Chicagoania

UChicago Economics, Setting the Highest Standards

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With the recent Nobel award to UChicago economists, it is good to be reminded of spirit of Chicago economics, and why it keeps producing Nobel Prize winners.

A friend who is a UChicago economics professor, who was a PhD student at the time, witnessed the following episode.

Gary Becker ran the Applications of Economics workshop in the Department of Economics for decades. This workshop was legendary as Ground Zero for tough microeconomics workshops. Frequent attendees included George Stigler, Ted Schultz, Sherwin Rosen, Kevin Murphy, Eddie Lazear, Bob Lucas & more. In addition, many PhD students (including myself) attended. That’s where we learned how to do research & think critically.
 
In the late 1980s (probably 1988), Asser Lindbeck came to present a paper he was working on. At the time Lindbeck chaired the Nobel Prize selection committee, & Gary was the #1 choice in the betting pools to receive the Nobel next. He did in fact win in 1992.
 
Lindbeck sent paper #1 ahead of coming to Chicago. As was the culture of the workshop, attendees had read it & were prepared to discuss the paper. As always, Gary showed up with a couple of questions scribbled on the front of his copy of Lindbeck paper #1.
 
Unfortunately, Lindbeck had sent the wrong paper. He arrived prepared to present paper #2. At the start of the workshop, he announced that he would not take any questions for the first 20 minutes, while he presented paper #2, & then he would open it up for discussion.
Gary immediately replied, “No, we prepared the paper that you sent, & that’s what we will discuss.” Lindbeck had a stubborn personality & replied, “No, I will present #2 & that’s what we will discuss,” & proceeded.
 
Gary immediately interrupted him with a question about paper #1. Lindbeck interrupted him with a blunt admonishment that he was going to present #2, & started again.
 
Gary interrupted again with another question about #1. Lindbeck tried to stop him. This continued for a couple of minutes until Lindbeck relented & we discussed paper #1. A vigorous & constructive discussion then followed (since the audience was prepared).
 
Watching this as a PhD student was frightening & inspiring. Gary was fearless. He clearly was not interested in playing Nobel politics, but only in running his workshop with the highest of standards. His expectation was that we all read the paper & arrived prepared, that the presenter had high standards, & that the discussion was vigorous, rigorous & thoughtful.
 
I never forgot this lesson from Gary Becker in what is most important at Chicago: Economics.

May it always be so.

Gary Becker, Nobel 1992, above.

Two Chicago Boyz Win Nobels for Economics

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Congratulations to Eugene Fama (top) and Lars Peter Hansen.

Some details about the men and their work can be found here.

See also, this piece from economist John Cochrane, Gene Fama’s Nobel:

“Efficiency” is not a pleasant adjective or a buzzword. Gene gave it a precise, testable meaning. Gene realized that financial markets are, at heart, markets for information. Markets are “informationally efficient” if market prices today summarize all available information about future values. Informational efficiency is a natural consequence of competition, relatively free entry, and low costs of information in financial markets. If there is a signal, not now incorporated in market prices, that future values will be high, competitive traders will buy on that signal. In doing so, they bid the price up, until the price fully reflects the available information.
 
Like all good theories, this idea sounds simple in such an overly simplified form. The greatness of Fama’s contribution does not lie in a complex “theory” (though the theory is, in fact, quite subtle and in itself a remarkable achievement.) Rather “efficient markets” became the organizing principle for 30 years of empirical work in financial economics. That empirical work taught us much about the world, and in turn affected the world deeply.

Alex Tabarrok at Marginal Revolution on Hansen.

Tyler Cowen on Fama.

Jack Cella Retires as General Manager of the Seminary Co-op Bookstore

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The Seminary Co-op is the best bookstore there is. And Hyde Park is where the best book store there is belongs. I have been a regular and a devotee since I first set foot in the place 32 years ago. When my own book came out I talked to Jack Cella, whose name I did not know, but he knew mine! We had been chatting on and off for 32 years, of course. He made sure they had America 3.0 on the shelf. Seeing my book on the shelf at the Seminary, in the very shadow of my alma mater, the University of Chicago, is the single proudest moment I have had as a published writer. I felt somehow I had come full circle.

End of an era: Farewell to Jack Cella

Seminary Co-op’s Cella retires

“Most everyone that I interviewed for the project, not only identified the Co-op as being the physical embodiment of the life of the mind and the ideals that the University of Chicago strives to create and encourage, but they also strongly identify it with Jack himself,” Doherty said, adding that, “for many, Jack kind of is the Co-op.”

Chicago Sunset

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Recently I attended a rooftop charity event at the “Life Storage” building in River North. I was able to get a photo of the sunset facing west (I rarely get to shoot in that direction).

River North, the district where I live, is in the midst of a giant building boom and is among the hottest districts in Chicago. Seemingly every empty lot or older building is either being built on from scratch or redeveloped, and the Life Storage building is no exception.

Cross posted at LITGM

Illinois Legislators’ Lincolns

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Way back in the day when LITGM used to do a bit more of the political type articles I wrote about Illinois representatives’ automobiles. I confused the Lincoln Navigator that Danny Davis (district one) drove vs. the Ford equivalent that Jesse Jackson Jr. drove, and a bit of web hilarity ensued.

Recently I saw another politician’s car and the first thing I did was look it up – and this Lincoln is owned by a Republican in the 6th district, which happened to be Henry Hyde’s old district. It is a matter of how jaded I’ve become that the fact that an elected official drives a Lincoln is barely worth a web peep.

While American’s think that “big money” has captured politics, it is literally nothing compared to the wealth of China’s politicians. This WSJ article describes how wealthy the top Chinese politicians are vs. the USA…

According to the Hurun Report, as cited by Bloomberg, the 70 richest delegates in China’s National People’s Congress have a combined net worth of 565.8 billion yuan or $89.8 billion. That’s more than 10 times the combined net worths of all the members of Congress, the Supreme Court and the President. (Their collective riches are only $7.5 billion.)

Thus I can only imagine the rage I’d have over the same type of rich trappings if I were Chinese. Unfortunately, they can’t vote, and protests tend to go down badly with authorities. As bad as our system is, in terms of being captured by the interests of the wealthy, it is a comparatively egalitarian route compared to our largest economic competitor.

Cross posted at LITGM