.
There is an infamous story about Grossman remodeling his house. Having worked on incomplete contracts, Grossman was extra careful to write a contract so there was no wiggle room for the contractor to hold him up. Inevitably, they fell into dispute. The judge said that with the contract that is normally signed he would have sided with homeowner in this kind of dispute. But since a non-standard and rather complex contract was written, the contingency under dispute must have been considered and dismissed. Hence, the judge found in favor of the builder. In other words, Grossman’s attempt to write a complete contract backfired and hurt him in the contract dispute.
When asked about his story, Grossman said “he had never heard it”. Via a Clintonesque use of wording, Grossman gave an incomplete answer and avoided the main thrust of the question …
- “I have given up. Letters have gone to both referees requesting the return of your manuscript to this office right away. I hope to God I can have better luck with the next people. I don’t know whether this is a matter of concern to you, but let me assure you that it is my intention not to publish the paper by Arrow and Debreu (which has also been submitted) before the publication of your paper (if both are found acceptable). I think this would only be fair to you.” – Econometrica Editor Robert Strotz’ 1953 letter to Lionel McKenzie on his existence proof for general equilibrium
- I had a fun conversation over dinner with Alessandro Lizzeri (outgoing AER coeditor) at the 2011 Winter Meetings in Denver. He had a fine insight about the economics graduate education: Economics grad students start out learning the classics in first year, absorb the stock of highlights from the last ten years in second year, and then start coming to field seminars, seeing the quasi-shitty flow of marginal new ideas … and we wonder why they are jaded.
- “Wanna see who lives in Einstein’s House now? Visit Princeton on Hallowe’en night ….. the current genius, Dr. Eric Maskin dresses up like Einstein and gives treats out to Princeton kids.”
- SOPHOMORE = SOPHOS + MOROS = “wise” + “foolish” (Greek)
- I just learned that (1) Thomas Crapper did not invent the toilet, and (2) the word “crap” does not come from his name. Now I feel totally disillusioned about my knowledge base. Bummer!
- My car takes 91 octane. Gas is sold locally in octanes 87, 89 and 92 or 93 octane. So I must average octanes. One would think that gas stations would have figured this arbitrage out. But it is always strictly more profitable for me to mix 92 and 87 octane than 92 and 89 octane. So drivers: avoid 89 octane!
- I am such a sucker for Venn diagrams. This one categorizing all drugs is for the ages.
Disclaimer: For me, caffeine is a stimulant and alcohol is a depressant (my nightly glass of red wine, angel face). I have had nitrous oxide (hallucinogen & depressant) two or three times. I have fended off the peer pressure to consume all others – does that make me a geek or a nerd? Curiously, cannabis – or marijuana (Mary Jane) – is simultaneously a stimulant, hallucinogen, depressant, & anti-psychotic.
- Jerry Seinfeld (September 1993) clearly beat Laibson (1994) to the punch on (the rebirth of) present-biased preferences, the conflict between future and current selves, and the value of commitment:
The Glasses I never get enough sleep. I stay up late at night, cause I’m Night Guy. Night Guy wants to stay up late. ‘What about getting up after five hours sleep?’, oh that’s Morning Guy’s problem. That’s not my problem, I’m Night Guy. I stay up as late as I want. So you get up in the morning, you’re … , you’re exhausted, groggy, oooh I hate that Night Guy! See, Night Guy always screws Morning Guy. There’s nothing Morning Guy can do. The only Morning Guy can do is try and oversleep often enough so that Day Guy loses his job and Night Guy has no money to go out anymore.Hey we can’t let Jerry beat us, so let’s credit this agenda to its rightful originator, Strotz (1956), before his fourteen year presidency of Northwestern.
- Gary Becker (1973) only barely edged out Sylvester Stallone (1976) on the importance of strategic complements in the marriage model. Sly had has this wonderful metaphor in Rocky: “I dunno, she’s got gaps, I got gaps, together we fill gaps.”
- Patrick Billingsley – who taught me convergence of probability measures at Chicago — was also a part-time actor. I was unaware he was a bailiff in “The Untouchables” (with Kevin Costner, Sean Connery, and Robert De Niro). His Probability and Measure textbook was his chef d’oeuvre. I find it cool that a world-renowned star of probability pursued his passion as an obscure actor.
- Why won’t the Happy Days owners release season 5 and later on dvd? After all, I have been waiting over two years to get past season 4. For the uninitiated, this is the season in which the TV series gave us the timeless metaphorical image to “jump the shark”. Perhaps they do not want to reveal this moment of futility?PS Which research agendas in the profession have also “jumped the shark”. ^_^ And could it be that their ratings (citations) decline long after their fundamentals do?
Linda Tesar, mild-mannered Chair of Michigan Economics Department by day, movie set owner by night:
As you walk down the long brick walkway toward the prominent front porch of Joe and Linda Tesar‘s home, built in 1910, it is easy to spot in the front garden the gallon jug container filled with a red substance and labeled “blood.” This is not the type of item you would normally see on this Burns Park block a full two months before Halloween. But then, the Tesars’ home is far from ordinary: For the past three-and-a-half weeks, it’s been a primary filming location for “Scream 4.”
Roger Myerson playing “My Way” on his harmonica on his 60th birthday.
An unusual coalition has developed at New York Times op-ed meetings – sworn enemies libertarian Tyler Cowen and socialist Paul Krugman have banded together to oppose the new NYT paywall. Cowen and Krugman could not be further apart philosophically.
An ardent believer in the esoteric “Coase Theorem”, Cowen opposes all government intervention except to enforce property rights. 
He believes everything else can be “left to the market” and “rational agents will negotiate their way to the efficient frontier”. Krugman is now a behavioral economics fanatic. To Krugman, rational agents are some hypothetical ideal that is never seen in the “real world”. If people make mistakes, a government or a super-intelligent being – as Krugman believes himself to be – can make decisions on their behalf. Hence, the Nobel Prize winner thinks consumers, firms, banks, investors, in fact pretty much anybody should be pushed not nudged into making good decisions. Indeed, Krugman is writing a new book “Shove” to act as a counterpoint to the milder forms of intervention proposed by the Chicago School of Behavioral Economics.
Naturally, op-ed meetings were quite lively with these two extremists in the same virtual room via Skype. But NYT Editor Bill Keller and owner Arthur Sulzberger are looking back at those meetings with misty eyed nostalgia now Cowen and Krugman have ganged up. Both commentators are hopping mad about the paywall but for quite different reasons.
Libertarian Cowen thinks his column belongs to him and that the NYT has violated his property rights by making money from his columns without compensating him. Also, he and Alex Tabarrok have a highly successful website, Marginal Revolution, which is free. Cowen makes money from the advertising the site carries as well as from speaking gigs his fame generates. His free-up-till-now column for the NYT was another part of this business model.
Krugman has quite different motives. Most importantly, he simply wants his radical message to get out to as wide an audience as possible. A paywall might stop that. Second, Krugman is obsessed with the size of his readership. In the internal impact ratings followed at newspapers, the newspaper equivalent of Google Scholar, Krugman is number one. But the paywall might allow his archenemy George Will at the (free-after-you-register) Washington Post to leap ahead.
So, Cowen and Krugman are planning a Twitter-murder of the NYT paywall. Each will link to NYT articles in Twitter messages and send them to vast legions of loyal followers. These links are free and subvert the entire logic of the paywall. They may overwhelm traffic at the NYT. If Twitter can get rid of a dictator in Egypt, surely it can tear down a paywall.
Cheap Talk 