ECONOMICS DEPARTMENT BULLETIN Autumn 2001

A WORD FROM THE CHAIR

This year the US News & World Report rated the Stanford Economics Department as second in the nation, just one tenth of a reputation point below MIT. Actually they put us in a four-way tie for second, along with Harvard, Princeton and Chicago. But we can still say “we’re number two” and within reach of the very top, if we were so inclined. However, the official Stanford position is that these rankings are meaningless, and so, in compliance with this point of view, I will make nothing of them.

But in the competitive world of high-level economics, it is a continuing struggle even to maintain a meaningless ranking in a mythical league table. And in our case we face a number of special challenges, beginning with the fact that three of our best members have been called away to Washington DC: John Taylor to the Treasury Department, Anne Krueger to the IMF, and Mark McClellan to the Council of Economic Advisers. Add to these an unexpectedly large number of faculty on leave, and we are left to hobble through the academic year at considerably less than full strength. Our current shorthanded status should not, however, be our main concern. Instead we will devote much of the year to building for the future, through vigorous efforts to recruit new faculty at both junior and senior levels.

We do after all have a reputation to uphold, based on what is now more than a century of departmental history. The ranking surveys were completed prior to the retirement of Joe Stiglitz from Stanford, though also prior to the announcement of his Nobel Prize. Yes, that’s right: Joe actually “retired” rather than resigned when he accepted his new position at Columbia. So at least we can brag that two more of our emeriti have now won Nobel Prizes! Indeed, it is more than mere bluster for the department to claim some credit for this year’s prizes. Much of the prize-winning research on asymmetric information and market signaling was completed here, when Joe Stiglitz and Mike Spence were members of this department in the 1970s. Believe it or not, that was before my time at Stanford, but department veterans assure me that it is true. .

Clusters of departmental talent are inevitably subject to unpredictable quirks and vagaries, just like Nobel Prizes and departmental rankings. Recruiting new talent is a central part of our mission, but chasing after rankings and prizes is probably not the best way to direct our energies. What we can concentrate on is generating a lively and robust academic atmosphere in the department, where ideas flow freely and intellectual exchange is spirited and infectious. Toward that end, workshop budgets for visiting speakers have been increased again this year, and you can check out the menu at a glance - and download most of the papers - on the new seminar web page at http://www-econ.stanford.edu/events/seminars.html. One particular highlight coming up soon is the first Abramovitz Lecture, to be delivered by Angus Maddison on November 28th at 5:15. The title of Angus’ lecture will be: “Growth and Interaction within the World Economy: The West and the Rest over the Past Millennium.”

Gavin Wright

A warm welcome also to Susan Athey who has joined the faculty from MIT where she has taught since 1995.

The department is also pleased to welcome new and returning visiting faculty for autumn quarter. Marcus Alexis (Econ 148, Urban Economics) is visiting us from Northwestern University where he is Professor of Economics. Jose Gonzales Anaya aka (“Pepe”) (Econ 111, Money and Banking) is a Sr. Research Associate downstairs at CREDPR where he is in charge of the Latin American Program. Linda Bell (Econ 101, Economic Policy Analysis) is returning for her second year here. She is Associate Professor of Economics at Haverford College. Guillaume Daudin (Econ 115, European Economic History) is visiting from the London School of Economics where he is a Scientific Researcher. K.C. Fung (Econ 165, International Economics and Econ 266, International Trade Theory) is a Professor of Economics at UC Santa Cruz. David Johnson is an Instructor and Director of Teacher Training in the Dept. of Economics at Duke University in Durham, North Carolina. He is visiting us for the year, and during Fall Quarter is helping with Econ 1, Elementary Economics. Hamish Low (Econ 140, Financial Economics) is visiting us from Cambridge, England, where he is Assistant Professor in Economics at the University of Cambridge. Michael Topper (Econ 101, Economic Policy Analysis) returns to the Department to teach for us again this year. Mike is an Associate at Cornerstone Research in Menlo Park.

Visiting Scholars: Visiting scholars who will be with us all year or some part of this year are: Noburo Hamaguchi, Waseda University, Tokyo, who does research on International Economics. He is sponsored by Gavin Wright. Hiroyuki Imai, Assoc. Professor at Lingnan University, Hong Kong, who does research in the fields of Development and International Economics. His sponsor is Larry Lau. Ryo Kambayashi, Assoc. Professor, Tokyo Metropolitan University, does research on Labor Economics. His sponsor is Avner Greif. Francesco Lippi, an Economist at the Bank of Italy, does research on Monetary Economics. His sponsor is Tom Sargent. Maurizio Motolese, Asst. Professor at the Catholic University of Milan and Carsten Nielsen, Asst. Professor at Copenhagen University, will both be here for three years doing research with Mordecai Kurz. Tsunao Okumura, Assoc. Professor, Yokohama National University, is doing research in Macroeconomics. His sponsor is Takeshi Amemiya. Klaus Schenk-Hoppe is an Asst. Professor at the University of Zurich and studies Mathematical Economics. His sponsor is Mordecai Kurz. Gunther Schnabel is a Lecturer at Tubingen University in Germany and studies Industrial Policy. His sponsor is Ron McKinnon. utaka Suzuki is an Assoc. Professor at Hosei University in Japan where he specializes in Microeconomics. His sponsor is Takeshi Amemiya. Naoki Yoshihara is an Assoc. Professor at Hitotsubashi University in Japan where he studies Microeconomics. His sponsor is Peter Hammond.

New Staff: Kelly Carson joined the staff in July. She filled the vacancy created when Jean Koentop left a year ago. Please take a minute to introduce yourself to Kelly if you haven’t done so. She shares room 252 with Dru Scott.

FACULTY NEWS:

Larry Goulder has been named the first holder of the Shuzo Nishihara Chair in Environmental and Resource conomics in the School of Humanities and Sciences.

Avner Greif has been selected to sit on the Board of Trustees of the International Society of the New Institutional Economics (ISNIE).

Ilya Segal has been selected as the Nina C. Crocker Faculty Scholar in the School of Humanities and Sciences.

Frank Wolak has been chosen as one of several scholars to conduct a new study on the energy crisis funded by the William and Flora Hewlett Foundation. The $10 million energy initiative will analyze energy problems facing California and the West in particular, and will aim to develop a national energy policy. Wolak will focus on California’s power problems.

A $1.5 million grant from the Hewlett Foundation will fund a SIEPR research initiative. Ken Arrow and Larry Goulder will take the lead on the initiative that will study The Economy, the Environment and Sustainable Welfare, all issues that are essential for the long-range planning and well-being of our society.

GRADUATE STUDENT NEWS

Mu Yang was married to Alan Li on September 1. She is in the process of changing her name to Mu Yang Li. Congratulations, Mu.

Congratulations are also in order for Sean Buckley, this year’s Forman Fellowship recipient.

We want to thank Matt Agard and Peter Coles for the terrific job they did chairing EGSA last year, and we congratulate Ben Malin and Matt Osborne on being selected to serve this year.

Last spring’s TA Award winners were Suraj Jacob (Econ 121), Chris Kingston (Econ 169), Lilian Quah (Econ 121), Yongseok Shin (Econ 103), and Slavi Slavov (Econ 140).

Centennial TA Awards were announced at June’s Commencement ceremony. They were Giovanni Facchini, Kelly Russell, and Slavi Slavov.

DEPARTMENT NEWS:

Graduation, June 2001

The Economics Department held its commencement reception on June 17, 2001, when we conferred 237 BAs, 11 MAs, and 34 Ph.Ds. Our commencement speaker was Frank Wolak. One of Frank’s many activities is chairing the Market Surveillance Committee of the California Electric Industry Independent System Operator. He says that his experience in the arena of policy discourse has led him to reflect upon the value of education in basic economics for making decisions that affect us all. Hence the title of his talk at commencement: “Economics and the Real World.”

Prizes were given to a number of undergraduates. The Firestone Medal for Excellence in Research as an Undergraduate is a University distinction and is the top award available for undergraduate research. This year’s Firestone award went to Ben Liu for his thesis titled “Product Market Monopoly and Worker Compensation: Are Labor Unions Required for Monopolies to Share Rents with Workers?” Ben’s advisor is John Pencavel.

The recipient of this year’s Anna Laura Myers Award for an outstanding honors thesis in the Department is Felix Reichling. His thesis is titled “Brain Gain through Brain Drain: A Theoretical Analysis of Human Capital Accumulation in the Presence of Migration.” Felix’s advisor is Dirk Krueger.

This year’s recipient of the John G. Sobieski Award for Creative Thinking in Economics went to Rodolfo Barreto for his paper titled “Monetary Policy Rules for Small Open Economies.” His advisor is Michael Kumhof.

KEN ARROW’S 80TH BIRTHDAY PARTY

Ken Arrow’s eightieth birthday was August 21, but the department celebration was one month later, on September 21. By chance, 2001 is also the fiftieth anniversary of the publication of Social Values and Individual Choice, a book that revolutionized economic thinking about collective choice. A distinguished afternoon panel discussed the book’s impact over the past half century: Pat Suppes on philosophy, John Ferejohn on political science, and Eric Maskin on economics. An added attraction was the presence of emeritus Professor Ted Anderson, who was a member of the Columbia faculty when Social Values was submitted as a dissertation. As a mathematically-oriented economist, Ted was called upon to pass judgment about a draft thesis that was unrecognizable to Ken’s advisors. The course of modern economics hung in the balance, but fortunately Ted came through by pronouncing the work sound.

In convening the session, Debra Satz (director of the Ethics in Society Program) described some advice to entering graduate students that she had encountered on the website of a leading economics department (not Stanford). The subject was “forms of proof in economics.” Her first example: “proof by illegibility” (if the grader can’t read your nswer, how could it be wrong?). Her last example was “proof by reputation,” which goes as follows: Any idea that you may have had was already thought of by Ken Arrow. Since Arrow is always right, your idea must be right too, right? QED.

A dinner that evening featured moving toasts and appreciations by Mordecai Kurz, Eytan Sheshinski, and Eric Maskin. The real show-stoppers were surprise performances by Ken and Selma’s two sons. David Arrow recited Lewis Carroll’s “You Are Old, Father William” with rare feeling. And when Andy Arrow (accompanied by Larry Goulder) sang “If I Sing” from the musical Closer than Ever, there was not a dry eye in the house. It was left for the impromptu Economy Singers to send the crowd home on a cheerful note, with their musical advice to rising young economists: “Brush Up Your Arrow, Start Quoting Him Now.”

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Weekly detailed schedule available at department front desk and on the Web: http://www-econ.stanford.edu/events/seminars.html

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