Advancing Economics THE BECKER FRIEDMAN INSTITUTE FOR RESEARCH IN ECONOMICS 2014–15 Annual Report

Advancing Economics
THE BECKER FRIEDMAN INSTITUTE
FOR RESEARCH IN ECONOMICS
2014–15 Annual Report
2 H I G H L I G H T S
4 C O N F E R E N C E S
6 R E S E A R C H I N I T I AT I V E S
8 V I S I T I N G S C H O L A R S
1 2 S A I E H H A L L
14 STUDENT EVENTS
1 6 O U T R E AC H
2 1 F I N A N C I A L S
22 HONOR ROLL
2 4 L E A D E R S H I P
From the Leadership
The Becker Friedman Institute began 2014–15 in new facilities and has
enjoyed and prospered in our home in Saieh Hall. Before, given limited
space, there was a virtual aspect to our institute; now with dedicated
offices for visiting scholars and room to host workshops, lectures, and
academic conferences, we have changed in truly important ways.
This past year we had 47 visitors to the Institute, hosted 12 academic
conferences, and sponsored 26 events for student and public outreach.
We welcomed scholars from all over the world, achieving our ambition
to be a true intellectual destination for new research advances.
Motivating these activities and our research initiatives is the belief that
informed discussions of prudent public policy are uplifted by formal economic analysis and empirical evidence. As Milton Friedman made clear, the
conclusions of economics “are immediately relevant to important . . . questions
of what ought to be done and how any given goal can be attained.”
While we miss the inspiring intellectual leadership of Gary Becker, we
continue to explore his vast scholarly interests while pursuing a growing
range of interconnected research initiatives.
We now have the opportunity to bring in elite scholars for longer term visits
to the institute to complement strengths on campus and explore exciting
new endeavors. We continue to welcome returning distinguished institute
scholars and our new young scholars, including Mohammad Akbarpour and
Manasi Deshpande. Our ambition is to host four to six postdoctoral research
fellows in residence to add energy and ambition to our institute activities
and the broader economics community.
Finally, we are pleased to announce our Chicago economics history project,
which will showcase the intellectual contributions associated with the
University in ways that go beyond the simplistic characterizations often
projected in public forums. An exhibit, oral histories of Chicago economists,
and other features will offer a rich exploration of our past.
We are excited by our opportunities in the upcoming year. We are supported
by a team of dedicated staff and guided by an Institute Research Council
of distinguished scholars as well as an advisory council that works to
strengthen the institute. We are grateful for the generosity of those who
have made our work possible, and we look forward to continuing support.
Lars Peter Hansen
Director and Cochair Kevin M. Murphy
Cochair
2014–15 Highlights
47 236 18 38
Visiting
scholars
Presenters
Student
events
Total
events
In 2014–15, the Becker Friedman Institute capitalized on beautiful and
spacious new quarters in Saieh Hall for Economics to be come a true
intellectual destination for economic inquiry.
Our flourishing visitors program hosted a record
policymakers spent time at the institute as visiting
47 economists and other scholars who shared their
scholars.
work in seminars, talks, and informal discussions.
Twelve research conferences, eighteen events for
students, and eight public talks on topical issues
conveyed economic insights and analysis to widening network of researchers, students, policymakers,
alumni, and the public.
Notably, this year we increased our direct support
for research, providing funding to thirteen
faculty members through the Rosenfield Program
in Economics, Public Policy and Law; to our
postdoctoral research fellows; and to twenty-seven
graduate students through our Macro Financial
We’re especially proud that many of these events
Modeling Initiative funded by the Alfred P. Sloan
involved and engaged policymakers, generating
Foundation.
valuable exchanges about how research, evidence,
and new models can inform public policy. Several
2 | The University of Chicago
Read on for more details of our active and
productive year.
3,450
Stanford’s Susan Athey at a studentorganized panel on big data
The Bank of England’s
Andrew Haldane
Total audience
Research Scholar
Benjamin Brooks
Charles Evans, president of the Federal Reserve Bank of Chicago,
with former Bank of England governor Sir
Mervyn
King Institute | 3
Becker
Friedman
R E S E A R C H CO N F E R E N C E S
Becker Memorial Highlights Year
of Diverse Conferences
As Gary S. Becker once said, “economics is judged ultimately by how
well it helps us understand the world, and how well we can improve it.”
By that standard, his long career was a brilliant success, as his
incisive economic analysis illuminated a wide swath of life: education,
discrimination, marriage and family life, crime, addiction, and more.
The institute celebrated
Summing up Becker’s influence, panel modera-
the scope and influence
tor Steven Levitt said that he and Pierre-André
of Becker’s work at a
Chiappori once analyzed the impact of leading
conference in his memory
economists by totaling how many times their work
October 30–31, 2014.
was cited as a motivation for other papers. Becker
Leading scholars and
clearly led the pack, with more than three times
longtime colleagues
the number of papers of any other economist—and
gathered to present work in the areas aligned
these influential papers appeared in each of six
with or inspired by his research.
decades, Levitt said.
Panels of fellow faculty members explored two
Other campus colleagues and some from across
key areas of inquiry that Becker pioneered: human
the country and abroad presented recent research
capital theory and its role in development and
in the fields that Becker pioneered. They included:
growth, and the economics of crime and the law.
A pioneer of human capital theory, Becker was
interested in the power of education to influence
almost everything. In that vein, fellow Nobel laureate
Robert E. Lucas Jr. and Harvard economists Claudia
Goldin and Edward Glaeser shared evidence on
the link between education and lower fertility rates,
higher female participation in the economy, and
improved political governance.
In the second panel, William Landes of the
UChicago Law School discussed how Becker’s
work, rooted in the assumption that offenders are
responsive to costs, benefits, and sanctions, gave
rise to a very large empirical literature on the economics of crime. Professor of Economics Casey
Mulligan discussed how Becker’s work extended
• Richard Blundell of University College London,
on inequality, insurance, and family labor supply
• Pierre-André Chiappori of Columbia University
on human capital, matching, and labor supply
• Scott Kominers of the Harvard Society of Fellows
on strategy-proofness, investment efficiency, and
marginal returns
• Edward Lazear of Stanford University, applying
Becker’s work on human capital and fertility to
analyze the demographics of entrepreneurship
• Assar Lindbeck of Stockholm University, on
norms, incentives, and information in income
insurance
• Kevin Murphy, presenting work coauthored
with Becker on the economics of persuasion in
advertising
the notion of imperfect competition to politics,
James J. Heckman spoke on the market and non-
while Sam Peltzman of Chicago Booth highlighted
market benefits of human capital, and later con-
Becker’s lesser-known role as a major figure in the
cluded the conference with a keynote address on
economic analysis of regulation.
the impact of Becker’s research.
4 | The University of Chicago
Academic
Conferences
2014–15
Midway Market Design
Conference
The Society for Economic
Measurement
Creditors and Corporate
Governance
Guity Nashat Becker
Richard Blundell,
University College London
Interactions: Bringing Together
Econometrics and Applied
Microeconomics
Normative Ethics and Welfare
Economics
A Celebration of the Life and
Work of Gary S. Becker
Science of Philanthropy
Macro Financial Modeling and
Macroeconomic Fragility
(New York)
Flows of Goods and
Technologies in the Global
Economy
Exploring the Price of Policy
Uncertainty (Washington DC)
Conference on the Handbook
of Macroeconomics, Volume 2
Federal Agency Decision
Making Under Deep
Uncertainty
Always empirical, Heckman considered a number
Heckman explained that when Becker began his
of different ways to quantify Becker’s impact. One
work, the general view of was that things like family
measure was his awards—the Nobel Prize, the
life and individual choices about labor supply
National Medal of Science, and the Presidential
were not for economic study. But Becker and
Medal of Freedom among them. Another was the
the Chicago School changed all of that. “What is
opinions of his teachers; in 2001 Milton Friedman
notable about Gary Becker is that as he evolved
said “Gary Becker was the most influential social
in his thinking, he took the field of economics with
scientist of the past half century,” Heckman noted.
him—and later, many other social sciences too,”
Heckman said.
Becker Friedman Institute | 5
R E S E A R C H I N I T I AT I V E S
Initiatives Deepen Economic Inquiry
Economic research can provide evidence to shape effective policy,
and that motivates much of the work the institute supports.
This year, however, we also invested in research that looks at how policy
and economic models should account for what we don’t know.
With funding from the MacArthur Foundation, the
and legislators should make regulatory choices
institute launched the Price of Policy Uncertainty
when required cost-benefit analysis is ambiguous.
Initiative, which pursues key questions about accurate measurement and economic impact of such
uncertainty. It explores how individuals’ doubts and
responses to unknowns can be factored into models, forecasts, and policies themselves.
In 2015, this initiative organized two conferences.
In May, initiative co-investigator Lars Peter Hansen
gave two talks on the consequences of uncertainty
in Washington and later gave one in Paris. The
institute also provided direct research support to
co-investigator Steven J. Davis and colleagues,
who are refining an index that measures policy
“Exploring the Price of Policy Uncertainty,” held
uncertainty. To share this emerging research with
April 7–8, 2015 in collaboration with the Urban
wider audiences, the institute launched a video
Institute, was the first institute event that engaged
series with two releases exploring the key research
the Washington, DC policy community and schol-
questions pursued by active group of UChicago
ars in that area. On May 8–9, colleagues at the
scholars.
University of Chicago Law School and Harris School
of Public Policy collaborated to present “Federal
Agency Decision Making Under Deep Uncertainty.”
This conference examined how agencies, courts,
Price Theory initiative
director Steven Levitt
6 | The University of Chicago
Other active research initiatives explore issues
or areas of economics with activities summarized
at right.
The Andrew and Betsy Rosenfield
Program in Economics, Public
Policy, and Law
Within this program, several initiatives
maintained an active roster of programs and learning opportunities.
Chicago Experiments continued
to run numerous economic field
experiments in settings ranging from
the Parent Academy in the United
Kingdom to residential energy use
in California and Vermont. The initiative’s Science of Philanthropy conference, held November 7–8, 2014,
brought together researchers and
nonprofit leaders to share insights
about individuals’ giving behavior.
The initiative also made preparations
to host its first Summer Institute
on Field Experiments for young
researchers interested in the field in
mid-July 2015.
Law and Economics hosted notable
visiting scholars: Thornber Fellow
Ulrike Malmendier and Ken Ayotte,
both of University of California,
Berkeley. The initiative also supported
and organized the newly-named
George J. Stigler Workshop in
Economics and Policy.
Price Theory director Steven Levitt
gave a popular Friedman Forum talk,
“The Freakonomics of Quitting,” on
January 23, while the Becker Brown
Bag lecture series for MBA students
continued with casual research presentations from Ann McGill, Tarek
Hassan, Gregor Matvos, Devin Pope,
and Robert Topel.
The initiative provided research support for senior faculty Kerwin Charles
of the Harris School and Matthew
Gentzkow at Chicago Booth. It
also funded the work of nine earlycareer researchers: Benjamin Brooks,
Thibaut Lamadon, Magne Mogstad,
Brent Neiman, Felix Tintelnot, and
Alessandra Voena in the Department
of Economics and Eric Budish,
Loukas Karabarbounis, and Neale
Mahoney at Chicago Booth.
Economics of the Family sponsored
the “Asian Family in Transition” conference March 26–27, 2015 in Hong
Kong. Researchers presented work
exploring the economic consequences of changing household and
family formation and labor patterns.
The initiative also continued the
weekly Family Economics Workshop,
to review new work in the field.
Fiscal Studies
With support from Donald R.
Wilson Jr., AB’88, and Edward R.
Allen III, PhD’92, this initiative presented a public talk, “The Role and
Impact of Monetary Policy in an
Uncertain Economy” with Charles
Evans and Lars Peter Hansen, and a
Friedman Forum for undergraduates,
“Speculation, Trading, and Bubbles,”
with José Scheinkman. The initiative
also presented the “Conference on
the Handbook of Macroeconomics
Volume 2” on April 23–25.
Health Economics
The institute hosted noted scholars in
this field, including Michael Dickstein
of Stanford University, Ben Handel
of University of California, Berkeley,
and Joshua Gottlieb of University of
British Columbia. In collaboration with
faculty at the Harris School, Medical
School, and Chicago Booth, the institute also developed a plan for foundational research on health care markets
and is working to secure funding.
Human Capital
The institute continued to provide
communications support for the
Human Capital and Economic
Opportunity Global Working Group.
Among its many notable activities,
HCEO presented its second Summer
School on Socioeconomic Inequality
June 30–July 4 at the University of
Chicago Center in Beijing. Other
conferences explored identity and
inequality, social mobility, the effects
of socioeconomic status on identity
and personality, school choice, and
family economics.
Industrial Organization
This emerging initiative hosted visiting scholars Isabelle Perrigne and
Quang Vuong of New York University,
Glen Weyl of Microsoft Research, and
Frank Wolak of Stanford University.
Macroeconomic Financial
Modeling and Systemic Risk
The MFM Working Group continued
its efforts to develop and evaluate
macroeconomic models with linkages to the financial markets in two
meetings held in September and May
in New York. With generous funding
from the Arthur P. Sloan Foundation
renewed at the end of the year, the
initiative awarded dissertation funding to 27 graduate students over the
course of the year. These students
have produced innovative work that
sheds light on the mechanisms by
which financial shocks are transmitted through the economy.
Emerging Initiatives
The institute is in the early phases
of expanding its research portfolio
in global directions. An initiative in
International Economics began with
a conference on “Flows of Goods and
Technologies in the Global Economy”
April 3–4. Likewise, an initiative on
the Economics of Conflict will begin
in spring 2016 with a research conference cosponsored by the Harris
School.
Becker Friedman Institute | 7
VISITING SCHOL ARS
An Intellectual Destination
for Inquiring Minds
With plenty of space for visitors in our new home in Saieh Hall, the
institute welcomed a diverse group of 47 visiting scholars who gained
from and contributed to daily exchanges across the UChicago economic
community. Researchers hailing from Berkeley to Zurich spent time at
the institute interacting with students and faculty, sharing work in
areas ranging from behavioral economics to game theory. Here are the
stories of just a few of those visitors.
The Economics of Migration
Visiting the institute in April, Melanie Morten of
Stanford seemed unfazed by the fierce reputation of the University of Chicago’s workshops. “It’s
a very intellectually vigorous environment,” said
Morten, who was thankful to faculty and students
attending the family economics workshop for giving her “a great opportunity to present research in
progress.”
Morten and her coauthors are in the process of
examining how where you live might relate to how
Morten also looked at the comparative costs of
commuting. If infrastructure has made it cheaper
for laborers of a given industry to get to their job in
an urban center, or on the outskirts of a developed
region, what does that mean for how people match
to certain types of work? What does this lower
matching cost mean for the economy as a whole?
“When we look at that, we find that [lower migration costs] could explain an increase in per capita
income of about 20 percent,” says Morten.
That quantifies the returns on higher worker mobil-
much money you make. All over the world, people
ity over time, but we can also use this measure
live in areas with very low wages compared to what
to compare developing countries to the US. An
they might earn elsewhere. Morten wants to know if
American citizen’s average output is around 15
the factors that individuals use to make these deci-
times that of a person living in Indonesia; by
sions differ depending on where you live. Can you
Morten’s measure, about ten percent of that pro-
simply move a person to a richer part of the world
ductivity gap can be explained by the lower mobil-
and expect her to earn more? Or do low wages aris-
ity costs enjoyed by US workers.
ing from individual factors and decisions that would
continue in a high-wage environment?
Morten hopes that work like hers will help policymakers recognize the benefits of integrated labor
People elect to stay put for all sorts of reasons—
markets, as well as possible side effects of misdi-
common language, shared religion or culture, pre-
rected regional development policies
ferred weather, an optimal commute. Giving up
these things are costs migrants bear along with the
actual expenses of moving. Morten and colleagues
correlated such factors to detailed micro-data for
Indonesia and the United States from 1976 to 2012.
That data starts to paint a picture of the costs of
migration over time, and an understanding what
causes them to change, says Morten.
8 | The University of Chicago
Explaining Bubbles
Asset price bubbles have cropped up in financial
markets for centuries, yet we don’t completely
understand how and why they arise. Distinguished
Research Fellow Jose A. Scheinkman has studied
them carefully, and offered some explanations at a
Friedman Forum Undergraduate Lecture.
Distinguished Research Fellow
Pierre-André Chiappori
George Tavlas of
the Bank of Greece
Columbia University’s
José Scheinkman
Distinguished Research Fellow
Thomas J. Sargent
Scheinkman outlined three observed facts about
commentator. “On both sides, there are investors
conditions associated with bubble episodes: they
who overestimate their knowledge and therefore
coincide with increased trading volume and also
make decisions based on that overconfidence,”
with financial or technical advances, and they burst
he added.
when asset supply increases.
As long as the two groups have different informa-
As evidence, Scheinkman cited overtrading in the
tion or beliefs, the option to be able to sell to the
years leading up to the 1929 stock market crash
other group will always bring a higher price for the
and the Internet start-ups crowding onto the stock
stock than its fundamentals indicate. And the more
markets during the dot.com boom.
the two groups diverge, the higher prices will rise.
Scheinkman presented his model of bubble formation with two groups of investors. Group A is
“That is the bubble. It is not because one group
is more optimistic. The bubble is the value of the
rational and makes decisions about investing based
option of reselling to the other party in the future,”
on their reading of the markets. Group B makes
Scheinkman said.
decisions based on the opinions of a TV business
Visiting Scholars continued f
Becker Friedman Institute | 9
VISITING SCHOL ARS
Costas Meghir,
Yale University
The Failings of Macro Models
Sir Mervyn King, the former governor of the Bank
of England, also addressed the shortcomings of
models from a policy perspective in one of the
talks he gave as the institute’s 2015 Ta-Chung Liu
Distinguished Visitor.
Standard available macroeconomic models did
not help forecast the last financial crisis or help to
respond to the long-lasting recession that followed.
So what type of model would help us understand
what came before and after the financial crisis?
Stefanie Stantcheva,
Harvard Society of Fellows
King said a financial or economic crisis could be
defined as “a reaction to the realization that a big
mistake was made.” Many existing macro models
“are not helpful about why the mistake or misperception has built up. There must be something to
explain why misperceptions could exist and why
the correction takes a long time as well.”
Students enjoyed several opportunities to hear
and learn from King, a policymaker and influential
scholar. He spoke with students in Anil Kashyap’s
class at the University of Chicago Booth School
of Business. He also spoke to a crowd of students
King explored this question in an informal talk for
and professionals at an event cosponsored with
about 60 students and faculty members.
Chicago Booth’s Initiative on Global Markets. That
“Despite the biggest stimulus ever seen in the world,
we have seen a recovery that is very slow and left
a gap between where we thought we would be
ten years ago and where we are,” remarked King.
talk explored the relationship between currencies
and nations. King later said that he much enjoyed
his visit to Chicago and the interaction with faculty
and students.
Competing explanations have been put forth to
King’s visit was made possible by the generosity
explain the slow recovery, but they are incomplete
of Ernest and Joan Liu, who established a
or circular, he said. “We have to make a story with
visiting scholar’s post in honor of Ernest’s father,
the economics behind it to explain observed facts,”
distinguished econometrician Ta-Chung Liu.
he noted. “I’m trying to put the economics back
The institute is grateful to the Liu family for
into this.”
supporting King’s visit.
10 | The University of Chicago
“Competing explanations have been put forth to explain
the slow recovery, but they are incomplete or circular.
We have to make a story with the economics behind it
to explain observed facts.”
—SIR MERVYN KING
Visiting
Scholars
2014–15
Dilip Abreu
Princeton University
Econometrics
Ufuk Akcigit
University of Pennsylvania
Economics of innovation
and growth
Kenneth Ayotte
University of California,
Berkeley
Bankruptcy, corporate
finance
Yeon-Koo Che
Columbia University
Contracts, organization,
microeconomics
Andrew Chesher
University College London
Econometrics
Stefano DellaVigna
University of California,
Berkeley
Behavioral economics,
applied microeconomics
Michael Dickstein
Stanford University
Health economics
Yanqin Fan
University of Washington
Econometrics
Jesús Fernández-Villaverde
University of Pennsylvania
Applied econometrics,
public policy
Drew Fudenberg
Harvard University
Game theory
Xavier Gabaix
New York University
Asset pricing,
macroeconomics,
behavioral economics,
executive compensation
Stefania Garetto
Boston University
Macroeconomics,
international trade
Joshua Gottlieb
University of British Columbia
Health economics
Benjamin Handel
University of California,
Berkeley
Health and behavioral
economics
Shui-Chin Lee Fellow
Richard Hornbeck
Harvard University
Economic history
of America
George Tolley Fellow
Felix Küebler
University of Zurich
Computational economics
Tong Li
Vanderbilt University
Identification and inference
in game theory models
Ulrike Malmendier
University of California,
Berkeley
Corporate and behavioral
finance
Thornber Visiting Fellow
Albert Marcet
Barcelona Graduate School
of Economics
Macroeconomics, financial
economics, time series
Costas Meghir
Yale University
Labor responses to tax
reforms
Carolin Pflueger
University of British Columbia
Monetary policy, finance
Monika Piazzesi
Stanford University
Finance, macroeconomics
Luigi Pistaferri
Stanford University
Labor economics; applied
econometrics
Jean-Marc Robin
Sciences Po
Microeconomics
Christina Romer
University of California,
Berkeley
Economic history,
macroeconomics
David Romer
University of California,
Berkeley
Monetary economics,
macroeconomics
José Scheinkman
Columbia University
Financial markets
Karl Schlag
University of Vienna
Modeling choices with
unknowns
Karl Schmedders
University of Zurich
Computational economics
Martin Schneider
Stanford University
Macroeconomics, finance
Andrew Shephard
University of Pennsylvania
Labor, public economics
Melanie Morten
Stanford University
Economics of migration
Stefanie Stantcheva
Harvard Society of Fellows
Optimal tax design
Ulrich Müeller
Princeton University
Econometrics
Chris Taber
University of Wisconsin
Econometrics
Isabelle Perrigne
Rice University
Industrial organization,
econometric applications
George Tavlas
Bank of Greece
Monetary policy
Quang Vuong
New York University
Theoretical and applied
econometrics
E. Glen Weyl
Microsoft Research
Price theory, industrial
organization
Frank Wolak
Stanford University
Environmental economics
Tao Zha
Federal Reserve Bank
of Atlanta
Macroeconomics,
econometrics
Distinguished
Research
Fellows
Pierre-André Chiappori
Columbia University
Behavior, risk, mathematical
economics
Thomas J. Sargent
New York University
Rational expectations,
macroeconomics
Robert M. Townsend
Massachusetts Institute
of Technology
Economic organization and
financial systems
TA-CHUNG LIU
DISTINGUISHED VISITOR
Sir Mervyn King
New York University
Monetary policy
Research
Fellows
Benjamin Brooks
Princeton University
Microeconomics
Thibaut Lamadon
University College London
Macro-labor, contracts,
applied econometrics
Becker Friedman Institute | 11
SAIEH HALL
Chicago Economics
Has a New Home
Seven years of planning, meticulous restoration, and adaptive
renovations culminated in a beautiful and efficient new home for the
Becker Friedman Institute and the Department of Economics.
The Saieh family
tours the hall
Ann Beha and Associates transformed the 90-year-
Saieh and his extended family were on hand for the
old former seminary building into a modern
dedication. “What Chicago has done for the world,
research and educational center tailored to the
for America, for Chile, and for my family is enor-
ongoing tradition of intense inquiry, discussion,
mous. As a family, we made the decision to support
and collaboration.
The institute held its first programs in the facility’s
new skylit classroom in September 2014. In a joyful
ceremony held October 30, the building was dedicated as the Saieh Hall for Economics, with thanks
the department and the Becker Friedman Institute,
and we feel we are privileged to do that,” he said.
Saieh recalled the Department of Economics as a
contentious place in his student days in the 1970s.
“Everybody had different views,” he recalled. “The
to the generosity of Chilean businessman Alvaro
only thing they had in common was to dig deep for
Saieh, AM’76, PhD’80, and his family.
knowledge.”
“Years of plans, dreams, ambitions and hard work
have culminated in the reality of this beautiful building,” said institute director Lars Peter Hansen.
With space to accommodate an expanding roster
of visiting scholars and programming for research-
That’s still true today, President Robert J. Zimmer
remarked. The UChicago economics community
is an extended family, and, like many, “it’s a complicated family. This family fights all the time,” he
quipped.
ers, students, and the public, “the institute is a true
Reflecting on the number of people around the
intellectual destination for the world’s best econo-
globe so profoundly affected by powerful eco-
mists,” he added.
nomic insights born here, he noted, “It’s remarkable to think there could be so much impact from
people sitting around, thinking and arguing with
each other.”
12 | The University of Chicago
We gratefully acknowledge
the generosity of the
Alvaro Saieh Family and
others who have contributed
to our beautiful and
functional new home.
Bernard J. DelGiorno
Richard and Jane Wong
Hodson and Ludmila Thornber
Mr. and Mrs. James B. McWethy
Jeremy J. Siegel
The Northern Trust Corporation
“We want to make buildings where people come together and find quiet places for
discovery. We find hidden opportunities, even if underground. We want a space that is
light, not intimidating, that joins the past with the future, that is up-to-date yet brings
back the richness of an era when architecture cared about the little details. We find
cozy spaces for the seminars, and gems waiting to be polished.”
—ANN BEHA, ON THE PROCESS OF TRANSFORMING SAIEH HALL
Becker Friedman Institute | 13
STUDENT EVENTS
Preparing Future Economists
Leading experts offer insights on “Big Data” and the future
of social science research
University of Chicago undergraduates heard an array of views on
the economic, moral, and political effects of so-called “big data” at a
student-organized panel discussion held on April 10, 2015.
The panel featured economists Susan Athey of
Athey noted that while economic models are
Stanford University, Hal Varian of the University
designed to find causality, figuring out how to fit
of California, Berkeley, and statistician and machine
these models to big data sets is a necessary next
learning expert Larry Wasserman of Carnegie
step in the field.
Mellon University.
“We really don’t know how to apply these tech-
In their opening remarks, all three panelists noted
niques to big data sets. If I have three variables,
that one of the biggest challenges of big data is
I can think really hard about how to specify
how to draw the right conclusions from it. While
my model, but if I’ve got thousands—nobody
the vast pools of stored data on virtually every elec-
has a theory of how a thousand variables affect
tronic transaction are useful in showing correlations
your outcome,” she said. “Where I’m trying to
between phenomena, interpreting correlations and
do research to bring these things together is to
showing causality between them remains difficult.
combine the best of both worlds.”
Student
Events
2014–15
Graduate Student
Lecture Series
Institute events offered
undergraduate and
graduate students access
to a wider range of
expertise and approaches
and opportunities to
build their research skills
through these events.
Research Experience
for Undergraduates
in Economics
How Big Data is Changing
Economies
Susan Athey, Stanford
University; Hal R. Varian,
Google Inc.; and Larry
Wasserman, Carnegie
Mellon University
Price Theory Summer
Camp
Edward Lazear, Steven Levitt,
John List, and Kevin Murphy
taught the unique Chicago
price theory approach
to PhD students from top
programs around the country.
14 | The University of Chicago
Reflections on Models of
Stagnant Demand
Mervyn King, former
governor of Bank of
England
Segmented Housing Search
Monika Piazzesi and
Martin Schneider, Stanford
University
Trends and Cycles in
China’s Macroeconomy
Tao Zha, Federal Reserve
Bank of Atlanta
Overview of Corporate
Bankruptcy
Kenneth Ayotte, University
of California, Berkeley
Becker Brown Bag Series
What Can Auctioneers Teach
Us About Auctions? Evidence
from Manheim Car Auctions
Devin Pope, Chicago Booth
Selling Failed Banks
Gregor Matvos, Chicago Booth
Who or What to Believe?
Trust and the Differential
Influence of Human
and Anthropomorphized
Spokespersons
Ann McGill, Chicago Booth
The student moderators, fourth-years Kayla Reinherz
added. Despite the challenges facing the use
and Justin Manley, also asked the panelists about a
of big data, the panelists were unanimous in prais-
pressing issue arising from the ubiquitous collection
ing its promise. All three agreed that this is the
and unlimited storage of transactional data: privacy.
most exciting phase of their careers, and that it’s a
If there are no safeguards in place, data can be
phenomenal time to be a scientist, economist,
traced back to specific individuals.
or statistician.
Wasserman demonstrated why this is such a com-
They also all agreed that it’s important for big data
plicated issue, saying that in order to guarantee
experts and economists to learn from each other
privacy, noise must be introduced, diluting the
and work together to find new solutions to data
data to a degree that robust analysis becomes
impractical. “You have to dissolve the amount of
issues. As Athey said in her introductory remarks,
“This is a moment in time where social science
information in the data set so much that it quickly
and economics can do so many things we couldn’t
becomes useless,” he said. With tensions between
do before.”
the statistician and internet security communities,
the two sides of the argument seem far from
coming to a solution to the problem, Wasserman
The Power of the Street:
Evidence from Egypt’s
Arab Spring
Tarek Hassan, Chicago
Booth
Inequality, Human Capital,
and Economic Growth
Robert Topel, Chicago Booth
Friedman Forums
Millennial Goals: What’s
Happened? What’s Next?
Nancy Stokey, UChicago
The Freakonomics
of Quitting
Steven Levitt, UChicago
Speculation, Trading
and Bubbles
Jose A. Scheinkman,
Columbia University
Computational
Economics Colloquium
Massively Parallel
Programming for
Economists: Challenges
and Opportunities
Jesús Fernández-Villaverde,
University of Pennsylvania
The institute gratefully acknowledges support for
this event from the CME Group Foundation.
Computable General
Equilibrium and the PATH
Solver
Todd Munson, Argonne
National Laboratory
Recent Advances in the
Computation of Equilibria
in Heterogeneous Agent
Macro Models
Felix Kübler, University
of Zurich
Projection Methods and
Higher-Order Dynamics in
Asset-Pricing Models with
Recursive Preferences
Karl Schmedders, University
of Zurich
Structural Approaches to
Optimal Taxation Design
Andrew Shephard,
University of Pennsylvania
Tensor-Based Computing
in Contract Theory, IO,
and HJB PDE Macro Models
Victor Zhorin, UChicago
Becker Friedman Institute | 15
O U T R E AC H E V E N T S
Taking Research on the Road
In free and lively public discussions, the Becker Friedman Institute
shared research, analysis, and insider views of US and global monetary
policy, the response to the financial crisis and Great Recession, the slow
economic recovery, and struggling labor markets.
Eight events—sometimes in different cities in the
same week—illuminated timely economic issues.
On January 6, the Chicago Economic Society, a
Immobility and Inequality
In Washington, DC, Davis and Murphy focused
on long-term trends that signal distress in
Washington, DC-based alumni group, hosted an
labor markets. Davis started with data showing
institute talk at which Steven Davis and Kevin
that employment rates have been dropping for
Murphy shared different evidence-based explana-
American men of most ages and education groups
tions for the slow-growing US economy and strug-
for decades. The decline in employment for
gling labor markets. Wall Street Journal reporter
women started more recently.
Pedro da Costa Davis moderated the talk.
The next night, back in Chicago, a standing-room-
“This has been going on long before the Great
Recession. It says we had serous problems in the
only audience of about 150 showed up on a bitterly
labor market,” said Davis, the William H. Abbott
cold night for a wide-ranging discussion of mon-
Professor of International Business and Economics
etary policy and uncertainty with Charles Evans,
at the University of Chicago Booth School of
president of the Federal Reserve Bank of Chicago,
Business.
led by Institute Director Lars Peter Hansen.
Labor market fluidity, measured by the pace at
which people move across jobs or positions move
Outreach Events 2014–15
across employers, has also been declining since
Tax Policy and the
Growth of States
with Rex Sinquefield,
MBA’72
mobility on the employee side both show a bit
Saieh Hall Open House
Presidential Economics
with Edward Lazear and
Christina Romer
Jobs, Growth and the
State of the US Economy
with Steven Davis
and Kevin Murphy
(Washington, DC)
16 | The University of Chicago
The Role and Impact
of Monetary Policy
in an Uncertain Economy
with Charles Evans and
Lars Peter Hansen
Consequences of
Uncertainty
with Lars Peter Hansen
(Washington, DC)
Money and Nations
with Mervyn King
Consequences
of Uncertainty
with Lars Peter Hansen
(Paris)
the 1980s. Reallocation on the employer side and
more than 25 percent drop in fluidity, a pattern
seen in all 50 states, all industries, and all firms,
for every age, education group, and gender.
Structural shifts in firm size, firm age, and industry
distribution, and an aging workforce account for
only a small share of the decline. “That leaves most
of the phenomenon unexplained,” Davis said.
Is this a cause for concern? Lower job reallocation
rates mean less unemployment and less job market
friction. But for Davis, the downside outweighs this
upside.
2014 Nobel Laureate
Jean Tirole
Edward Lazear and
Christina Romer
“If you do lose your job, or have a job and aren’t
Lars Peter Hansen with Chicago
Fed President Charles Evans
and declining growth, showing that the wage
satisfied, it’s harder to find a new path. Co-locating
differential between college and high school
with a spouse or moving along a career path is
graduates has skyrocketed since the late 1970s.
harder. If you can’t move along a career path and
College graduates today earn 70 percent more
gain a salary increase that goes with it, it’s harder
than high school graduates—compared to a
to build human capital.”
20 percent college wage premium in 1979.
“Evidence suggested declines in fluidity are reduc-
“Over 40 years, there was an expansion of inequality
ing employment rates, particularly among the
throughout the wage distribution and a rise in the
younger and less educated. They are the ones for
educational differentials. It’s not the old story of the
whom fluidity is likely to be most important.”
underclass, where everyone is doing okay except
Complementing Davis’s data, Murphy shared
evidence on salaries for the younger and less
educated. He offered a supply-and-demand
the poorest,” said Murphy, the George J. Stigler
Distinguished Service Professor in Economics.
Outreach Events continued f
explanation for wage inequality, unemployment,
Becker Friedman Institute | 17
O U T R E AC H E V E N T S
“There are a couple of ways to think about that:
‘wow, that’s a big rise in equality,’ or, ‘that’s a big
poorly prepared for higher ed,” Murphy said.
“Education is largely a public endeavor; we have to
return on investment. It’s an opportunity,’” Murphy
do what we can to respond to the challenge of pre-
noted.
paring a work force trained for a growing economy.”
People have recognized that opportunity and
sought higher education and the rewards it
brought. For most of the 20th century, the supply of skilled labor met demand. But for the last
30 years, demand for skilled workers in a modern,
technology-based economy has exceeded supply,
driving up wages for graduates.
Embracing Uncertainty
At the “Role and Impact of Monetary Policy in an
Uncertain Economy” in Chicago, Evans explained
the thinking behind Fed policy and explained that
his assessments are often followed by a key caveat:
“I could be wrong about that.” With the economic
While college entrance rates are strong, comple-
stakes so high, Fed officials must consider differ-
tion rates have declined since the 1990s. One rea-
ent ways they could err and which types of errors
son is because too many students are coming out
would be most costly for the economy.
of struggling secondary school systems and are
poorly prepared for college. And those who don’t
go to college or drop out of high school have few
job opportunities and minimal wage growth.
“People are trying to respond to labor market
demand, but they are not very able to. They are
18 | The University of Chicago
Evans and his fellow policymakers on the Federal
Open Market Committee deal with such uncertainty
and the very real economic consequences of being
wrong every day. Hansen wrestles with uncertainty
on a more theoretical basis, studying ways to incorporate it in macroeconomic models like those on
“There are a couple of ways to think about the rise in
educational [wage] differentials: ‘wow, that’s a big rise
in inequality,’ or ‘that’s a big return on investment.
It’s an opportunity.’”
—KEVIN MURPHY
Institute cochair Kevin Murphy
which the Fed relies. The pair agreed that they’d
One way the Fed has tried to acknowledge and
like to see more acknowledgement of uncertainty
reduce uncertainty is with forward guidance—state-
in the policy realm.
ments about how the Fed is likely to adjust policy
For example, Hansen cited editorials that use overly
simplistic data to draw opposing conclusions on
the effectiveness of Keynesian stimulus. “There’s
scope for the greatest divergence in opinions
when historical evidence is weak,” said Hansen.
if economic conditions in the future evolve as predicted. Pointing out that forward guidance is not
always so clear, Hansen wondered, “Is the point to
buy the Fed some wiggle room?”
Evans said that while laying out the thinking of
Not acknowledging the unknown “opens the data
Fed policymakers in advance does help people
that’s out there to multiple interpretations, often
and firms anticipate shifts in monetary policy,
dramatically different opinions of the same data.
the realities of keeping the market stable and
In my view, it diminishes the discourse around
achieving consensus among the 17 members of
public policy.”
Evans agreed: “The way I would like debates like
this to carry forward would be that someone brings
their analysis to the table, and they make predic-
the FOMC means that policy must be conditional,
since it is shaped by a wide array of information.
“I’m amenable to explicit numbers, but it’s hard
to do,” said Evans.
tions, like [the Fed is] willing to do.”
He said that robust policy prescriptions should
not only specify how policy should evolve if events
work out as expected, but also how policy should
react if predictions turn out to be wrong.
Becker Friedman Institute | 19
20 | The University of Chicago
2 0 1 4 –1 5
Financial Report
Revenue
Expense
In thousands of dollars
In thousands of dollars
Funding Source
Budget
Unrestricted Support
1,355
Unrestricted Endowment Payout
665
Restricted Gifts and Grants
1,965
Restricted Endowment Payout
Total Current Year
Expense Area
Amount
BFI Operations
1,811
Researcher Compensation
865
Conferences & Research Support
1,268
599
Visitors574
4,584
Total4,518
27%
40%
Endowment Payout
(unrestricted
and restricted)
BFI Operations
19%
Researcher
Compensation
30%
Unrestricted
Support
28%
Conferences and
Research Support
43%
Restricted Gifts
and Grants
13%
Visitors
Funding Allocation to Expense Areas
In thousands of dollars
Expense Area
BFI Operations
Researcher Compensation
Conferences and Research Support
Visitors
Unrestricted
Funding
Restricted
Funding
1,465
346
130
735
115
1,153
310264
Expense Total
2,020
2,498
Funding Available
2,020
2,564
0
66
Net Total
Overall, the institute underspent funding by $66,000, but this was
almost exclusively from restricted sources. Unspent funding rolls over
into the next fiscal year.
Becker Friedman Institute | 21
2 0 1 4 –1 5
Honor Roll of Donors
The Becker Friedman Institute gratefully acknowledges these individuals, foundations,
and organizations for their generous gifts supporting the institute’s efforts to advance,
refine, and disseminate policy-relevant economic research.
$1 million +
$10,000+
Mr. David Gerrard Dunn
Anonymous (2)
Dr. Stephen M. Denning
Goldman Sachs & Company
The Education Endowment
Foundation
John Templeton Foundation
Mr. Jeremy J. Siegel
& Mrs. Ellen Schwartz
$100,000 +
Anonymous (2)
Dr. Edward R. Allen III
& Dr. Chinhui Juhn
CME Group Foundation
Mr. Donald Ray Wilson Jr.
Mr. Claudio L. S. Haddad
& Mrs. Rosalie Rahal Haddad
Humana Inc.
Dr. Peter D. Linneman
& Ms. Kathleen Linneman*
& Ms. Judith J. Johnson
Mr. Charles P. McQuaid
& Mrs. Monica McQuaid
James B. McWethy
Dr. Bernard E. Munk
Mr. Stephen R. and Lisa S.
Rigsbee
Mrs. Barbara Ritzenthaler
& Mr. Lawrence R. Moats
Mrs. Luann Jacobs*
Mr. Boyan Jovanovic
Mr. Matthew Edwin Kahn
& Ms. Dora Luisa Costa*
Mrs. Kay H. Kamin
Professor Jisoon Lee*
Mr. James A. O’Donnell
Dr. Justin Yifu Lin
Dr. Yue-Chim Richard Wong
Mr. Arthur Sidney Margulis, Jr.
Mr. Lawrence Hilibrand &
Ms. Deborah Ziegler Hilibrand
$1,000 +
Mr. Andrew William Alford
& Ms. Wei Jiang
Pfizer Inc.
Mr. Yuko Arayama*
Searle Freedom Trust
Mr. Michael John Bazdarich
Mr. Edward A. Snyder*
Mr. Lawrence Scott Berlin
Mrs. MarrGwen Chapman
Dr. John F. O. Bilson
& Dr. Laura Anne La Haye
Mr. Joseph L.Y. Chan
& Ms. Erica Liu Chan
Mr. William M. Landes
& Mrs. Elisabeth M. Landes*
Constellation Energy Group
Foundation
22 | The University of Chicago
Mr. Matthew W. Jacobs and
Mr. Lawrence W. Kenny, PhD*
Mr. David Adler
Townsend*
Li-Huang
Mr. Myron Scholes*
John D. & Catherine T.
Townsend & Mr. Stuart B.
Mr. He Huang & Ms. Rebecca H.
Mr. Richard O. Ryan
Ernest and Joan Liu Foundation
MacArthur Foundation
Dr. Robert J. Hodrick
and Mrs. Elaine R. Margulis
Mr. Paul M. Mayfield
& Ms. Susan N. Mayfield
Mr. Frederic W. Morton, Jr.
& Mrs. Karen S. Vrechek
Mr. Todd Eugene Petzel
Mrs. Maria E. Pippo-Kretschmer
& Mr. R. David Kretschmer
Mr. Luis Rodriguez
Mr. James O. Roeder
Mr. Evan Schulman
Dr. Sherman Shapiro
& Mrs. Ellen Shapiro*
Mr. Arthur Sidney Margulis, Jr.
and Mrs. Elaine R. Margulis
Mr. Steven B. Weinstein
Mr. Mingde Yu*
Up to $1,000
Mr. William K. Haffner
Mr. Benjamin Changwook Shim
Dr. James Dutton Adams
Dr. Ronald W. Hansen
Ms. Carol J. Simon
Mr. David Jerome Adelman
Mr. Jonathan S. Hartley
Mr. Reynold Bennett Strossen
AIG Matching Grants Program
Mr. David C. Healey
Dr. Jeanne-Mey Sun
Mr. Johnathan A. Alexander
Mr. Andrew J. Hogue
Mr. Baird Smith Allis
Mr. Robert A. Kaiser Jr.
Mr. Kenneth N. Sundaresan
Dr. Andrew James Aronson
Mr. Benjamin Klein
Dr. Pavel Svihra & Ms. Joy Svihra
Mr. Konstantin Georgiev Kulev
Mr. Matias E. Tapia Gonzalez
& Dr. Iris K. Aronson
Ms. Aasha Bharat Barot
Mr. Bernard Lashinsky
Mr. James Baumgardner
Ms. Madeline Z. Lauf
& Ms. Ann E. Herington
Mr. Scott Lee
& Mr. Tom J. Janssens*
& Ms. Ana S. Leon Lince
Ms. Emma G. Marquez and
Mr. Gordon L. Toggweiler
Mr. Peter J. Boxall*
Mr. Norman B. Lefton
Mr. Lee A. Caplan
Dr. David M. Levy
Mr. Kevin Chun Chau Cheng
Ms. Yuen Shan Sandi Li
Ms. Anita Ka-Yin Yu
Dr. Phillip Ely Church
Lincoln Financial Foundation
Ms. Abby M. Zarkin & Gary A.
Mr. Damien De Walque &
Mr. Shawn S. Loh
Ms. Celine P. Van Zeebroeck*
Dr. Dennis N. and Mary De Tray
Deutsche Bank Americas
Foundation
Mr. Melchior Dikkers
Mr. Robert J. Doyle Jr.
& Mrs. Susan B. Wessels*
Zarkin, PhD
Ms. Karen Virginia Lombard*
Mr. Clare W. Zempel
Mr. Patrick Jose Henry
Mr. Harry Zimmerman
Reyes Malto
Dr. Richard Dale Marcus
*Gifts marked with an asterisk were
Mr. William D. Marder
made in memory of the late Gary S.
& Ms. Donna Rhae Marder
Mr. Scott David Drewianka*
Ms. Deborah Ann Mason
Ernst & Young Foundation
Dr. Ann-Marie Meulendyke
Matching Gifts
Dr. Walter John Wessels
Becker.
Every effort has been make to
accurately acknowledge all gifts and
Mr. Ian M. Muir
pledge payments made between
Mr. John B. Faughnan
Mr. Christian Michael Origlio
July 1, 2014, and June 30, 2015.
Mrs. Frances M. and Dr. James
Pacific Mutual Life Insurance
If there are errors or questions, please
M. Ferguson
Company
Mr. Michael E. Edleson
Mr. Ian William Holmes Parry*
Mr. Andrew Joseph Filardo
Ms. Chantelle R. Pires
& Ms. Elizabeth Lynne Profit
Mr. Clayne Legrand Pope
Mr. Trevor S. Gallen
Ms. Anisha Raj
Mr. Hays N. Golden &
Mr. Andrew C. Rhoads
Ms. Kathleen B. Rubenstein*
Ms. Itir Gorguc
Dr. David E. Runkle
& Ms. Patricia M. Runkle
Mr. Francois Gourio
Dr. John William Ruser
Ms. Madeleine Sophie
Mr. John Paul Salvino
Greathouse
contact [email protected].
Mr. Jeffrey R. and Jennifer
Seaver
Becker Friedman Institute | 23
Leadership
Governing Committee
Institute Research Council
Becker Friedman Institute
Eric D. Isaacs, Chair
Lars Peter Hansen, Chair
Council
Provost
Director and cochair,
Yue-Chim Richard Wong, Chair
Becker Friedman Institute
Guity Nashat Becker, PhD’73
Eric D. Isaacs, ex officio
David Booth, MBA’71
Sunil Kumar
Dean, University of Chicago
Booth School of Business
Kevin Murphy, ex officio
Richard Elden, MBA’66
Steven J. Davis
Cochair, Becker Friedman
Daniel Fischel, JD’77
Deputy Dean, Chicago Booth
Institute
Claudio Haddad, AM’72, PhD’74
Daniel Diermeier
Fernando Alvarez
Leo Melamed
Dean, Harris School
Department of Economics
Charles McQuaid, MBA’76
Kerwin Charles
Henry Paulson
Harris School of Public Policy
Andrew Rosenfield, JD’78
of Public Policy
John List
Chair, Department
of Economics
Michael Schill
Dean, Law School
David Nirenberg
Dean, Social Science Division
James J. Heckman
Department of Economics
Erik Hurst
Chicago Booth
Richard O. Ryan, MBA’76
Alvaro Saieh, AM’76, PhD’80
George P. Shultz
Hodson Thornber, AB’62,
PhD’66
Anup Malani
Law School
MarrGwen Townsend
Don R. Wilson Jr., AB’88
Distinguished Advisory Group
Pierre-André Chiappori
Columbia University
Edward P. Lazear
Nancy Stokey
Department of Economics
Chad Syverson
Chicago Booth
Stanford University Graduate
Pietro Veronesi
School of Business
Chicago Booth
Thomas J. Sargent
New York University
Robert M. Townsend
Massachusetts Institute
of Technology
© 2015 The University of Chicago. Photography: Joseph Sterbenc, Rob Kozloff, Jason Smith, and John Zich
Contributors: William Leddy, Robin Mordfin, Mark Riechers, Toni Shears, Amelia Snoblin, and Fareine Suarez
Design: Sorensen London Design
24 | The University of Chicago
The Becker Friedman Institute
Saieh Hall for Economics
5757 South University Avenue
Chicago, Illinois 60637
773.702.5599
[email protected]
www.bfi.uchicago.edu