UNIVERSITY OF CALIFORNIA, BERKELEY The Econ Exchange

NEWS AND NOTES FROM THE DEPARTMENT OF ECONOMICS

VOLUME FOUR, NUMBER 2 FALL 2001

AKERLOF SHARES 2001 NOBEL PRIZE IN

ECONOMICS: DEPARTMENT’S SECOND WIN IN A ROW

A Message From Chair By Kathleen Maclay, Public Affairs (reprinted with permission) Alan J. Auerbach... The award spotlight George A. Akerlof, an economics professor at the University of California, remained trained on Evans Hall Berkeley, was named the 2001 co-winner of the Nobel Prize in Economic Sciences this fall, with the announcement on [on October 10, 2001]. It is the second consecutive year in which the Nobel has October 10th that George Akerlof gone to a UC Berkeley economist. had been awarded the 2001 Nobel Memorial Prize in Economic Akerlof, described by a colleague as “a citizen of the profession,” is the Sciences. With Dan McFadden’s author of a landmark study on the role of asymmetric information in the market for receipt in 2000, this marks the “lemon” used cars. His research broke with established economic theory in second consecutive year that a illustrating how markets malfunction member of the Berkeley Economics when buyers and sellers – as seen in Department has received the used car markets – operate under award, the third time in seven different information. The work has had years, and the fourth time overall. The Nobel committee cited Akerlof far-reaching applications in such and his co-winners “for their diverse areas as health insurance, analyses of markets with asymmet- financial markets and employment ric information” or, to use the more contracts. colloquial expression based on Akerlof shares the prize with Akerlof’s original article on the economists A. Michael Spence of subject, the “lemons” problem. Stanford University and Joseph E. With the Economics Department accounting for all of the campus’ Stiglitz of Columbia University for their Nobel Prizes over the last decade contributions to the analyses of markets and a half, graduates and faculty with asymmetric information. may take great pride in the Akerlof, 61, is UC Berkeley’s Department’s role on campus. eighteenth Nobel Prize winner. He is During the flurry of press the university’s fourth economics inquiries following October’s Nobel

Photo: Peg Skorpinski professor and the third in seven years Prize announcement, I was asked Nobel Prize recipient George A. Akerlof at the university to be so honored. more than once how one might

See CHAIR, page 8 See NOBEL, page 7

THE ECON EXCHANGE, FALL 2001 1 MICHAEL JANSSON:

HE F INDS AN “INHERENT BEAUTY” IN ECONOMETRICS A New Faculty Profile

graduate programs. Although Jansson research, specification testing in non- is the first member of his family to be stationary time-series analysis, as awarded even a bachelor’s degree, his macroeconometrics, in that he tries to parents, both elementary school teach- develop statistical techniques that ers, encouraged his academic aspira- macroeconomists can use in their work. tions; those aspirations have now taken The sub-field of non-stationary time- him far from his hometown of Viborg. series analysis, which has been in After one year at MIT as a existence for at least twenty years, is visiting graduate student, Jansson crucial to undertaking empirical work decided that he wished to pursue his in macroeconomics. Jansson explains: academic career in the United States, “One of the things you have to take into for a number of reasons. “American account is that the data you are working universities have better economics with exhibits serial dependence, and it programs. They are so much better, turns out that the way you interpret the there are hardly any comparisons.” So, results of your model, and the statistical Jansson returned to Denmark, com- techniques you employ in order to get

Photo: Grace Katagiri pleted his dissertation, and returned to results from the model, depends the United States, this time as a Re- crucially on the extent to which this Beauty in econometrics? “Yes,” search Economist in UC Berkeley’s pattern of serial dependence is there in says Michael Jansson, Assistant Economics Department, a one-year the data. So it is very important from a Professor of Economics. “I like the appointment which led to a tenure-track practical point of view to be able to overall approach that econometricians position. Although Jansson applied for a discriminate between different models take, in that they specify a mathemati- number of positions, he hoped for an of the way in which time-series evolve cal model of the problem they want to offer from a large academic institution. over time.” Jansson’s work therefore study and then there are well-defined Jansson says that, although he was sure involves the development of techniques criteria that [they] try to meet when that he wanted to be in the United that will enable people to discriminate developing statistical techniques, and States, his wife “was never sure that this between competing models of this there is a way of getting regular results. was something that she would be willing dependence structure. He goes on to It seems to me that you are doing real to do. But she made it pretty clear to me say that his current research tries to scientific research, there is no political that, if I could get a job at Berkeley, she clarify “whether the inability to dis- agenda there; it’s real science.” would be willing to live here with me. criminate between competing theories Econometrics was a natural So I pretty much knew what I had to is just a fact of life, in the sense that the choice for Jansson, primarily because do.” He says now that “even if I had the data we have simply doesn’t allow us to his home department at the University choice, I am not sure I would have draw any clear conclusions, or whether of Aarhus (in his native Denmark) chosen any other department over it is due to the fact that the techniques works primarily in that specialized Berkeley.” we use simply aren’t good enough.” area. The department is so small that Jansson joins a distinguished Jansson’s research is primarily all doctoral students are required to group of Berkeley econometricians, motivated by concrete applications from spend one year of graduate study including Nobel Laureate Daniel international finance, particularly the overseas in order to flesh out their McFadden. He describes his current question of whether purchasing power

See JANSSON, page 10

2 THE ECON EXCHANGE, FALL 2001 CHAD JONES:

ECONOMIC GROWTH IS THE ‘BIG QUESTION’ A New Faculty Profile

“Why are some countries rich which sparked an initial interest in Jones says: “This gave me a much while others are poor?” “Why is there the area. Eventually, under Barro’s better appreciation for the difficulty of long-run growth in per capita income?” supervision, Jones wrote his senior answering any questions in economics. These are the questions Charles thesis on Ricardian equivalence. I decided that if all questions are hard “Chad” Jones has been struggling with However, when Jones arrived to answer, I might as well work on the since he started as an undergraduate at at MIT as a graduate student, he important ones.” This led him directly Harvard University in the mid-1980s. explains that he “was affected by what back to his earlier interest in economic As new Associate Professor of Econom- seems to be a common anti-macro growth. Ultimately, Jones produced a ics this fall, Jones has compared his dissertation entitled “Time Series path to economics with that of many Tests of Endogenous Growth Mod- other scholars in the field: a love of els,” under the tutelage of advisers math and a desire to do something Olivier Blanchard and Stanley with “real-world applications.” Fischer. Jones started off thinking In general, Jones’ research that math and computer science centers on questions about the were the way to go. He grew up just growth of per capita income. Why is as computers were becoming “per- there long-run growth in per capita sonal,” back when students could income and why does it take hold in build their own machines from some places but not others? Recent components. During his first year of publications in this area include college at Harvard, he “discovered “Was an Industrial Revolution that computer programming really Inevitable? Economic Growth Over meant spending three hours a week the Very Long Run” (Advances in designing programs and fifty hours a Macroeconomics, August 2001) and week debugging them, which didn’t “Why Do Some Countries Produce strike me as a good bargain.” Since So Much More Output per Worker his roommates were taking some than Others?” (with Robert E. Hall, introductory economics courses that Quarterly Journal of Economics, seemed interesting, he joined in, and sentiment among first-year students (or February 1999). Interestingly decided that economics offered him a at least it did at that time).” And so he enough, some of his current research forum to apply his interest in math to broadened his interests and considered hearkens back to a topic he has real social phenomena. microeconomics as a specialty. He visited before: health economics. In a His road to a specialty in spent his summer tracking down data paper entitled “Why Have Health economic growth was not a straight one, sets and a collection of panel data from Expenditures as a Share of GDP but at first it traveled though the office about 1000 firms, writing an economet- Risen So Much?” Jones investigates of Harvard economist Robert Barro. At rics paper in his second year on the technological advances in the health the time, growth economics was explod- hedonic pricing of health insurance. field and their effects on the rising ing, and Barro was working on his But as soon as he included “state share of expenditures on health care. famous cross-country empirical papers. effects” in the econometric specifica- While an Assistant Professor at Jones was hired as a research assistant, tion, all of the results disappeared. Stanford University (1993–2001),

See JONES, page 8

THE ECON EXCHANGE, FALL 2001 3 YINGYI QIAN:

A TRANSITION ECONOMIST C OMES FULL CIRCLE A New Faculty Profile

“My background is a bit high school graduates vying for accep- political agenda. unusual,” Yingyi Qian says of his tance to university. Entrance exams Within a few years of arriving journey from a village in rural China to had not been administered for over a at Tsinghua, a series of events occurred the position of Professor of Economics decade, meaning that only 3% of the that radically changed Qian’s direction at the University of California, Berke- large pool of applicants gained admis- and future. Shin-sheng Tai, a professor ley. Born in Beijing in the mid-1950s, sion. Qian, one of the fortunate minor- from the Institute of Mathematics at the Qian enjoyed only a few years of formal ity, was only familiar with mathematics, Academy of Sciences of China, taught education at the experimental Beijing so he chose to become a major in that Linear Algebra and Differential Form at Jingshan School before all the country’s field at Tsinghua University in Beijing, Tsinghua; Tai had done his graduate schools were closed down as a work at Cal in the 1960s and result of China’s Cultural returned to China in the Revolution. At 17, Qian was following decade. In 1980, Tai “sent down” to the country- selected Qian and several side, along with all high other Tsinghua students to school graduates at that time. attend a Differential Geometry He went to a mountainous course at Peking University, suburban area of Beijing, taught by S. S. Chern, a Miyun County. “The village I visiting professor from Cal’s was in was very poor. I spent Mathematics Department. four years there, working as a Qian received an “A” in peasant, doing all kinds of Chern’s course, leading Tai to farming jobs... raising pigs, suggest that he continue his digging canals, watering studies in the U.S. He had vegetables, everything.” known as “China’s MIT.” Qian has proved, with his success in Chern’s In 1977, the Chinese govern- always had a strong interest in social class, that he could compete at the ment reinstated university entrance issues, honed by the four hard years he same level as American students. exams, which Qian took while still in endured working in the poverty of the Within a year, Qian received a fellow- the village. He had continued to study Chinese countryside. At that time, ship in Mathematical Statistics from while in the countryside, focusing economics in China consisted exclu- Columbia University and completed mainly English and calculus. “I had a sively of Marxist political economy, and an M.A. in 1982. Next, as a student small transistor radio. I listened to the did not attract science-oriented stu- at Yale’s School of Management, broadcasts of various programs in dents. The term “Western Economics” Qian finally began formal training in English. When people in the village in Chinese carried a negative connota- economics. asked what I was listening to, I told tion, and the subject was, at best, During those years, China them ‘an ethnic minority language.’” summarized and then heavily criticized underwent its successful agricultural That year saw the most competitive in university economics courses. For reform, and there was talk of extending college entrance exam in China’s this reason, Qian stuck to math, a hard these reforms to the urban areas, to the history, with a ten-year accumulation of science isolated from the Marxist industry and banking sectors, among See QIAN, page 9

4 THE ECON EXCHANGE, FALL 2001 GRADUATEUPDATES STUDENT News from Graduate Student Affairs Kalena Cortes is the recipient of the Officer Helga Northrop: Graduate Opportunity Program Disserta- 2001 was a very successful tion-Year Award from UC Berkeley for year on the job market for May 2001 2001-02. Ph.D.s. Tenure-track assistant professorships were accepted by Scott Gehlbach, Ph.D. candidate in Gary Charness (UC Santa Barbara), Justine Hastings political science and economics, was (Dartmouth College), Ling Huang (Peking University, PRC), awarded a Fulbright-Hays Doctoral Stephen Luk (Hong Kong Polytechnic University), Chris Dissertation Research Abroad (DDRA) Meissner (Cambridge University, UK), Kris Mitchener (Santa Fellowship to study in Russia during the Clara University), Suzanne O’Keefe (CSU Sacramento), Steven 2001-02 academic year. He is spending Puller (Texas A&M), Michael Roberts (Duke University), and the year at the Center for Economic and Wei-Kang Wong (National University of Singapore). Graduates Financial Research (CEFIR) in Moscow. who accepted non-academic positions include Mark Carlson (Fed Board of Governors), Brendan Daniels (General Account- Petra Geraats (Ph.D. 2000) was awarded ing Office), Erling Larson (Statistics Norway), Bhashkar the European Economic Association 2001 Mazumder (Federal Reserve Bank Chicago), Richard Mortimer Young Economist Award for her submis- (Analysis Group, Cambridge, MA), Andrea Tokman (Banco sion to the EEA 2001 Congress entitled Central de Chile), and Sally Woodhouse (Cornerstone Research, “Precommitment, Transparency and Boston, MA). Monetary Policy.” Dr. Geraats is in her first year on the Economics faculty at The department received 600 graduate applications, of Cambridge University, and is a fellow of St. which 92 were recommended for admission. 28 new students John’s College. The announcement of her enrolled this past August. Due to the generosity of Dean award was made at the August meeting of Breslauer, the department was able to offer two-year fellowships the Congress, at which Professor Matthew to its top incoming students. In addition, continuing students Rabin delivered the Marshall Lecture. are eligible for the Dean’s Normative Time Fellowship Program. This year’s Graduate Economics The fellowship is intended to encourage students to start their Association’s co-presidents are Gustavo research early, take their oral exams and advance to candidacy Bobonis, Andrea Cann, and Sally Kwak. at the end of the third year. If successful, the student receives a full one-year fellowship with a stipend of $14,000, University Fourth-year student Rebecca Hellerstein fees and non-resident tuition, where indicated. Students who has been awarded a two-year fellowship advance to candidacy by the end of their fourth year receive a from the Social Science Research one-semester fellowship with a stipend of $7,000. Council’s Global Security and Cooperation Program (funded by the MacArthur Other student news: Foundation) to gather and analyze data on the prices of patented drugs across devel- Doug Almond received a National Institute of Aging fellowship oping economies. To gather the data, she is in the demography and economics of aging, which will support working with the non-governmental dissertation research on the early childhood origins of adult organization Medecins Sans Frontieres disease and mortality. (Doctors Without Borders). See GRAD STUDENTS, page 10

THE ECON EXCHANGE, FALL 2001 5 FACULTY NEWS & NOTES

During this past summer, Alan Auerbach served as In August, Professor John M. Letiche delivered a an advisor in Wellington to the New Zealand Treasury’s Tax lecture on “National Security and the World Economy” at the Review Commission, which released its report in October. U.S. Federal Government Senior Executive Program in Aurora, Colorado, where he spent the day discussing with Pranab Bardhan presented lectures at home and heads of our government agencies the political-economic abroad this past summer and into the fall. He spoke on determinants of terrorism. He also worked in Western Europe “Inequality and Collective Action” at the University of on United States-European Union and Russian economic Copenhagen in June and at the Santa Fe Institute in Septem- ber; on “Democracy and Inequality” in Columbia collaboration in September. His latest publication is “Les- University’s Mellon-funded Sawyer Lecture Series; on sons from the Euro Zone for the East Asian Economies”, corruption at a meeting of the Gorbachev Foundation in Journal of Asian Economics, 11 (2000). Madrid, Spain; and again at Columbia University, as part of the symposium on decentralization at the Institute of Policy Ted Miguel was in the field this summer in Delhi, Dialog, all in October. India, planning an evaluation of a non-profit school health program, and in Busia, Kenya and Meatu, Tanzania, continu- Barry Eichengreen Congratulations! received the ing his research on local school public finance in rural Felix Neuburgh Prize (awarded to an economist once every Africa. two years). He delivered the Felix Neuburgh Lecture in Gothenberg, Sweden, in November. Maurice Obstfeld spent July “down under.” He presented the Reserve Bank of New Zealand Lecture at the Joseph Farrell is back in Berkeley after a year as Deputy Assistant Attorney General at the Justice Australasian Meeting of the Econometric Society and the Department’s Antitrust Division. His successor there is Miguel Sidrauski Memorial Lecture at the Latin American another Berkeley professor, Michael Katz. Farrell is teaching meeting of the Econometric Society in Buenos Aires. In antitrust and regulation to undergraduates, and in a joint addition, he has been named a Foreign Honorary Adviser to effort with Oxford University professor Paul Klemperer, is the Institute of Monetary and Economic Studies of the Bank writing an article on switching costs and network effects for of Japan (the Japanese central bank). Previous holders of this the next volume of the Handbook of Industrial Organization, position include Milton Friedman, James Tobin, Stanley a standard reference. Fischer, and John B. Taylor.

In October, Bronwyn Hall organized a Franco- In August, Glenn Woroch presented a paper at the American workshop on the Law, Economics, and History of “Industrial Competitiveness and Competition Policy in the Intellectual Property, held at the Haas School of Business. Economics Department members presenting papers were Era of Telecommunications Convergence” conference in Richard Gilbert, Suzanne Scotchmer, and graduate student Seoul, Korea. He was an organizer of, and presenter at, the Petra Moser. In September, Hall lectured at the European October “National Summit on Broadband Deployment” in Summer School in Industrial Dynamics at Cargese, Corsica. Washington, DC. See FACULTY, page 11

6 THE ECON EXCHANGE, FALL 2001 NOBEL, from page 1 Economics professor Daniel deserved” for his leadership in the his work that helped launch the McFadden shared the prize last year. revolution of understanding what burgeoning field of behavioral The now-deceased John Harsanyi, a makes markets work. McFadden, who economics,” said Alan Auerbach, professor of economics and business lives near Akerlof, dropped by to Chairman of UC Berkeley’s Econom- administration, won the Nobel Prize congratulate him in person early [on ics Department. “All the while, he in 1994; and Gerard Debreu, a October 10th]. has made crucial contributions to professor emeritus of economics and “One of the most profound macroeconomic theory, thereby mathematics, won the prize in 1983. insights in modern economics is that demonstrating the extraordinary Since joining UC Berkeley’s the formation and structure of mar- breadth of his interests.” Economics Department in the College kets depend critically on the informa- Christina D. Romer, a of Letters & Science as an assistant tion available to participants, and on colleague in the Economics Depart- professor in 1966, Akerlof has been the mechanisms that govern transac- ment at UC Berkeley, wrote in a 1996 recognized for his research that tions and the enforcement of con- evaluation of Akerlof’s work that he borrows from sociology, psychology, tracts,” said McFadden. was almost certainly destined to win a anthropology and other fields to “These conditions can Nobel Prize. She praised his path- determine economic influences and prevent the formation of markets that breaking work that incorporates outcomes. His areas of expertise would be desirable for resource psychological insights into models of include macroeconomics, poverty, allocation, or lead to markets that do economic behavior. family problems, crime, discrimina- a poor job of allocating resources. Also known as an outstand- tion, monetary policy and German Conversely, getting information flows ing professor, Akerlof earns teaching unification. and governance aligned can facilitate evaluations by his students that “are Akerlof is married to econo- the development of markets that simply off the charts,” Romer said. mist Janet L. Yellen, the Eugene and improve resource allocation, particu- His commitment to the University, the Catherine M. Trefethen Professor at larly in situations such as the internal Economics Department and his UC Berkeley’s Haas School of operation of firms and bureaucra- students “is legendary,” Auerbach Business and Professor of Economics. cies.” said. Yellen served as chair of the Akerlof’s award came as no “George is a kind, generous, President’s Council of Economic surprise to many of his fellow econo- and enthusiastic person who loves Advisers from 1997 to 1999 and was mists at UC Berkeley and around the economics,” Romer said. “He con- a member of the Board of Governors country. tributes immeasurably to the depart- of the Federal Reserve System. “More than any other person ment by simply being the kind of Akerlof and Yellen have worked in economics, George has worked to person he is.” together on numerous research show how the insight from sociology The native of New Haven, projects. Their son Robert, 20, is a and psychology could broaden, enrich Conn., developed a keen interest in junior at Yale University. and increase the power of economics. economics as a child growing up in “He has real flashes of He is, in my opinion, perhaps the the shadow of the Great Depression of insight into human problems, into most imaginative and creative applier the 1930s, an era he called the of insights from other disciplines,” what may explain social phenomena,” “catastrophe that took over the said Henry Aaron, senior fellow at the Yellen said. “It’s wonderful to work world.” Brookings Institution. with him; he’s so original.” “I’ve always been interested “George Akerlof’s contribu- in why people are poor,” he said. UC Berkeley colleague and tions to economics have been funda- “What economics is about is trying to fellow Nobelist McFadden said mental, from his celebrated paper prevent poverty insofar as that is Akerlof’s receipt of the Bank of describing the role of asymmetric possible.” Sweden Prize in Economic Sciences information between buyers and Akerlof earned a bachelor’s in Memory of Alfred Nobel “is richly sellers in the market for ‘lemons’ to degree at Yale in 1962 and a Ph.D. at See NOBEL, page 8

THE ECON EXCHANGE, FALL 2001 7 NOBEL, from page 7 CHAIR, from page 1 the Massachusetts Institute of Tech- explain Berkeley’s recent success momentum of recent years. Future nology in 1966. He is a Non-resident (including Matthew Rabin’s receipt this issues of The Econ Exchange will Senior Fellow at the Brookings Institu- past spring of the American Economic provide more information on how gifts tion and a research associate of the Association’s John Bates Clark Medal). to the department have been used, and After the obvious disclaimer that these the challenges that remain. Canadian Institute for Advanced awards recognize remarkable individual Research. He also is one of five Rich- achievements for which there need be ard and Rhoda Goldman Distinguished no common explanation, I did allow JONES, from page 3 Professors in the College of Letters & myself to speculate that our department Jones authored Introduction to Science, appointed in 1997 for a five- provides a challenging and yet uncom- year term. monly collegial environment in which Economic Growth (W.W. Norton and Additional awards he has to do research. Company, 1998), a textbook on received include a Guggenheim Alas, success brings its own growth that is available in five Fellowship, Fulbright Fellowship, problems, as discovered by students languages. Before this book was who attempted to enroll this fall in Dan Fellow of the Econometric Society and written, Jones says, the fascinating McFadden’s intermediate Fellow of the American Academy of advances in the study of economic microeconomics course, Economics growth achieved during the last Arts and Sciences. He served as senior 100A. At one point, early in the staff economist with the Council of semester, there were nearly as many fifteen years had yet to filter down Economic Advisers from 1973-1974 students on the waiting list as enrolled into undergraduate teaching—the and was visiting research economist in in this, a key gateway course for the insights were largely locked away in the special studies section of the economics major. While this example academic journal articles. At Berkeley, Federal Reserve System Board of is perhaps among the more extreme, it Jones plans to incorporate this material reflects the difficulty we face in accom- Governors from 1977 to 1978. into the undergraduate courses that he He is a former Cassel Professor modating the many undergraduates wishing to study economics. teaches, including intermediate macro- of Economics with Respect to Money With the University’s support, economics, and possibly in smaller and Banking at the London School of we are making progress in expanding seminar-style courses. He will also Economics, and visiting professor at the our department to meet student needs. teach growth at the graduate level. Indian Statistical Institute in New Thanks in large part to the outstanding When asked to comment on Delhi. leadership of my predecessor as Chair, what he likes best about being at Cal, In An Economic Theorist’s Book Maurice Obstfeld, the Department has Jones remarked that “the Economics of Tales (Cambridge University Press, added four new members to our faculty 1984), Akerlof discussed his approach this year, joining the four who arrived Department at Berkeley is a very to his work. last year. This year’s “class” includes special place these days. Obviously, it “Economic theorists, like Professor Yingyi Qian, a specialist in is one of the top departments in the transition economics and the Chinese French chefs in regard to food, have world. But in addition, it has a great economy, Associate Professor Charles developed stylized models whose collection of economists at all stages in (Chad) Jones, a leading expert on ingredients are limited by some unwrit- economic growth, and Assistant their careers.” He says that he really ten rules,” he wrote. “Just as traditional Professor Michael Jansson, who enjoyed the warm welcome he received French cooking does not use seaweed specializes in time-series econometrics. upon his arrival in July and the level of or raw fish, so neoclassical models do Arriving officially later this year will be collegiality among the faculty. not make assumptions derived from Professor Guido Imbens, a leading Jones and his wife are the psychology, anthropology, or sociology. microeconometrican. parents of twenty-one month old Audrey. I disagree with any rules that limit the As I assume, once again, the So when he is not hard at work, Jones nature of the ingredients in economic role of Department Chair, I wish to and his family are hard at play, discover- models.” thank those friends of the Economics Department who have provided their ing the many attractions that the East Bay Editors note: Additional information can be found at http://emlab.berkeley.edu/users/akerlof/ support in the past, which has played a boasts for children, including play- index.html, and at http://www.berkeley.edu/ grounds, parks, and the Oakland Zoo. news/features/2001/nobel/index.html. key role in helping us maintain the

8 THE ECON EXCHANGE, FALL 2001 QIAN, from page 4 others. While at Yale, Qian met Jinglian democratization, a reliance on the rule strengthening of the faculty in this area. Wu, a visiting scholar from the Chinese of law, nor has it involved very fast Qian is teaching two new Academy of Social Sciences, and now privatization. China’s deviation from courses during his first year here. For arguably the most famous economist in the norm begs the question of whether undergraduates, he is offering a lecture China, who played an important role in these elements are essential for fast course entitled “Economics of Transi- China’s market-oriented reform. Wu transition and growth, which econo- tion and Development: China”; and for suggested that Qian read Janos Kornai’s mists had always taken for granted. graduates, a lecture course on econom- Economics of Shortage, which greatly From the perspectives of political ics of transition. In addition, he and inspired him. At this time, Qian decided economy and institutional change, Gérard Roland are starting a new to become an economist and applied to Qian looks at how nations develop seminar course on transition economics, the Ph.D. program in economics at institutions, and how these institutions which will bring in specialists from Harvard, where Kornai was on faculty. evolve during a period of transition and Europe’s Center for Economic Policy His decision led him to the fields of as society quickly changes. Research and from the Davidson economic theory and comparative When asked what attracted Institute at the University of Michigan, economic systems, under the guidance of him to Berkeley, Qian mentioned that among other distinguished researchers Kornai, economic theorist Eric Maskin, he has had contacts with scholars here in the world. The seminar seeks to and Andreu Mas-Colell, a long-time Cal for many years—going back, of course, identify general themes and principles mathematical economist. He used game to that fateful Differential Geometry beyond country–area specialties from theory to study such topics as incentives course he took from S. S. Chern in the perspectives of institutional devel- in hierarchy and “soft budget con- 1980. He first met Gérard Roland, opment and political economy. straints” in centrally planned economies. Berkeley’s first transition economist, at Yingyi Qian is a fan of classical With the completion of his Ph.D. in 1990, a Berkeley conference organized by music, specifically Western opera and Qian began to look at China’s transition the Economics Department’s Pranab symphonic music, of which he has a from a centrally planned to a market Bardhan in 1991. His interest in very extensive collection. Qian often economy. It was at this point that his coming here was sparked when he travels to Europe and Asia. He is interests and academic study found learned that Roland would be joining delighted to be back on the West Coast common ground in which to develop. the department. They share a strong (he taught at Stanford between 1990 Qian now saw a way to link his profound interest in the institutional and organi- and 1999), as flights to China are interest in social problems with his solid zational issues of transition, and have shorter from San Francisco than from mathematical background, to become the co-authored a number of journal the East Coast. His other interest— kind of economist he could not have articles, including “Federalism and the traditional Chinese cuisine—he links to become had he remained in China. Soft Budget Constraint” (American his experiences during China’s Cultural Qian describes himself as a Economic Review, December 1998). In Revolution, when social disruption specialist in the fields of comparative addition, Qian corresponded for many forced children to become self-suffi- institutional economics, economics of years with Oliver Williamson on various cient at a very young age. As a result, transition, and China’s economic issues in organization theory. He feels Qian learned to cook at age 10 and still reform and development. His work on that Berkeley is quite committed to the enjoys making the traditional dishes China focuses on that country’s study of transition, and he points to that he learned to prepare as a boy. transition from planned to market now-retired faculty Gregory Grossman economy. In contrast to the reform of and Ben Ward as examples of the the Central and Eastern European department’s tradition in comparative economies, China’s transition looks economic systems. Qian also men- markedly different. To date, it has not tioned the campus’ long commitment to been accompanied by political East Asian studies, and a recent

THE ECON EXCHANGE, FALL 2001 9 JANSSON, from page 2 GRAD STUDENTS, from page 5 parity is found in the data. For in- young. This group of econometricians is Nicole Maestas is the recipient of two stance, one can look at whether ex- second to none . . . and Berkeley fellowships for 2001-02: a disserta- change rates in different countries tend certainly has one of the best statistics tion fellowship from the Burch Center to move together over time. Is there a departments in the world.” Jansson for Tax Policy and Public Finance, and a Phi Beta Kappa fellowship from long-run relationship between the hopes for an opportunity soon to offer a UC Berkeley’s Alpha Chapter. exchange rates in the United States and special topics course in the Economics the United Kingdom? Over time it is Department on time-series analysis. He This fall, Jason Seligman is a Doc- possible to see that the exchange rate of feels that this would be interesting to both toral Research Fellow with the Office the dollar vis-à-vis the pound goes up econometrics and macroeconomics of Ratepayer Advocates, California and down. Do exchange rate move- graduate students. Jansson expects his Public Utilities Commission, re- ments move together with movements in current research to keep him busy for at searching regulatory federalism and the price levels in the different coun- least another year, and hopes that his electricity markets. tries? The essential question is whether findings will suggest other avenues for Roger Studley products in the UK sell for the same investigation. has again been price as products in the US. If they When not at work, Jansson awarded a research grant from Berkeley’s Center for Studies in don’t, one would think that, over time, and his wife like to visit San Fran- Higher Education, where he contin- people would be able to exploit that cisco to explore the parts of the city ues as a Research Associate. He is difference to make money. Economists not written up in travel guides or also working as a research analyst on recognize that it takes a long time for seen on television. His wife, a nurse, admission policy for the UC Office of this kind of adjustment to take place, is awaiting permission from INS to the President. In November, he but the question that lots of researchers work here in her chosen field. On presented “Inequality in College have tried to address is whether this weekends the couple attends local Admissions” at the “Rethinking the adjustment takes place at all. One is rock concerts (particularly bands SAT in University Admissions” therefore attempting to quantify the from the UK) and seeks out good conference at UC Santa Barbara. inertia within the adjustment process. restaurants. Jansson has also taken Till Wachter There are techniques that can be used up tennis, something he always spent two months this summer doing dissertation research to address these issues. The overriding wanted to pursue, but that Denmark’s in Rome funded and hosted by the theme in Jansson’s research is that the climate made difficult. He says that Ente ‘Luigi Einaudi,’ an Italian current techniques do not do an he finds the Bay Area weather “quite institute affiliated with the Bank of acceptable job of quantifying the effect. phenomenal” and conducive to Italy, the Italian central bank. He addresses existing questions by hiking and travelling up and down trying to develop new techniques that the California coast, which offers “so Marta Wosinska has been awarded a are better at quantifying these issues. much variety, you can find what you dissertation fellowship from the Agency When he arrived at Berkeley are looking for.” for Health Care and Quality to fund her last year as a research economist, work on the effects of direct-to-con- sumer advertising on demand for Jansson says he “realized straight away prescription drugs. She previously that it is a very friendly and open received funding from the Institute for department. The atmosphere is very Business and Economic Research and collegial and supportive, which is very the Center for Health Research, both important particularly when you are at UC Berkeley.

10 THE ECON EXCHANGE, FALL 2001 FACULTY, from page 6

security and safety at our airports, percent. (The federal General as well as on the impacts of low pay, Accounting Office has cited higher inadequate training and turnover turnover of airport screeners as a among the 8,000 pre-board baggage principal cause of security breaches. screeners in the United States. At Boston’s Logan Airport, turnover “Paying airport workers a rate reached 200 percent in 1998, Editor’s Note: This timely press release living wage is proving to be successful which means the average screener from the UC Berkeley Office of Media in San Francisco,” said Michael had been on the job for three Relations appeared in October, 2001. Reich, Professor of Economics in the months.) Economics Professor Michael Reich’s College of Letters & Science and research informs current public debate Research Chair for the Institute for 2) Employers reported improvements regarding the status of private airport Labor and Employment, which is in overall job performance and security personnel: whether they should sponsoring the study. “The quality greater ease in recruiting more be replaced by, or made, federal employ- standards program at the San Fran- skilled applicants. ees, or whether they should remain cisco International Airport should be employees of private firms which looked to as a model.” 3) Employers reported reduced contract with airport management to absenteeism, fewer disciplinary The quality standards pro- provide security services. The issues problems and higher morale. gram was established at the airport in under debate pertain to security person- January 2000 and set recruitment, nel level of training and performance 4)The cost of the San Francisco training, pay and benefit standards for expectations, among other things. quality standards program works out all employers with workers in security to $1.37 per passenger traveling BETTER PAY FOR AIRPORT areas or performing security functions through the airport. SCREENERS IMPROVES JOB at the airport. The standards are above PERFORMANCE, REDUCES those required by the Federal Aviation “These findings imply that a TURNOVER, SAY RESEARCHERS Administration. They cover baggage policy of replacing all airport screeners screeners, but also skycaps, baggage with federal security personnel runs the By Kathleen Maclay, Public Affairs handlers, airplane cleaners, fuelers, risk of being too narrowly focused,” the (reprinted with permission) and boarding agents—anyone whose report concluded. “One of the main performance is essential to airport advantages of the SFO program is the Increasing wages for airport security. breadth of its impact. By linking wage security workers significantly reduces After a summer 2001 survey improvements to training and accredita- turnover and improves job perfor- of ground-based employees of airlines, tion programs, the program has gone a mance, according to a preliminary airport-service firms and concession- long way to improving morale and study by a UC Berkeley research team aires with almost 30,000 workers, performance across the entire airport.” that is examining an innovative pro- researchers concluded that: gram at San Francisco International Airport. 1) Turnover of screeners at San The report comes as national Francisco International Airport attention focuses on how to improve dropped from 110 percent to 25

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The Econ Exchange is published semiannually for alumni and friends IN OUR NEXT ISSUE of the Department of Economics, University of California, Berkeley. Notes from the Chair DEPARTMENT OF ECONOMICS Alan J. Auerbach Chair and Burch Professor Economics Department Celebrates of Economics and Law 100 Years Theodore Keeler Vice Chair and Professor of Economics New Faculty Profile...Guido Imbens Department Office: (510) 642-0822 Department Website: http://emlab.berkeley.edu/econ/ Graduate Student Field Office Renovations Underway THE ECON EXCHANGE Editor Jane Turbiner Faculty News & Notes Contributors Alan J. Auerbach Graduate Student Updates Kathleen Maclay

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