Advancing Economics

THE BECKER FRIEDMAN INSTITUTE

FOR RESEARCH IN ECONOMICS
201415 Annual Report

From the Leadership

The Becker Friedman Institute began 201415 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.

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

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.

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

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

201415 Highlights

47 236 18 38 3,450
Visiting
scholars

Presenters

Student
events

Total audience

Total
events

In 201415, 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

Were 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

Read on for more details of our active and

productive year.
Stanfords Susan Athey at a studentorganized panel on big data

2|The University of Chicago

The Bank of Englands

Andrew Haldane

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 Beckers influence, panel modera-

the scope and influence

tor Steven Levitt said that he and Pierre-Andr

of Beckers work at a

Chiappori once analyzed the impact of leading

conference in his memory

economists by totaling how many times their work

October 3031, 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 economistand

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

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 Beckers work extended

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

on human capital, matching, and labor supply

Exploring the Price of Policy

Uncertainty (Washington DC)

Scott Kominers of the Harvard Society of Fellows

marginal returns

UChicago Law School discussed how Beckers

Creditors and Corporate

Governance

Pierre-Andr Chiappori of Columbia University

the link between education and lower fertility rates,

In the second panel, William Landes of the

The Society for Economic

Measurement

on inequality, insurance, and family labor supply

on strategy-proofness, investment efficiency, and

improved political governance.

Midway Market Design

Conference

Richard Blundell of University College London,

Goldin and Edward Glaeser shared evidence on

higher female participation in the economy, and

Academic
Conferences
201415

Conference on the Handbook

of Macroeconomics, Volume 2

Edward Lazear of Stanford University, applying

Federal Agency Decision

Making Under Deep
Uncertainty

Beckers 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

Always empirical, Heckman considered a number

Heckman explained that when Becker began his

of different ways to quantify Beckers impact. One

work, the general view of was that things like family

measure was his awardsthe 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

the notion of imperfect competition to politics,

James J. Heckman spoke on the market and non-

Medal of Freedom among them. Another was the

the Chicago School changed all of that. What is

while Sam Peltzman of Chicago Booth highlighted

market benefits of human capital, and later con-

opinions of his teachers; in 2001 Milton Friedman

notable about Gary Becker is that as he evolved

Beckers lesser-known role as a major figure in the

cluded the conference with a keynote address on

said Gary Becker was the most influential social

in his thinking, he took the field of economics with

economic analysis of regulation.

the impact of Beckers research.

scientist of the past half century, Heckman noted.

himand later, many other social sciences too,

Heckman said.

4|The University of Chicago

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 dont 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 78, 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 89, 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,

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 initiatives Science of Philanthropy conference, held November 78, 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.

Price Theory initiative

director Steven Levitt

6|The University of Chicago

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 2627, 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., AB88, and Edward R.
Allen III, PhD92, 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 Jos Scheinkman. The initiative
also presented the Conference on
the Handbook of Macroeconomics
Volume 2 on April 2325.

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 30July 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 34. 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 Chicagos workshops. Its
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
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 mobility 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 citizens 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

Mortens 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.

continue in a high-wage environment?

commentator. On both sides, there are investors

who overestimate their knowledge and therefore

coincide with increased trading volume and also

make decisions based on that overconfidence,

Morten hopes that work like hers will help policy-

with financial or technical advances, and they burst

he added.

makers recognize the benefits of integrated labor

when asset supply increases.

common language, shared religion or culture, pre-

rected regional development policies

ferred weather, an optimal commute. Giving up

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

Distinguished Research Fellow

Thomas J. Sargent

conditions associated with bubble episodes: they

markets, as well as possible side effects of misdi-

actual expenses of moving. Morten and colleagues

George Tavlas of
the Bank of Greece

Scheinkman outlined three observed facts about

People elect to stay put for all sorts of reasons

these things are costs migrants bear along with the

Columbia Universitys
Jos Scheinkman

to certain types of work? What does this lower

much money you make. All over the world, people

ing from individual factors and decisions that would

Distinguished Research Fellow

Pierre-Andr Chiappori

Explaining Bubbles
Asset price bubbles have cropped up in financial
markets for centuries, yet we dont 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.

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

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
201415
Dilip Abreu
Princeton University
Econometrics
Ufuk Akcigit
University of Pennsylvania
Economics of innovation
and growth
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 institutes 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 Kashyaps
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 Booths 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

Kings 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 scholars post in honor of Ernests father,

the economics behind it to explain observed facts,

distinguished econometrician Ta-Chung Liu.

he noted. Im trying to put the economics back

The institute is grateful to the Liu family for

into this.

supporting Kings visit.

10|The University of Chicago

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
Jess Fernndez-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 Kebler
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
Jos 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 Meller
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-Andr 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

We gratefully acknowledge
the generosity of the
Alvaro Saieh Family and
others who have contributed
to our beautiful and
functional new home.

SAIEH HALL

Chicago Economics
Has a New Home

Bernard J. DelGiorno

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.

Richard and Jane Wong

Hodson and Ludmila Thornber
Mr. and Mrs. James B. McWethy
Jeremy J. Siegel
The Northern Trust Corporation

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 facilitys
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, AM76, PhD80, 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-

Thats still true today, President Robert J. Zimmer

remarked. The UChicago economics community
is an extended family, and, like many, its 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 worlds best econo-

globe so profoundly affected by powerful eco-

mists, he added.

nomic insights born here, he noted, Its remarkable to think there could be so much impact from
people sitting around, thinking and arguing with

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

each other.
12|The University of Chicago

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 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 its 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.

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

Wasserman demonstrated why this is such a com-

They also all agreed that its important for big data

learning expert Larry Wasserman of Carnegie

step in the field.

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

Mellon University.

We really dont 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 Ive got thousandsnobody

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 Im 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
201415

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
Chinas 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

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 couldnt

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 Egypts
Arab Spring
Tarek Hassan, Chicago
Booth
Inequality, Human Capital,
and Economic Growth
Robert Topel, Chicago Booth

Friedman Forums
Millennial Goals: Whats
Happened? Whats 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
Jess Fernndez-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 Kbler, 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 eventssometimes in different cities in the
same weekilluminated 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.

2014 Nobel Laureate

Jean Tirole

Labor market fluidity, measured by the pace at

which people move across jobs or positions move

Outreach Events 201415

across employers, has also been declining since

Tax Policy and the

Growth of States
with Rex Sinquefield,
MBA72

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)

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,

Edward Lazear and

Christina Romer

If you do lose your job, or have a job and arent

Lars Peter Hansen with Chicago

Fed President Charles Evans

and declining growth, showing that the wage

satisfied, its 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.

Structural shifts in firm size, firm age, and industry

harder. If you cant move along a career path and

College graduates today earn 70 percent more

distribution, and an aging workforce account for

gain a salary increase that goes with it, its harder

than high school graduatescompared to a

only a small share of the decline. That leaves most

to build human capital.

20 percent college wage premium in 1979.

for every age, education group, and gender.

of the phenomenon unexplained, Davis said.

Evidence suggested declines in fluidity are reduc-

Over 40 years, there was an expansion of inequality

Is this a cause for concern? Lower job reallocation

ing employment rates, particularly among the

throughout the wage distribution and a rise in the

rates mean less unemployment and less job market

younger and less educated. They are the ones for

educational differentials. Its not the old story of the

friction. But for Davis, the downside outweighs this

whom fluidity is likely to be most important.

underclass, where everyone is doing okay except

upside.

Complementing Daviss 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,

16|The University of Chicago

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 the rise in

educational [wage] differentials: wow, thats a big rise
in inequality, or thats a big return on investment.
Its an opportunity.
KEVIN MURPHY

Institute cochair Kevin Murphy

There are a couple of ways to think about that:

wow, thats a big rise in equality, or, thats a big

poorly prepared for higher ed, Murphy said.

Education is largely a public endeavor; we have to

return on investment. Its 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
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.

poorly prepared for college. And those who dont

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

One way the Fed has tried to acknowledge and

like to see more acknowledgement of uncertainty

reduce uncertainty is with forward guidancestate-

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

While college entrance rates are strong, comple-

of struggling secondary school systems and are

which the Fed relies. The pair agreed that theyd

Evans and his fellow policymakers on the Federal

Open Market Committee deal with such uncertainty
and the very real economic consequences of being

the effectiveness of Keynesian stimulus. Theres

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

thats 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.
Im amenable to explicit numbers, but its hard
to do, said Evans.

tions, like [the Fed is] willing to do.

wrong every day. Hansen wrestles with uncertainty

He said that robust policy prescriptions should

on a more theoretical basis, studying ways to incor-

not only specify how policy should evolve if events

porate it in macroeconomic models like those on

work out as expected, but also how policy should

react if predictions turn out to be wrong.

18|The University of Chicago

Becker Friedman Institute|19

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

Visitors 574

4,584

Total 4,518

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

310 264

Expense Total

2,020

2,498

Funding Available

2,020

2,564

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.

20|The University of Chicago

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 institutes efforts to advance,
refine, and disseminate policy-relevant economic research.

$1 million +

$10,000+

Mr. David Gerrard Dunn

Up to $1,000

Mr. William K. Haffner

Mr. Benjamin Changwook Shim

Anonymous (2)

Dr. Stephen M. Denning

Goldman Sachs & Company

Dr. James Dutton Adams

Dr. Ronald W. Hansen

Ms. Carol J. Simon

Dr. Robert J. Hodrick

Mr. David Jerome Adelman

Mr. Jonathan S. Hartley

Mr. Reynold Bennett Strossen

Mr. He Huang & Ms. Rebecca H.

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

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

Mr. Boyan Jovanovic

Mr. Matthew Edwin Kahn
& Ms. Dora Luisa Costa*
Mrs. Kay H. Kamin

& 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

& Ms. Ana S. Leon Lince

Ms. Emma G. Marquez and
Mr. Gordon L. Toggweiler

Mr. Lawrence W. Kenny, PhD*

Mr. Peter J. Boxall*

Mr. Norman B. Lefton

Professor Jisoon Lee*

Mr. Lee A. Caplan

Dr. David M. Levy

Mr. James A. ODonnell

Dr. Justin Yifu Lin

Mr. Kevin Chun Chau Cheng

Ms. Yuen Shan Sandi Li

Ms. Anita Ka-Yin Yu

Dr. Yue-Chim Richard Wong

Mr. Arthur Sidney Margulis, Jr.

Dr. Phillip Ely Church

Lincoln Financial Foundation

Ms. Abby M. Zarkin & Gary A.

Mr. Damien De Walque &

Mr. Shawn S. Loh

Mr. Lawrence Hilibrand &

Ms. Deborah Ziegler Hilibrand
$1,000 +
Mr. David Adler
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

Townsend*

Mrs. Luann Jacobs*

Mr. Myron Scholes*

John D. & Catherine T.

Townsend & Mr. Stuart B.

Mr. Matthew W. Jacobs and

& Mr. Tom J. Janssens*

Mr. Richard O. Ryan

Ernest and Joan Liu Foundation

MacArthur Foundation

Li-Huang

& 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

and Mrs. Elaine R. Margulis

Mr. Paul M. Mayfield
& Ms. Susan N. Mayfield
Mr. Frederic W. Morton, Jr.
& Mrs. Karen S. Vrechek

Ms. Celine P. Van Zeebroeck*

Dr. Dennis N. and Mary De Tray
Deutsche Bank Americas
Foundation

Mr. Todd Eugene Petzel

Mr. Melchior Dikkers

Mrs. Maria E. Pippo-Kretschmer

Mr. Robert J. Doyle Jr.

& Mr. R. David Kretschmer

Mr. Luis Rodriguez
Mr. James O. Roeder

& 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. Evan Schulman

Mr. John B. Faughnan

Mr. Christian Michael Origlio

July 1, 2014, and June 30, 2015.

Dr. Sherman Shapiro

Mrs. Frances M. and Dr. James

Pacific Mutual Life Insurance

If there are errors or questions, please

& Mrs. Ellen Shapiro*

Mr. Arthur Sidney Margulis, Jr.
and Mrs. Elaine R. Margulis
Mr. Steven B. Weinstein
Mr. Mingde Yu*

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 bfi@uchicago.edu.

Mr. Jeffrey R. and Jennifer

Seaver

22|The University of Chicago

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, PhD73

Eric D. Isaacs, ex officio

David Booth, MBA71

Sunil Kumar
Dean, University of Chicago
Booth School of Business

Kevin Murphy, ex officio

Richard Elden, MBA66

Steven J. Davis

Cochair, Becker Friedman

Daniel Fischel, JD77

Deputy Dean, Chicago Booth

Institute

Claudio Haddad, AM72, PhD74

Daniel Diermeier

Fernando Alvarez

Leo Melamed

Dean, Harris School

Department of Economics

Charles McQuaid, MBA76

Kerwin Charles

Henry Paulson

Harris School of Public Policy

Andrew Rosenfield, JD78

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, MBA76

Alvaro Saieh, AM76, PhD80
George P. Shultz
Hodson Thornber, AB62,
PhD66

Anup Malani
Law School

MarrGwen Townsend
Don R. Wilson Jr., AB88

Distinguished Advisory Group

Pierre-Andr 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
bfi@uchicago.edu

www.bfi.uchicago.edu