The Miracle of NES: The Foundations of Modern Economics in Russia

Copyright 2012 by Gur Ofer.

Th is is an internal, limited edition of the book, to be distributed among members and friends of the New Economic School (NES) free of charge, as a present on the occasion of the celebration of its 20th anniversary, and not for sale.

NES expresses its sincere gratitude to alumni and staff members for the photos provided.Our special gratitude to Mr. Ivan Ivanyuk.In the book were also used photos by Anatoly Morkovkin, Stanislav Tikhomirov, Anton Tokarev.

UDC 378

Gur OferTh e Miracle of NES: Th e Foundations of Modern Economic in Russia. – M., 2012. – 180 p.ISBN 978-5-98856-157-6

I dedicate the book to Dalia, my wife,who persevered with me and supported mewith utmost patience for fifteen long years.

She is the invisible hero of NES,its utmost miracle

About the authorGur Ofer is a Professor (emeritus) at the Departments of Economics and of Russian Studies, Th e Hebrew University of Jerusalem, Israel. (www.economics.huji.ac.il). He received his BA (1962) and MA (1964) degrees in economics at the Hebrew University, and his PhD at Harvard (1969). In addition to extensive work and publications on the Soviet Economy, he worked and published in the areas of Immigration, the Welfare State and of Health Economics in Israel. Gur Ofer was among the founders of the New Economic School (NES) in Moscow, and served as the chair of its international advisory board (IAB) (1991-2004) (www.nes.ru). Since 2004 he is a member of its IAB. Gur Ofer served as the head of the economics department at the HU (1985-86), and as the president of the Israeli Economic Association (1998-99). During 1995 -2007 he served as the head of Th e Israel National Institute for Health Policy and Health Services Research (www.israelhpr.org.il ). Over the years Gur Ofer was a visiting scholar, among others, in Harvard, Columbia, UCLA, Yale, Th e Rand Corporation, the Wilson Center, the Brooking Institution, the World Bank and NES. Gur was born (1934) in Jerusalem, is married to Dalia, professor (emeritus) of Jewish History at the Hebrew University and they have four daughters and seven grandchildren. Email Address: [email protected]

About the bookTh is book tells the story of the creation and the development of NES during its early years, 1991-2004 under the dual control of its “founding fathers”, Russians and foreigners. It is a story of “transfer of technology”, that success or failure depends in many cases on the quality of the domestic partner and on the “chemistry” between the two groups. Th e choice of CEMI (Th e Central Economic and Mathematic Institute) as the domestic partner was probably the crucial one. Despite some disagreements and tensions on the way it was clear from the start that the Russian partners fully understood and supported the main features of NES. Th e same may be said of the group of Western professors that agreed to join in as members of the International Advisory Board (IAB). While the deliberations on internal academic issues were more interesting, the eff orts to obtain the support of the outside, in Russia and abroad, mostly fi nancial aid, were more diffi cult, sometimes frustrating. Yet NES enjoyed the support of a number of major foundations, fi rst and foremost those belonging to George Soros, that on top of a steady support, played also a role of supporter of last resort. Th e book tells the story of the growth of NES in terms of students and faculty, the replacement of visiting professors with young faculty members coming back from Western countries with PhD degrees, the introduction of modern teaching methods, engaged in research and combined teaching with research, and creating of a tenure track appointment and promotion system; of how NES promoted a close network and cooperation in research and scientifi c publications with the global community of economists, including that with graduates of NES who stayed abroad; and of how it raised the funds needed to run the school, including the introduction of tuition supported by a student loan fund; all these with the help of a dedicated group of staff members who had to learn their tasks almost from scratch. Finally the book recounts the radical change in its governance regime, the creation of a board of directors and the transfer of power from the founding fathers and dominance of the IAB to the young generation of economists; And, fi nally to learn on how NES became one of the top economic departments among the former communist bloc.

7

Table of Contents

The Miracle Worker on Miracles ................................ 9

Preface ......................................................................11

Chapter I. Prelude .....................................................13

Chapter II. Foundations and Preparations ................17How much mathematics? .......................................................21Statistics and econometrics ....................................................23Finances, the Budget, and the Budget Process ....................25Countdown: six months left ...................................................25Recruiting the First Visiting Professors................................26Textbooks, Journals, Library, and Computers .....................28Offi ces and Administration....................................................29

Chapter III. The First Year, 1992/93 – Plunging into Stormy and Chilly Waters ..................................31

Th e Visiting Professors ...........................................................35Students ....................................................................................36Tuition, Stipends and Fellowships ........................................37Th e “Public Seminar” ..............................................................37Fundraising ..............................................................................39

Chapter IV. 1993/94 – the Class of 1994and the First Commencement..................................41

Th e Second Year of Studies ....................................................42Master Th eses and a Semester Abroad .................................43PhD Studies Abroad ................................................................44Th e First Commencement .....................................................45

Chapter V. 1994/95–1996/97: Barry Ickes, Stabilization, the Research Center,and the Partner Hunt ................................................47

Research and Master Th eses ..................................................48Th e Research Center, GET, and the Ford Foundation Grant .........................................................................................49GET at work .............................................................................52Th e Birth of EERC ...................................................................53Widening the Scope and Merging aft er All? ........................56MSSES .......................................................................................56HSE ...........................................................................................57Strengthening NES’ Underpinnings .....................................59My Only Lengthy Stay at NES ...............................................60Fundraising and Public Relations .........................................61

Chapter VI. 1997/98–2002/03 – The Second Piatiletka, Building a New Facultyand Reaching Out.....................................................62

New Strategic and Business Plans and Th eir Implementation .......................................................................62Preparing for and Recruiting New Faculty ..........................63Th e Academic Appointment Committee (AAC) ................65Going into the Job Market .....................................................68RECEP/CEFIR .........................................................................69Growing to a Class of 100 ......................................................71Stewarding our Students through Graduation ....................72Th e Attendance Problem ........................................................73Developing the Curriculum and a Courseon Institutions ..........................................................................73

8

Th e “Applied Track” ................................................................74Reaching out ............................................................................75Whither NES Graduates? .......................................................77

In Russia ................................................................................77…And abroad .......................................................................78

Becoming Alumni and Forming an AlumniAssociation ...............................................................................79Governance Issues Yet Again .................................................80

Chapter VII. 1997–2002 –Fundraisingfor the 2nd Piatiletka .................................................82

Turning to Russia ....................................................................82Th e Russian Advisory Board (RAB) .....................................84But still dependent on the West ............................................85And between West and East ..................................................88Depending on Ourselves: “Cost Recovery” .........................88Tuition and the Student Loan Fund ......................................89Budgets, Defi cits and Arrears ................................................92Zvi Griliches – in Memoriam ................................................92A Concluding Note .................................................................92

Chapter VIII. 2002 – The Tenth Anniversary............94

Chapter IX. The Last Two Years under the Ancien Regime ......................................................................99

Chapter X. The “Russian House of Economics”(RHE) or the “Dom Ekonomiki” ............................101

Chapter XI. Changing of the Guard and Beyond ..103

Chapter XII. Epilogue –Four Concluding Summaries ..............................................................105

Stephen Kotkin’s Qualitative Evaluation ............................105Th e Budapest Conference ....................................................107NES in Figures: 1992 – 2004 – Today .................................108A Personal Perspective .........................................................109

Appendixes .............................................................114

Picture Gallery .........................................................129

9

The Miracle Worker on Miracles

Sergei Guriev

Unlike many of my friends and most of the faculty of the New Economic School, I have never studied at NES. Moreover, I have not even heard of NES during its fi rst years – until I started to come to its seminars and conference in 1996 and began working at NES as a teaching assistant in 1997. I know the vast majority of the Gur Ofer’s book characters, but even though I have heard about the main events in the book many times, I have not lived through these NES’s fi rst years myself. I joined the School in its later years (I became its fi rst full-time faculty member in 1999 and its second Rector in 2004), and this is why I can now read and talk about those fi rst years of NES as an “outside observer”. On the other hand, given my closest involvement with NES in the last eight years, I can also appreciate how the fi rst years’ plans and actions planted the seeds for what happened in the later period.

It is fascinating to see how much of what happened at NES in 2000s was predetermined by the initial plans and vision. Some of those plans were naïve. But even those that have not been implemented have still guided the later strategies and eff orts for many years to come. Moreover, I cannot fi nd any single signifi cant event or achievement of today’s NES that would not be traced back to the founders’ plans and decisions made in the School’s fi rst years.

I have always been asked – at least one thousand times! – why NES has diff erent names in English and Russian (the Russian name is RESch, literally “Russian Economic

Sergei GurievRector, Professor of Economics, 2012

10

The Miracle Worker on Miracles

School”). Barry Ickes, one of the School’s founders, has always joked that the School was so unique that we had to name it twice. Th e rational explanation is that in 1992, outside of Russia “Russian Economic School” would be associated with Soviet rather than with modern economics. Naming the School the “New Economic School” sent a completely clear signal that NES would be new, modern, diff erent from the past. And within Russia, “Russian Economic School” made perfect sense – as NES’s mission was (and still is) to built a Russian economics profession and to be the leading Russian economics institution. But I am sure that part of the explanation (and the title of Gur’s book) is related to the fact that “nes” is Hebrew for miracle. Gur uses the word “miracle” in the title of the book exactly because for him – and for many people associated with the School as well as for outside observers – NES was and still is a true miracle.

For me, however, NES is not just one miracle, but a succession of miracles building on one another. Th e fi rst miracle was to gather support from the leading Western and Russian academics and to mobilize fi nancial support from George Soros and then from the other Western foundations. Th e founders managed to bring outstanding economists from the US, Europe and Israel as NES’s fi rst visiting faculty. Th e second miracle – which of course would be impossible without the fi rst one and yet was a miracle even if the fi rst miracle were taken for granted – was to bring in the top Russian students. Even before it had permanent faculty, NES managed to build a reputation to have one of the best schools outside the US in terms of quality of students, and their track record in joining and succeeding in the world’s best PhD programs.

Th e third miracle – once again, impossible without the second one – was one that the founders of the School strongly believed in. But nobody in Russia thought it would be possible. I am talking about reversing the brain drain

and bringing back those who left Russia for PhD programs. Starting in 1999, NES started to hire in the international market and now has a permanent faculty of about 30 internationally hired tenure-track and tenured faculty.

Th e fourth miracle was to make sure that these returnees would remain an active part of the international academic profession upon their coming back to Russia. Th e academic success of the NES faculty made sure that NES has quickly risen in the international research rankings taking over its counterparts in other non-OECD and post-communist countries.

Th e other miracles included creating a modern governance structure, building not only faculty but also professional and committed staff , assuring diversifi ed sources of funding and many other achievements. Th ere are certainly many more miracles to come. NES is still to grow in terms of quality of its faculty, size, reputation of its newly created undergraduate program, it is still to build a PhD program.

What I have learned during all these years at NES is that the past and future miracles can only be made by a team sharing the vision and committed to the mission of the School. However small NES is, its success is a product of many people. Th is is why I would not like attributing the School’s success to any single individual. But Gur Ofer’s contribution to the success of the School certainly stands out. As it is clear from the book – and the book is certainly accurate, albeit too modest in this sense – it was Gur’s vision, conviction, idealism, and eff ort that made NES creation and development possible.

Th e main lesson from Gur – and from his book – is that in order to work miracles, it is not enough to have a clear action plan. One also has to be idealistic; moreover, probably, one even has to be over-optimistic – with regard to both himself/

11

herself and other people. I have met many people who were excessively confi dent of their own talents; but the people who are over-confi dent in capabilities of others are much less common. But these are precisely the latter who build successful teams and organizations. For example, to this day I am puzzled why Gur and other founders hired me in 1999 as an Assistant Professor; given our today’s hiring standards I would probably not stand a chance. On the other hand, it was completely consistent with the School’s DNA – believe in people who share the mission and the passion, give them an opportunity and work hard to support their own hard work. I think this is the message that comes out very clearly from the Miracle book by the professional Miracle Worker Gur Ofer.

Preface

It was autumn 1991, between the failed August coup d’état and the fall and disintegration of the Soviet Union. A radical “shock therapy” economic reform, including almost complete price liberalization in the then-independent Federal Republic of Russia, was on the way. Th is period of near-anarchy in almost all spheres of life also saw the conception, if not yet the birth, of the idea of introducing the study and practice of modern (Western) economics in Russia. Th e right people happened to have similar ideas and also to meet each other in Moscow; one of them was George Soros, who provided a small grant (around $200,000) as seed money for the project. Asking for the money were two economists, Gur Ofer of the Hebrew University of Jerusalem and Valery Makarov the Head of the Central Economics and Mathematics Institute (CEMI) in Moscow. Two meetings in the span of one week or so, Ofer with Soros and then Ofer with Makarov, holding a piece of paper, a page and a half long, that brought about the birth of the New Economic School (NES).

Th e doors of NES opened for business a year later, in October 1992, with about forty students. At this writing, NES is celebrating its twentieth anniversary. More than 1000 students have entered its graduate school, a new undergraduate program, in cooperation with the High School of Economics (HSE) already completed its fi rst year, and a fl ourishing executive program in fi nance is entering its fi ft h year. Its tenure-track faculty of nearly thirty strong, most holding PhD degrees from leading Western Universities is fully integrated into the global academic community, publishing in peer-reviewed international economic journals, attending conferences, and all the rest. Celebrating its twentieth birthday, NES had trained more than 1,000 professional economists in its graduate program and about 100 in its

12

Preface

executive fi nance program. Most of these alumni are working in the now-vibrant market environment of Moscow and across Russia. About 175 graduates of NES have completed PhD. studies in the West and, although many of them did not return to Russia, a large majority among them joined a network built around NES and participated actively in what the literature dubs “brain circulation” with NES and Russia.

In recent years NES and CEFIR, the Center of Economic and Financial Research, the research and policy arm of NES, are ranked relatively high by two indexes of research: REPEC and SSRN.1 According to REPEC NES is ranked 147 and CEFIR, (Center of Economic and Financial Research) NES’s think tank is ranked 20th in the ranking of think tanks http://ideas.repec.org/top/top.ttanks.html . NES’ ranking according to SSRN is 69 by citations. According to REPEC NES is top among the post-communist and non-OECD countries, and according to SSRN NES is positioned second place only below Tsinghua University in China.

Th is essay tells the story of the creation of NES and its development during the formative years, 1991 – 2004. At the end of this period, the school’s management was transferred from its founding fathers to the young generation and its governance shift ed from a dual model composed of Western and domestic scholars, with dominance in the hands of the former, to an independent board in which indigenous players are dominant and the Western group was relegated to a secondary role. Many additional changes occurred at this time, including my retirement as chair of the NES International Advisory Board (IAB) and the transfer of many

1 Th e REPEC (Research Papers in Economics) ranking of economic institutions is misleading as it includes both schools and research institutes within the schools. So LSE appears in the ranking ten times. So in REPEC we only need to look at the ranking of economic departments http://ideas.repec.org/top/top.econdept.html.

responsibilities to Sergei Guriev, NES rector since 2004, and to many others. Barry Ickes and Eric Berglof stayed on the New Board of NES, Barry as the president of AFNES, the American Friends of NES, a non profi t organization that raises money and goodwill for NES, and as co-head of the Academic Appointment Committee of NES, and Berglof as the chair of NES’s International Advisory Committee.

Th e original plan for this volume was to include in it also a number of academic papers that I wrote during my service with NES and beyond, on various issues related to the role of higher education in economic growth, reforms in higher education, and matters of brain drain and brain circulation. One paper is devoted to the development of modern economics in Israel, a source of inspiration to me and others on how to approach the case of Russia; the diff erences and similarities between the countries; lessons that Russia can learn from Israel. We hope to be able to implement this plan in future, as well as to produce a Russian version of the book including the papers.

A word should be said about the confl ict that arises here as I, in the role of author, recount and discuss a story in which I was deeply involved, violating the fundamental principle of “Don’t toot your own horn.” Th e account that follows has two concurrent goals: to maximize objectivity but also to tell the story from my own point of view. In essence, it aims to combine the biography of NES with a piece of the relevant autobiography of my life during this period. I leave it to the readers, including members of the NES community, to judge how well I succeeded. Draft s of this essay were distributed to a number of members of the leadership of NES, and I am grateful to Barry Ickes, Sergei Guriev and Zarema Kasabieva for many helpful comments.

Finally, a word about referencing: during the period covered here NES had no systematic archive. Instead, several

13

troves – mostly Web sites – had incomplete collections of the main documents; I had a few collections, also not complete; and Barry Ickes provided me with others. Th e virtual archive contains routine documents such as annual reports, my annual commencement speeches, main documents on specifi c projects, fi nancial and fundraising records, NES statistical series, and thousands of electronic-mail messages. Given the interest in publishing the essay as quickly as possible, it was decided to allow the essay to fl ow more fl uently with almost no references – ”almost” because a small number of documents, Diagrams and Tables are included in the Appendix.

Th anks: Work on this narrative started back in 2007 when I was invited by the World Bank to serve as a visiting research fellow at ECAVP under the primary management of Mr. Pradeep Mitra its chief economist, in cooperation with Mr. Boris Pleskovic, the research manager of DECPO. I thank both Pradeep and Boris for the invitation and for guidance and advice during my stay at the bank. Draft s of this essay were distributed to a number of members of the leadership of NES, and I am grateful to Barry Ickes, Sergei Guriev, Zarema Kasabieva, and Konstantin Sonin for many helpful comments. Naft ali Greenwood edited an early draft of this manuscript. Luda Solntseva took care of bringing the manuscript to the publisher, Olga Fadina who helped to prepare the fi nal version, and to Svetlana Nabieva for support with data on students and alumni. Yet I take full responsibility of any mistake that was left in the manuscript, hoping that there are only a few.

PreludeChapter I

On August 19, 1991, forces hostile to Mikhail Gorbachev and his reforms in the Soviet Union mounted a coup that carried on for two or three days before ending in complete failure. Boris Yeltsin, then-president of the Russian Federation and head of the anti-coup forces, emerged as the new national hero. Th e coup served as suffi cient excuse to call off the fi ve-day conference of the International Association of Public Finance that had been scheduled to open in Leningrad (yes, still Leningrad) on August 25. Th e coup also postponed by a few days my prearranged month-long visit to the Soviet Union as a guest of the Institute of Economic Forecasting and its head, the academician Yury Yaremenko. As an Israeli national, I had long been barred from the Soviet Union; in fact, I had never set foot there until January 1989. My August 1991 visit, my fi rst longer stay in the country, came with an itinerary including the capitals of the Western Soviet republics and their respective institutes of economics. For more than two weeks, we – I, my wife Dalia, and Zhenya Tankilevich, then a graduate student at the Forecasting Institute – visited Riga, Vilnius, Minsk, Kiev, and then Leningrad, which had been “re-renamed” to St. Petersburg on the night of our arrival there.

We returned to Moscow full of impressions – fi rst of the very dramatic changes under way but then of the vast areas of life that remained very much what they had been during the Soviet decades. One of these “no change” areas was the initial setting of the story that follows.

In Moscow, where I spent the rest of my visit, I had a meeting with George Soros on the morning of Yom Kippur,

14

Prelude

September 18, 1991. I had already met him while having participated in a series of missions to the Soviet Union that he had organized in 1989 – 1990 to sell his ideas on how to implement the transition to democracy and a market system.1 At the meeting, I relayed to Mr. Soros my impressions of the tour that I had taken. One of these impressions was this: six years into the Gorbachev reforms, there had been almost no move or change in the content of the teaching of economics and the training of economists that could tackle the requirements of the transition to a market system. I say “almost” because in St. Petersburg we did visit a group called the Ekonomicheskaya Shkola (ESH) which had begun to publish new introductory economics textbooks in Russian by rewriting and translating Western texts.2 It was probably one of several ventures across the Soviet Union at that time. I am not sure what Soros thought about all this, but before we parted he did tell me that if and when I came up with an idea in the relevant direction – the introduction of modern economics to Russia – I should let him know.

Even today, most acts of conception need two partners. Th us (according to my recollection but in confl ict with that of others), it happened that at a dinner party several days later in the home of Evsey Gurvich, an offi cial at the Soviet Ministry of Finance, where I recounted my meeting with Soros, Mark Levin (then an economist at the Moscow Institute of Steel and Alloys, today a microeconomics department head at HSE, mentioned that academician Valery Makarov, head of the acclaimed Central Economics and Mathematics Institute (CEMI), a leading economics institute of the Russian Academy of Sciences, was thinking along similar lines. A meeting was arranged at CEMI and indeed, Makarov handed me a document a page and a quarter long, dated September 19,

1 Soros, George, Opening the Soviet System, London, Weidenfeld and Nicolson 1990, pp. 28–30.

2 ESH still exist, possibly affi liated with HSE.

1991, titled, by sublime coincidence, “CEMI Econometric School.” Th e document, prepared by a group of leading economists at CEMI, envisioned a new program of graduate studies in three directions – ”modern economic theory,” “econometrics,” and “management” – the establishment of a research center (working mostly on macroeconomic models), and “some kind of commercial activity, such as consultancy for the government and private business.” CES (as the original document already called it) was to be a “private shareholding company” with diverse stakeholders: CEMI; Moscow State University; Dialog, a private investment group; an organization representing the Russian Government (!) that would “give the graduate students an offi cial status”; “a Western university […] from which CES can receive money and invite Western professors”; and, fi nally, “individuals […] who make major investments in CES.” As for the governance of CES, let us mention only that the entity was “to operate like a nonprofi t institution.” As we revisit several additional elements in this document below, we can only be amazed that much of what happened later, and what NES is at present, was already captured in the missive’s 400 words. (See attachment 1). If I may return to the conception metaphor, here was an anxious sperm that carried most of the right genes.

Th e actual conception occurred a short time later, although not before some additional fl irting took place. I promised to check whether the Hebrew University of Jerusalem (HU) might be willing to serve as the Western academic partner and whether George Soros might assume the role of the aforementioned “individuals.” At this very time, however, my meeting with Makarov was interrupted by Richard Portes, then-head of the Center for Economic and Policy Research (CEPR) in London. Glancing at the same document, he also promised to “look into it favorably.” Portes never got back on this to Makarov but the HU (and I) did, with full support from the University’s president and rector, the late Yoram Ben-Porath and Hanoch Gutfreund. Th e HU

15

Prelude

Valery Makarov and Mark Levin, 1992

16

Prelude

affi rmative inclination, not to mention my own, was at least partly explained by a similar experience at the University that had led to the introduction of modern economics in Israel more than forty years earlier. It happened when a young PhD from Chicago, Don Patinkin, joined the University faculty and revolutionized the curriculum and the teaching of economics – a revolution that eventually made Israel an important academic center in this discipline. Ben-Porath and I had been part and parcel of this process; indeed, we had been among its guinea pigs.

Th ose early deliberations with Makarov and at the Hebrew University instigated a partnership that gave birth to the New Economic School (as it was already named in the preparatory documents in autumn 1991) within a year, a bit longer than the nine months of human gestation. A group of leading Western economic professors joined in and NES

was raised in full cooperation among many on both sides of the divide until it matured and became ready, able, and willing to take off upon its “Bar Mitzva,” thirteen years later in autumn 2004. Since then, as happens in many families, the parents have stayed at arm’s length but are still watching and lend a hand from time to time. Th e Russian name assigned to NES was RESH, the “Russian Economic School,” rather than NES, the acronym that the natural translation would yield. Th e argument was that only by incorporating the word “Russian” into its name could the institute qualify for fi nancial support from the new government of the Russian Federation. On the other side, using “Russian” as part of the title of an institution required government approval. As it happened, this magic word never fulfi lled its assumed promise. It did, however, symbolize the partnership between two groups, one that almost always led in the same direction.

All this, however, draws us too far into the future. At this point of the narrative, the story has just begun.NES godfathers

17

Foundations and Preparations

Chapter II

Preparatory work leading to the opening of classes proceeded in earnest in several directions: the mission of the school had to be agreed upon and a curriculum developed in accordance. Th e target characteristics and populations of teachers and students had to be defi ned and located, the institutional structure and logistics determined, a budget drawn up, and a business plan and budget sent – to Soros at that stage – for approval and funding. Although we worked intensively and enthusiastically with the general sense of taking part in an historical event, akin to the atmosphere that pervaded the USSR and (later) Russia, we thought the chances of Soros’ approving our project very slim.1

Th e NES mission was fi rst presented, in rough terms, in the original document mentioned above – ”CEMI Econometric School” – and later in the fi rst public document, the NES brochure.2 Th e general goal was to bring “modern” economics, a euphemism for Western economics, to Russia by establishing in Russia “a graduate center off ering a high level of teaching, study, and research in economics as practiced in the West and training teachers of economics as well as professional economists and researchers in economics for Russia (and other constituents of the Commonwealth of Independent States).” Th e choice of

1 In our correspondence with Soros during these early weeks, we discussed additional potential projects; from the start, however, I emphasized that the proposed school was the most signifi cant.

2 Taken from the pre-IAB document (May 1992) and the fi rst NES brochure (August 1992).

a graduate-level program was motivated by the intention to leverage the eff ort by “training trainers” – future professors of economics for NES and, later, for other universities, but also professional economists who would provide the needed cadres for the country’s transition to the market system. Even so, the yawning gap between the small size and, in turn, the requirements of Russia (and the CIS) and those of NES, even under the most optimistic scenario imaginable, precluded the feasibility that NES would fi ll the void. NES, we thought, might be viewed as a foot in the door, signaling to others that they should join the eff orts to open the door, or as a demonstration project to be emulated by others. At the outset, most teaching in Russia would have to be done by visiting professors from the West, the fi rst generation of “trainers,” whose students would have to augment their training by completing their studies in Western universities at some stage.

As the description thus far makes clear, the NES – CEMI partnership was more something that “happened” than the product of a careful search process. Yet CEMI was probably among the very few institutions in the entire Soviet Union that could have been qualifi ed to take part in such a project. Mathematical economics was the only fi eld in Soviet economics that engaged in academic work resembling that in the West. It was the only one in which Russian economists maintained rather close relations with their global community, publishing in Western journals, participating in conferences, and even leading in several areas. Th us, it may not have been by accident that the aforementioned founding document originated in CEMI. As for the NES project, it was evident from the start that Makarov, Polterovich, and other members of the group involved with NES had a clear view of the NES mission, one that closely resembled the ideas of the group of Western economists. Debates on how to proceed on various issues abounded at the preparatory stage as well as in later years, but they were always secondary to the clear strategic vision of the venture.

18


One critical issue regarding the mission of “bringing modern economics to Russia”3 came up right away: Could the new school be establish at Moscow State University (MSU), as part of its economics faculty, or, as a second option, at MSU as an independent college? I recall having proposed the fi rst option to Makarov at our very fi rst meeting. If possible, it would have been done in conjunction with CEMI because several leading CEMI members taught at MSU and even held chairs there. By developing the project under the umbrella of the leading and highly prestigious university, we would presumably lend it immediate legitimacy and visibility and amplify its impact by triggering a systemic imitation eff ect.

Makarov’s vehement and categorical nyet excluded this option right away. Th e conservative culture and approach of the rector of the university, the dean and faculty of economics, and the entire institution, he argued, could not possibly be surmounted. It was diffi cult for me to argue with this, but any doubts I may have entertained disappeared over the coming months and years as I had the opportunity to get better acquainted with the MSU economics faculty.4 At approximately the same time a group of young economics professors at MSU, reaching the same conclusion, left MSU to establish the Higher Economics School (HSE), a new state university that off ered mostly undergraduate programs but also a graduate program that had

3 Th e events described here and until the end of 1991 still took place in the Soviet Union. References to Russia, the Russian Republic, or the CIS anticipate subsequent events.

4 As time passed, more and more young economists, including vice rectors, chose to leave for the same reasons. Yet, despite the above, while working on the Project of NES, we also created a student summer exchange program with the economic department of MSU, under which a group of the second class students traveled to Israel for a month course in economics and some travel in Israel, while a group of Israeli students of the faculty of social sciences visit Russia and take lectures on the transition process and also do some travelling around. Th is exchange program was partially fi nanced by Soros and it lasted three or four years until Soros discontinued his support.

the same goal as ours, the teaching of modern economics. Yet the rector of MSU, academician Victor Sadovnichiy, agreed to join as one of the founders of NES and a cooperation agreement between MSU and NES was signed later, MSU provided two critical inputs to our project: subsidized dormitory space for NES students and, most importantly, arranging the students’ deferment from military service (a service that NES was unable to provide). As the years passed, MSU steadily raised the rent for its dormitory space and created diffi culties in making enough rooms available. It also became harder and harder to obtain Sadovnichiy’s signature on various legal documents such as amendments to the charter. When at a later date we added to the agreement an invitation to members of the MSU faculty of economics to attend any course at NES free of charge, almost no one responded.5

Over the next few months (October 1991 – February 1992), Makarov and I exchanged draft s of a proposal and a budget. I visited Washington, D.C. to seek advice and, upon my return, Makarov visited Jerusalem, bringing a major snowstorm with him. Th e proposed curricular program was far from fi nal at this time; for one thing, it still included a program in management and business. Th e budget was increased several times for the sake of greater realism. Th e Hebrew University approved my participation and draft s of an agreement in this matter were exchanged. In late December, a fi nal proposal and budget were sent to George Soros and, a fi rst (unsuccessful) fundraising eff ort took place, to Amnon Golan of the World Bank. At the same time, we started to assemble what would soon become the NES International Advisory Board. Th e fi rst to join it were Sergiu Hart and Michael Bruno of the Hebrew University and Zvi Griliches and Andreu Mascollel (both from Harvard)

5 On developments in the teaching of modern economics at MSU, see Ofer, Gur and Victor Polterovich, 2000, “Modern Economics Education in TEs: Technology Transfer to Russia”, Comparative Economic Studies 42(2): 5-36; and references ad loc.

19


from the U.S.; others came aboard a short time later. Although all were enthusiastic and helpful, it was Zvi who invested the most time, truly a great amount of time, in NES aff airs – ideas, recruitment of teachers, modes of operation, practical help, you name it – from the beginning to his premature death in 1999. On the Russian side, in addition to Makarov, the preparatory team included Victor Polterovich, Alexander Friedman, Mark Levin, Vladimir Zhitkov, Sergei Aivazian, and Revold Entov.

One day in mid-February, while in Washington, I received a telephone call from a total stranger, who informed me

that Soros had approved the project and that we could go ahead. Th e caller, it turned out, was Roman Frydman, a professor of fi nance economics at NYU and a close associate of Soros’, whom Soros had sent to vet the proposal in Moscow. As I discovered later, Soros himself met with Makarov. During Makarov’s visit to Jerusalem at the end of that month, we revised the proposal to include even a larger budget request and sent the revision to Soros. I also used Makarov’s visit to arrange meetings between him and the leaders of the Hebrew University and members of the Department of Economics and for discussions about the

Th e meeting of International Advisory Board. From left to right: Michael Bruno, Zvi Griliches, Roman Frydman, Gur Ofer, Valery Makarov, Barry Ickes, 1993

20


University’s role in the project.6 By now, the school had become a real prospect, although nothing yet existed.

Th e next step was to convene the group of Russian and Western professors in Moscow to make concrete plans. Th is session, held on April 9 – 11, 1992, may be considered NES’ inaugural meeting. It yielded an eight-page document (dated May 8) that summarized the main academic, logistic, and administrative matters, off ered a plan of action, and presented yet another budget proposal. With a few exceptions, this meeting defi ned the main parameters of NES operations from then on:

• NES would concentrate solely on economics and abandon its ambition to serve as a business or management school as well. Only a master’s (graduate) degree in economics would be off ered; the introduction of a full PhD program would have to wait.7

• Th e curriculum would resemble that of leading Western graduate departments of economics but with one major diff erence: three intermediate (undergraduate) courses in micro/macroeconomics and in statistics/econometrics would be taught in the fi rst semester.8 Th e main motives behind this decision were the need to close a curricular gap among most incoming students in the basic concepts

6 Th e severe snowstorm that I mentioned forced the cancellation of planned lectures by Makarov but not of tours to the Judean Desert and Masada.

7 Confusion between economics and management persisted among applicants to NES for much time; each year, some students left NES aft er a period of study when they realized the diff erence. Much later, NES did add some elements of fi nance and management education to the curriculum. At the present writing, NES still does not off er a full PhD. program including dissertations. We discuss this issue below.

8 Th e fi rst teaching and course schedule was presented and discussed at the of the “pre-IAB” meeting on April 9-11, 1992.

of economics and to focus on and emphasize an intuitive approach to these concepts, a matter of supreme importance in a country that lacked any experience in the ordinary operation of markets but had a student body profi cient in mathematics. While the rest of the curriculum matched the norm among graduate schools, i.e., it was part of a PhD program, no full PhD program would be off ered. Th e writing of dissertations was put off to a distant future when senior professors would comprise at least part of a resident faculty. All students would take the same curriculum and meet the same requirements but could take elective courses in specifi c fi elds, including advanced theory, in their second year of studies. Th e curriculum would include courses on Soviet/Russian economics and on the transition that was under way, but the full development of these courses would take some time. An additional course would be called “Current Issues”; in due course it turned into “Public Seminar a weekly seminar presided over mainly by guest academics and public fi gures from Russia and abroad.

• Th e program of studies was initially set at four or fi ve semesters in Moscow plus up to a year at a Western university, mainly for work on master’s theses under proper supervision. As it turned out, this pattern lasted only for the fi rst entering class, that of 1994, indeed not fully even for them as students who couldn’t go abroad could graduate in Moscow. In later years, the master’s thesis was incorporated into the compulsory program in Moscow (see below). Eventually, the program converged into fi ve semesters during two years, each semester divided into two modules of 7 – 8 weeks’ duration. Th is modular system was introduced mainly in order to accommodate the readiness of visiting teachers to come to Moscow. Even then there was heavy pressure on their part to leave as early as possible, resulting in the “packing” of most exams into the seventh week. Th is modular system, at fi ve modules

21


per year, remains in eff ect at NES to this day, even though the number of visiting professors is very small.9

• Entrance examinations in mathematics and English and preparatory summer courses in both subjects would be off ered. Th e mathematics exam had a written and an oral part; the written part was patterned aft er the American SAT and the English exam closely followed the American TOEFL (Test of English as a Foreign Language). Requirements in mathematics and English were determined and preparatory summer and regular courses where included in the curriculum.

• Terms of hiring for visiting professors, including length of stay, levels of remuneration, lodging, etc., were determined.

• Th e participants elected Makarov as rector of NES and made several additional appointments. Th ey also established several committees; one of them, the International Advisory Board (IAB), comprised leading Russian professors and some of the Western members and was expected to add a few more Western members. Indeed, within several months the IAB was joined by Roman Frydman (New York University, also representing Soros), Anthony Atkinson, (LSE) and Elhanan Helpman (Tel Aviv University). Th e last two served for only a very short time. Th e Russian side was represented by those mentioned above. I was elected “coordinator” (later chair)

9 Th e module system was introduced aft er heated debate and strong resistance. Many years later, when it became redundant because most teaching was done by resident faculty, similar resistance in the opposite direction prevailed. Th e module system was also adopted later by the Higher School of Economics, where very few visiting professors taught. Th e HSE colleagues told us that the practice of having frequent exams helped provide stronger incentives to students than the Soviet system where exams where held once a semesters and mid-term exams were uncommon.

of the IAB. Th is structure of governance created a dual management of sorts, an essential mechanism under the circumstances, with clear advantages and virtue over other systems on the one side but one that also carried the potential of tension – of which, fortunately, materialized only on rear occasions over the years.

• A draft budget was presented and approved (see below) and Evgenia Telegina, a vice-director at CEMI, was elected as chief fi nancial offi cer.

• Finally, a timetable was set for the admission process, the preparatory courses, and the opening of the fi rst year on October 12, 1992. Th e Russian partners pushed for an early start, motivated in part by the wish to preempt the establishment of the HSE; the Western participants were more cautious and opted for more careful preparations.

How much mathematics?

Much of the discussion at the April meeting focused on the scope of the economics to be taught and the approach to use in teaching it. Our associates from CEMI were able to off er courses in the two closely related directions of mathematical economics and theory because CEMI was a center for both. Indeed, Makarov’s original document refl ected an emphasis on mathematical economics and theory but included in his draft econometrics and computer sciences and courses in business administration. From the start, however, all non-Russian attendees at the gathering, myself included, insisted on a more general scope for the curriculum, in particular the inclusion of all fi elds of economics in the program of studies, and a broader methodological approach with special emphasis on intuition alongside a formal mathematical slant. Th e approach originally taken by the members from CEMI was based in part on what they thought

22


CEMI could off er. Th e opportunities to invite professors from the West removed this constraint. Th e Western members of the IAB underscored the importance of a wide range of fi elds and, on the methodological front, placed emphasis on the intuitive approach to economics and the use of descriptive and qualitative tools. Th e importance of mathematical tools for economics was accepted due to the new School’s partnership with CEMI. A related question in the discussions was the level of mathematics that all students in the program were to attain. We will come back to this matter below. In all these discussions, the role of the mathematical economists and theoreticians among the IAB members, Sergiu Hart and Andreu Mascollel, as well as Zvi Griliches, proved crucial. Th ey had more of a common language with the Russian partners than the others did and thus could advise them more clearly and credibly of the importance of the broader horizons that they envisioned.

As it turned out, the curriculum at NES did eventually include a wide range of fi eld courses that expanded even more over time. Still, economic theory, mathematical economics and game theory remained a strong and leading specialization throughout the years. In addition to the CEMI tradition, this was also a result of the background, education and training that many of the students brought to NES. Th roughout, the entrance exams showed a consistent bias in favor of mathematics-trained applicants. Although it was not fully intentional, it was abetted by the general trend in Western teaching and research in economics toward more abstract theory and the use of mathematical modeling and tools.10

Th e group of Western professors involved in the program repeatedly emphasized to all visiting professors the need

10 Krueger, Anne O. et. al. 1991. “Report of the Commission on Graduate Education in Economics”. Journal of Economic Literature, 29 (September): 1035-1053.

to concentrate on the intuitive approach to economics and asked them to use mathematical tools as a second resort. Th is, however, proved to be an uphill and not fully successful eff ort. We even tried to use text books that emphasized this approach such as Alchian and Allen, 196211, but with limited success. Many visiting professors discovered aft er a couple of lectures that the use of mathematical tools gave them a handy common language with the students, especially since many students were not very profi cient in English (a matter most pronounced in the early semesters). Many teachers were excited to face a group of students with very strong math skills so they could teach at a very high technical level, – which probably have been diff erent from what the IAB wanted. As described above, this issue evolved during the fi rst years into a specifi c argument between some of us and Amos Witztum (from London School of Economics and then Guildhall College), who taught at NES during its fi rst three years. Witztum was of the view that the students’ good training in mathematics should be treated as an advantage, a useful tool with which to internalize main economic ideas, concepts, and way of thinking. Our view at the time, as mentioned above, was the opposite: the immediate use of mathematics, we feared, might allow students to ignore the intrinsic meaning of the economic content of things.

Despite all the eff orts, visiting teachers at NES and, later, advisors to PhD students from NES who were studying in the West oft en remarked that NES students were extremely well trained and capable technically but less versed in the deep meaning and context of economics. Th e students’ comparative advantage in mathematics served them well during their term abroad, making them much in demand as assistants and even as co-authors with their professors. It also motivated many to write their

11 Alchian, Armen and Wiliam Allen Exchange and Production, Wadsworth Publishing Company, Belmont , CA, 1962

23


dissertations on theoretical and highly technical topics. When time came to hire them back as faculty members at NES, the best candidates were theoreticians and good candidates in other fi elds were harder to fi nd. Consequently, the tilt toward mathematical economics and theory spread to the NES faculty, where it persists to this day.

Despite the remarks above, the expansion of the scope of the curriculum, the emphasis on empirical work in many masters theses, and the subsequent development of the Center for Economic and Financial Research (CEFIR) – a research center, think tank, and center for economic policy work, associated with NES – created off setting and complementing tendencies and helped to pull the center of gravity in teaching and research back toward a more balanced range of fi elds including empirical and more applied research.

Along with this issue, there was a continuous debate over the level of mathematics to be taught to all students at NES, something that would dictate the requirements on the entrance exams. Although it was agreed by all that mathematical tools are essential for work in modern economics, the discussion of where to draw the line between what all students needed and what should be required of students specializing in theory was a fi xture on the agenda of the academic and admission committees, as well as the IAB. Th e required level of mathematics at the entrance exams also infl uenced the makeup of the entering classes and “we”, most of the Western members of the IAB pushed consistently for a more pluralistic class in terms of candidates’ previous areas of studies. Admissions were administered mostly by the Russian partners. Admission is done in Russia mostly in the second half of July, when there are no classes at NES and, thus, no visiting professors; this also might have infl uenced the outcome of these debates. Finally, the emphasis on mathematics reduced the proportion of women students (see more below).

Statistics and econometrics

Related discussions took place about the nature of the study of econometrics. Here the main divide was among the members of the Western group. While Jan Magnus tended to emphasize the teaching of classical econometrics, including the theoretical underpinnings of the empirical applications, Zvi Griliches suggested that the program start with a basic course on “measurement in economics”12 that would concern itself with the description, defi nition, meaning, measurement, handling, management, and manipulation of main economic variables. Zvi considered this essential in general as a tool for doing empirical work everywhere; but especially important for NES due to the almost complete absence of proper empirical research in the Soviet Union, the prevailing practice of manipulating data to fi t political requirements, and the need to create a proper conceptual and scientifi c infrastructure for the subsequent introduction of empirical research at the school. Th e fi rst draft of the curriculum, discussed at the April 1992 meeting, included the “measurement in economics” course and another course on statistics and research methods. Only later, in the second semester of the fi rst year, would the fi rst course in econometrics be taught. Over the years, the “measurement” course underwent a sequence of changes and eventually adopted various confi gurations of research workshops. Th e establishment of such workshops took place several years later; the intention was to prepare the students for work on their Masters theses by dealing directly with issues in the meaning and handling of data. However, econometric theory remained dominant. Th e fi rst NES graduate to be named to the faculty, several years later, Stas Anatolyev, was a

12 Th e original document discussed at the IAB meeting in April 1992 spoke of “Measurement in economics an introductory course on main economic variables in use, their defi nition, meaning, and measurement, e.g., national accounts, prices, and price indexes.”

24


theoretical econometrician, who however over time expanded his interest toward empirical work to a signifi cant extent.

Th e “pre-IAB” April 1992 meeting also dealt with teaching issues: the format of teaching, designating work on weekly problem sets as a main teaching tool in all courses, introducing written (mostly blind) examinations, confronting the problem of cheating, and initial discussion of attendance policy, compulsory or not. We return to all of these below.

Finances, the Budget, and the Budget Process

Th e April meeting approved the basic fi nancial arrangements that had been agreed upon and relayed to Soros. NES would have two separate, parallel budgets: one in rubles, covering domestic operating costs and salaries for domestic teachers and administrators, rent at the CEMI building. and costs related to the then-expected move to permanent premises; and a U.S. dollar budget to cover salaries, travel expenses, and room and board for visiting professors and foreign administrative staff , IAB expenses (expenses only, with no compensation for time devoted to NES), and the purchase of books, periodicals, computers, communication devices, and copying machines. Th e two budgets were to be administered separately, one by the Russian partners and the other by the IAB. A fi nance committee would coordinate the process at the general policy level.

Th is budget bifurcation also established the principle and facilitated the introduction of diff erent pay schedules for domestic vs. foreign staff and teachers. Obviously a sensitive issue, it was rationalized in terms of the principle of the two groups’ diff erent opportunity costs (and, of course, resource constraints). Visiting professors were compensated on the basis of their salaries at home – one quarter of their nine-month home salary for each eight-week module in Moscow, teaching two module courses (eight hours) a week.

Th is simple pay rule saved us many hours of negotiations. Domestic teachers, who were normally fully employed by CEMI or some other academic institution, were paid per lecture hours at a much lower (calculated) rate. Due to the rapid infl ation that beset Russia at this time, the rates were usually denominated in U.S. dollars. Th e diff erences in pay between people with seemingly similar academic ranks, with an emphasis on “seemingly”, could reach a ratio of ten to one on a per hour basis or, when adjusted to take account of part-time positions, fi ve to one.

Th is arrangement of dual pay scales persisted at NES throughout the years, with various modifi cations. One was the signifi cant redrawing of the lines of demarcation between the groups. Also, when Western-type tenure-track faculty arrangements were introduced in 1998, returning Russian PhDs – NES graduates or not – were included in the higher-paid group. Tenure was also off ered to three Russian professors, Valery Makarov, Victor Polterovich and Vladimir Popov, who qualifi ed for it but had been working at NES less than full time. Th e salaries of several veteran teachers at NES who were unable to receive tenure were raised by means of research grants and compensation for extra teaching in the outreach program (see below) and for assuming administrative responsibilities. All these measures helped to narrow the salary gaps. NES still hires outside teachers on the basis of a lower rate of pay but does so in the manner of many Western universities.

During the budget discussions for the second year of teaching (1993/94), it had already become clear that the available ruble resources would not suffi ce to cover the needs of the domestic budget. Th erefore, it was agreed that the Soros Foundations would cover 50 percent of the ruble budget by increasing its grant to NES. Th is was the fi rst step on the way to the merger of the two budgets – a matter consummated in 1999 under one fi nancial offi cer and one fi nance committee.

25


At this time, as noted above, we were continually revising our budget proposals upward. In fact, neither Makarov nor I had a clue at the beginning about how much money we might need and how much to request. Th e early budget proposals that we sent to Soros were judged by Roman Frydman as too small; Soros himself took exception to the expanded requests that we prepared later on. In hindsight, it is clear that we were too modest; thus, we set our initial benchmark much too low, making the subsequent fi nancial struggle more diffi cult than it should have been. Visiting professors’ remuneration was determined on the basis of that paid to visiting professors at the Central European University (CEU) in Budapest, another institution also supported by Soros. We found, however, that it was more diffi cult to attract professors to Moscow than to Budapest. Soros insisted that salaries be set at a level that would not make them the main attraction. Also as instructed by Soros, all travel, with few exceptions, would be economy-class. We also under – budgeted the library, computer labs, and equipment. Th e total dollar budget that we requested at the end for the preparatory period and for the fi rst two years of operation was $720,000. As it turned out, we spent signifi cantly more during this period.

In the early years, the dollar budget was managed directly from the offi ces of the Soros Foundations (SF) (which assumed diff erent names over the years) in New York. Although the SF had an offi ce in Moscow (the “Cultural Initiative”) with which we had some relations, NES belonged all along to a division of the SF that supported institutions of higher education (eventually evolving into the Higher Education Support Program, HESP). Running the budget from New York meant that I would have to defend every payment by sending the offi ce in New York a fax (or, later, an email message) with support documentation. Most payments from the dollar budget could be made outside of Russia with no problem, but payments in Russia were a completely diff erent matter. Some of us, visitors,

traveled with greenbacks or travelers checks in our wallets. A 4 percent charge applied to the cashing of travelers checks. Even later when a bank account for NES could be opened, transfers took much time to complete and oft en came late. During the fi nancial crisis of September 1998, NES emerged with comparatively small losses, about $ 25,000, due to the bankruptcy of Dialogue Bank

Reporting on the budget situation to the Soros Foundation people was haphazard; I spent hours with the fi nancial offi cers in New York checking fi gures. Even if I state that NES may have overspent its budgets signifi cantly during that early period and probably up to the end of the 1995/96 academic year, it refl ected mostly my personal impression. Not until autumn 1994, when we hired Oxana Budjko away from the Israeli Embassy, did NES begin to manage its fi nances independently. Aft er starting out with administrative responsibilities, Oxana also gradually took over all budget and fi nancial matters until she became NES’s legendary CFO, a position she holds to this day. Her appointment turned out to be one lucky long-term move among others at NES that contributed to the School’s success. Apart from the massive learning that she had to do – and did – she quickly showed that NES’ fi nances had been placed in the hands of a conscientious and absolutely honest person who was dedicated to the institution and provided a solid base for sound fi nancial Management.

Countdown: six months left

Th e chronology reverts to the April 1992 meeting. When it adjourned, there remained only six months before classes were to start. Much had to be accomplished, most notably, the recruitment of offi cers, students, and teachers. Th e Russian partners took the admission process upon themselves but Zvi took part in setting the admission threshold. Zarema Kasabieva, then a doctoral student at CEMI, was appointed dean of students

26


and managed the process with help from others. Zarema is still with NES, now as vice dean for academic and student aff airs, one of a handful of dedicated leaders who made the NES project possible and successful. Th ere were many other unknowns: how to advertise? Where? Would students apply? How many? “When” was a simpler matter; in Russia, university admission

takes place in July, aft er the high-school exams. Applicants came in response to notes posted on the bulletin boards of the relevant faculties of leading universities in Moscow, by word of mouth in academic circles, and through a summer school run by the London School of Economics and Amos Witztum, whom we had also hired for the fi rst two modules of teaching.

Uncertainties were high, but on September 1 fi ft y-two students who were admitted aft er the entrance exams showed up for an intensive three-week English course. Th is made it necessary to hire a group of English teachers and write a program of studies. We contacted the American Council of Teachers of Russian (ACTR)13 in Washington, D.C., which also specialized in teaching English as a second language. ACTR president Dr. Dan E. Davidson and his staff provided NES with programs, furnished lists of materials and books, and put us in contact with the one offi ce in Moscow that administered TOEFL exams. Our fi rst and second classes took the TOEFL exams in that offi ce. In later years, our English teachers composed TOEFL-like exams from older tests for admission purposes and interested students took the real TOEFL individually as they prepared for study in the West.

Recruiting the First Visiting Professors

was mostly the responsibility of the IAB members. It so happened that the fi rst two visiting teachers at NES were Israeli: Amos Witztum, a graduate of the Hebrew University then situated in London, and Don Patinkin, the founder of modern economics in Israel and the Department of Economics at the Hebrew University, already emeritus in 1992. Amos, who had considered becoming a stage actor before turning to an academic career, was an exemplary teacher, as was Don. Amos

13 Today it goes by the name of American Councils for International Education, ACTR & ACCEIS.

Zarema Kasabieva, 1994

27


was already involved in projects in Russia and continued in those capacities aft er two years of teaching at NES.14 Patinkin’s enlistment was symbolic given the similar role he had played in establishing modern economics in Israel in 1948, a couple of generations before. It was also useful as a persuasion tool to convince teachers to come to Moscow, “if it is O.K. for Patinkin…” Th us, the signifi cance of NES’ inauguration transcended the availability of two excellent teachers; it also gave extra weight to the role of the Hebrew University as a partner. Indeed, many teachers from the Hebrew University and other universities in Israel came to teach at NSE in subsequent years. At the time, we also imagined that the Hebrew University would admit NES graduates to PhD studies. Th is has not come to pass thus far, mostly because of the language barrier.15 Th e University did, however, enroll fi ve or six teachers and second-year students at NES in its annual summer workshop on economic theory at its School of Advanced Studies (chaired for many years by Kenneth Arrow). Th e fi rst group, including members of CEMI and future teachers at NES, attended the workshop in June 1992, before NES opened.16 Th ese visits, centered in Jerusalem, also gave me an additional opportunity to meet and talk with NES (near-) graduates, boast about NES’ achievements, and increase its international visibility among leading professors and select graduate students from around the world.

In recruiting the many teachers at NES who came from Israel, as well as the others, much of the work was done by

14 Amos came twice for an entire semester, once with his wife and two small children. In later years, he became one of the founders and then a major player in the establishment of the International College of Economics and Finance (ICEF), an English-speaking college of economics that belongs to HSE and is sponsored by LSE.

15 One graduate of NES came to Jerusalem to work on a PhD. but had to return to Russia before actually enrolling.

16 Th e program was discontinued in 2004 for budgetary reasons (the total cost was around $5,000 per year) – something I regretted but understood – but was renewed in 2009.

Zvi Griliches and, later, by Barry Ickes (see below) and other members of the IAB. Many teachers who came to NES once were willing to come again – many did come, some more than twice – and all of us received inquiries and expressions of interest about coming aboard. During this fi rst phase of activity (up to 2004), more than 100 visiting professors from

Zvi Griliches, 1994

28


more than a dozen countries taught at least one module at NES, a quarter among them from universities in Israel. (See a list of visiting professors in the appendix below). Many were motivated to enlist by the excitement of the transition that Russia was undergoing, the high quality of the students, and the atmosphere that NES had established.

As exhilarated as they were about participating in Russia’s transformation, the visiting professors needed a place to stay and a way to survive in an environment of shortages, very few adequate stores, almost no restaurants, and bad public transportation (with the exception of the very effi cient but English-unfriendly Metro), crowned by their lack of profi ciency in Russian (with a few exceptions). Th e few good hotels being extremely expensive, the only reasonable way to deal with the matter was by renting apartments; hiring housekeepers to take care of shopping, cooking, laundry, and cleaning; and making special transportation arrangements.

We were lucky to be able to rent the two fi rst apartments in a well kept and guarded building that belonged to the Russian Academy of Sciences, not far from CEMI, and even had a restaurant downstairs. Unfortunately, we had to surrender the fl ats at the end of the fi rst semester as the relationship between NES and the academy soured. With private real-estate services just being established and not very reliable, we had to look for apartments mostly through personal contacts or even by posting notes in entrances of apartment buildings. Modern, Western-style apartments used by diplomats and executives of international organizations were far too expensive for us. While many lower-quality apartments were acceptable inside, the public areas surrounding them (staircases, elevators, corridors) were utterly neglected in most cases – one glaring example of the attitude toward public property under Soviet Socialism. An additional problem was security: most dejournayas – doorkeepers from the Soviet era – had been released by the tenants, who either did not appreciate or could

no longer aff ord their services. Ultimately we managed, but not without incidents and tension between the NES staff and the visiting professors.17 All along, NES maintained a supply of three or four rented apartments; over time, their quality improved, the doorkeepers reappeared, and some leases became long-term. As the general conditions in Moscow improved, we also gave up the drivers (except for travel to and from the airport) and the shopping and cooking services. At NES, the visiting professors received offi ces equipped with computers, Internet connections (from the second or third year), and telephone lines allowing international calls.

Textbooks, Journals, Library, and Computers

Th e selection of textbooks to be used in the main courses was made in consultation with the incoming teachers. It was decided to distribute copies of each textbook to every student (on loan). Teachers also brought with them copies of required journal articles, which we photocopied and distributed to every student. Lists of books and journals to be ordered as a base for the NES library were compiled. Orders were placed with distributors abroad, Moscow having no distributors at the time and few even later. Receiving shipments in Moscow was fraught with problems including lengthy waits at customs offi ces and sometimes high duties. Th us, many of the books were imported in the suitcases of IAB members and visiting professors. At fi rst there was no room for a library – all we had was a bit of storage space at the rector’s offi ce – and no librarian. In July 1993, when we obtained the use of a small room, we hired a librarian, Karina Ter- Akopian, an urban archeologist and an expert on Moscow, who changed her

17 In one case, we found an apartment with a doorkeeper at the last minute as one professor threatened to cancel his participation. I tried to establish the custom of laying in a bouquet of fl owers and basic supplies ahead of every new arrival but it didn’t always work.

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career, put a substantial eff ort in training in her new calling, in formal courses and through self studies. Her commitment to the library compensated for much of the formal training gaps. Karina worked hard for many years to develop the library, to put it on an electronic basis by building an electronic catalog, assembling a collection of electronic data, expanding its space and equip it with computers and search tools. Eventually the library became the best economics library in Moscow with books and, especially, economic journals (some forty titles). In 2002 Karina resigned and a new team of librarians took over. Aft er her retirement Karina was ready from time to time to take visiting teachers and other guest of NES for walking tours around Moscow, and we are deeply thankful to her for this.

Th e story of the library has a sad follow up. Aft er two years of teaching at NES (one module per year), Don Patinkin fell ill with recurrent cancer and died a few months later, in March 1995. His widow, Devora, donated part of his large library in Jerusalem to NES. Th e NES library was named subsequently the Don Patinkin Library in his memory. Several additional private collections, especially of back issues of main journals, further enriched the library over the years; one came from the library of Zvi Griliches aft er his death in April 1999.

Modern communication in Moscow hardly existed in 1992. Electronic mail was very weak and unreliable, Internet services hardly existed, and telephone lines were bad. Our fi rst fax machine (“the main nerve center,” Barry Ickes called it) was carried in as luggage from Israel but sending a fax was another matter. Kate and Kim the two fi rst offi ce managers at NES, both Americans struggled to keep telephone and fax working and the visiting professors stood by these machines praying that they would work. A fi rst photocopier was leased locally. With no library in the fi rst year, students depended on the copier for their reading materials, making the machine into a major bottleneck. It took several years to overcome these technical constraints. We used the hard-currency budget to buy a few computers

and printers for the administration and a dozen computers for students’ use. We then set up a computer department and a lab equipped with search computers and in-house soft ware.

Offices and Administration

Most governance and administrative positions at the fl edgling NES were assigned to CEMI people: Alexander Friedman as Vice Rector, Evgenia Telegina as Vice Rector for Finance and Development, and Zarema Kasabieva as Dean of Students.

Don Patinkin, 1993.

30


NES needed an administrative assistant in place in Moscow who would represent the foreign partners and be responsible for the USD budget, communication with donors and IAB members (including the chair), and care of visiting professors. Th e candidate chosen was Katherin (Kate) Hardin, a graduate of Russian studies from the U.S. who was working at RECEP (the Russian – European Center for Economic Policy), a think tank established by the European Union and run by Richard Layard. Hired several months before classes started and beginning full-time work just a few days before the actual start, Kate worked at NES for a year before leaving to continue her studies in the U.S. Kate helped to establish a solid modus operandi with us abroad and with the Russian partners, a pattern that served NES during the years to come. Kate operated under poor conditions, especially related to communications. Also, the domestic staff greeted the appointment of a Western administrator with some resentment but eventually came to accept it, in great part due to her charm.

One major logistical weakness of the dual governance structure of NES, from the start and also in future years, was my inability to spend the prolonged periods of time in Moscow that my responsibilities and duties entailed. I could not leave my post as a professor at the Hebrew University and, more so, I considered too high the personal price that my family and I would have to pay for such a move. With an administrative assistant in place in Moscow and information and communication facilities developing rapidly, I thought it possible to try to perform my many duties at and for NES by a combination of frequent relatively short visits, remote control via email and telephone when available, and Ms Hardin as my “representative” in place.18 During the period of

18 I must also admit that I was asked to undertake more tasks than I had assumed initially; others may defi ne this as having to become over-involved in matters that I should have skirted.

my intensive involvement with NES, I must have traveled to Moscow dozens of times. Th is was not enough (see below); from 1994/95 on, NES appointed a Western professor who would spend at least one full year in Moscow and serve as a domestic academic coordinator on top of teaching.

Th e appointment of a Western administrator in Moscow was also motivated by a certain degree of uncertainty about the norms of transparency and accountability that we might encounter. Let me express this in no uncertain terms: we had full trust in our Russian partners but had no experience or knowledge about the accepted norms of conduct in Russian organizations. In my years of commuting to and from Russia, I witnessed several cases in which well intentioned Western initiatives fell through due to misuse of funds or worse. During the period of preparations to open NES, George Soros twice replaced the entire staff of his Moscow foundation, the Cultural Initiative, for these reasons. As it turned out, the NES experience over the years was an exemplary case of proper and fairly transparent, and effi cient, use of funds. An early case involving an attempt to use the name of NES vis-à-vis the authorities for personal and external gains ended with the summary termination of the culprit.

As for physical premises, CEMI gave NES a “campus,” i.e., a small number of offi ces accessed through one door at the northern end of the seventeenth fl oor that opened onto an entrance hall. It was no simple matter for CEMI to share its space with NES; the Institute made a fi nancial sacrifi ce on this account because it could have leased most of its spare space to new emerging business outfi ts.19 Even so, CEMI

19 Th e CEMI building, an imposing twenty-one-fl oor rectangular structure facing the Profsoyuznaya metro station and sporting a huge concrete human ear at its façade, housed several Academy of Sciences institutes, some of them spin-off s of CEMI, before the transition. In the early years of the transition, as budgets plumped and space became available due to the move of some people to

31

charged NES a minimum rent paid out of NES’s ruble budget. Several additional rooms on the fi ft h fl oor of the building became the fi rst classrooms. Th is initial beachhead, presumed temporary until a suitable building for NES could be found. During 1992-1993, intensive eff orts were made to fi nd a suitable building for NES in various parts of Moscow. In each of my frequent visits during that period, Evgenia Telegina drove me around to inspect the options. At that time, the City of Moscow and the government did allocate land or buildings to new nonprofi t institutions. Nothing came of these eff orts. Zarema Kasabieva, then the dean of students, set up shop at the 17th fl oor; so did a small staff together with Kate Hardin; the remaining offi ces were reserved for a few visiting professors. All the other CEMI people who were involved with NES, either as teachers or administrators, stayed at their CEMI offi ces; this included Valery Makarov, who remained at the spacious quarters reserved for the CEMI director. One outcome of this, however, was that the people on the campus, with one or two exceptions, were much more intensively involved in NES aff airs than those who retained their old CEMI offi ces or stayed in other corners of the huge building. Another outcome was less interaction – than desired – between visiting professors and students and the CEMI partners. Th e entrance hall at the seventeenth fl oor became a “quadrangle” where students, teachers, and staff met. Tea and biscuits were served there at lunch time; this was extended later to the entire day, a tradition that persists to this day. As these general conditions at NES are described, one has to remember the general environment in Moscow: shortages of almost everything, extreme bureaucratic disorganization, like to receive shipments of books at the airport, changing or transferring money, having a telephone line installed etc.

new organizations, CEMI leased out much space to a number of newly created businesses. Rents were determined by CEMI, or in fact the Academy of Sciences, according to the status of the organization, business, or NGO, and its relation to CEMI.

The First Year, 1992/93 – Plunging into Stormy and Chilly Waters

Chapter III

Eighty-four applicants applied for the fi rst entering class. Aft er the entrance exams in mathematics and English, fi ft y-two were admitted, several on the proviso that they upgrade their profi ciencies during the fi rst semester. Th e class was almost evenly distributed by gender, an achievement that did not recur in future years. More than half the students came from faculties of mathematics, eight others from physics, and only a quarter of the students (thirteen) from economics. Following a six-week intensive course in English (September – October 1992), the whole contingent began regular classes on October 12. Th e inauguration events started with a ceremony and reception on October 29 that included speeches by representatives of all the founders, including George Soros. Th ese events were followed by a one-day conference, and concluded with a meeting of the IAB. Soros suggested taking advantage of IAB members’ visits to have them present academic lectures at NES. Th is launched a tradition – two research conferences a year at NES – that eventually evolved into presentations of research at NES by students and faculty.

Th e October events also included a formal meeting of the founding institutions: CEMI; MSU, represented at the meeting by the dean of its Faculty of Economics, Vassilii Kolesov ; the Hebrew University, represented by Don Patinkin; and the Russian Ministry of Higher Education and Technology, represented by minister Boris Saltykov, who also used the occasion to present NES with a license as nongovernmental institution of higher education license

32

The First Year, 1992/93 — Plunging into Stormy and Chilly Waters

under the law that prevailed then. Also among the founders were Dialog, the aforementioned fi nancial-investment group, represented by its president, Ruben Vardanian; and the Soros Foundations, represented by George Soros. Under Russian law, the board of founders is the highest authority at NES, its responsibilities including fi nance. To the best of my knowledge, however, this body has not reconvened to this day. When amendments to the NES charter were required, the signature we had to obtain was that of the Rector of MSU, Academician Victor Sadovnichy; this was a very painful and time-consuming task. Dialog was expected to help fi nance the NES ruble budget; its contribution over the years, however, has been very modest. Eventually, too, neither the Hebrew University nor the Soros Foundations stayed on as founders due to legal complications related to their being foreign. Th e HU connection had taken a blow two weeks earlier. Professor Yoram Ben-Porath, president of the HU and a source of encouragement for cooperation with NES, had been invited to the opening ceremony and to an offi cial visit with MSU and the Ministry of Higher Education and Technology. Tragically, he was killed, together with his wife and young son, in a traffi c accident in Israel.1

During the 1992/93 academic year, I went on sabbatical leave at the World Bank in Washington, D.C. Th ere, I divided my time between research at the transition unit of the Research Department, under Alan Gelb, and the Operations Department under Russell Cheetham. My contract allowed me to pledge 10 percent of my time to NES business. Being in Washington and near its sources of money and power, free from teaching, and having opportunities to go to Moscow

1 Cooperation between HU and MSU continued anyway. In the early 1990s, the two institutions implemented a student-exchange agreement, also fi nanced by Soros. A group of second-year economic students from MSU came for a month-long summer school at HU and a group of HU students from the faculty of Social Sciences visited Russia and MSU to study the country’s transition process.

not only for NES but also on World Bank missions, I enjoyed greater freedom and fl exibility than before to attend to NES matters. Even this, however, proved insuffi cient. Th erefore, in summer 1993 I asked for a one-month leave without pay from the World Bank to concentrate on NES even more: fundraising, recruiting teachers, and dealing with daily administrative details. I tackled the last-mentioned by remote control, initially mostly via fax (which was oft en down), because the only phone line at NES that allowed international calls was accessible only at night, but later in the year also by e-mail and, in the daytime, by telephone.

Th e IAB met twice in Moscow during this period, on August 26 and October 31, 1992. In addition to its members,2 we invited to attend the meeting teachers and stuff members, visiting professors on hand, and also (a bit later) student representatives. Th e NES offi cers reported on developments and problems in their purviews and all were invited to take part in discussions. Th is provided the domestic staff of NES with direct feedback and established close relationship between them and the IAB members. Th e meetings were held in English with oral (rather loud, in fact) interpretation for the few participants who could not follow. Th us, the Moscow meetings of the IAB became a “town meetings” or “general assemblies” of sorts, a pattern that continued throughout. Only the IAB discussions on appointments, fi nances, and other sensitive matters were closed to non-members.

Th e October 1992 IAB meeting dealt mostly with the curriculum, the academic schedule, the recruitment of teachers, and the mode of teaching. Courses were to meet twice a week for two academic hours each. Teaching would be accompanied with weekly problem sets, handed out if

2 Th e members at that point included Makarov, Ofer (Chair), Polterovich, Friedman, Atkinson, Mas-Colell, Bruno, Griliches, Hart, and Helpman (who was unable to attend).

33


possible before the discussion of the relevant topics in class (the “Patinkin method”). Students’ papers were to be graded by teaching assistants, who would also run weekly sections, review the solutions, and clarify and expand on class and the reading materials. Th e fi rst assistants, chosen from among the PhD students, (those going for the kandidat Nauk degree) at CEMI, were expected to attend the classes and in this way train

themselves to teach the courses in the future. One of Patinkin and Witztum’s fi rst four assistants, Alla Friedman, became a professor at the High School of Economics (HSE) aft er completing her PhD at CEMI. Another assistant, Ira Denisova, completed a PhD at the University of Manchester in England; subsequently she joined the faculty of CEFIR and, later, of NES. A third, Lev Gelman, became a businessman in Moscow, and

Victor Polterovich, Academician and Pavel Katyshev, coauthor of the fi rst textbook on Econometrics in Russian, 2000

34


the fourth, Tanya Glavatskaya, eventually followed her husband and moved abroad. Two domestic teachers of statistics and econometrics, Pavel Katyshev and Anatoliy Peresetsky, served as assistants to Jan Magnus and Dan Hamermesh and, in a later year, to Zvi Griliches. In addition to this on-the-job training, both were sent to Harvard and Tilburg for training and course preparations in subsequent years. Eventually, together with Jan Magnus of Tilburg and LSE, they prepared a basic econometrics textbook in Russian and stayed on to teach econometrics at NES for many years. In later years, teaching assistants were recruited from among the best second-year students, some for courses that they attended for the fi rst time. Later, NES recruited its own graduates as they worked on PhD at CEMI, did research at CEFIR, served as full-time teaching or research assistants at NES, or even held jobs elsewhere in Moscow.

A long and diffi cult discussion that engaged the IAB members into the early morning hours concerned the format of examinations. It was clear to the Western participants that written and anonymous exams must be used; the Russian members countered this by passionately advocating the Russian tradition of a sequence of oral exams. A strong argument against written exams was cheating, a prevalent norm in Russia, that became a problem at NES as well. Still, whether it was due to persuasion or to attrition, the Westerns won the day and written exams were introduced.3 It took several years of educational eff orts, eff ective proctoring (including the presence of teachers rather than staff at the examinations halls), and several cases of severe sanctions to reduce cheating to an “acceptable” low level.4 Later on, in 2001 NES introduced a students’ Honor Code that seems to work well.

3 Oral exams survived as part of the mathematics entrance exam for a few more years; the decision on anonymity was left to the teachers.

4 Danny Kahn, the academic coordinator in 1995/96 still had to deal intensively with cheating, as a large number of email messages by and to him testify. Th e discussion on cheating was probably also the incentive for a comparative empirical study

Since there was only one entering class to teach in 1992/93, only a few additional visiting professors were needed: Ben Polak from Harvard, Suzanne Scotchmer from Berkeley, Barry Ickes from Penn State, Jan Magnus from LSE and Tilburg, and Dan Hamermesh from Michigan State. Zvi Griliches was responsible for the recruitment of all of them except Magnus and Ickes, whom I recruited aft er meeting with them.5 Th e above, together with Don Patinkin and Amos Witztum, formed a very impressive group of teachers and academics that helped to set standards for the future. Th e recruitment of Barry was no doubt a long term strategic achievement.

It was a very successful academic year by all accounts. Th e encounter of highly talented students and top scholars produced results that far surpassed all sides’ expectations: Many teachers expressed readiness to come back, mostly because of the quality of the students; the students, apart from expressions of satisfaction, also complained about an overly onerous burden of studies – always a good sign that something right was happening. All these demonstrated that the teaching and academic formula was going to work despite the problems, of which there had been more than a few.

Th e fi rst year of teaching consisted of two semesters, each divided into two halves, normally each half with diff erent teachers and two fi nal exams each for every half. Th is created

on cheating and attitude to cheating in a number of countries, Russia, Israel and the Netherlands by Magnus, Polterovich and Savvateyev, “Tolerance of Cheating: An Analysis Across Countries”, Th e Journal of Economic Education, 33:2, 125-135.

5 We did not know at the time that this last recruit of Barry would leave a very signifi cant imprint on the development of NES. I met Barry at the World Bank in the summer of ’92, and told him about the project. Barry told me about his working with Makarov on research. Th is was why it made sense for him to add teaching at NES. Like me he probably didn’t think that he was hooked to the project for the next twenty years and still counting.

35


problems of coordination, transition, and continuity that, despite strenuous eff orts, remained with us for a long time. Th is was one of the main factors behind the demand by IAB members at the time (particularly Bruno) to create a position of a Western academic coordinator. Eventually, the “two-halves” semester structure was discontinued and each half morphed into an independent module, a course with set teaching materials and independent exams and grades. In later years, many second-year elective courses were defi ned in advance as single-module courses, some with no real or even “virtual” sequencing. Another problem was coordination across modules – how to avoid teaching the same (exciting) stuff twice and cover everything (including boring stuff ) at least once.

Visiting professors were allowed one home leave (an extended weekend) per module. Th is, together with the interest or need of some of them to shorten their visits and the prevailing Russian habit of switching the times of classes across the week for various reasons, created the institution or tool of a “weekly teaching schedule” at NES, with several variations from one week to another. We tried continually to make the changes less frequent; this was to be yet another responsibility of the proposed academic coordinator. Nevertheless, the “weekly schedule” prevailed at NES for many years, the number of ad hoc changes declining only slightly.

The Visiting Professors

were guests and expected to be treated as such. Th is expectation was fulfi lled, though not fully. Th ere was usually a reception at the beginning of every module in honor of the arriving professors and, in most cases, some sort of farewell party at the other end of their term. NES instituted a weekly faculty and staff lunch where all teachers met for discussion of issues related to the teaching process but also

to socialize. Th e minutes of one of these faculty and staff meetings, on October 26, 1992, have survived. Th ey contain serious discussions on the relationship between teaching mathematics and teaching economics, (“there’s too much of the former”), fi rst impressions of the atmosphere in class, the students’ study habits, the nature of the public seminar, etc. On many of my visits to Moscow, we arranged outings to restaurants with faculty and staff . Having lunch on or near the campus was a problem. Most visiting professors avoided the CEMI cafeteria due to the Soviet-style cuisine that it still off ered. Th e off erings of restaurants in the vicinity were extremely poor; to get a reasonable meal, one had to travel to the center of town. For a time, we received special permission to eat at the somewhat better cafeteria of one of the private companies that had moved into the CEMI building. Over the years, however, the CEMI cafeteria and the nearby restaurants multiplied and improved.

As mentioned above, the visiting professors were assigned housekeepers who took responsibility for shopping, cooking, house cleaning, and washing. Most of the housekeepers whom NES employed for these tasks did a great job. Inna Michailovna Moisseeva, became a legend, in particular for her cooking, an integral part of the myth and the collective memory of the early days of NES. Veterans of NES sigh with nostalgia when stories about her culinary talents and the pleasant atmosphere that she and others created are retold.

Upon arrival, the visiting professors learned rather quickly that, with few exceptions (Victor Polterovich, Mark Levin, and Zarema Kasabieva ), they would not be invited to the homes of fellow Russian teachers and staff . At fi rst they speculated that this was occasioned by the widespread shortages or, perhaps, to the state of the apartments. When the general and persistent nature of the phenomenon became clear, several visiting professors took on the role of hosts and invited groups of teachers (and students) to

36


their apartments, creating some confusion of identities: who were the hosts and who were the guests? It may well be that some on both sides of the partnership considered the “autonomous zone” on the seventeenth fl oor part of the West and that the Russian participants felt like guests there.

Language was also a barrier. While most Russians “on the seventeenth fl oor,” as well as others involved with NES, spoke good or acceptable English, few visiting professors spoke Russian. Th is probably exacerbated the constraint against socializing to some extent and also reduced the visiting professors’ potential contribution in meetings of the academic and other committees, which were conducted mostly in Russian.

Some of these voids were compensated for, on the social side, by tours in Moscow and the vicinity for the visiting professors, exploitation of the rich cultural opportunities that Moscow off ers,

and, above all, being close-range eyewitnesses to the dramatic events surrounding one of the most exciting social, political, and economic transitions in modern history. Finally, as if by careful planning, an English language newspaper, Th e Moscow Times was inaugurated in Moscow on October 2, and NES subscribed for two copies, a major and almost sole source of information in English on Russia and the world during the fi rst few years.

Students

While highly satisfi ed with their studies, most students were even more enthusiastic about the warm and cohesive atmosphere that NES had created. Within a few weeks, it became clear that NES did more than teach a subject that had been terra incognita in Russia; it also provided a new social and intellectual environment. Students remained at the school into the late evening, reading, doing homework, working at the computers, but also playing computer games (something that we tried to limit, in vain, due to the limited number of computers), table tennis … and socializing. NES became a second home for the students and a fi rst home to some.6 A high degree of complementarity between the social environment and academic achievements must have developed. Another contributing factor to the NES atmosphere was the small size of the class (and the school); the close relationships among students, teachers, and staff ; the excitement of doing something new and important – and also the tea and biscuits served every day in the entrance hall, the “Forum,” the friendly and motherly approach of Zarema, the dean of students, and also, in its particular way, the weekend

6 So they reported at the end of the year to members of the IAB who spoke with them in groups and one on ones; to me on many occasions, including long talks I had with the group that attended the summer school in economic theory at the Hebrew University of Jerusalem; and to outside evaluators who were sent occasionally by the grantor institutions.

Class of 1994 at the Boat. From left to right:Francesca Cornelli, London Business School; Arkady Dvorkovich, Elena Sharipova, Andrey Uspensky, Alexander Ustinov, 1994

37


and summer river trips around Moscow on an old Soviet navy boat that Vladimir Zhitkov and a group of friends, among them several graduates of NES, had purchased.

Tuition, Stipends and Fellowships

During the fi rst ten years of NES, almost all students were granted full tuition waivers and also received academic stipends on top of that. For the fi rst two modules of their education, all students received stipends of equal amount: $40 per month. In the mid 1990’s, $40 a month in Moscow was barely enough to get by. Aft er the fi rst two modules, students’ stipends were determined by academic standing with a base stipend amount of $40 per month and a higher stipend of $60 per month for students with high academic achievements, determined by a “stipend index score” created in 1994, and adjusted periodically in consultation with the students. Over time, NES also introduced need-based scholarships, fi nanced mostly by an increasing number of scholarship funds created by supporters and alumni of NES. Th is was the situation regarding tuition and fi nancial support to students until the late 1990s when tuition was raised quite dramatically and supported by a student loan fund (See chapter 7 below).

The “Public Seminar”

Th e public seminar worked well, though not always every week. It off ered students a selection of lectures on a wide range of topics, mostly related to the Russian transition, and a few “real” academic papers, mostly by visiting professors teaching at NES or invited by other institutions in Moscow. Most of the presentations, however, concerned current issues in Russia’s transition and economy and were presented by government offi cials, members of parliament, economists from other institutions, and the like. Many of them belonged

to what may be called the “reformist clique,” a group comprised mostly of young economists who were working on the transition inside or outside the government. People at CEMI, Makarov included, knew all of them very well; some were involved with them in various groups, preparing diff erent pieces of the reforms. I also knew most of them from my earlier work on the aforementioned Soros project, from meetings in conferences and seminars in Russia during my many visits, and later through my work with the World Bank.

Th e members of this group were intellectually, if not ideologically, close to and supportive of NES. Some of them, however, remained partly reserved, ambivalent, and somewhat aloof from our venture. Several factors may explain this. First, to that point in time NES had invited none of them to serve in any of its governing organs. Only years later, when NES created its Russian Advisory Board, were many members of this group co-opted (see below). Second, only one of them had been invited to teach a regular course at NES; the others did no teaching even on the Russian economy or the transition. Th ird, at least some of them had doubts about NES’ long-term sustainability. Despite the school’s role as a door-opener toward the West, there was a suspicion or concern about the outcome: would NES become a one-way bridge out of the country for students instead of providing Russia and the transition with Western trained economists? Fourth, some of them faced a language barrier. Fift h, the normal and ubiquitous tension between policymakers and theoretical academics must have been present. Finally, many members of this group found in the Higher School of Economics (HSE) and the Institute of Economic Transition (IET, the Gaidar Institute), a much more familiar, friendly, and (in their eyes) useful venue to serve the immediate needs of the economic reform. Many members of the group were invited to off er courses and serve on various administrative boards there. In return, they off ered HSE political backing as well as fi nancial support in the form of research contracts,

38


hiring of graduates by the institutions and/or government departments for which they worked, and other means.

Th e exclusion of members of this group from teaching positions at NES was the outcome of a deliberate decision that was made to assure the high academic level of all courses, and was implemented in full agreement with our Russian partners.7 Not giving members of this group an early formal role in the governance of NES, at least as consultants, was very likely a mistake. Up to a point, we expected our Russian partners to take the lead in establishing NES’s public relations and assuring its visibility in Moscow, the government, and the business community. Some of this happened but it was not enough; it became another task that we, the Western partners, including myself, had to shoulder to a greater extent than expected. Th is was done in many cases by recruiting Makarov and using the notorious “Vertushka”, the special telephone on his desk to arrange meetings and invite people to speak at the public seminar, in conferences, and other events. One of the items on my agenda and later on Barry’s, when visiting Moscow, was to schedule meetings with members of this group: Yegor Gaidar, Evgeny Yasin, Vladimir Mau, Sergei Vassiliev, Andrei Illarionov, Andrei Vavilov, Oleg Viugin, Peter Aven, Maxim Boycko, Boris Fedorov, Michael Dmitriev, Sergei Alexashenko, and others. In the early going, we also met with members of the older guard such as Oleg Bogomolov and Abel Aganbegyan. At such meetings, in addition to reporting about NES and seeking support, we discussed economic issues related to Russia’s transition. Aft er all, we tried to continue cooperating on the academic side of things.

7 Maxim Boycko was an exception; he declined the invitation to teach at NES due to his deep involvement with the privatization process in Russia. Later on (2001) Boycko served as the chair of the Russian Advisory Board (RAB), and then since 2004 the chair of the governing Board of NES.

Th e public seminar and the periodical conferences served, in addition to their main goal – acquainting students and staff with the economic problems and developments of their country – as a way to establish and preserve contact with members of the reformist group and to pay respect to them. Four members of this group (Evgeny Yasin, Sergei Alexashenko, Sergei Glaziev, and Boris Fedorov) lectured at NES early on; most of the others did the same in subsequent years. Here too, while the Russian partners at NES played a role, the Western partners’ responsibility for inviting speakers to NES conferences and ceremonies increased over time. Securing the consent of most of these people to attend a seminar or a conference was diffi cult to begin with; making sure they would show up was even harder. Th e usual response when accepting an invitation, sometimes given through a secretary, was “We’ve marked it on our calendar.” Showing up, however, was determined by an evaluation of the priority of all invitations that had been accepted for the same time slot and “marked” on the calendar. Over time, we got used to this cultural behavior and tried to have replacements lined up. All this aside, several “reformists” came closer to NES and off ered help, each according to his or her capacity at the time in question – with money (Andrei Vavilov, Peter Aven), advice and help vis-à-vis the authorities, and cooperation with their own institutions (Yegor Gaidar, Andrei Vassiliev, Maxim Boycko). On other occasions, however, we had to swallow our disappointment with unfulfi lled promises and commitments.

At the end of the fi rst year of teaching, there was a general feeling that we had surmounted the main barrier, the virtual barrier of disbelief that the NES endeavor was at all possible – something that many, including many of us, had faced. Indeed, in his letters of reference to Western foundations for support of NES, Zvi Griliches wrote the following:

Despite all of these diffi culties, the school has completed its fi rst year. It selected a fi rst class of 40+ students and taught them successfully, bringing in an impressive

39


list of fi rst-rate teachers. A similarly impressive list is on the deck for next year […]. It is off to a very good start. It has “lift ed off ” […] (August 12 , 1993).

Andreu Mas-Colell had the following to say:

As things stand now, it is my belief that NES is poised to become a leading, perhaps the leading, Russian economic school of the future (August 9, 1993).

And Michael Bruno added (from a letter to me aft er a visit in Moscow):

At that time [August 1992] we looked at the proposed program […] and it was all new, promising, but accompanied (at least to me) with considerable apprehension as to whether such an enterprise could lift off and succeed. Now, at the end of the fi rst academic year […] I cannot but praise it as an unusually successful venture [...]. Th ere is a good chance that given the right support and management it will develop into a sustainable and successful fi rst-rate graduate school of economics in Russia, of a rank that can be compared internationally (June 25, 1993).

Prophetic indeed.... All these letters, however – Bruno’s more than others – refl ected the problems that NES faced at that juncture, as the IAB convened in late May 1993 ahead of the second academic year.

Fundraising

Th e summer break between the fi rst and second years brought additional good news to NES, this time in the form of the fi rst grant outside of the original one by the Soros Foundations. While in Washington in mid-July 1993, I noticed an announcement from an organization

called the Eurasia Foundation (EF),8 inviting proposals for a variety of projects in the countries of the former Soviet Union (FSU).9 I sent a letter of inquiry to Mr. William Bader, president of EF. Th ere was an immediate response, asking for more information. Within days, I was invited to a meeting at the EF, where I learned about this organization and got to know some of its offi cers. A few weeks later, I received a letter announcing a grant of $100,000 to NES.10

Th is grant was especially important since Mr. Soros had conditioned his continued support on the co-opting of other foundations. He viewed this as a test of the quality and importance of the project, a way to reduce his share in the total support, and – as we discovered a little later – a device with which to increase the absolute level of support to NES. On this occasion, it did not happen. To this day, in fact, the Soros Foundations (HESP and OSI) remain NES’ largest and longest-tenured supporters. Several times George Soros and Bill Newton Smith, the president of HESP intervened with other foundations to support NES, and on other occasions they came to the rescue of our venture when it ran into fi nancial diffi culties. Both Soros and Bill Newton Smith visited NES now and then (see below) despite Soros’ rather bumpy and tense relations with the Russian government.

Th e negotiations over the EF grant taught us a fi rst lesson in fundraising: foundations want their support to be earmarked in a way that will give them recognition and distinguish them

8 Intensive search in the Eurasia archives failed to uncover this announcement; I believe I saw it in the Washington Post.

9 Th e Eurasia Foundation was established by the U.S. government to give grants to the FSU states, partly in order to separate the small-grant business from the larger USIAD, which focused on much larger projects. NES tried more than once to obtain support from the latter but to no avail, with one exception, to help cover some of the costs of the tenth anniversary of NES.

10 Th e grant was announced in the EF bulletin Highlights, 1(1): 2.

40


from other grantors. With NES in its infancy, this was relatively easy to do and demonstrate. Less than a year later (June 1994), Eurasia awarded NES another grant, this time in the sum of $250,000. Since the management of the NES budget from the offi ce of the Soros Foundations was not to EF liking, this arrangement had to be changed ahead of the third EF grant. Eventually, NES became the largest EF grantee outside of a project of Eurasia’s own creation, the Economics Education and Research Consortium (EERC), of which more will be said later.11 EF supported NES until 2003. By then, the process of obtaining consecutive grants had become much more complex. Furthermore, there were periods of considerable tension, some due to our less-than-prompt compliance with the reporting requirements and partly due to a built-in confl ict between the nature of NES’ needs as a long-term project and the Eurasia charter, which concentrates on small, short-term, and mostly non-recurrent seed-money grants. One problem arising from this mismatch was that new grants could be applied for only aft er full performance of the previous one. Th is created time gaps in EF support while activities at NES had to proceed continuously. Th e creation of the EERC, the EF’s own in-house project, certainly also played a role.

Our initial success with Eurasia gave us confi dence that we must be doing something important and might record further successes in fundraising elsewhere – an activity alien to our character, our inclination, and a fortiori our capabilities.12

Other eff orts to obtain fi nancial support for NES in the West at this time, however, were not successful. Th e aforementioned talks with Amnon Golan, director of the Economic Development

11 Interview with William Bader, president of Eurasia Foundation, where he cited NES as the largest grantee of Eurasia at that point; Transition (6:1 – 2, 6 – 7, February 1995).

12 Even aft er Bill Bader stepped down from his position in EF, he continued to support NES through his engagement with the World Bank and in other ways.

Institute (EDI) – predecessor of the present World Bank Institute (WBI), the Bank’s educational arm – went nowhere. A much more promising direction, at least as it seemed at the time, was to obtain a World Bank loan for “training,” a rubric negotiated with the Russian Government at the time of my stay in Washington DC in early 1992. Th is rather large loan (initially planned at $270 million) seemed to be perfectly timed for NES; we hoped to receive a small piece of it. At the time, it was supposed to be executed at the end of 1992. By the time it was implemented two or three years later, it had shrunk to only $60 million and was no longer off ered in support of higher education. We had to wait for a special new loan that was in the works. It took a few more years to negotiate and execute the new loan, and only then (in 2001) did NES receive a small piece of the loan through the National Training Foundation, a Russian outfi t established to distribute and administer the loan to a small number of nonprofi t higher-education institutions. Th e delay in signing on the two loans and their eventual modest size were occasioned by Russian government’s refusal to borrow for investment in higher education13 and, possibly, by a dispute over whether nonprofi t organizations should be allowed to benefi t from the proceeds. Th e Russian government wanted all the money to go to state universities; the World Bank almost acceded. Aft er we and others applied heavy pressure, a small part of the loan was earmarked for a few independent nonprofi t organizations that were spearheading reforms in economic higher education and creating a basis for emerging civil-society institutions in this sector.

Countering this small victory, though delayed by almost ten years, our eff orts during the fi rst couple of years to obtain fi nancial support from other foundations, Carnegie, Ford, Rockefeller, Star, and a few others, as well as directly from the WB, all failed.

13 Yegor Gaidar, the Russian prime minister at the time, was quoted as asserting that support for higher education had to come in the form of a “technical assistance” grant rather than a loan.

41

1993/94 – the Class of 1994 and the First Commencement

Chapter IV

Th e second year at NES started with bad news: Kate Hardin, our fi rst administrative assistant, was leaving for further studies. Fortunately, we replaced her in good time with Kimberly (Kim) Carlton, a graduate of Pomona College in California who came to Moscow and NES directly from the U.S. She stayed with NES for one year, through the summer of 1994, and was replaced by Oxana Budjko as noted above.

Still a year away, however, was the appointment of the year-long Western academic coordinator that the IAB had demanded. For the time being, Amos Witztum, back to teach the fi rst two modules of 1993/94, accepted the coordinator’s responsibilities as an additional task and a partial substitute for the real thing. Now that we had two classes, the typical teaching load of visiting professors consisted of one compulsory course to the fi rst class and another course (compulsory or elective) to the second. Th is allowed each teacher to get to know most of the students, an important factor in writing the reference letters that would help them gain admission to graduate schools abroad. Th e number of visiting professors grew from two to four at this time, increasing the demand for apartments, offi ces, computers, and everything else commensurably.

Th e fi rst order of business for Year 2 was to reorganize the teaching schedule, if only (among other factors) to ease the heavy burden of studies of which almost all students complained. Th e load was indeed onerous, fi rst of all on the supply side, given the number of topics to be covered in economics plus the

requirements in English and mathematics. Several teachers used their “academic freedom” to add teaching hours to the scheduled four weekly hours per course, plus two hours of sections run by teaching assistants (TAs.) On the demand side, the students weren’t used to a regime entailing so much independent work for each course, including problem sets on almost a weekly basis plus required reading. In addition, only the best students, about a third of the class, received tuition waivers and subsistence fellowships; the rest had to work to cover their basic living expenses.

Th en we ran into the additional problem – a total surprise to us, Western partners – of students who had enrolled simultaneously at NES and at another institute of higher learning. Dual registration happened in two ways. One was the admission of students to NES before they completed the normal fi ve years of university studies toward a Diplom. While it was a basic requirement at NES to admit only candidates who had completed their Diplom, we also decided to admit good candidates who had fi nished three years of university studies successfully (deeming this a “virtual” bachelor’s degree). Given the uncertain status of the graduation certifi cate that NES would award – a matter we address at the end of this chapter and below – it was only natural that such students would opt to continue their studies toward the offi cial state Diplom, especially since this document also conferred military deferment privileges that NES could not provide at the time. Th e second kind of dual registration among NES students involved enrollment in a formal State PhD program that led to the “Candidate of Science” (Kandidat Nauk) degree. Some applicants to NES had already begun such programs when they applied; others applied to both simultaneously. A few of those pursuing a formal doctorate degree were doing so at CEMI, in which case their studies could be coordinated with the program at NES. At this point, NES was unable to refuse such applicants, especially the best among them. Over time, however, as we shall see, this problem diminished as the NES diploma earned fi rst an informal reputation and eventually offi cial recognition. In some cases, the

42

1993/94 — the Class of 1994 and the First Commencement

second program of studies outside of NES was “symbolic”; in others, however, it did impose an extra burden on the students.

Th e IAB took up the issue of burden of studies in its meeting of May 1993. Th e main decision that was made to lighten the burden was to extend the academic year from four modules to fi ve – from twenty-eight weeks to thirty-fi ve – starting in early September and going until the end of June. Th is was only a very partial remedy if any, because the modular structure itself, with its frequent exams (including some in mid-module), imposed a heavier burden than the semester format would have. In further decisions, some of the English training was shift ed to summer vacation, teachers

were instructed to stay within the allotted hours per course, and students were limited to four courses per module. Th e subsistence fellowships were increased and a second, higher level of fellowship for the best students was established, encouraging students to relinquish their outside jobs and concentrate fully on their studies. Several second-year students were given paid positions as teaching assistants; they too would not have to work elsewhere. Eff orts to reduce the teaching content in mathematics succeeded in a very incomplete way, leaving students and some teachers convinced that some of the material taught had little if anything to do with the economics courses. With all that, students’ complaints about the heavy burden of studies neither ceased nor eased.

The Second Year of Studies

started with the fi nal modules of the compulsory sequence in micro, macro, and econometrics, followed by an almost full slate of fi eld courses: international trade and international economics, public fi nance, money and banking, IO, political economy, economic growth and development, and more advanced theory and game courses. It also included the fi rst course on transition economics, taught by Dan Berkowitz, followed in later years by Ofer, Polterovich, Ickes, Polishchuk, and others.

In addition to the aforementioned Russian teachers who taught courses in English, mathematics, statistics, and fi rst-module econometrics, domestic teachers off ered several courses that belonged to the core economics curriculum: Th e mathematics sequence also included the fi rst course in game theory, off ered in the fi rst few years by the renowned game theorist Vladimir Danilov. Among the instructors from CEMI, Victor Polterovich, a leading mathematical economist who had already established strong academic connections with the West,1 off ered from the

1 He was a member of the editorial board of Econometrica and published in that forum and in other Western journals.

Kate Hardin, Zarema Kasabieva and her daughter Alena, 1993

43


start courses in international economics and a course on the transition, in addition to part of the Micro and Macro sequences.

Victor, and later also Valery Makarov, took advantage of the transition and the advent of NES to expand the breadth of their economic interests beyond mathematical economics. Victor was especially interested in economic transition issues and became one of the academic leaders of the school of thought that advocated “gradual reforms” and the use of “heterodox” policy tools, e.g., an increase rather than a decrease in public spending to avoid or at least attenuate the initial “transformational recession.” Makarov turned his main interest in the direction of public fi nance and joined in to teach the course several years later. Revold Entov, a leading economist at IMEMO (the Institute of the World Economy and International Relations of the Russian Academy of Sciences, RAN) who also had close academic ties with the West, (he was in charge of the translation of the fi rst Western economics textbook – Samuelson’s in 1964!), taught at NES for many years a course on the history of economic thought. Oleg Eismont of the Institute for Systems Analysis also of the RAN, who worked in the area of environmental economics, expanded his interests to the economics of natural resources and taught at NES since the mid-1990s onward.2 For a few years Leonid Friedman and Vitaliy Meliantsev taught a course called “East – West,” a blend of economic development, modern economic history, and Soviet economics.

Th e decision to include a course by a domestic teacher was made by the IAB. Th e normal procedure was that the proposed synopsis and reading list were sent to a member of the IAB or another expert in the fi eld for evaluation and comments. Approval was not automatic. Even aft er approval, courses were subjected to an evaluation process, the results of which were reviewed and discussed by the academic committee. Eff orts to improve performance were made when

2 Oleg passed away in 2012.

necessary and some courses given by domestic teachers – and a few by visiting professors – were discontinued.

Th e second year of studies brought with it three additional academic challenges in train: introducing a format for the preparation of Masters theses; arranging the placement of most students in Western, mostly European universities for a semester or two, and selecting those graduates who qualifi ed for PhD studies in the West and arranging their admission to respected graduate schools. In all these three cases there were unexpected developments.

Master Theses and a Semester Abroad

Work on an independent research project, be it empirical or theoretical, is part and parcel of the education of an economist (and, indeed, of any academic scientist). Th erefore, the academic program for the second-year students included the compulsory preparation of a Masters thesis. Here NES faced the diffi culty of not having enough qualifi ed supervisors for all students in the class. Not all the domestic teachers were qualifi ed to supervise master theses; the few visiting professors could supervise no more than a few students and did not stay in Moscow long enough to complete the task. While continued supervision could in principle be accomplished by remote control via electronic means, this proved problematic in most cases and seldom worked well. In any case, the decision was to assign two or three students to each qualifi ed teacher and leave the completion of the task, when needed, to the period of study abroad. Indeed, this was one of the goals of the period of the study abroad.

Another goal of this program was to give students an opportunity to experience a real Western academic environment and take a few additional courses in fi elds of specialization that were not available in Moscow. Some members of the fi rst graduating class did go abroad and complete their Masters theses there; several

44


others completed their thesis work in Moscow. Originally, too, it was thought that some of these students would extend their stay abroad to engage in PhD work. As it turned out, however, a signifi cant number among the better students preferred to enroll directly in PhD studies in the West, something that made the completion of a Masters thesis abroad by these students less realistic and exacerbated the burden of supervision in Moscow. In view of these diffi culties, it was decided to allow students to graduate with or without a thesis (this was indicated in their diploma) and to prepare a better process of work on master theses and the period of study abroad for future years. Eventually, given the popularity of the option of PhD training abroad (see next paragraph) and the diffi culties encountered by an academic program that required a semester away from Russia, we cancelled this part of the program and prepared a solid infrastructure for Master theses preparation at NES. Specifi cally, we extended the domestic second-year program to fi ve modules and thirty-

fi ve weeks, as in the fi rst year, and reinstituted the requirement of a Masters thesis by all students as of the class of 1995.

PhD Studies Abroad

Sending some of the best students for PhD studies abroad was a declared goal and plan of NES, aimed at producing its own future faculty and that of other universities in Russia. Even so, all of us were surprised by the large number of second-year students – nearly half the class – who sought this option. A placement project of this magnitude (on top of those sent for shorter periods) required additional administrative and logistics support, had to be developed from scratch with little experience, and involved many unknowns, uncertainties, and risks. To succeed, NES obviously would have to obtain maximum support from members of the IAB, not to mention signifi cant fi nancial resources.

Proceeding mostly in the dark, NES enlisted a coordinator for the project. Eric Livny was a former student and research assistant of mine, a graduate of economics and political sciences at the Hebrew University who immigrated to Israel from the Soviet Union with his parents a few years earlier.3 He had also worked with me at the HU as the manager of a student-exchange program with MSU, where I came to appreciate his organizational skills and energy. Reaching Moscow in early autumn 1993, he had to dive into the project with little time to learn or prepare. Yet within a few weeks he contacted universities, arranged GRE and TOEFL examinations in Moscow, applied for fi nancial support, and put a student selection process in place. Since the targeted universities had never heard of NES, a special introductory document was prepared and attached to the reference letters, which were signed by visiting professors and IAB members whose names the addressees would recognize.

3 Even though in Soviet Union his name was Lev, in Israel he was Arik, but back in Russia he called himself Eric.

Eric Livny with NES students and graduates, 1995. From left to right: Irina Aganina, Andrei Shevchenko, Eric Livny, Alexander Aganin. In the background: Evgeniy Trubach, Sergei Zaitsev

45


Th e outcome of this very intensive and hurried eff ort was that 13 students were admitted to PhD studies at universities including Harvard, MIT, Chicago, Duke, Yale, Cambridge, and Oxford – something that was hard to imagine beforehand. Concurrently, 17 students were sent in small groups mostly to Western European universities (LSE, Tilburg, Leuven, Stockholm, etc.) to complete their Masters thesis’ requirements; several of them stayed on longer and enrolled in PhD programs. To cover travel expenses and other outlays, additional funds were obtained from the Soros Foundations; contributions to various fellowship programs from the U.S. government and the (then) European Community subventioned the admissions.

Observing the results of the admission campaign in the spring of 1994, the entire NES community was elated: it meant the successful implementation of another major part of the original NES mission, it augmented the school’s self-confi dence and sense of approval – a matter of supreme importance for its self-image, visibility, and reputation – and it would help us to attain fundraising and public-relations goals in Russia and abroad.

However, this success also brought worries and signaled a distant risk: would our students do well abroad? And would they come back aft erward? Th ere was some criticism in Moscow of sending students abroad, some possibly seeing this as something that NES considered its end goal. Below we revisit these questions and the general issue of sending students abroad. Here we shall only note that, on the basis of the infrastructure created during this fi rst year and due to the successful performance of the majority of NES students, the admission of NES students to Western universities went much more smoothly in subsequent years: in almost all cases, the candidates were admitted with full four-year fellowships, some to the top schools and others to the second-tier ones. In the following year, there were still a few PhD fellowships created at NES’ initiative – from IRIS, at the University of Maryland, the Soros Foundations, the European Communities’ ACE/TACIT project, SITE (Stockholm Institute of Transition Economics),

and a few others. As of the third year, however, NES stopped seeking fellowship support for its graduates who were going abroad, except to cover the costs of the GRE exams, registration fees, procedures, and travel. It became NES policy to prefer a full four-year fellowship from a lesser school than to subsidize to better schools. As we shall see below, funds earmarked for such support were eventually used to encourage NES graduates and others to come back to Russia and to NES. NES continued to actively coordinate the foreign PhD campaign until it was discontinued in 2002 and the responsibility over these services was passed to faculty members, fi rst Alexander Deviatov and later Sergei Izmalkov. Th e coordinator’s role was to assist students in obtaining and fi lling out admission forms, schedule exams and other matters, disseminate information, and, with the help of faculty members, gently “spin” the distribution of applications among relevant schools to maximize the rate of success.4

One diffi culty relating to the PhD programs off ered in the West, especially in the U.S., was that students had to start their graduate studies from scratch since they received no academic credit for their graduate courses at NES. Th is prolonged their programs and oft en forced them to repeat at least some fi rst-year courses, but possibly useful to some students. Only one American university, Penn State, agreed to waive most of the fi rst-year graduate requirements for NES students. Th is dispensation, arranged through the good services of Barry Ickes, also served Penn State’s interests because it attracted more and better NES students. By 2012, 23 NES graduates had taken PhD studies there. Th e repetition of courses was less of a problem in many European universities, where a PhD program could be completed in fewer years.

4 Following Eric Livny, the coordinator’s post was fulfi lled, consecutively, by Marie Bentlee, 1996-97, Stuart Shaw, 1997-99, Vanessa Fuller 1999-2002, and the last one, Kristian McDonald, up to 2004 or so. Since 2008 it became a duty of one or two designated faculty members, starting with Paul Dower and Sergei Izmalkov).

46


The First Commencement

NES’ fi rst commencement took place on June 27, 1994. Th irty-two of the thirty-fi ve members of the inaugural class graduated5 and it was announced at the ceremony that thirty of them would be departing for studies abroad, fi ft een of them at the PhD level. Th e aff air was attended by parents, representatives of other universities, institutes, international organizations, several embassies, and many members of the “reform group” of economists. We adopted some features of Western (and probably also Russian) ceremonies of this kind: the graduating class entered to the sound of music and applause from the audience and an invited dignitary was called up to deliver the commencement speech. Th e invited guest speaker, Abel Aganbegyan, cancelled in the last minute, true to the pattern described above, but he did show up eventually when everything was over. Th e ceremony proceeded with the presentation of diplomas to every graduate, accompanied by a red rose, a T-shirt, kisses, and camera fl ashes on the podium; the release of balloons; the recitation of blessings; the announcement of prizes; the taking of a class photo – and then a gala dinner. Missing were the traditional ceremonial caps and gowns. Barry Ickes, who had come to teach the fi ft h module, served as the master of ceremonies and pulled it off with the right mix of solemnity and humorous and lighter interludes. A testimony to his success is that he has been invited to repeat his commencement performance whenever in Moscow until recently, with one exception: in July 2009, when U.S. President Barack Obama did the honors.

Given the “fi rstness” of the commencement, its preparations were frantic. Barry reminded me that I had asked at the last minute for the creation of an NES banner that should be suspended behind the podium. Th is was no trifl ing demand in Russia of those days.

5 One of the students of the fi rst class, Katya Zhuravskaya, left for LSE aft er one year at NES and joined her classmates as a PhD. student at Harvard the following year.

As it turned out, a fellow from CEMI spent a good part of the night before the ceremony painting the banner by hand. Th is call of mine was on top of my daily calls from Jerusalem that according to Barry “made my head as well as Kim’s spinning”. My self-appointed role – repeated in every commencement up to that of 2004 – was to give a talk on “Th e State of NES,” a summary of the past year’s record, achievements, and problems, a listing of “what needs to be done,” and discussion of several more fundamental issues related to developments at NES. I read my remarks from notes, usually being too tense on such occasions to speak extemporaneously. In my fi rst “State of the NES Address,” that of 1994, I noted the miracle of having gotten to that point. It so happens, I said, that nes means “miracle” in Hebrew but this miracle was achieved through the great eff orts and dedication of many people. Most of my speech at this fi rst commencement concerned the issue of study abroad: the responsibilities that those heading out assumed vis-à-vis NES and future classes and the question of returning to Russia to help fulfi ll the NES mission. In this context, I cited the importance of opening Russia to the world and the potential risk and cost of brain drain – matters that would take center stage in subsequent years at NES and will do the same in the rest of this report.

Now, what was our diploma worth? While NES had received a license to operate as a “non-governmental 6higher educational institution” under an eponymous statute back in 1992, its Diplom was not offi cially recognized. To gain recognition, NES had to be fi rst licensed and then accredited by the Ministry of Higher Education. Nevertheless, it did issue its graduating students with diplomas that were signed by Makarov and me. As noted above, Western universities did come around to acknowledging the diploma and the transcript attached to it as credible evidence of the graduates’ high academic achievements and slowly gave them a reputation

6 In Russia, “non-governmental” was and still is synonymous to a non-profi t NGO.

47

among the emerging business community in Moscow and, more so, among foreign companies operating in Russia.

Accreditation would take years to attain but in autumn 1994, when the third class (that of 1996) took their seats, NES fi nally made it to the international media with a complimentary article by John Lloyd, the legendary Moscow correspondent of the Financial Times, titled “Russia’s Harvard Gets Down to Business” (November 11, 1994.) An earlier article in a Dutch paper (Hans Nijenhuis, Moscow correspondent, Handelsblad, April 1994), captured our hopes and doubts in a seven-word headline: “From Moscow to Harvard and Back, Perhaps.”

Th is maybe a proper moment to observe: out of 13 NES students who went to Harvard, four came back to NES as faculty (Zhuravskaya, Enikolopov, Petrova, Styrin), four had a successful career in the Western academia (Onatsky went to Columbia, now tenured at Cambridge, Mikoucheva went to MIT, Egorov to Kellogg, Itskhoki to Princeton), 3 went to the private sector in the US (Aganin, Piankov, Kovtunenko), one went to modeling business (Fedorova) one tragically died (both didn’t fi nish thus not counted).

First NES graduating class, 1994

1994/95–1996/97: Barry Ickes, Stabilization, the Research Center, and the Partner Hunt

Chapter V

Th e big news at the opening of classes in Year 3 (1994/95) was the advent of Barry Ickes as our academic coordinator. Barry, a member of the small group of dedicated people at NES who made major contributions to the success of this project, had already begun his career with us by saving the Masters thesis project during the last module of the previous year by running a research workshop, talking to many of the students, and reading and grading towering stacks of papers. Th e academic coordinator’s role was his fi rst at NES, the beginning of a long list of duties that entailed, and still entail, massive investments in time and energy. By 1994, Barry had joined the IAB as an active member, contributing much to the recruitment of teachers and the placement of students in PhD studies abroad. Upon the establishment in March, 1996 of the American Friends of NES (AFNES), a US-based nonprofi t organization that provided NES with fi nancial and public-relations support, Barry became its president and, ex offi cio, its CFO as well. With him and Oxana, the CFO of NES in Moscow in charge, fi nances would be in solid hands. Later, when NES started to hire permanent tenure-track faculty, Barry was appointed secretary of the Academic Appointments Committee (AAC) that had been created for that purpose, and in this capacity he introduced a hiring and job-market process much like the one practiced by most Western universities and assumed all the administrative duties of the process, in addition to his very important voice in decision-

48

1994/95—1996/97: Barry Ickes, Stabilization, the Research Center, and the Partner Hunt

making. All this is on top of teaching whenever in Moscow, co-head with Victor Polterovich of the research center, and running research workshops. Th is piling of responsibilities on a full-time professor and a prolifi c producer of outstanding books and papers may explain the occasional cases of late reporting and wage arrears that occurred. Barry and I worked together in full harmony, though not always in full agreement on how to proceed. While I tended to be more of a dreamer and a visionary on what could and could not be accomplished, Barry always leaned on the side of caution, planting actions and plans in more realistic soil. Th e only trait we shared was a passion or bias toward getting things done at the expense of procedure, sometimes creating the impression of somewhat messy management. Aft er the

changeover in NES governance in autumn 2004 (see Chapter 11), Barry stayed on as a member of the newly created board and retained his posts as president of AFNES and chair of the AAC (on which we shall have more to say below).

Research and Master Theses

Th e fi rst order of business in Year 3 was the consolidation – no, the creation – of an infrastructure and a process for the preparation of Master theses by students in Moscow. Th e need for this traced to the not-so-successful experience in Year 2 of sending the students for a semester abroad. Th e end goal was to establish a well fi nanced and properly equipped research center at NES that would support students’ thesis work and faculty members’ own research requirements. In this way, NES would achieve its goal of combining research with teaching as is done in modern Western universities, unlike the Russian and Soviet tradition of separating the two. Th is mission was accomplished toward the end of the year (see below). In the meantime, we augmented the teaching program with a series of single-module research workshops throughout the academic year and made them compulsory for all second-year students. Th e workshops, headed mostly by visiting professors, were designed to prepare students for writing research papers, provide them with additional guidance, and put them under greater pressure to help them complete their theses on time. Th e workshops also compensated for some of the discontinuity of supervision caused by the brevity of the visiting professors’ stay in Moscow. Th e fi rst-module workshop included some of the ABCs of searching for and choosing a topic, preparing a proposal, searching for relevant literature, checking data availability if needed, basic data-processing methodologies, and a few fundamental research methods (on top of the preparation given in the econometrics courses). Several electives in diff erent fi elds were off ered in the fi rst two modules of Year 2 to broaden the

Gur Ofer at the Research workshop

49


choice of master theses topics beyond those suggested by the compulsory courses. On this basis, students were required to prepare research proposals and write short papers – which could be developed into Master theses – for presentation in subsequent research workshops for discussion. Finally, the workshops in the fourth and last modules provided an arena for the presentation of draft s as well as encouragement and a fi nal push for the completion of theses. From that year on, the writing of a Masters thesis became mandatory for all students.

Despite the ongoing discontinuity of supervision and other diffi culties, almost all the students handed in their papers before year’s end and earned graduation diplomas. I credit this to the persistence and energy of Zvi Griliches, who ran the fourth-module research workshop, and Barry Ickes, who ran the last workshop. Th eir presence did much to enhance the quality of the theses, the teaching of econometrics, and NES at large.

Convening in Moscow in April 1995, the IAB discussed the issue of Master theses and the establishment of a research center, most of which would have to wait until a full-fl edged and adequately budgeted and provisioned research center could be set up. Th is was successfully achieved late that year through a generous grant by the Ford Foundation, to which we now turn.

The Research Center, GET, and the Ford Foundation Grant

Eff orts to obtain fi nancial support from the Ford Foundation began in 1993 but led nowhere for quite some time. One reason for this was the refusal of the Ford Foundation to fi nance education activities. Th is prompted us to look for an alternative important activity. A new start took place early in 1995 at a meeting in Moscow with Joseph

Schull, the Foundation’s new program director for the FSU. At the meeting, following a discussion on a number of options Mr. Schull offi cially invited NES to prepare a proposal for the establishment of a research center. On September 27, 1995, the Foundation approved a three-year grant in the sum of $500,000 for this purpose.

Th e proposal, whose main features names and titles were developed over dinner at Patio Pasta, included a main research topic: “Transforming Government in Economies in Transition,” GET for short, a title that became identifi ed with research at NES for a few years until the research agenda was widened. GET was chosen mainly as a complement to our main object of research attention at the time, macroeconomic stabilization issues relating to Russia and other transition countries. While GET incorporated some macroeconomic issues, it aspired to focus direct attention on the institutional aspects of reforms that were increasingly recognized as key to the success of the transition process and had been somewhat neglected in earlier years. By concentrating on institutional economics, GET also provided an opportunity to apply the high-level theoretical and technical skills that both the students and the faculty of NES possessed. Th e GET project hoped to develop new ways of thinking about institutional theory and policy, political economy and governance issues, and to apply them to the economies of Russia and other transition countries. In this way, the focus of the research program would complement the teaching program, which was much heavier on theory and off ered only a few courses on transition. Indeed, we expected both students and teachers to apply some of the course material to issues of transition.

Research and work on Masters theses, the IAB decided, would be performed in small workshops on each specifi c topic, including a research team composed of two project leaders, one Western and one Russian, another great idea contributed by Zvi, a group of second-year students, and

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in most cases a research assistant – a graduate of NES or a more mature researcher. Ideally the topics would be selected, announced, and distributed among students at the end of the fi rst year of studies. Th is would allow the members of each team to prepare during the summer by reading relevant literature and then selecting individual topics. During the second year, a research workshop would convene regularly to work on the selected topic. Th e students in the team would prepare their theses and also serve as RAs for the project leaders, who would write papers of their own. Initially, the model incorporated the aforementioned larger research workshops. Several years later, however, as the team meetings turned into weekly aff airs, some of the general workshops were discontinued.

Research in empirical economics lagged in the Soviet Union, partly due to the pursuit of the Marxist-Leninist version of economics but also because the regime, eager to maintain its monopoly on what was “true” or appropriate, was not interested in free and objective inquiry into economic problems. Consequently, the study of econometrics, research methods, and other tools of empirical research were undeveloped. Th erefore, the methodology of modern economic research, like so much else, had to be brought in from the West and taught not only to students but to domestic teachers as well. Th e mating of Western and Russian project leaders, another brainchild of Zvi Griliches, was designed to achieve this goal. It would also provide the team’s work with continuity, as the Western project leaders typically spent less time in Moscow. In the early years of the GET project, NES also invited economists working in the Russia’s public sector and other universities and think tanks to serve as project leaders; this broadened the spectrum of projects that could be conducted and helped to provide the needed data.

Th e papers produced under GET were to be presented in two annual conferences: one in late spring, where (mostly) draft s of students’ papers would be presented and discussed ahead

of their submission deadline a couple of months ahead, and a second conference the following autumn, mostly for the presentation of the project leaders’ papers. Th is operational pattern, which later expanded from GET to all areas of economic research, evolved and improved over the years. Th e research center also provided fi nancial compensation to all participants including the students, and in this case Western and Russian researchers received equal pay.

As well craft ed and reasonable as the plan sounded to us, our negotiations with the Ford Foundation over the terms of the grant were protracted and arduous. Ford objected to the incorporation of Western researchers into the proposal and demanded that all (or at least most) of the money go to Russians. We explained and insisted that the joint project leadership was the best way to contribute to Russia, as was the case with teaching by visiting professors. Eventually, we had our way. As it turned out, in research as in teaching, the number of Western research leaders declined as more Russians were trained and came back from study in the West. Th is substitution process gathered momentum in later years when CEFIR, the Center for Economic and Financial Research (a think tank employing mostly NES graduates), was established and moved near and eventually inside NES. Many researchers working there, including those who returned to Russia with Western PhD’s in hand, became project leaders and research assistants who provided NES with all the research support it needed. In research as in teaching, NES showed that it was able to move from almost full dependency on the West to self-suffi ciency. Today NES and CEFIR are by far the leading sources of high-level internationally recognized academic research in economics in Russia. Independent and highly qualifi ed researchers at both institutes collaborate with researchers in Europe, the U.S., and other countries, but now as equal partners.

Th e Ford Foundation also insisted that the funds go physically to Russia, even though this made things much

51


more complicated technically and riskier as well, especially in the early years.1 On this point, a compromise was reached. Th en, like most foundations, Ford insisted that the grant and the project be diff erentiated and separated (“colored”) from every other project, even though the grant it had off ered, USD 500,000 over three years, could cover only part of the costs of the research center. Of special sensitivity, as with the Eurasia Foundation’s grants, was any mixing of the grant money with Soros Foundations funds.

Another obstacle to approval of the Ford Foundation grant to NES was a competing proposal that in some (superfi cial) ways was more attractive to Ford. It came from the newly established Institute of Economic Analysis (IEA), a joint venture between HIID (Harvard Institute of International Development) and its leader at the time, Jeff rey Sachs, and a group of Russian reform economists leaded by Andrei Illarionov. Th is was a “sexy” endeavor that promised to deal in a big way with all urgent policy issues associated with the transition and the Russian economy. Most of IEA’s work would be performed by Russian economists, who would therefore receive most of the pay – at Western levels – and the budget would be transferred to Russia. To qualify for our grant (let me emphasize, a small amount compared with the above), Ford suddenly asked NES to conclude an agreement of cooperation with IEA – something that, in essence, would reduce the net fi nancial contribution to NES even more and distance us from our way of doing research. We removed this obstacle by surrendering to Ford’s dictate, only to witness the collapse of IEA within a year or so of its establishment, largely due to disagreement over management and fi nancial conduct. Th e only positive result of this collaboration was

1 NES came away from the fi nancial crisis in Russia in 1998 basically unscathed because most of its funds had been deposited with AFNES in the U.S. Many other organizations who held their cash in Russian banks never saw their money back.

the coming to NES of Michael Dmitriev who had been Assistant Director of IEA. At NES he became a project leader in GET. Michael became a great friend of NES, and when the time came he also joined the Board of NES.2

Th e fi rst grant from Ford was succeeded by a steady stream of subventions from this source. All being said, NES was and remains deeply thankful to the Ford Foundation – its New York headquarters and its Moscow offi ce – for this long-term support and its confi dence in what NES has been able to accomplish. In 2006, the Moscow offi ce of the Ford Foundation commissioned Professor Stephen Kotkin of Princeton to write an evaluation of higher-education support by Western foundations in Russia. Th e report, Innovation: Individuals, Networks, Patronage, (October, 2007)3 had to cover all sources of support since most had become mixed with grants from other sources. Th e main issues raised in this thorough and penetrating document will be presented in Chapter 12 and some of its nice words about NES will be kept for the Conclusions. Below, however, we quote one passage about NES:

Th e small New Economic School (NES) is hands down the most impressive institution of higher learning in Russia. Th is applies to the level of scholarship – NES is the best economics department in Russia and probably one of the best in all of Europe. And it applies to governance and management, which is just as hard to get right as the scholarship […]. NES does what very few in Russia do – it combines high-quality teaching with research” (p. 51, emphasis added).

2 In Russia Michael Dmitriev served as deputy minister of the economy under German Gref and later 2004 was appointed to head the Center for Strategic Research in charge with economic reforms..

3 Th ereby including the changes in the Governess structure and the improved fi nancial situation achieved by the newly created board as of September 2004.

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GET at work

To organize the work of the research center, NES rehired Eric Livny for a couple of months at the end of 1995. Project leaders and topics had to be selected, students assigned to projects, regulations and a timetable worked out, and a pay schedule and budget determined. Barry Ickes and Victor Polterovich were chosen as leaders of GET and a research committee convened to decide on all these matters. Th e method of selecting students for individual projects became the topic of prolonged discussions during the coming year, focusing on the question of who chooses whom, students or project leaders? Th e proper distribution of students, including how to take their academic achievements into account, was also much debated. Eventually, those involved converged to an algorithm that bore all these factors in mind. Over the years, too, an eff ort was made to implement a decision made earlier by the IAB: to announce the topics and distribute students among teams at the end of the fi rst year. Th e limited availability of domestic project leaders and diffi culties in recruiting visiting ones precluded real competition in the selection process. Even so, each team of project leaders was asked to present the Research Committee with a proposal for discussion and comments and to prepare a fi nal version. Th e research workshops continued in the fi rst years, serving among other things as venue for periodic presentations of students’ work in progress. Th e fi rst-year topics covered a vast spectrum of issues in macro-stabilization and industrial policy, banking reform, fi scal federalism, social policy, pension reform, and healthcare reform.

Th e domestic project leaders included economists outside of NES who worked on the chosen topics in other institutes or various government offi ces. A few students avoided GET and wrote their Masters theses on topics of their own. Th e fi rst GET conference took place in September 1995 as something like a kickoff event; but the real fi rst conference with papers presented by project leaders and students alike was held a year later. From the 1997/98 academic year onward, GET added a mid-year

conference devoted exclusively to the presentations of students’ papers, leaving the autumn conference open mostly to papers by project leaders and a few of the best students’ papers. All conferences were conducted mainly in English. Th ey were open to the public and, especially, to the community of economists in Moscow, and for this purpose they were supported by simultaneous interpretation in both directions.4 As the years passed, the research conferences became longer, parallel sessions were introduced, and the presentations improved in both content and form. Also, we cancelled simultaneous translation assuming that the whole audiences would understand and speak English.

Th e original research plan included the creation of an NES database. Although this eff ort did not succeed in full, the rapid expansion of available data on line, followed by the creation of CEFIR, compensated for most of this void.

Students’ papers were graded by project leaders and the best were published in a series of “Best Student Papers” and were recognized and given modest prizes at the commencement ceremonies. Most papers were written in English but students were encouraged, via monetary grants, to translate them into Russian during the summer break. Project leaders’ papers were published in an in-house series and quite a few of them, as well as some student papers and joint student – leader papers, found their way to journals in Russia and the West.

Th e establishment of the NES research center created a framework with which more research grants could be obtained, either for general purpose or for individual projects. Th e center encouraged potential project leaders to seek fi nancing for their projects and gave priority to funded project proposals. Over the years, funding for research, usually in modest amounts, was provided by many organizations

4 Although attendance by non-NES people picked up over time, it never achieved the level aspired to.

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including Russian government agencies, Russian think tanks (e.g., the Institute of Financial Studies), large fi rms (i.e., RAO-UES, Russia’s national electricity company), the World Bank, IRIS, the European Union’s TACIT/ACE research program and competition, and many others.

In 1996/97, I initiated a project in collaboration with the World Bank on the transition process in several major cities along the Volga. First-year students wrote survey papers on the changes that took place in each city, and during the next year several of them wrote thematic papers as Master theses on selected aspects of the reforms as these cities experienced them. As a frequent visitor to NES, I was able to attend team workshop meetings to follow up on the work. Eventually, four theses were written (two of which were presented at the mid-year NES conference in April 1998). On the basis of this work along with some research of my own, I collaborated with Martha De Melo of the World Bank in publishing two synthetic papers.5 In September 1997, NES held a two-day workshop on the project, giving me an opportunity to experience the research process and follow the students’ work.

Th e establishment of the research center and its success in creating an appropriate environment for research at home, as well as the unexpected success in sending students abroad for PhD studies, made the sending of all other students abroad for shorter terms of studying less important. Th us, this part of the program was discontinued.

In later years, RECEP (the Russian-European Center for Economic Policy) and then CEFIR joined in and became major producers of research at NES and employers of NES

5 De Melo, Martha and Gur Ofer, 1999; “Th e Russian City in Transition: Th e First Six Years in 10 Volga Cities”; Th e World Bank, Policy Research Working Paper 2165. and de Melo Martha, Gur Ofer and Plamen Yossifov. 1999; “Transition in Regional Capitals along the Volga” Post-Soviet Geography and Economics,” 40:8, 553-616.

graduates and economists with Western PhD’s. Concurrently, CEFIR continued to provide the teams working on Master theses at NES with project leaders and assistants.

The Birth of EERC

Another development of great signifi cance for NES in 1995, including its fundraising eff orts, was the establishment of the Economic Education and Research Consortium (EERC). Th e consortium was created and led by the Eurasia Foundation and the World Bank, with the participation of the Ford Foundation, the Carnegie Corporation, the Soros Foundations, other foundations, and several Scandinavian governments. Th e idea was to bring together as many supporters as possible for the introduction of modern economic education and research in transition economies.

It began in New York in May 1994, when a report on needs and options was commissioned. On the basis of this report (March 1995), it was decided to go ahead and establish the consortium and the fi rst round of fi nancial commitments was made. Although we at NES had not been part of the deliberations, we knew about them and were elated about the idea, assuming that NES would be included in it and thus relieved of part of the burden of fundraising. Consequently, we could concentrate on our main mission, where our strength lay. To our great surprise – no, to our astonishment – we discovered that the report recommended, and accordingly it was decided, that:

In Ukraine the EERC supports a M.A. in Economics program at the University of Kiev Mohyla Academy. In Russia – where economic education needs had already been addressed by several foreign donors (for example, in the New Economic School) – improvement in economic research was chosen as the priority, and the EERC supports a research grant program that helps build economic policy analysis and research.

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NES (and HSE, the High School of Economics) were barely two years old by then and had turned out just one graduating class. Even so, the group considered us a vehicle by which “education needs had already been addressed.” Even more surprising was that NES’ “foreign donors” were none other than the leaders of the new consortium. We could not understand the decision then – and it boggles my mind to this day – because it was so remote from any reasonable assessment of the situation at the time. Th e consortium, at least in principle, was a long-term framework consistent with the long-term needs of building of a university. I tried to discuss the matter with Michael Bruno, then chief Economist and Vice President of the World Bank and a main partner of the new initiative, but this turned into an angry exchange. It was implied by Bruno that the inclusion of NES in the consortium would place him in a confl ict of interest, since he was a member of the IAB of NES. Regrettably, this marked the end of Bruno’s involvement in NES.

On a personal level, we managed to mend our relations before Bruno died prematurely of cancer on December 25, 1996. Eff orts were made to establish a project in his name at NES with the help of James Wolfensohn, President of the World Bank. Although nothing came of this idea, Michael Bruno’s great contributions to NES in the early years, described above, remain as his monument.

All of our eff orts to have NES included in the EERC failed to change their decision. Th ese eff orts included a strongly worded letter from George Soros (threatening to pull out of the consortium), an eff ort by NES through Andrea Harris, the person in charge of EERC on behalf of Eurasia, and a direct appeal to the EERC’s board.

EERC-Kiev, a school structured pretty much along the design of NES, had been established in 1995 as a partly independent entity inside the Mohyla Academy, a university established in 1632 that had been shut down during the Soviet period and reorganized and reopened upon independence in 1991 as a major symbol of Ukrainian nationalism and independence.

Unlike NES, relations between EERC-Kiev and the Mohyla Academy were tense throughout, possibly because the Academy, unlike CEMI, NES’ partner, was a teaching institution and thus in competition with EERC. Nevertheless, EERC-Kiev succeeded in producing a stream of well trained economists – some of whom proceeded to PhD studies abroad while others took up high policymaking positions in the government – and instigating the development of an indigenous faculty.6

Th e mission of EERC-Russia, also established in 1995, was much diff erent. A more recent document explains:

[…] EERC was created […] to strengthen economics education and research capabilities in the CIS. Managed by a Moscow-based secretariat, EERC’s Research Network supports original policy-relevant studies, organizes training seminars and research workshops, links academics and policymakers, and invests in the virtual research infrastructure – access to scholarly literature, data and peers. Since 2000, EERC serves as the regional representative of the Global Development Network (GDN) in the CIS.

Th e main activities of EERC-Russia (since 1999, EERC-CIS) are a twice a year competition for domestic research proposals and the funding, training, monitoring, and supervision of winning proposals with the help of Western and other scholars. Th e main events are two annual meetings devoted to the above. In addition, EERC organizes training workshops on research- and policy-related topics in various parts of the CIS. Like NES, EERC was almost totally dependent on Western economists for these tasks in the early years, but as more and more indigenous professionals were trained, especially at NES and by EERC-Kiev, they were incorporated to the work.

6 In 2007, EERC-Kiev seceded from Mohyla and, in conjunction with the Victor Pinchuk Foundation, established the Kiev School of Economics (KSE), a fully independent institution.

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Th e head of EERC-Russia (-CIS) from almost the start in 1996 was our Eric Livny, who had left NES a few months earlier to seek a higher calling in Moscow’s expanding market economy. He turned EERC into a very successful operation from the fi rst go. Cooperation between EERC and NES was more than natural. Even at that early stage, NES was able and ready to provide the EERC researchers with a library, some on-line reference support, courses to attend, and teachers (domestic and visiting) for workshop activities, teaching, and project supervision. Th e involvement of NES, its faculty, and its graduates in EERC aff airs expanded over time. From the other direction, NES students and faculty were allowed and encouraged to enter EERC’s research competitions, in which they won quite a number of grants.7 In time, the Swedish government created a special fund through EERC to encourage Russians training abroad to come back and teach in Russian institutions by covering the salaries of returning faculty for a few years. Most of the winners of these “Swedish Professorship” grants were the fi rst NES graduates who returned to join our faculty.

All the foregoing demonstrates the strength of the synergy between the two activities, those of NES and those of EERC, and explains why NES should have been included in them. Had it happened, NES would have provided EERC with a research infrastructure and would have performed an “outreach” function as a natural outgrowth of its activities, as occurred in Kiev. What actually happened instead, was very close scrutiny by Eurasia to make sure EERC would develop full visibility and independence at the greatest possible distance from NES. I fully supported Livny’s appointment

7 We at NES did consider the participation of our students and domestic teachers in the EERC competitions unfair to all the others. We repeatedly suggested that some of the funds be earmarked for a separate competition among the better trained, but this idea was rejected.

as the head of EERC-Moscow; it clearly proved to be the right decision. However, his previous work at NES and our close personal relationship raised the level of alert at Eurasia lest the two institutions become too close. Several years later, institutional loyalty overcame all relations, however, intimate, and thwarted a merger between NES and EERC-CIS. Several years farther on (spring 2002), however, EERC-CIS moved to the CEMI building (where NES is situated) and talks about a potential merger with NES resumed. Plans were drawn up including a detailed joint proposal by Livny and me, long meetings were conducted, consultants hired, and studies made. In December 2002, from the podium at NES’ tenth anniversary celebrations, William (Bill) Maynes, President of Eurasia at the time, more-or-less announced the merger of our institutions into a “Russian House of Economics.” It didn’t happen – mostly due, in my view, – to strong survival instincts at EERC and, possibly, some bad personal relationships. Even proposals to make EERC an independent entity inside NES, backed by fi nancial guarantees, failed to overcome the reluctance to accept the call for (partial) subordination. Th e decision to reject the merger by the board of EERC on Sunday surprised us at NES, since on the previous Friday we were asked to put EERC under AFNES and presented with a contract to sign.

A few years later, EERC-CIS ran out of fi nancial support and moved its activities to Kiev under the umbrella of the now-independent EERC-Kiev; as should have done with NES back in 1995 or at the fi rst subsequent opportunity. Counterfactual history is a treacherous business, but it is tempting to replay the history of NES had it been included in EERC from the outset. Th ere is a good chance, to my mind, that the joint operation in Russia would have borne even more fruit than the two institutions harvested separately. Th e downside would have been the loss of freedom for NES to develop the way it did due to a surfeit of external control.

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Widening the Scope and Merging after All?

NES had been established as a one-department school, a rather unusual creature among institutions of higher learning. In addition to the disadvantage of high overhead that comes with being small, this situation was also far from satisfactory in terms of the narrow scope of education that NES could off er. While economics is a “loner” among the social sciences everywhere, a broader curriculum including other social sciences, law, history, philosophy, and management is tangential to many economic subjects, not to mention the more general education that a contributing citizen of a modern society must have. For these reasons, many considered NES a temporary arrangement until a proper partner providing at least part of the above could be located.

Th e fi rst real option of uniting with another institute of higher education came with the establishment in September 1995 of the Moscow School of Social and Economic Studies (MSSES), which opened graduate programs in sociology, political science, and law, and planned to open a program in social work.

MSSES

was established by Teodor Shanin, a professor of sociology at the University of Manchester who specialized in rural Russian and Soviet society. Born in Russia, he had immigrated to Israel, where he completed his studies and held his fi rst academic position before moving to England. He had known Soros for many years and initiated the founding of the school a few years before it actually opened with Soros’s fi nancial support. Th e opening had been delayed for lack of proper premises and appropriate facilities, especially a fi rst-rate and well stocked library. Th ese requisites were met aft er Abel Aganbegyan, then-rector of the Russian Academy of the National Economy (a school for the training/retraining of government employees),

invited MSSES to his very spacious campus in the south of Moscow and lend the new venture partial fi nancial support. I had known about Shanin and had met him in the corridors of the Cultural Foundation building (headquarters of the Soros organization) in Moscow in early 1992. Naturally, we exchanged views and information about our respective projects and how to move them ahead. In Moscow, Shanin was in his element: he knew everybody, was well connected with the intelligentsia, and excelled in the ways and means of getting things done. He was almost permanently stationed in Moscow throughout those years; I was a complete stranger, inexperienced and struggling to express myself in Russian. Accordingly, Shanin became my secret guide and tutor in the maze of the Russian state and foundation bureaucracies. Until I retired in 2004, we met for dinner on almost each of my many and frequent visits.

In previous years, Shanin and I had already held preliminary discussions about the idea of a merger between NES and MSSES. On top of all the above, the potential advantages of a merger at that time included the prospects of sharing facilities, receiving support from the Russian Academy of National Economy, and sharing support from HESP (the aforementioned Higher Education Support Program), which was also interested. Th e two institutions were much diff erent in basic structure and academic approach: NES followed the American model of graduate education; MSSES intended to follow the traditional British model of emphasis on individual tutorials. In addition, MSSES relied mostly on domestic teachers who took short periods of training abroad and had a one-year MA program as opposed to NES’ two years. Th e feature that really worried most of our people, however, was Shanin’s much more centralized managerial style. Just the same, the NES staff held several meetings with Shanin and some of his people and sketched the main contours of a merger, based on a “federal” arrangement that would allow each school to maintain its academic and even fi nancial independence. Th e schools would share common services and encourage some joint courses and cross-registration in courses.

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When the IAB took up the issue in its April 1995 meeting, many reservations were raised – mainly related to possibility that the deal would somehow cost NES its high quality. At some point, HESP and Soros himself got interested in the merger idea and even developed a three-way merger scheme, the third party being the Central European University (CEU) in Budapest, the fl agship of the Soros Foundations and HESP, which intended at the time to expand to Moscow. Th ere was a meeting in Budapest and everything seemed to be moving ahead, until I received a telephone call from Shanin, who stated tersely that the entire scheme had been called off , at least for the time being. To this day, I do not know why. Given the serious hesitations among many of us at NES, the decision was received with a degree of relief. Some among us, Barry included, saw their thinking on the project fully coming through: of no merger and no blame on NES. Either way, economics at MSSES remained an empty vessel and NES continued to operate on its own.

In subsequent years, the idea of a merger with MSSES was replaced with a more modest one of moving together to a joint building or campus, allowing many of the scale advantages and some cross-registration to courses while skirting the problems associated with academic unifi cation. In 2005, the idea of sharing a building almost materialized with the help of an endowment fund that the Soros Foundations provided for this purpose. Plans of sharing a building or at least moving together to the same campus came up and failed during the last decade, and it seems now (2012) that each of us will go its own direction.8

As happened so many times during NES’s history, there is almost always a plan for a new building on the agenda until it falls apart and replaced with an alternative one.

8 Among the considered but failed ideas were plans to move together to the new campus of the new State Business School in Skolkovo, or that NES will move to the campus of the Academy of the National Economy (in Yugo-Zapadny. (See more on this below).

As these lines go to the printer at least three ventures are discussed. Based on the record of history allow me to add a fourth option: stay where you are and expand gradually inside, expand and renovate, one step at a time…

HSE

A second unsuccessful attempt at cooperation if not merger took place between NES and HSE during the 1996/97 academic year. HSE, was a new state school established in 1992 by a group of reform-minded economists. Some of its founders were “expatriates” of the faculty of economics at MSU; one of them was Yaroslav Kuzminov, who has been serving as the rector and leader of HSE for many years. HSE had expanded quickly in Moscow and beyond, in economics and to other disciplines. It was well connected with the Ministry of the Economy and the government in general; leading reform economists such as Alexander Shokhin and Evgeny Yasin (both serving as Ministers of Economy) became and still are its President and Academic Director, respectively. HSE also had a Masters program in economics and was interested either in upgrading it or in adding a higher level program such as that at NES. One way of achieving this, it was thought among some at HSE and NES, was through some form of cooperation with NES, specifi cally by merging the two schools’ graduate programs. For NES, in addition to the considerations mentioned above, the idea also dangled the prospect of obtaining a new building, some fi nancial subventioning, strong institutional support, and protection by the political establishment.9

A group of Russian members of NES strongly supported such a step – they may also have participated in initiating it – and aft er a

9 A few years earlier, in a meeting over dinner, Kuzminov urged NES to join HSE and suggested, or even warned, that a non-state institution such as ours had no chance to survive.

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charged debate at the IAB it was agreed to task Victor Polterovich and Alexander Friedman with preliminary negotiations. Several months later (early in 1997), they came up with a draft agreement and, following a second round of deliberations at NES, including the IAB meetings in March and July, it was decided to meet with representatives of HSE to clear up some vague language in the draft . At the resulting meeting – between a group of NES offi cials, Makarov, Polterovich, Friedman, Kasabieva, Ickes and Ofer, and HSE rector Kuzminov (alone!) – we discovered what the vagueness had been about: the promised academic independence of NES was far from secured, the fi nancial support off ered was way below expectations and in doubt, and the potential building was far away in southeastern Moscow and in need of major renovations. Kuzminov talked most of the time and the longer his presentation continued, some in response to questions on our side, it became clearer that the proposal failed to meet even the minimal expectations of those in favor of the merger. Amid these revelations, people close to HSE outside the meeting, were already stating that NES would be merging into HSE (see below). Th is persuaded almost all of us to back out of the venture and try to work out a more balanced agreement.10

One possibility of cooperation that HSE did pursue might have involved us but did not. In late 1997, in conjunction with

10 Such a thing did materialize in 2006, when NES and HSE established a joint center for advanced studies that runs conferences and seminars and invites economists from abroad for short visits. At the present writing, this cooperative venture is of positive, though not very high, signifi cance for both schools. Th e cooperation of NES and HSE received a real boost with the establishment of a joint undergraduate program which is now (2012) entering its second year. Th is project is very successful especially in the recruiting of the best candidates to study economics: applied for admission to the program were 40 out of 55 winners of the All- Russian Olympiad in Economic, and many winners of other Olympiads, including in mathematics. So much so, the program admitted for the fi rst year 63 students instead of the planned maximum of 50. Th e head of the program is Professor Konstantin (Kostya) Sonin, a member of the faculty and Vice Rector of NES. Both partners are very happy with this project.

Gur Ofer and Zhenya Nikolaeva waitingfor George Soros at CEMI entrance

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LSE and with the help of Amos Witztum, HSE established an English-speaking undergraduate college of economics, ICEF (International College for Economics and Finance) that enjoyed a degree of academic independence from HSE. Over the years, there were thoughts of merging the college with NES and then setting up a joint Masters program (in addition to the NES graduate program). Although nothing came of it, over time several NES graduates and faculty members moved to HSE as teachers and imported with them some of our still-young academic “tradition” and programs.

Did all this amount to a squandered opportunity? Th e aforementioned Kotkin report raised the possibility that the merger of NES and HSE, had it gone through, would have spread modern economics in Russia more quickly and widely than the NES could have done alone. Kotkin rejected this proposition but lauded the dissemination of NES’ teachings through the mobility of its teachers and programs (pp. 9-10).11

Strengthening NES’ Underpinnings

Th e NES administration on the seventeenth fl oor stabilized and expanded during these early years. Th e Dekanat (offi ce of the Dean of Students), headed by Zarema Kasabieva, took responsibility for the teaching schedule, examinations and grades, alumni and graduates, communication with teachers

11 As this report goes to press, there seems to be an option for NES to move for a few years to the campus of the Russian Academy of National Economy. It would be a temporary move because there seems to be a plan to move to the new Skolkovo Business School. NES may also be involve with the more recent innovation project at Skolkovo and to play some role, together with MIT, in teaching and research in economics as a service to the main participants of the project. It is far from decided that NES will be using a building, or build a campus at Skolkovo. I would rather say that, as of this moment, NES is actively exploring several interesting proposals to build a campus.

including visiting professors and IAB members, and secretarial help for the author of this report. Stability was maintained despite turnover. Zhenya assumed eventually the position of Kim as coordinator and secretary in charge of the visiting professors, the IAB and also as my secretary. She played a major role in the preparations for the 10th anniversary. Since 2002 there were a number of opportunities for Zhenya to come back to NES, but each time she considered but eventually declined.

When Eric Livny left in late 1995, Oxana Budjko undertook additional administrative responsibilities in addition to her fi nancial ones; these, however, declined gradually and fi nally petered out when the fi nancial offi ces moved to the eleventh fl oor. Eric Livny’s main responsibility for the placement of NES students in studies abroad was taken over in the autumn of 1995 by Marie Bentlee, an education specialist (and wife of the Australian ambassador to Moscow). Like Eric, she helped us all with the preparation of proposals, annual reports, NES brochures, other offi cial documents, and correspondence in English.

Overall responsibility for the day-to-day functioning of the school was tasked to the academic coordinator in residence. Barry Ickes (1994/95) was succeeded in this post by Danny Kahn (1995/96), Jim Leitzel (1996/97), Alastair McAuley (1997/98 and 1998/99), Leonid Polishchuk (1999/2000 and 2000/01), Tony Shorrocks, for just a few months, and the last coordinator, Judith Shapiro (2001 – 2002/3). By then, incoming young faculty members were ready to share the foreign coordinator’s tasks. Th e academic coordinators worked closely with Victor Polterovich, chair of the Academic Committee, who spent long hours dealing with all kinds of academic issues at NES (and with me by e-mail).

Separate from the complex on the seventeenth fl oor were the registrar’s offi ce it moved to the 17th fl oor for a few yeas and then moved out again, in 2010, the research center offi ce, and, later, the outreach offi ce. Th e Academic Secretary, Valentina Krupina and her staff dealt with the formal and fi nancial

60


aspects of admission, tuition, payment of fellowships, and management of the ruble budget during the period that it existed. I had very little to do with this offi ce, but as much as I know it functioned effi ciently and was friendly to the students.

During my lengthy stay at NES in the winter of 1995 (see next paragraph), I had an opportunity to notice problems in the way NES was governed and run. Along with great enthusiasm and dedication – most staff ers spent long hours at the school – there was endemic confusion about the division of labors and responsibilities and the source of authority. Th e rector, Valery Makarov, was down on the fi ft h fl oor and in addition to running NES, was busy with many other responsibilities. Th e authority of the academic coordinator, on the seventeenth fl oor, depended largely on his academic status and personality; he/she did not always invoke his formal decision-making power. Barry and I were more assertive than most others, yet the fi nal authority resided with the rector. A similar

asymmetry existed between Alexander (Sasha) Friedman, the vice rector for academic aff airs, and Zarema Kasabieva, the dean of students: formal authority resided with Sasha and practical responsibility for the entire academic process rested with Zarema. Th e small size and heavy workload of the administrative staff on the seventeenth fl oor sometimes caused confusion and confl icts. Although we tried to defi ne precise responsibilities for each and every position, gray areas remained that sometimes made it necessary to shift workloads among staff members according to need, resulting in tension and mix-ups. Th e most serious asymmetry in the structure of governance was the one between NES’ Western and domestic partners. We, Westerners, although “advisers” had no formal authority, possessed much power and responsibility: we were the main bearers of the teaching paradigm and the providers of a very large and growing share of the budget. Th is situation lay at the core and essence of the partnership but was at times a source of governmental stress and turmoil.

My Only Lengthy Stay at NES

an exception to my many frequent and shorter “commutes,” occurred during the third module of Year 3 (winter of 1994/95). I took this opportunity to teach macro to the fi rst class and transition to the second and to replace Barry for this module as the academic coordinator. While teaching the macro course (completing the intermediate part of the course, using mostly Sachs and Larrain as the text), I had a chance to appreciate the students’ ongoing diffi culties in understanding spoken English (though my Israeli accent supposedly made things easier) and, more so, the intuition behind the graphs and the (few) equations. Still, as far as equations where concerned, you could fully depend on the students to point out any mistake made in class. Th e transition course was much more fun, foremost because the class was smaller. I intended to start with a short survey of central planning and the economic history of the Soviet Union, calling

In the admission offi ce on the 17th fl oor. Valentina Krupina, 1998

61


it “Transition from where?” Instead, I found myself spending the better part of the course discussing these topics. It had been almost ten years since Gorbachev’s rise to power and the students, in their early twenties, lacked even basic knowledge of the old system, its Marxist legacy, and the history of their country. Interested anyway, they swallowed the reading list whole and wrote several short papers in lieu of problem sets. During this period, I was able to follow the teaching process closely and was satisfi ed with most of what I saw. I was also strongly impressed by the warm social atmosphere, the cohesion among the student body, the many extracurricular activities, the beehive-like mingling that took place during tea breaks, and the group work on the problem sets and in the computer lab. Like other visiting professors at NES, my wife Dalia and I would up our stay by inviting the NES community to a farewell party at our apartment.

Fundraising and Public Relations

American Friends of NES (AFNES), established and registered in the U.S. in March 1996 and is up and running by this time, gave NES fundraising and PR support, received and managed grants received in the West (as the Eurasia Foundation demanded), paid directly for expenses outside of Russia, and transferred money to NES. At the start of the 1996/97 academic year, management of the HESP grants was transferred from New York to the HESP main offi ce in Budapest. Th ese two moves, coupled with a great improvement in the budget process and management at NES, upgraded the way the fi nances of NES were handled. Th e budget itself, although more-or-less balanced over a span of one year or, at the most, two consecutive years, suff ered from periodic negative cash fl ows that led to arrears in meeting obligations including wages. More oft en than not, this was occasioned by the gap between our more-or-less stable stream of expenditures (typically lower during summer breaks) and the much less stable revenue fl ow, worsened by the lack of any lines of credit. Th e problem of arrears, which also persisted in later years, caused

all of us much concern and agony. Some of them, such as those to visiting professors who received regular salaries elsewhere, were tolerable, but arrears in paying domestic staff and student fellowships were not. In several cases, arrears occurred due to disagreements within the Western wing about the likelihood and timing of future revenue streams. Some of us were more conservative than others in responding to such situations, especially in view of the alternative of tolerating wage arrears.

NES budget rose from about $700,000 in 1993/94 to about $800,000 in 1994/95 and then jumped to $1.4 million in 1995/96, mostly due to the establishment of the research center and the funding of research. $1.1 million came from our main contributors (HESP, Eurasia, Ford) and the rest from the ruble budget (including registration fees, entrance-exam fees, and tuition), smaller research grants, and other subventions.

NES turned fi ve in the autumn of 1997. Although still young and fragile, it had managed to acquire the most important elements needed to provide a good graduate education, including a high-level curriculum and solid research for a class of forty to fi ft y students, albeit still based on visiting professors. No one considered this a steady state; we had in place a list of tasks that would allow us to attain a sustained model in the years to come. First among these tasks was the replacement of the visiting faculty with an indigenous one comprised mostly of PhD’s including NES graduates who would return to Russia with their advanced Western training in hand. Th e institutional, academic, resource, and fi nancial infrastructure for this task had to be prepared and the process itself had to get underway. Th e second major task was for NES to reach out of its relatively closed, isolated, and generally inward-looking circle to the academic and policy-making communities in Russia and the CIS. We proposed to tackle these challenges by establishing an outreach program and giving our research a stronger policy orientation and an outward-facing tilt. Th e next chapter describes the outcomes.

62

1997/98–2002/03 – The Second Piatiletka, Building a New Faculty and Reaching Out

Chapter VI

New Strategic and Business Plans and Their Implementation

During these subsequent five years, NES developed two strategic plans and three business plans that I will treat as stages of a unified program because they had the same basic goals, all related to the construction and completion of the NES infrastructure as envisioned in the original documents. Developments and efforts in these years aimed to assemble an indigenous faculty; combine high-level research with teaching; boost the student body to a sustainable level of approximately 100 per entering class. A larger class was important as it allowed to broaden and diversify the curriculum and thus adapt it to the graduates’ needs; a larger class also allowed to increase and diversify the faculty, thus reduce the administrative burden and free more time for research. The other goals for the coming years are: to reach out to the larger higher-education and economic-policy communities in Russia; and install the internal governance structure and sound budgetary and accounting processes that the school’s expanded operations warranted. Finally, NES needed to attract more financial support in the West and in Russia and, even more important, to shift from a financial structure of sporadic short-term support to a more stable and long-term base.

Th e fi rst strategic plan for the Second Piatiletka at NES, was drawn up as part of our application to the MacArthur Foundation and to the EU in academic year 1996/1997. Th e plan envisaged new programs for the development of indigenous faculty and for outreach. Later, in 2000, Eurasia earmarked $50,000 out of a new $250,000 grant to NES for the hiring of a consulting group, the Institute of Higher Education Policy, to help us develop new strategic and business plans. In the resulting project, conducted by Ron Phipps of the Institute, people from the Institute met with the entire NES staff several times from mid-2000 onward. Th e fi nal document integrated parts of the existing NES strategic plan into a more detailed exposition. Of special signifi cance in all three plans were two chapters, one on self-fi nancing including the introduction of a higher level of tuition, and another, dealing with the desired governance structure.

Th ese two issues, tuition and governance, were bones of contention between us at NES and those at the granting foundations, especially HESP and its head, Bill Newton Smith. Given the dire economic conditions in Russia, especially during the early 1990s, we at NES feared that steep tuition would discourage students from applying and would leave us with off spring of rich families only. Among the NES leadership, it was mostly the Russian wing that took this stance, refl ecting the lengthy Soviet tradition of free higher education. Th ey and others proposed to have a large number of tuition waivers (fellowships) based not only on academic excellence but also on economic needs. Th ose in the Western wing and others admitted that very few Western PhD programs in economics charge tuition and that most students in these programs receive full four-year fellowships. Th e introduction of high tuition, however, we argued, should take place along with two things: the creation of a student loan fund, to be replenished by repayments from the high salaries that graduates could expect to receive; and a greater eff ort to build up an endowment fund, mostly in Russia. Th e Westerners prevailed: NES introduced signifi cant tuition

63

1997/98—2002/03 — The Second Piatiletka, Building a New Faculty and Reaching Out

(initially $2,000 per year) and simultaneously established a loan program for any interested student. By 2003/04, following a few years during which AFNES run the tuition plus student loan program, NES established a full-scale student loan program through a Russian bank “Russian Standard”, to help students pay for annual tuition equivalent to USD 5,500.

Facing demands from HESP, Eurasia, and others to improve its governance, administrative structure, and fi nancial controls, NES adopted a double-pronged approach. On one prong, it was involved in a continual process of improving its administrative structure and its fi nancial fl ows and controls. On the other, it resisted demands, mostly from HESP, to create a governing board as its supreme authority on the grounds that its dual management structure did not lend itself to the straightjacket of a single board. Th is reform, to our minds, should wait until the second generation of leadership at NES would be ready to take over. As we see below, this indeed happened at about the right time.

All three strategic and business plans were integrated into a new application for support from the World Bank and were presented at an NES fundraising meeting at the Bank’s Headquarters on May 22, 2001. Th e preparation of the third plan, that in which the Institute of Higher Education Policy and Ron Phipps had taken part, involved the intensive participation of the entire NES community, which received the fi nal document enthusiastically. Until then, people remarked that they had had no clear view of what was going on. Th is reaction gave us, the leadership, food for thought. It had been our impression that the open IAB meetings and meetings with the various committees had painted a transparent tableau of where we were heading.

Suspecting that today’s reader would also do well with such an elucidation, below we review the main contents and activities of all three plans:

Preparing for and Recruiting New Faculty

To create a new indigenous faculty at NES, it was necessary to develop a model for the school’s future academic regime, strategies and procedures for academic appointments and promotions, a set of teaching, research, and publication requirements that new faculty would have to meet, and a recruitment strategy.

As noted above, most graduates of our three fi rst classes who went on to PhD studies were doing well. Almost all members of the third group (the class of 1996), had received full four-year fellowships for their studies from the universities that admitted them, including leading universities in many cases. We began to view full support from the admitting university as a tacit condition of sorts, encouraging students who did not receive it to opt for a lower-ranking school. While most did well, there were some exceptions: a few students were advised, or decided on their own, to abandon their PhD programs aft er the fi rst year or even later. Some of them returned to Russia, others sought employment in the West.

Th e 1997 strategic plan envisaged several options for the return of PhD’s to Russia – as faculty members at NES, with another university, or as economists in the public or private sector. Th ose to be hired as faculty members at NES would split their time between teaching and research at the research center. To those gravitating to other universities, NES would also off er part-time positions at its research center, thereby supplementing their income and, no less important, allowing them to continue to do research and be part of the new economic community. A similar arrangement would be off ered to those taking positions in the public or private sector, their employers’ rules permitting.

We intended to off er salaries as close as possible to competitive salaries abroad, at least in purchasing-power

64


terms, even though we knew our budget constraints would not allow this to be done in full. To help minimize brain drain, this left us at least partly dependent on the weakness of the Western job market, Russia’s retentive power, the quality of its economy and society, and the candidates’ personal attachment to Russia and their families. Th e half-time teaching load would also enhance the attractiveness of our off ers, we hoped.

We at NES did not have a good feel about the strength of the inclination to return to Russia, but we understood that the school would have to provide a long-term horizon of fi nancial sustainability in both the job off er and the school itself, i.e., the best possible research infrastructure and a supportive and welcoming environment on campus. Th is had to include provisions for the maintenance of strong ties with the West: generous mobility provisions comprising travel allowances, periods of leave for work in universities abroad, and the option of inviting research partners to NES. Th e “environment at NES” rubric, we learned, had to include the assurance of a respectable status for young faculty vis-à-vis the veteran Russian teachers and leaders who dominated the school at the time. We were also very concerned, although unable to do much, about the welcoming ability of Russia’s economic, political and social environment generally, and among potential employers particularly. We also built on the growing academic interest abroad in transition issues.

Th e NES staff and the IAB held quite a few lengthy discussions about the basic nature and institutional parameters of the future faculty. Th e debates revolved around a draft document that had been prepared by Alastair McAuley, the incumbent academic coordinator (1997/98 – 1998/99), and Sasha Friedman the vice rector. Most Western members of the IAB and some of the Russian ones favored a Western model of tenure-track appointments and promotion, including a full-time commitment on the part of faculty members and only limited permission to do outside consulting; as well as publishing in

Western journals as a sine qua non. Contractual arrangements of this type as conditions for tenure were totally unknown in Russia; some even considered them illegal. Th e opponents suggested that we apply the continental pattern instead: the appointment of new faculty members as assistants to senior (veteran and chair-holder) professors. Th is model, however, was rejected. Several aspects of the tenure-track system that NES considered and introduced clearly contravened a provision of the Russian system and law on academic appointments: in which foreign doctoral dissertations are considered only aft er they are translated into Russian and approved following a specifi c form of “defense.” Only in 2011 through the support of – among others- also NES, the Russian government introduced a simple procedure of recognizing degrees from the top international universities. In addition, it was the Russian practice not to count publications in foreign scientifi c journals in the process; we at NES considered publishing abroad one of the most important requirement for tenure. We eventually settled for a western-style tenure system, based on US models, initially with a six year tenure clock, later changed to eight years in 2007.

More problematic was the demand of full-time commitment to NES. In the Soviet Union, and a fortiori in the new Russia, academic teachers habitually taught in more than one place – at institutes and universities, for instance – and juggled many consulting projects on the side. We wanted to create a cohesive faculty that spent all its working time at NES, engaging in research at the research center, collaborating in research, and limiting their consulting to what we would allow at their NES offi ce, yes, every faculty would be given a single offi ce at NES – a huge innovation in Russia! and if possible, such work will be recognized in NES’ name. Th ese principles were eventually accepted and have remained in force most of the time.

Next came a discussion about who might be accepted as a tenured-track faculty member and on what grounds. Our

65


assurances that the selections would be based exclusively on academic merit and that anyone could apply were greeted with skepticism if not outright suspicion by some of our Russian partners. Th e merit criteria did include the potential of research of suffi cient quality to be published in Western professional journals and, of course, the ability to teach a full variety of graduate courses. We expected those who held doctoral degrees from Russian institutions, whether graduates of NES or not, to go abroad for a year or two of post-doc experience and training before applying to NES. Th is option was diffi cult to accept by some of the more senior Russian teachers at NES. Th e demand for a full-time commitment to NES also became an issue for many of them because they already held full-time posts at CEMI or elsewhere. Th e IAB solved this by allowing a small number of senior domestic teachers at NES to apply for part-time tenure-track or tenured appointments. It was also decided that the salaries of tenure-track faculty would be determined by rank alone and would be equal among all who shared the same rank. Finally the IAB ruled that the assignment of courses to teachers would be made solely in accordance with academic and teaching considerations.

All these discussions were, to some extent, proxies for an underlying question: where would the new faculty fi t in in terms of academic status, assumption of responsibility, and decision-making and leadership roles? While young and inexperienced, the new arrivals were academically up-to-date and expected to take over the leadership of NES at some point in the not-too-distant future. Even though some of the senior (academically and age-wise) teachers at NES were fi rst-rate economists and had superior teaching skills relative to the fresh PhDs, one could envisage a takeover by the young generation down the road when a critical mass of ten or more new faculty members would be attained. Th is was expected to take time as the young faculty got started academically and navigated its formal and informal status in its early years. Th e

question of how the transition would happen, however, was diffi cult right then. No formal decisions on this issue were made at the time; indeed, they could hardly be made. Th e vagueness on this matter while it really helped for the time being, would have negative consequences, as we shall see.

Th e 1997 strategic plan envisaged the recruitment of ten or more new faculty members over a fi ve-year period, at two or so per year.1 Th e plan also determined how this should be done, with the IAB adding details to the strategy.

The Academic Appointment Committee (AAC)

Th e appointment of new faculty members to the tenure track and to any other academic position was assigned to an Academic Appointments Committee (AAC),2 composed of members of the IAB (Western and Russian) with Makarov and Ofer as ex-offi cio co-chairs and Ickes as an (initially) non-voting secretary, doing most of the work. Th e appointment process was to follow the Western pattern of a case-by-case review by an ad hoc committee, based among other things on reference letters from experts in the relevant fi eld. Th e AAC’s vote would be passed on to the IAB for evaluation and fi nal vote. A unanimous vote by the AAC was preferred but one dissenter would be allowed. Th e selection of the AAC members started out with a disagreement that was resolved by Makarov setting the number of members at fi ve instead of seven as thought of initially. While in practice the debate over membership was ad hominem, the real agenda had to do with the candidates’ academic level and the infl uence they might have on NES’ image and reputation. Th ose elected, in addition to the co-chairs were Victor Polterovich, Zvi Griliches, and Andreu Mascollel. Th e adoption of the Western principle,

1 Later plans upped the target number to twenty over a longer period.2 Introduced in Chapter 5.

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concept procedure and practice of Tenure Truck appointment and promotion, based on merit, was clearly one of the major contributions of NES to higher education in Russia.

New faculty members were to be recruited through all channels, including our participation in the Job Market, held at the annual meetings of the American Economic Association. Th is last step was also a symbolic act of maturing. While we intended to focus primarily on NES graduates, we were looking for all suitable candidates who might apply, Russians and non-Russians alike.

In anticipation of the faculty recruitment campaign, NES intensifi ed its communication with the alumni association that it had already created and, especially, with its “abroad” branch, which at that time consisted mostly of graduate students pursuing PhD’s. (See end of this chapter.) In addition to distributing materials about NES and encouraging visits during the Christmas and end-of-year recesses, the graduates held a series of regional meetings with members of the IAB (London; Cambridge, MA; Washington, D.C.; Ann Arbor, etc.), who encouraged them to consider applying for positions with NES and learned about and appreciated the concerns and queries that they associated with such a step. In addition to the regional meetings, NES organized a dinner party at the AEA meetings for all members of the NES community – graduates, faculty members and teachers, and IAB members. Th e dinner became a tradition and took place annually at the AEA meetings.

At the IAB meetings in August 1997 and April 1998, Zvi Griliches suggested that graduates of NES be invited during their last year of PhD work to teach a one-module course or participate in leading a research project. Th e idea was to attract them to NES and give them time to examine and evaluate the school – and to let the school examine and evaluate them – before applying for a position or entertaining an off er.

To our surprise, some of the Russian members opposed this quite vehemently, arguing that these students might not be ready to off er graduate courses; instead, they should serve as teaching aides or as junior partners with a senior professor. Th e fi nal decision came down in favor of the scheme and since then, a stream of NES graduates has come back to teach courses and/or outreach workshops (see below) and join research projects.3 Th e fi rst graduate of NES who was invited under this program, Stanislav (“Stas”) Anatolyev, a PhD student at the University of Wisconsin, taught a course in econometrics during the fi ft h module of the 1996/97 academic year and found himself at the center of controversy on the grounds mentioned above. Th e next year (1998/99), four graduates came together in the fi ft h module. Since then there has been a constant fl ow, including NES graduates who received academic or other appointments in the West. Although the eff ectiveness of this form of “brain circulation” as a recruiting tool is diffi cult to assess, it has clearly benefi ted everyone involved. It has strengthened ties with our growing group of alumni abroad and is one of the most eff ective links between the school and its graduates, especially those in the newly created “NES Diaspora” abroad. Th e Open Society Institute (OSI), part of the Soros Foundations, recognized the importance of this program and agreed to shift to it the largely unused funds that had been originally earmarked for support of the admission of NES students to PhD programs abroad.

NES’ debut in the AEA Job Market took place at that organization’s January 1999 meetings in New York. In the run-up to this occasion, we took the opportunity to resolve the nature of the tenure-track appointments that some of our domestic teachers would receive. Th rough this process, Victor Polterovich and Valery Makarov became part-time

3 Notably, a similar debate, leading to a similar conclusion, took place on whether NES graduates employed in Moscow might be invited to present talks or papers at the public seminar.

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full professors and three others – Pavel Katyshev, Anatoly Peresetsky, and Oleg Eismont – received non-tenured lecturer appointments with extended contracts and pay raises. Th e fi rst to receive a full tenure-track appointment as an assistant professor was Sergei Guriev, who had earned his PhD (Kandidat Nauk) at the Economic Systems Mathematical Modeling Department of the computer center of the Russian Academy of Sciences, spent a year (1997/98) as a post doc at MIT, and returned to teach at NES in 1998/99. Th e fi rst tenure-track appointments that went to graduates of NES were awarded to Stanislav Anatolyev and to Kirill Sosunov a year later, following the AEA meetings in Boston.

Th e process of creating an indigenous faculty brought several related issues or implications to the fore. First, what would happen to the crown jewel of NES, its visiting professors? Clearly their numbers would dwindle; the strategic plan envisaged their gradual replacement with the new recruits. Th e prospective budget attached to the plan shift ed most of the funds for visiting professors to the absorption of new faculty and research associates. While fully confi dent about the academic level of the returning faculty members, we still had doubts about their full integration and their internalization of what Griliches called the “music” of economics. Th erefore, it was decided to continue for the time being to invite visiting professors to teach the introductory courses in micro and macro and to continue hosting a number of guest professors throughout the year in some cases for just a shorter seminar series.

Th e next question concerned the language of instruction. At the time, it was assumed that at least some new faculty members would prefer to teach in English for lack of a proper economic vocabulary in Russian. It was also assumed (hoped) that the young faculty would include some non-Russians who might be defi cient in Russian, augmenting the many benefi ts of globalizing the faculty by having some courses taught in English, at least for a few years. Both assumptions proved

wrong. All Russian members of the faculty have been teaching in Russian (albeit “Russifying” many English terms). Only very recently did NES succeed in hiring several, six by now, non Russian assistant professors who speak little or no Russian.

Th e main concern, however, was how to provide academic guidance and mentoring to young faculty members in a faraway location that had so few senior people. Th e mobility provisions discussed above were assumed to be part of the solution. Another part was the replacement of module-length guests with more senior economists who would pay shorter visits and focus them on mentoring. Th e problem did not receive enough attention at the time; it surfaced in full fury several years later and NES tackled it by draft ing a mentoring program and seeking fi nancial support for it. We will discuss this in its proper place below. A fi nal issue was the lack of correspondence between the relatively small class size and the minimum faculty size that would be considered viable. At fi rst we thought of

Sergei Guriev (third from the left ) and graduates of 1998.Volodya Smirnov, Inna Konovalchuk, Luda Solntseva, 1998

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fi ft een tenure and tenure track faculty as the minimum; then we upped it to twenty and even twenty-fi ve – much too big for the two entering classes of fewer than fi ft y students each that NES had to that point. Th e obvious response, enrolling larger classes, was decided on somewhat later, as Russia emerged from its 1998 crisis. We come back to this issue below.

Going into the Job Market

In the spring of 1998, I went to Cambridge, Massachusetts, to meet with a group of some twenty PhD students in an area that covered much of the northeastern U.S. Over dinner at a Chineese restaurant near Harvard Square I told the group about developments at NES, focused on our faculty recruitment program – making it clear that they were prime targets – and asked for their responses. Th ey expressed concern about the longer term sustainability of NES, especially but not only in the fi nancial sense, and about the status they could look forward to if they came. It was rather diffi cult to respond to the long-term fi nancial sustainability issue. I had to be honest to admit that there was still a wide gap between the fi nancial demands of a long-term tenure-track academic structure and the mostly short-run nature of NES fi nancial support. I used NES’ record of achievements as my best ammunition regarding the future. Addressing the last query, I responded that it depended on them: if a group of fi ve or six among them came in one go, they could take the place over. Th ey also mentioned the uninviting environment in Russia. Some expressed a desire to stay put for a few years aft er fi nishing their PhD, “to gain more experience.” Others asked about the demand for non-academic positions in Russia. I told them about my discussions about the demand for Western-trained PhDs in the private sector with Peter Aven, president of Alfa Bank, and was quite upbeat about it, especially in reference to the level of salary that expatriates could expect to receive. Bear in mind that Russia was then at the peak of a macroeconomic

bubble that would burst just a few months later. I told them we were heading for the Job Market in New York and asked them to apply. I came away with mixed feelings and knew we would have to work hard. A year later, I met with a group of NES graduates studying at Yale and schools in New York City and came away with similar impressions. Th e crisis in Russia had erupted by then (1998) and was clearly aff ecting the graduates’ thinking. Worse still, off ers of the kind I had discussed with Aven just a few months earlier might not reappear soon if at all. Still, I continued to meet with prospective applicants to NES: in Washington, D.C., Boston again, this time at the Harvard Faculty Club, Ann Arbor, London, and a few other places. Some of the meetings were one-on-one.

For NES, like any other respectable department of economics, joining the Job Market was fi rst of all a symbolic act of “maturing” and becoming members of the club. Barry Ickes, the Academic Appointments Committee secretary who had amassed much experience in the matter at Penn State, placed appropriate ads in the AEA master list Job Opportunities for Economists, collected the dossiers, and booked a suite for interviewing. Makarov and Polterovich fl ew in from Moscow and Beth Allen and Jan Magnus assisted us in one or two interview sessions. We received fi ft een responses from Russians and other FSU candidates (including one graduate of NES) and non-Russians and invited seven for interviews. Following the standard operating procedure in these matters, we short-listed four of them for fl y-outs to Moscow, where they would present a seminar and meet with NES and its people.4 Barry fl ew in to NES to attend these seminars for the fi rst two years. Ultimately, aft er meetings with members of the AAC in Moscow and e-mail correspondence with others, we were ready to make off ers to three candidates including Sergei Guriev. We then

4 For comparison sake let us note that during the job market activity of 2012 there were more than 200 applications to NES, there were 27 fl youts and there were 17 job off ers, 6 of which were accepted.

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found that the other two had accepted alternative off ers. Th ree NES graduates who were in the Job Market that year Maria Arbatskaya, Alexandre Repkine, and Alexandre Possazhenikov – did not apply to NES5 this was a bad sign. Ksenia Yudaeva, Katya Zhuravskaya, and Irina Denisova (Irina was already in Moscow) accepted off ers from RECEP, as noted above, and it was hoped that all of them would be involved in teaching and research at NES. Guriev was already such a candidate. In subsequent Januaries up to the tenth anniversary of NES in 2002, we tendered successful off ers to Kirill Sosounov, in 2000, with a PhD from the Australian National University, Konstantin Sonin, 2001 aft er he completed a post doc year at Harvard; Oleg Zamulin, in 2001, originally from Novosibirsk and then a PhD from the University of Michigan; Alexander Deviatov, a graduate of NES and a PhD from Penn State; Grisha Kossenok, a graduate of NES and a PhD from Wisconsin-Madison; and Alexei Goriaev, a PhD. from Tilburg, all in 2002. All these off ers were made with the full consent of the AAC and, later, of the new members of the faculty, whose views were consulted before the decision was made. In only one case was an off er withheld due to disagreement. I am not sure what the outcome would have been but I didn’t like the negative decision. Th is person accepted a US off er and went on to a successful publishing and academic career.

RECEP/CEFIR

Th e outcome of our recruiting eff orts in the fi rst few years was that while we recruited several new faculty members among the expatriates, several others – people with strong leadership potential – preferred to join RECEP (Russian European Centre for Economic Policy), which had been reorganized in 1996 under the leadership of Erik Berglöf, then also head of SITE in Stockholm and a new member of our own IAB.

5 Sergei thinks that Repkine and Possazhnikov did apply, may be to RECEP.

Th e revamped RECEP off ered leadership positions to fresh Western PhDs right away and provided them with a number of NES graduates whom the center had also hired. It is diffi cult to tell whether other potential candidates for NES decided to stay abroad for similar reasons. We at NES regretted this development, which split a very small group into two even smaller ones and clearly delayed the shift to a new leadership at NES by several years. Even so, NES cooperated closely with the new RECEP by participating in joint research projects and inviting members of RECEP to serve as outside teachers and heads of research workshops. To this day, RECEP and its successor, CEFIR (Center for Economic and Financial Research), have been major employers of graduates of NES. Th e succession story had a happier end than the misfortune with which it began. When political pressures in Russia transferred RECEP to a competing group three years later, 2000, the entire NES contingent at RECEP moved into the CEMI building near NES and established CEFIR. Cooperation intensifi ed and eventually culminated in a formal merger with NES in 2004, creating “CEFIR at NES.” Th is move made the generational shift at NES more successful, if somewhat belated.

Th e pursuit of separate paths of NES and CEFIR for a while had some benefi ts. It helped CEFIR to establish itself as a major policy-oriented research center, the same role that our 1997 Strategic Plan had assigned to the research center at NES; and as an employer of NES graduates including faculty members and returning PhDs. CEFIR also expedited the process of creating an important and outward-reaching policy-oriented research center.

One NES graduate who applied to NES in New York did not receive an off er from us. He was a prototype of sorts for larger numbers of graduates who did not receive off ers from NES, and others that didn’t apply to NES, estimating their chances to receive an off er as poor. NES had found itself in a sort of a bind: while competing with better universities for top

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graduates – an endeavor in which its chances of winning were slight – it hesitated to tender off ers to those below the top, lest they fail to satisfy its rather high academic requirements. By withholding off ers to graduates (and others) who wished to go back to Russia, NES created the need for a mechanism that would help such people to fi nd alternative positions in other Russian universities or in the private or public sectors. We thought the Alumni Association might take care of it.

A discussion on the outcome of our fi rst experience with the Job Market, held at the IAB meeting in Moscow the following April (1999), emphasized the need to sweeten our off ers in terms of teaching load, supportive infrastructure, mobility to and from the West, and of course, salary. Th e starting salary that we were off ering at that time, $35,000 in1999, was not enough – something we knew even though the 1998 fi nancial crisis and the steep devaluation of the ruble had done much to improve the domestic currency’s purchasing power. To compensate, we set the teaching load at less than one course throughout the year. At the time, this package looked reasonable.

Aft er New York, NES participated in all AEA Job Markets. Over time, young faculty members replaced some of the more senior ones as interviewers. Th e number of applicants increased but NES failed during the next following years and until recently, to recruit even one non-FSU candidate even though many had applied, had been interviewed, and even came on fl y-outs. Th e recent years were more successful on this score and by 2012 there are six non Russian assistant professors at NES. As for NES graduates, we tried to make it a (honorary) norm that they should apply even if their chances of coming were not high. We also decided to invite all graduates who applied to NES for a presentation of their Job Market papers in Moscow, even if they did not qualify. We discovered that while going to the Job Market is important, most of the real recruitment work has to be done earlier and then continuously all year long. Th erefore, we started to invite candidates, including

those from European universities who did not attend the AEA meetings, to fl y-ins for early seminars before the meetings and even to make them off ers. In retrospect, quite a few faculty recruits who reached NES did so through this “side channel.”

Over the years, more and more faculty members and PhD students at NES were invited to present and/or discuss papers at the AEA meetings. In some cases, NES initiated sessions with such participation. Th e number of people who taught at NES as visiting professors also increased. In Atlanta in 2000, we seized the moment to schedule an IAB meeting over breakfast and a dinner party for the entire NES community. It became a tradition; these dinner parties grew over time and some topped fi ft y participants. In the early going, we still tried to conduct some business and make speeches at these aff airs, but later they turned into purely social events. I had mixed feelings about these gatherings. On the one hand, they highlighted NES’ academic achievements and created a link with the global community of economists in the manner of other universities. Th ey also demonstrated the strong social ties that existed among group members, their care for NES, and the strength of their affi liation with the school. Over the years these meetings demonstrated the fast growth of NES and its reputation. On the other hand, even though quite a few participants came from Moscow to give papers or interview candidates and many others were still students in or before the Job Market, a growing number had already settled in the West, at least for the time being, thereby reminding everybody of the problem of brain drain.6 Indeed, by then several graduates of NES had received and accepted off ers from top or highly ranked schools, e.g., Alexei Onatski at Columbia, Anna Pavlova at Sloan, Galina Hale at Yale, Andrei Sarychev at UBC and eventually at LSE, Sergei Izmalkov at MIT, Maria Arbatskaya at Emory, and Alexandre Passagenikov at the University of Dortmund.

6 Here I speak of the feeling that accompanied this realization; below (in Chapter 12) I subject this major issue to an analytical discussion.

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Others accepted less glittering off ers. Another rather large group moved to the private sector, mostly in fi nancial services and consulting. A few found work with the World Bank and the IMF. By 2002 NES boasted an indigenous tenure-track faculty comprised of seven assistant professors with Western PhDs or post-doc credentials (ten together with CEFIR), including fi ve graduates of NES (seven together with CEFIR).

Growing to a Class of 100

As for progress toward the other basic goals of the strategic plans up to 2000, it took NES until the . It never achieved the 120 target, included in the strategic plan of 2000. From 2000/01 and on, the size of the entering class increased from around forty-fi ve in the two previous years, the years of the Russian fi nancial crisis (and no more than sixty in any class in the past) to 80 – 86 in subsequent years (See Diagram 1 in the statistical appendix). It probably happened due to an active admission campaigns in Moscow, across Russia, and throughout the CIS; along with some streamlining of the mathematics exam, details below, and an increasing reputation and visibility of NES. Per contra, it happened even though tuition had been introduced and was raised over time to $4,000 by 2003; albeit, with the option of taking a loan for the full amount, and even though fewer and fewer fellowships were available.

Th e questionnaires returned by potential applicants to NES yielded a surprising fi nding, disappointing in one sense but gratifying in another: the most common source of information about NES was through personal friends. Only in the late 1990s did the Internet became an increasingly important source of information. Th e admission campaigns in the years following Russia’s crisis included a growing number of “open houses” in Moscow, Russia, and the CIS (fi ft een altogether, with twelve in Moscow), newspaper advertisements, e-mail and Web distributions, etc. As for the entrance exams, as

noted above, we simplifi ed the English exam by adopting a GRE-like, multiple-choice format that remained no less demanding in terms of content. Also, we off ered more preparatory courses in English and mathematics in Moscow, Novosibirsk, and Almaty, and administered entrance exams in these places, reaching as far away as Vladivostok. Eventually, we off ered an option to count TOEFL and GRE Math scores towards our entrance exams. Both TOEFL and GRE have been and are held in many Russian cities.

Th e admission eff orts outside of Moscow, most of which were add-ons to our outreach workshops in economics, produced a very small number of new students because few candidates met the minimum requirements in mathematics and English. Th is probably refl ected the lower quality of education in the countryside, a situation fl owing from factors related to the Soviet legacy, deterioration aft er the transition, or both. Interestingly, in discussions about the admission campaigns, hesitations were expressed about whether NES should try to bring the few qualifi ed students from the periphery to Moscow, it being thought that such an eff ort might induce an “internal brain drain.” As it happened, such a brain drain had been taking place all along, both during the Soviet period and more recently. More than half of our students over the years were originally from outside of Moscow, but many had reached NES following studies in top-level universities and institutions in Moscow (See Diagram 2.3 in the appendix). On one occasion, NES admitted without entrance exams a group of seven or eight young teachers of economics faculties from universities in Kazakhstan. Th ey were signifi cantly weaker than the rest of the class and needed much extra help to keep up with the program, but in the end all graduated and went back to their home state.

In addition to regular students, NES also admitted “special students” who came to take one or a few courses. Some came from provincial universities under various outreach programs including those run by EERC; others joined under

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special arrangements with universities in Moscow. One such arrangement was with Phyztech, a leading Moscow technical university: students in higher classes there could take NES courses as part of their specialization in economics, aft er which they could enroll in NES and receive credit for these courses. Several of them had earned enough credits in this manner to join NES directly as second-year students. One of them Dmitry Makarov a PhD student from LBS returned to NES as a successful assistant professor in fi nance.

From the beginning, NES had about twice as many applicants as it admitted. Th is 2:1 ratio seemed too small to us; at fi rst we considered it evidence of failure to make NES better known. Eventually, however, we reached the conclusion, which we verifi ed by talking to students, that the explanation lay in the stiff requirements of the entrance exams and the curriculum, as had become well known and taken into account even before applying. Indeed, many NES students had fi nished their earlier studies with top grades and most members of this group had graduated from other universities with a record that qualifi ed them for admission to PhD (Kandidat Nauk) studies.

Finally, the increase in the size of the classes, especially that of the entering class, made it necessary to divide the obligatory courses into two parallel groups. Th is and the growing number of courses all required more teaching classes. CEMI accommodated NES in this respect by turning a space occupied by old-fashioned central heating and cooling systems on the eleventh fl oor into four) new classrooms. At the same time, NES acquired more space for its library and computer laboratories and extra offi ce space for the growing faculty and administration. By the end of its fi rst decade, NES, CEFIR, and EERC occupied quite a lot of space of the entire twenty-two-storey CEMI building, its presence spanning fl oors 3, 5, 7, 9, 11, 17, 19, 20, and 21 – not counting the offi ces of members of CEMI who were involved with NES. Th is made

coordination more diffi cult and forced the old but effi cient elevator system to work overtime. Furthermore, NES, CEFIR, and CEMI invested money and eff ort in replacing or at least upgrading the visual quality of the lavatories on several fl oors; an uphill struggle that yielded modest achievements.

Stewarding our Students through Graduation

One unexpected but persistent phenomenon was the relatively high dropout rate. Between one-fourth and one-third of those who began studies at NES did not see them through to graduation, with no clear trend over time (Diagram 1). Initially we traced this to lack of understanding of what graduate economics education is all about, particularly in its distinction from business training. We also blamed it on the very high level of uncertainty that accompanied the transition, especially regarding changes in life and opportunities for young people. Who knew what new career opportunities might open up or close, what family dislocations might occur, or what economic hardships might surface? Th ere must have been additional important factors: responding to changing opportunities in the labor market, students taking full-time jobs in the middle of the program lest they squander non-recurrent opportunities and the phenomenon of dual registration at other universities (discussed in Chapter 4).

In response NES took several steps to reduce the dropout rate. It allowed students who requested it to go on leave and return later to fi nish their studies. It made eff orts to convince students to postpone full-time work until graduation and employers to postpone the recruitment of NES students until then, to hire them only part-time, or at least to give them time off to attend classes. Since the late 1990s, the main potential employers of NES graduates visited the school frequently to introduce themselves and interview candidates. Th is gave us a better chance to apply persuasion

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about the importance of graduating fi rst. Eventually the School’s reputation grew so strong with the employers that they agreed to wait until the student graduated before starting working for them. Over time, more and more second-year students served as TAs or RAs at NES and CEFIR; these part-time jobs kept them closer to their studies. Finally, NES tried to increase the value of its subsistence fellowships and reward well performing students with even higher stipends. None of these reduced the dropout rate signifi cantly; at best, it allowed the rate to oscillate around a constant.

The Attendance Problem

Attendance in class became a growing problem, especially as more and more second-year students accepted full-time jobs off campus. Some of us, myself more than others, favored taking attendance routinely in each class and subjecting truants to sanctions such as the withholding of stipends and the right to make up missing exams. Th e visiting professors felt too embarrassed to do this and some of the Russians, Victor Polterovich in particular, strongly resented all such measures, deeming them contrary to the new breezes and values of freedom that arose aft er the fall of the Soviet regime. Victor also seemed to believe that talented students could cover the course materials in diff erent ways and should be given the freedom to choose. He was probably right regarding the top 10 (or 5) percent of the class. Th e pro-sanction camp argued that most students who skipped lectures did so due to heavy external pressure and in the belief that the lectures were unnecessary or poor. If so, we said, we should apply counter pressure. Ultimately, it was decided to take attendance and keep the records at the dean’s offi ce, but also to off er more generous fellowships. Over time the taking of attendance records became voluntary and declined. Extreme cases of low attendance dealt with persuasion and the application of various sanctions as listed above.

Developing the Curriculum and a Course on Institutions

In their discussions in 1997 – 1999, the IAB and the Academic Committee tackled several important curricular issues that led to signifi cant changes. One such issue was related to the appropriateness of Western texts in micro and macro for students in countries that did not off er them the experience of a more-or-less well functioning market economy. Another question was how to make the curriculum more useful for the majority of students who accepted jobs with private and public organizations and did not advance to doctoral studies.

Th e fi rst issue focused on the absence of a proper discussion in the sequence of micro and macro courses of the nature and modus operandi of main market institutions. Th e courses and texts, made for Western students who were raised in a market environment, were inadequate for NES students who lacked this daily experience. We recognized this problem from the start, alerted the teachers to it, and asked them to fi ll in the gap – but apparently this was not enough. Th us, it was decided to add on an experimental basis, to the already very heavy workload of fi rst-year classes, a separate course on Institutions of a Market Economy. Th e fi rst course, taught by Alastair McAuley in 1998/99 (he was also the academic coordinator that year), was well received by the students and a decision was made to continue off ering it.7 Concurrently, Leonid Polishchuk off ered an advanced second-year elective course on Institutions. Leonid, originally from Novosibirsk but then from IRIS at the University of Maryland, started to teach at NES during 1996/97 as a visiting professor and stayed on aft erwards to teach during a number of modules a year; he also held the academic coordinator’s post for two years. In this way, the curriculum at NES responded to two matters widely recognized by transition economists: the

7 Alchian and Allen Exchange and Production, (previously University Economics), 1971, the appropriate text for this course.

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virtual neglect of institutional reforms in the transition process and the high barriers to reform created by the persistence of older institutions. In due time, the growing indigenous NES faculty would add courses on institutions and political economy and would contribute to research and to the new institutional literature that the transition experience yielded. Th e fi rst year Institutions course mentioned above succumbed a few years later to the heavy fi rst-year class load and was replaced by the growing list of elective courses on the economics of transition and the economic history of the Soviet Union. NES now has several political/institutional economists, (Dower, Enikolopov, Guriev, Petrova, Sonin, Zhuravskaya) and a very good economic historian, Andrei Markevich. Th ey cover, albeit later, in both teaching and research the “missing” fi rst year materials.

The “Applied Track”

Th is was our catchall term for the school’s eff orts to diversify its program of studies in order to accommodate the needs of graduates who accepted jobs in the private (and public) sectors. From the fi rst years on, students demanded the inclusion in the academic program of courses more typical of a business school, such as accounting, marketing and corporate fi nance. To some extent, this demand stemmed from their aforementioned confusion between graduate economics and business education and what NES was all about. We had to emphasize and explain the diff erences time and again – in the admission process, at the “open house” meetings, and in class. Later on, however, when the graduates started to look for jobs, especially in the private sector, prospective employers asked them to demonstrate knowledge in the very matters that we had not been teaching: accounting, fi nancial analysis of balance sheets and fi nancial statements, and the capital market. Th us, an extra-curricular course in accounting was introduced in the evenings (aft er classes) by Lev Gelman, one of the fi rst assistants, who later became a businessman. In 1997 a group of students presented

the NES leadership with a very detailed petition arguing for additional changes in this direction. Th is presented us with two problems: inadequate Russian context and content in many of the fi eld courses in economics and the principled issue of whether or not to add direct training in the conduct of business.

Regarding the fi rst matter, by the late 1990s the NES academic program had already diversifi ed, with courses in most main fi elds of economics, international trade and fi nance, public fi nance, labor economics, industrial organization, natural resources, money and banking, political economy, institutions, econometrics, and contract and game theory. Admittedly, the courses used Western texts, were mostly theoretical, and had little or no Russian context. Some context was added in the transition and economic history courses and in the research projects that were compulsory in the Master program. Even so, there were missing links in almost every fi eld between the theoretical base and the way to apply it to Russia’s problems, be it in the private or the public sector.

While all this was recognized, little was done about it until the fi nancial crisis of 1998. Th e fi nal trigger was fear of a decline in enrollment just as the plans called for an increase to 100 in each entering class. Th ese same plans made it possible to increase the number of courses, a process furthered by growth in the number of Russian faculty members, some of whom engaged in direct transition research at CEFIR. In this way work started on what was fi rst called “applied courses” and later the Applied Track, with diplomas explaining what each specialty involved.

Discussions about the form of the Applied Track began in the Academic Committee and continued among members of the IAB. Barry Ickes presented a fi rst draft at the IAB meeting in September 1999 but the debates continued in IAB meetings during subsequent years. One or two IAB members were willing to consider a two-level admission process based on two sets of entrance exams in mathematics; this radical

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approach was rejected rather quickly. It was also agreed that most fi rst-year economic and econometric courses would remain compulsory for all students. A lengthy debate ensued on how much mathematics to demand of those taking the “applied” sequence: should they have diff erent courses in econometrics and how far should they go in the advanced theory sequences? Th e “outside” members of the IAB took a fi rm stand in favor of keeping all required courses for all and making the “applied” courses elective. Any relaxation of the obligatory program, they feared, would water down the program’s quality – the main icon of NES – and create two levels of students. Th ey also claimed that the advanced theory and most of the mathematics taught at NES were required for good policy-oriented research and even good policy work.

Th e debates yielded various draft s of a new academic program for the second year. All included sequences of at least two one module courses in almost all fi elds: a theory course, say in international trade, and an “applied” trade-policy course dealing with main trade issues facing Russia. Th is structure raised the problem of the level of the theory required for “fi eld courses.” A major challenge facing the applied program was how to maintain the caliber of the courses and avoid creating two levels of students. Th e fi nal decision, made aft er additional experimentation and discussions during preparations for the 2002/03 academic year – and even then only on a pilot basis – was to keep all previously required courses in place for all students and to establish an Applied Track composed of elective courses that would be obligatory for those taking a given “special fi eld.”

Initially there were four such fi elds: Finance, Data Analysis, Economic Policy, and Managerial Economics, this last fi eld was never materialized. Each sequence included seven single-module courses that were compulsory for the fi eld but electives for everyone else. At fi rst, it was diffi cult to off er a full slate of such “applied” courses for each fi eld but the supply expanded over the years. For some of these applied courses, NES hired

teachers from its “periphery” or “Diaspora” – Russian and western economists from the Moscow offi ces of the World Bank and the IMF, professionals from the Ministry of Finance, and the like. Th e most popular applied track was, as might be guessed, fi nance. As NES hired more and more fi nance faculty members, it was taught increasingly by resident faculty specializing in the fi eld. To assure symmetry and equal treatment, we defi ned the program for students who chose no “special” fi eld as a “general” fi eld that included an equal load of courses to be chosen freely among all electives. Th is solution maintained the cohesiveness of the core program and, in turn, of the graduating class, and allowed a large degree of fl exibility in the choice of electives.

Th e experiment was considered successful in later years and the teaching program retained this form apart from a few non-consequential changes. Demand for specialization among the students remains high. Since 2003, NES diplomas have mentioned areas of specialization and most graduates have such indications. All this, however, responded only marginally to the students’ demand for “business school”- style courses, the sole exception being fi nance – a fi eld that in recent decades has become a “legitimate” part of the standard graduate curriculum in economics around the globe.

As mentioned above, it was also decided at this time to streamline the mathematics entrance exam by eliminating the oral part and patterning the written exam aft er the American GRE for graduate programs in mathematics, all as part of the eff orts to increase the size of the entering fi rst class.

Reaching out

NES always sought academic cooperation with other universities, considering this part of its obligation to society and to its own mission. In its fi rst years, however, NES was fully occupied with its own aff airs, limiting most of its outreach to participation in

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the initiatives of other organizations, mostly EERC. Independent outreach activities by NES became possible on the basis of two grants earmarked for this purpose, one from the MacArthur Foundation and the other, a short time later, from OSI (one of the Soros foundations). Apart from their intrinsic value, these activities gave NES an opportunity to increase its visibility (mostly outside of Moscow), provide additional work and pay for the Russian members of the faculty (veteran and new), and engage its emerging Diaspora in important services for NES and for Russia. Th e main outreach activities were a series of 1 – 2-week workshops across universities in many regions of Russia and a set of summer schools mostly in Moscow. Th e workshops involved mostly teaching rather than research, and since the teaching had to be done mainly in Russian, the NES domestic faculty and members of the Diaspora were most helpful in it.

Th e outreach program was a key element of the grant proposal that we submitted to the MacArthur Foundation in 1997. MacArthur, like other foundations, insisted on the creation of a “new” program at NES that would be identifi ed with the grant. Specifi cally, it was loath to support regular teaching at NES aft er having seen in China that this caused much brain drain. Soon aft er making the grant, the McArthur foundation realized the folly of this approach, and became one of the most reasonable and fl exible of our supporters, second following the Soros Foundations, watching each time when a new grant was in its eff ect on the entire fi nancial situation of NES, and tailor its own grants to the overall needs of NES.8 (See more on this in chapter 7 below). Here we turn back to discuss Outreach.

NES launched its autonomous outreach project in 1998 with a series of intensive week-long workshops in econometrics in

8 Th is policy of McArthur prevailed to beyond the period covered by this report, and included a generous grant earmarked toward providing a building for NES, and later a three year “exit” grant, until at least some of the support to NES will move from the West to Russia.

Moscow and in diff erent regions of Russia, organized by Pavel Katyshev and Anatoly Peresetsky, two veteran teachers, with assistance from Jan Magnus and based on a text in Russian that this troika had composed. In 1999 and subsequent years, similar workshops were added in micro and macro, fi nance, and several specialized topics. Th e workshops were attended by faculty and researchers in universities and institutes and focused on the provinces. Th eir main goals were to pique curiosity and motivate further study. Th e outreach activities of NES were organized by an Outreach Center, fi rst by Sergei Guriev, who was later succeeded by Oleg Zamulin.

Around this time OSI lunched an outreach project, the Regional Universities Project that gave us an opportunity to intensify our outreach involvement. Th e goal of this project was to strengthen the capacity and quality of provincial universities as a counterpart and counterbalance to the strong academic and political domination of Moscow and St. Petersburg, thereby furthering the development of stronger civil societies in these regional centers. Th e mechanism of the project called for the collaboration of several regional universities with a “center of excellence.” An interesting feature in this context was OSI’s decision to seek domestic centers of excellence in Moscow as mentors in the program instead of looking for them in the West. Th e regional universities were selected in a competitive process that tested their motivation to take part in the project and their readiness to invest in them and make the needed institutional and academic reforms.

Th e beauty of the project was that it recognized the great eff ort that was required to make a change and, therefore, structured itself as a longer-term and more integrated project than a mere series of more-or-less isolated workshops. Th e main problem with the project, however, as with the simpler version of outreach, was the yawning gap between its ambitious targets and the amount of resources

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devoted to it. A three-year budget prepared by NES (and a similar one produced by MSSES) was cut to one-fi ft h before we even started. Just the same, NES collaborated with the state universities of St. Petersburg, Yekaterinburg, and Voronezh, eventually mostly with the latter two, latter adding Vladivostok. Th ere were workshops on diff erent topics, internships at NES for faculty members of these universities (mainly for work on new courses and curricula), visits from NES faculty, a summer school, and other activities. When it was over three years later, NES received the highest evaluation off ered for the work done. Due to budget constraints, the project was cut to three years and its overall impact was modest at best.

NES’ outreach cooperation with EERC intensifi ed over the years, especially when EERC moved into the CEMI building (our neighbor) in the spring of 2002. NES participated in workshops organized by EERC and provided faculty members and graduates for many of its activities. When the Global Development Network (GDN) was formed (see Chapter 10), EERC was selected as its representative institution in the CIS. We at NES disapproved of this selection, considering NES the natural candidate for the task. Nevertheless, NES lent its full cooperation to the work of GDN via EERC, its faculty members leading projects, preparing papers (including some that won GDN prizes for best papers), and posting a senior member (Victor Polterovich) to the GDN board. Over time, however, we realized that this was not the best way to eff ectively use the organizational and logistic infrastructure of EERC in connection with the academic and resource capabilities of NES. Accordingly, NES proposed a merger with EERC. Th e general format proposed was to create a quasi-autonomous outreach center inside NES, much like the one that was eventually worked out between NES and CEFIR. Such a merger, we thought, would optimize the use of the main factor in short supply, NES’ human capital.

During 1998-2003, the outreach center at NES conducted more than 100 workshops and summer school meetings in dozens of locations from Minsk in the west to Vladivostok in the Far East. Eventually, NES incorporated the workshops into its admission campaign (see above). At fi rst, the workshops were provided almost free of charge to participants and participating organizations; gradually, however, greater eff orts to charge copayments were made. Much energy was put into the Soros project but, as mentioned, it failed. Worse still, with the change of governance at NES in 2004 (see below), budget constraints forced the new board to discontinue the outreach activities “for the duration.” In 2003 OSI created a more solid framework for outreach activities, called RESET, and NES started its participation in the project in its second year with a three-year grant to work on “Money and Economic Growth: Linking Th eory and Evidence,” directed by Oleg Zamulin. Within this project, we selected 30 participants from the CIS, who took part in three summer sessions, and two winter sessions. All sessions were in Moscow with the exception of the last one, in the summer of 2006, which took place in Voronezh. Th e contact sessions included interactive lectures by the staff of NES and some of its graduates abroad, on one side, and the domestic participants on the other.

Whither NES Graduates?

In Russia

Aft er graduation, most students at NES stayed in Moscow; smaller numbers remained elsewhere in Russia or in the CIS. Most members of the fi rst graduating classes did the same aft er spending short periods in European universities. Th ose from the fi rst classes had much trouble fi nding jobs in the business and government sectors of Moscow. Apart from NES being unknown and its diplomas not recognized,

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the Russian economy was just starting to stabilize, new fi rms were forming very slowly, and foreign companies were just testing the water. For the same reasons, salaries were relatively low. We at NES did not have enough experience to help out. However, once the fi rst platoon of graduates kicked the door open, a Western-style “buddy system” took shape that made the job hunt easier, especially with the economy growing toward the bubble of 1998. Most graduates preferred to seek positions in the private sector, which off ered much higher salaries and a much better working environment than the public sector. Many joined foreign consulting and fi nancial fi rms that had opened offi ces in Moscow and found the graduates’ combination of good economics education and language skills well suited to their needs. Within a few years, many major companies made it standard operating procedure to visit NES each year to introduce themselves to and interview upcoming graduates. Several years aft er that, many visiting representatives of these fi rms were graduates of NES. Th e crisis of 1998 induced some layoff s and a temporary increase in the number of graduates opting for PhD studies abroad. When the economy rebounded, however, the road for lucrative jobs for NES graduates reopened and networking reinvigorated. As noted above, some graduates joined RECEP and NES, hired others as TAs, RAs, and administrators.

A third group composed of NES graduates and, in some cases, NES students formed in the early going (1994) the Economic Expert Group inside (or near) the Ministry of Finance. It was led initially by Arkady Dvorkovich, who stepped down fi rst in favor of PhD studies at Duke but interrupted his studies a year later and returned to Moscow to head the group again. Since then, he has had quite a career: Deputy Minister of the Economy; head of the Expert Center under the President of the Russian Federation, then Vladimir Putin; from 2008 onward he served as top economic adviser to Dmitry Medvedev, Putin’s successor in the presidency; and as of mid-2012, Deputy Prime Minister in Medvedev’s new Government. Going

back to the start of this story the expert group was originally organized and fi nanced by Jochen Wermuth (at this writing a founding partner at Wermuth Asset Management GmbH) and was headed following the period of Arkady Dvorkovich by Maxim Kulikov, and then by Alexander Andryakov, both NES graduates. Its Academic Director was Evsey Gurvich(who taught at NES for a few years). Incorporated in 1997, it has remained active throughout. It provides consulting and other services to the top echelon of the Finance Ministry and other government entities, including participation in negotiations with international organizations and preparation of position papers. Other NES graduates joined various think tanks that were forming during this period; yet others worked for international organizations and foundations in Moscow.

Th e employment profi le of graduates working in Moscow by 2002 shows that more than half of the 200 members of this group were employed by more than forty private fi rms, including Russian ones, such as Alfa Bank, Yukos, and Evraz Holding, and by foreign fi rms like KMPG, Ernst & Young, and Procter and Gamble. A few had set up entrepreneurial businesses of their own. About one-third had found teaching and research positions in universities, research institutes, and think tanks (including NES) and about 10 percent were employed in the public sector including international organizations.

…And abroad

By the end of the fi rst decade, NES graduates were pursuing PhD studies (and, in a few cases, MBA programs) at more than fi ft y universities across the globe, mostly in the U.S. and Western Europe. Th e roster of schools included all the top names: Harvard, MIT, Chicago, Northwestern, Stanford, and UC-Berkeley in the USA, LSE and Cambridge in the UK, and Toulouse, Stockholm, Tilburg and others

79


on the continent. On the occasion of the tenth anniversary (December 2002), about 180 NES graduates were abroad, half still in school and the others divided almost evenly among academia and private consulting and fi nancial agencies, and few in international organizations. Most graduates abroad maintained close contact with NES and with each other and, given their decision to stay abroad at least for the time being, they created a solid and active base and “network” for a “Diaspora” branch of the NES Alumni Association.

Becoming Alumni and Forming an Alumni Association

An alumni association comprised of graduates in Russia and abroad was planned from the minute NES had alumni. Initially informal but formalized in 1996, the alumni and their association created a strong network among themselves with NES the main “node” at the center. Th e association got its start with the creation of a database on the whereabouts of almost all graduates, creating a communication and information facility for the group and between them and NES. Over time, this network provided placement services for study and work, information on conferences and seminars in Russia and abroad (including those for students at NES), and real-time information on activities at NES, to which all alumni were invited. Th e virtual network oft en turned real, fi rst and mostly via a constant stream of visits to NES by individuals and groups on occasions of “happened to be in the neighborhood,” somebody’s birthday, visiting a friend, attending commencement ceremonies or conferences, presenting a public seminar or a research paper at the CEFIR/NES academic seminar, or, fi nally, headhunting for one’s employer. Summer and winter vacations saw streams of graduates who were staying or living abroad “hopping over” to say hello. When the Alumni Association formalized its status, it named Elena Smirnova of NES as

its fi rst coordinator, found Zarema Kasabieva as the driving force (and “mother”) at home, identifi ed Sasha Aganin and Dima Davydov as the possessors of these qualities abroad, and found Sasha Ustinov and Seregi Prudnik in Moscow as the main activists and, subsequently, elected offi cers. Th e Association holds an annual offi cial meeting at NES each year, with up to 100 people in attendance. Th at old and rusty Soviet coastal (or river) battleship, Valaam, mentioned in Chapter 3, was still around until 2004 to serve as a mobile venue for alumni meetings and summer picnicking.

Alumni also helped the school directly, starting with small gestures like helping to set up a NES Web site, intervening in various places to recruit research partners, and meeting with potential donors. Gradually, the question of providing fi nancial support to NES came up as well. It began with sporadic and small donations, some anonymous, especially in fellowships for students in need. Ahead of the tenth anniversary, the Alumni Association turned fi nancial support for NES into a formal collective project. Very lengthy discussions took place on the goal, form, and management of this venture as well as other aspects; they concluded with a decision to organize a campaign for an endowment fund. By the time the tenth anniversary rolled around, the fund had met its goal of $25,000. Today, alumni contributions are the third largest long-term source of support for NES, surpassed only by tuition plus the student loan fund and outside donors’ contributions. If so, the fi rst $25,000 collected in 2002 might have been the drop that heralded the bucket. And indeed it was: a fundraising campaign for the endowment fund announced by the alumni a couple of years ago, with a target of $200,000 raised by mid 2012 $368,000, and might reach before too long two times larger than the announced goal. A personal fund, Th e Anna Dvornikova and Ilya Strebulaev Fund, created in order to help students to cover costs of applying to PhD program disbursed so far $27,000.

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Governance Issues Yet Again

As we have seen, NES’ tasks escalated from 1997 onward. Some expanded (research and outreach) and others became more complex. Th e academic schedule, admissions, placement of graduates, the Alumni Association, and fundraising, including the introduction of various self-fi nancing activities, all required the appointment of committees and executives to take responsibility and entailed ever-growing levels of coordination. NES’ fi nancial management, including accounting and auditing, grew in complexity. Concurrently, as the number of new faculty members increased, more responsibilities could be bestowed on them, including areas that had lacked proper academic oversight before, like the library and the IT services. To cope with all this, new staff members – including graduates of NES – were hired for administrative duties in outreach, the research center, the offi ce of the dean of students, the library, fundraising, and accounting. Th e diversifi cation of duties also required better job defi nitions for the administrative staff . Th e lack of clear lines of authority became a source of tension among offi cers, especially at the budget offi ce. Th e diff erentiation of responsibilities required professional upgrading but staff members had only sporadic access to training in their fi elds.9 All these circumstances reconfi rmed an urgent need that we had sensed: the appointment of an active and effi cient executive director.

In 1999, NES fi nally did away with its two-tiered budgeting system with the creation of a single budget run by a single CFO, to which position Oxana Budjko was named. Th e CFO was to be supervised by a unifi ed and supposedly strong Finance Committee (FC). Indeed, on several occasions the FC managed to restrain demands for pay raises and

9 A few such courses were run by OSI; several of our people took them.

Ilya Strebulaev (MAE’1999), Associate Professor of Finance, Stanford Graduate School of Business, Ph.D. in Finance, 2004, London Business School, “When I came to NES, I already had a degree in economics. For me, NES opened the doors to the world of real economics. Now, I am happy to visit NES, see familiar faces and help out in any way I can.”

81


thwart other expenditures that it deemed unnecessary or impossible to fi nance. An eff ort was made to create an orderly budgetary process ranging from budget requests through proper reporting, but it took time to accomplish. It took even more time to unify the system of accounting, replace the Accounting Department with one that reports only to the CFO, and place the accounting system on a modern digital footing. One bright spot in the fi nancial system was that much of NES’ fi nancing was managed by AFNES, which was run by a professional accounting and auditing fi rm at State College. Oxana also served as the de facto CFO of AFNES with the right to approve payments among other things. In 2003 AFNES opened a representative offi ce in Moscow and Oxana became its offi cial head. Since 1999, NES fi nances have been audited annually by outside fi rms that, while always fi nding things in need of improvement, never encountered any case of inappropriate use of money. Th ese audits do have a dark side, however: they are so time-consuming that grants to NES are oft en held back until the auditors’ reports come in.

Eventually, the issues of governance and fi nancial and budget management at NES prompted the Eurasia Foundation in year 2000 to earmark part of its latest grant to the preparation of yet another NES strategic plan and as we have seen before hired a team headed by Ron Phipps of the IHEP for this task. Among its many recommendations, the team urged the establishment of a governing board for NES. Th is set in motion a discussion among the NES leaders about when and under what circumstances a board is warranted (see Chapter 11). We knew that it would have to wait for the conditions to ripe for the replacement of the dual management model, in which the IAB, although lacking formal authority, shared power with the local governance bodies. Among these conditions was the readiness of the young generation of the faculty of NES to replace the founding fathers of NES, both Russian and outsiders.

Another related idea, developed and discussed from 2002 onward, was to create a “House of Economics” (HEC) by merging NES, EERC, and CEFIR. Our main motive here was the hope of improving coordination and attaining higher returns to scale and scope. Some of us at NES also saw this as an opportunity to implement the aforementioned radical change in governance by adopting the superior administrative capabilities of EERC and CEFIR. We even drew up proposed administrative charts that positioned offi cers from these two organizations in top managerial positions of the unifi ed HEC. Ironically, NES’ assumed weaknesses in governance were cited by the opponents of the merger, including another consulting group hired by Eurasia, as additional reasons to “postpone” the merger until NES could become “sustainable.”

To summarize: during its second Piatiletka, NES tried to conclude its “revolutionary era” and move onto more orderly tracks. Its eff orts in this direction succeeded only in part, mainly due to the absence of an effi cient executive director in place at the seventeenth fl oor, an active leader at the top of the administrative and academic pyramid. Our Western academic coordinators provided only a partial solution, the part waxing and waning depending on their inclinations and ability. We tried to appoint Oxana Budjko as an executive director in addition to her job as a CFO, but she was loath to fl ex her muscles on such matters, not to mention the built-in confl ict that existed between the two positions. Our eff orts to cajole Oxana ended when the budget offi ce moved out of the seventeenth fl oor to a spacious hall on the ninth fl oor in 1999. She also went then on a maternity leave at the end of 1998. Th ings improved somewhat when Sergei Guriev became vice rector for development and fundraising (2002), although he, too, refused to assume overall responsibility and rightly so. By the late 1990s, however, we could see a solution to the governance problem on the horizon – one that, however, would have to wait a few years (see Chapter 10).

82

1997–2002 –Fundraising for the 2nd Piatiletka

Chapter VII

Fundraising eff orts to fi nance the development of NES also shift ed gear in Stage 2, in the U.S. but most signifi cantly in Russia. Here, I construe the term “signifi cant” in terms of the innovation in the characteristics rather than their outcomes. Th e intensive fundraising eff orts in 1996 – 97 and subsequent years were aimed fi rst to bring new major supporters on board and then to shift the basis of support from short to long-term endowment. A permanent tenured faculty anywhere can be developed only on a long-term and sustainable fi nancial foundation, and in view of our specifi c faculty-building goal – the return of NES graduates among others – a credible and sustainable fi nancial future was indispensable.

Countering several disappointments in the West and in Russia (Carnegie International, the Starr Foundation, the EC, and the Association of the Russian Banks) were two and a half major successes. Th e MacArthur Foundation and the World Bank joined in, the latter via two independent channels. Th e joining in of the MacArthur Foundation turned out to be a major step forward, in terms of both the amount of support and the fl exibility in its terms. In a major fundraising eff ort in the U.S., veteran and potential supporters convened a meeting in New York on June 4, 1997, a meeting chaired by George Soros and Joseph Stiglitz (then Vice President and Chief Economist of the World Bank). On September, 16 of the same year, in a symbolically no less prominent fundraising encounter, we met with the CEOs and/or fi rst deputies of ten major Russian banks over

a “working breakfast” in the National Hotel in Moscow. A much more unusual event in many respects, even today it seems more like a dream, considering that one day before the same oligarchs met with Yeltsin in the Kremlin across the street. Both meetings required the preparation of detailed documents, introducing the concepts of research, outreach, and of tenure truck hiring, work leaded by Barry, Oxana, and the entire NES team. (See separate discussion below.)

Turning to Russia

Fundraising eff orts in Russia began earlier, with a most promising meeting over lunch between me and Sergei Vassiliev, then Deputy Minister of the Economy, in autumn 1996 at Hotel Metpropol in Moscow. Th ere I updated Vassiliev on the progress we had made on our new strategic and business plans, other developments at NES, and yes, our diffi cult fi nancial situation, emphasizing our failure to garner any substantial support in Russia to that time. To my great surprise, Mr. Vassiliev told me that the EU was entertaining a new round of research applications and that we should submit our own. Specifying the sum of $3 million, he assured me that the Russian Government would back our request, a requisite without which the EU would not even consider our bid. I was skeptical and told him about previous disappointments caused by non-friendly interventions, which I listed specifi cally. He insisted anyway, adding that as the offi cial responsible for the EU grant, he would make sure to see it through. Although my NES colleagues shared my skepticism, we took the project very seriously, holding meetings and discussions with potential EU partners (Tilburg, Pompeu Fabra, LSE, and others) – this was another requisite – and preparing a detailed proposal. Alastair McAuley, the incumbent academic coordinator at NES, coordinated the eff ort and attended meetings at the Ministry of the Economy to receive comments. We submitted a revised application and sat back to anticipate the results, occasionally

83

1997—2002 — Fundraising for the 2nd Piatiletka

receiving direct reassurances from Vassiliev that all was well. Th en came a period of silence, aft er which we learned via indirect channels that our proposal had been omitted from the package sent on to the EU. Makarov and I paid Vassiliev a visit to the White House, the seat of the Russian Government1 and had a rather charged exchange. Th e main “explanation” for what happened was, as we had suspected all along, that our proposal had met with the opposition of the High School of Economics whose management was strangely in charge of both sides of the process – decision making and receiving. Believing that NES was going to become part of HSE, Vassiliev continued, we did not need a separate grant (see Chapter 5). Th e fi nancial support that we were expecting through the World Bank loan for higher education to the Russian Government was similarly threatened (more on this below). We, including Barry, were more than deeply disheartened by this experience; I was also personally hurt due to my long-term relationship with Vassiliev. Others did not react that way; they must have been less naïve from the outset.

Another potential source of fi nancial support in Russia that was discussed with Vassiliev and elsewhere concerned the establishment in Moscow of a Bureau of Economic Analysis (BEA), a policy think tank funded by a special $24 million loan from the World Bank and headed by Leonid Gregoriev as soon as he returned from a term as a member of the Russian delegation at the World Bank. Rumor had it that the BEA was being created as a “refuge” for the group of reformers in the likely event that Viktor Chernomyrdin’s conservative Government would cease to use their services. For some reason, this group (Vassiliev included) had sought my personal support for the project with the World Bank. Th e BEA, brought into being in the spring of 1997, held many discussions – and gave many promises –

1 By then, he had become Deputy Chief of Staff of the Prime Minister of Russia.

about cooperation with NES. Nothing came of them and the BEA closed down aft er several years of operation.

A more dramatic event and a potential breakthrough into the Russian private sector was the aforementioned September 16, 1997, “working breakfast” in the National Hotel in Moscow with the heads or deputies of ten major Russian banks, convened explicitly to discuss fi nancial support for NES (!). It was organized by two members of the Russian economic “reform clique”: Peter Aven, President of Alfa Bank, and Sergei Alexashenko, then Deputy Governor of the Central Bank of the Russian Federation. Aleksei Kudrin then the First deputy Finance minister was the Co-Chair of the meeting but he didn’t show up. Th e banks that took part included Menatep, Alfa bank, Mostbank, OneximBank, Stolichny, later SBS agro, Incombank, Roskredit bank and the Moscow Association of Banks. Th e assemblage of security guards in the anteroom was no less impressive than that of the meeting itself. To appreciate the signifi cance of the gathering, one has to remember that Russia’s fi nancial bubble, in which banks reaped windfall profi ts by lending billions of dollars to the Russian Government in so-called GKO bonds at highly lucrative interest rates, was about to burst. 2 Just the same, Makarov, Barry and I presented NES, its mission, its potential contribution, and its needs. Following a short Q&A session, Mr. Vinogradov of Incombank moved to give NES an initial grant of $500,000, $50,000 from each of the ten banks present. It looked as if it were going to happen until Alexashenko, who chaired the meeting, intervened in the last minute by defi ning the proposal as only one possible variant and turning the whole thing as a matter that needed more consideration. With that, he declared the meeting over

2 A day or two aft er the bankers’ breakfast, a photo with almost the same cast of personalities appeared in all of Russia’s public media. It had been taken not at our meeting (how come we failed to take a picture then?) but at a meeting of the same group with President Yeltsin, discussing the fi nancial situation….

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before anybody could add a word, leaving us shocked and helpless. We never went back to fi nd out what had really happened. It is highly unlikely that these busy people would have shown up for a meeting that was pointless ab initio. Our speculation at the time was that Mr. Sergei Dubinin, Governor of the Russian Central Bank and main patron of the ICEF (a newly created fi nance and economics college that was part of the HSE), may have cast a last-minute veto.

We plugged ahead anyway, setting up individual meetings with several participants at the working breakfast, and came away with two annual grants of $25,000 each from IncomBank. Th e process of implementing this grant was extremely complex since Russian law, then and in subsequent years, made no provisions for such grants, not to speak of tax relief on the grant money. To access the funds, NES had to sign an ostensible service provider’s contract with the bank. Th e fi nancial crisis that followed these events a year later fl attened most of the banks that participated at the meeting, at least temporarily. Had we received the $500,000 that had been specifi ed in the initial motion, one drop in the bucket would have been saved from oblivion and NES would have profi ted immensely. It took several years before we could return to some of these banks (or their new incarnations) and seek their support again.

Th us, the fi rst serious round of eff orts to involve Russian money in support of NES ended with scanty results. NES’ only fundraising harvest in its relations with its friends in the Russian government was a piece of the world bank’s loan to the Russian government for higher education. Later on, we obtained a small slice via the national training foundation, which the government established to distribute small chunks of the larger loan among several nonprofi t higher-education institutes. Despite explicit threats that NES would get none of the proceeds unless it joined the HSE, we did receive a loan (2001-2004) of about $500,000.

The Russian Advisory Board (RAB)

On February 28, 2001, a new NES organ, the Russian advisory board, held its inaugural meeting. Th e creation of the RAB culminated a continuous process of informal meetings and consultations between the NES leadership and the large contingent of leading economists, public offi cials, and business leaders that we called the group of reformers. Since its establishment, NES had sought ways to involve members of this group and other key personalities in its aff airs. It regularly invited many of them to deliver keynote speeches and lectures at NES conferences and at the public seminar. Also, our leadership initiated periodical meetings with members of this group to report on developments at NES, seek advice and support (fi nancial and other), pursue research collaboration, and, in most cases, exchange views on the state of and developments in the Russian economy and the transition.

In a series of meetings with Yegor Gaidar, some held at his initiative, NES explored the possibility of cooperating with Phyztech (see Chapter 6) and using a fund that he had created to support the repatriation to Russian universities of Russians who had taken PhD training in Western economics. Unfortunately, when we proposed several candidates for NES – Phyztech joint appointments, we were rebuff ed. We then discussed the possibility of creating a national fund for this purpose, noting that Yeltsin himself had spoken publicly of such a need. In the same direction, a series of meetings with Peter Aven focused on fundraising matters. Th e decision to assemble a NES Russian Advisory Board to deal collectively and more offi cially with many of these issues followed a series of meetings with Maxim Boycko, then a managing partner of Video International Group. Boycko agreed to chair the panel if the members elected him for this duty. Barry Ickes and I consulted with Valery Makarov, Victor Polterovich, and others about potential members, with each of whom we conducted a round of meetings for this purpose. Nobody declined,

85


possibly because it was emphasized that the board’s meetings and activities would not unduly strain its members’ time.

In addition to the three members mentioned above, the RAB included initially Andrei Vavilov, who already supported NES and Sergei Alexashenko, both of whom had gone into private business by then, Alexander Zakharov, President of the Moscow Interbank Currency Exchange; Yakov Urinson of RAO-UES, the huge electricity corporation from which we had received several research grants; Ruben Vardanian of Troika Dialog, an old friend of NES (and of Makarov) who contributed several student fellowships; Oleg Viugin, then also at Troika Dialog; Sergei Vorobiev, a businessman and a member of the board of Club 2015; Sergei Vassiliev, by then of the Leontief Center in St. Petersburg; and Michael Dmitriev and Arkady Dvorkovich, both incumbent Deputy Ministers of the Economy. (Arkady was also a member of NES’ fi rst graduating class.) Makarov added to the group Myrad Sargsyan, a businessman and contractor who at roughly this time carved out at CEMI four spacious classrooms in a room occupied until then by the already-non-functioning central air-conditioning system.

Th e RAB’s offi cial mandate was to discuss the future of NES, including its response to the perceived needs of economics in Russia and the school’s relationship with the Russian environment generally and its public and business communities particularly, including the resumption of fundraising eff orts in Russia. Unlike the IAB, the RAB would have no executive authority over NES. Th e decision to keep the two boards separate was based on their diff erent tasks, logistical considerations, and the ambivalent relations that existed between NES and the group of economic reformers (see Chapter 3).

In subsequent years, the RAB met once or twice annually, hearing full reports on developments at NES and inviting its members to comment. It received a presentation

on the program of applied courses and specializations and responded with many comments, mostly in the direction of making the curriculum even more applied. It mulled various ideas on the development of executive training courses. We at NES tried to induce the group to think about a program that would place graduates living abroad in jobs in the Russian business sector; ideas were discussed but no real action taken. Th e RAB also initiated some fundraising activities, particularly in eff orts by Peter Aven to enlist fi nancial support from a series of business leaders.3 In time (2004), several members of the RAB joined the NES Board of Governors.

But still dependent on the West

Eff orts to enlist more Western supporters persisted throughout the 2nd Piatiletka (1997 – 2002). Th e aforementioned fundraising meeting on June 4, 1997, in New York, co-chaired by Stiglitz and Soros, was a fi rst for NES but a rather common thing in the well organized American fundraising market. At the encounter, Barry and I presented a brief report on developments at NES and the main elements of the new strategic plan and emphasized the importance of placing fi nancial support of NES on longer-term footing. Th e discussion elicited high praise of the school’s achievements to date and several pledges of support. In addition to the promise of a continued long-term commitment by HESP and the MacArthur Foundation, both via three-year grants, the World Bank announced its serious intention of joining in. Although the representative of the Ford Foundation could not attend, we reported on advanced negotiations with Ford toward a second three-year grant.4

3 Peter Aven set an example by making several personal donations.4 Th e Ford Foundation had moved its grants operation in

the CIS to Moscow; the negotiations took place there.

86


Representatives of several smaller foundations such as Starr and CitiBank made appreciative remarks but, by last count, only the latter eventually approved a couple of small grants. Just before the meeting, Eurasia announced its third grant to NES, this time in the sum of $200,000 instead of $250,000 as before, refl ecting its declared policy of initial support for new projects complemented by a phase out strategy. Our understanding of the comments of Horton Beebe-Center, the Eurasia Vice President who attended the meeting, was that despite this general policy and even though Eurasia depends and is constrained by annual budget allocations from the U.S. Congress, it like others, intended to continue supporting NES in the longer run. Aft er our report on the meeting was distributed, however, Beebe-Center denied having made any long-term commitment; this soured our relations with Eurasia for some time. Another negative outcome of the meeting was Mr. Soros’ announcement that in view of the expected grant from the McArthur Foundation he intended to cut his annual grant from $500,000 to $250,000, as he eventually did.

As noted in Chapter 3, there was a fundamental asymmetry between the mandate of the Eurasia Foundation and the needs of NES: as small as NES was, it was apparently somewhat too big for Eurasia and had become the Foundation’s largest grantee (except for EERC, Eurasia’s in-house project). Ours was a long-term project that needed long-term support; Eurasia was founded as a separate entity from USAID in order to subsidize short-term projects or put up only seed money for longer-term ones. Being too big for Eurasia kept NES too small for USAID, Eurasia’s mother agency. NES tried to get direct support from USAID anyway, holding meetings in both Washington and Moscow for this purpose. Ultimately, in 2002, a $150,000 grant was approved to cover part of the costs of NES’ tenth anniversary celebrations.

An additional element in this context is the relationship that we tried to build with relevant Embassies in Moscow.

We were constantly in touch with the Israeli Embassy, but this tryst was mainly platonic. I had decided from the start that NES would seek fi nancial support neither from Israel nor from main supporters of Israel abroad. However, close relations were established with several ambassadors. Israeli Ambassadors Aryeh Levin, Haim Bar-Lev, and Aliza Shenhar attended several commencement ceremonies and a number of American Ambassadors – James Collins, Th omas Pickering, and Alexander Vershbow, Bill Burns, John Beyrle, Mike McFaul – visited NES and spoke at public seminars or various conferences. Especially close relations developed with Th omas Pickering, who was posted to Moscow aft er a term as the Ambassador to Israel. We met him in Moscow and when he visited NES, again during his very brief term as the President of Eurasia, and later at the State Department. He appreciated NES’ work keenly and tried to help, but apparently even he could not unravel the maze of the U.S. bureaucracy. Later on, in 2004, as Vice President of Boeing, he did arrange a small grant for NES from this fi rm.

Negotiations with the MacArthur Foundation proceeded smoothly for several additional months. Th e $750,000 three-year grant approved in September 1997 included allocations for faculty recruitment and the outreach center. Relations with MacArthur, pursued mainly between Barry and Andy Kuchins and then John Slocum, were supportive and cordial (despite some tardiness in NES’ reporting, a recurrent problem). Jonathan Fanton, President of MacArthur, visited NES and also became one of its strongest supporters. At this writing, MacArthur’s ongoing support was most recently refl ected in a $2 million endowment and “exit” grant in addition to a new fi ve-year grant.

NES’ relations with the World Bank date almost to the beginning, notably during my 1992/93 sabbatical at the transition unit of the Research Department. Over the years, NES also maintained close relations with the Bank’s Moscow offi ce, mostly with the chief economists on duty starting with Charles Blitzer. NES received WB publications for its library, placed several students

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in WB summer internships, and participated in intermittent joint research projects led by domestic members of the Moscow WB staff , including modest fi nancial support. Th e chief and other economists of the WB Moscow offi ce occasionally visited NES to present papers or surveys on the state of the Russian, other FSU, and Eastern and Central Europe transition economies. I enjoyed very good personal relations with Charlie Blitzer, the fi rst chief economist in Moscow. All of this, however, seems not to have been enough to induce more intensive cooperation with the WB Moscow offi ce. Th e only chief economist who volunteered to teach at NES was Christof Ruehl. He was joined by Poul Th omsen from the IMF offi ce in Moscow.

Th e fi rst substantial grant from the World Bank a three-year grant in the sum of $250,000, annually came through in the aft ermath of a capacity-building meeting between NES and other institutions working in transition economies in New York in September 1997. In June 2001, the WB and the Soros Foundations collaborated in organizing a larger meeting of this kind at the WB in Washington, D.C. Th e encounter, again centering on NES, was co-chaired by Mr. Wolfensohn President of the WB, and Mr. Soros and attended by representatives of NES’ other major donors. Barry came to Jerusalem for two weeks to work on the proposal and presentation. At the World Bank end were Greg Ingram, Bill Bader and Boris Pleskovic. At an earlier lunch meeting with Mr. Soros, Mr. Wolfensohn, announced a second grant for NES in the sum of $750,000 for three years. Here NES and other “Centers of Excellence” in transition countries presented their achievements and challenges. An important event of the meeting was the announcement by Andrei Vavilov, a former Deputy Finance Minister of Russia, of the establishment of the fi rst chair at NES. It demonstrated to the Western donors that Russia was starting to share responsibility for the school’s fi nancial wellbeing.

At this time and in later years, NES’ main connection at the World Bank passed through the offi ce of Boris Pleskovic. As the offi cial in charge of capacity building for the Vice

President for Research and Chief Economic Adviser to the President, Boris was a persistent supporter of NES at the World Bank throughout the entire period. Also helping from this offi ce were Gregory Ingram who retired from a long period and great experience in how the WB operate, and Bill Bader who worked sporadically in this offi ce. Th e enlistment of the World Bank would complete the slate of major supporters of NES in the West for the next six or seven years.

Th e next episode in the World Bank support for NES is a story in itself. Th e idea was to apply for more stable subvention under WB’s “Special Grant Facility” (SGF). Th e idea originated with Greg Ingram, the veteran head of the WB Research Committee, who also undertook to help prepare the proposal and present it to the SGF Committee. We started right away, in 2001, to draw up a proposal in accordance with Ingram’s guidance and instructions. We initiated meetings with members of the

Gur Ofer and Boris Plescovic, Chief, Staff of Advisors, World Bank, 2002

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committee and secured, through offi cial letters, the full support of Nicholas Stern, the incumbent WB Chief Economist, and of Pradeep Mitra, Chief Economist of the WB Europe and Central Asia (ECA) Region. It looked like a sure thing. A year earlier, the SGF had awarded CERGE-EI in Prague5 a similar grant for three years; this enhanced our confi dence even more. Th e good thing about this grant ($900,000 for three years) was that it was renewable and, therefore, long-term – matching NES’ real needs. Contingent on its approval, the Research Department promised another $300,000 in support of research. Except that the grant was denied. Th e offi cial explanation was NES never stood a chance because the SGF subventions only multinational projects. As usual, other voices at the Bank off ered alternative explanations for the rejection. Th e ECA Research Committee “compensated” NES by granting it with $900,000 for three years. Th is time, however, the subvention was not only not renewable but amounted to an exit grant that we had to acknowledge as such by signing on it. Th e grant expired in 2005 deleting the World Bank, like earlier of Eurasia, from our list of Western supporters.

And between West and East

One obvious potential source of fi nancial support was the large contingent of Western companies that had invested in Russia and established branches and subsidiaries there. We assumed that such fi rms – banks, large consulting and accounting groups, oil companies, and others – would appreciate the work of NES, if only as a source of supply of professional staff for them. Furthermore, unlike Russian companies, they were used to supporting NGOs in their own countries, many through their own philanthropic foundations. We had ventured into

5 Th e Economics Institute of the Center for Economic Research and Graduate Education, a joint venue of Charles University in Prague and the Economics Institute of the Academy of Sciences of the Czech Republic.

this kind of fundraising by approaching Citibank, both in New York and in Moscow. In 1999, we took a more systematic approach to the matter by hiring a professional fundraiser, drawing up a list of relevant companies, extracting a letter of support from George Soros (an ex gratia gesture on his part that we appreciated), preparing a proper NES fi le, sending the letters out, and hoping for the best. Nothing happened. Th e people at the Western companies’ branches in Moscow referred us to their U.S. headquarters, which hardly responded at all. In Moscow, we joined the American Chamber of Commerce and were invited to speak with its members, again with no results. Except for CitiBank (in New York but not in Moscow!) and, much later, Boeing and BP (approached mostly through personal contacts), this channel of support bore no fruit. We still wonder why. We also approached private individuals such as Penti Khouri and Josee Marie Kravis – and, despite many meetings, much correspondence, and an exceptional word from George Soros – we came up empty yet again.

Depending on Ourselves: “Cost Recovery”

Budget problems and persistent pressure from donors encouraged NES to seek fi nancial support from within, through “cost recovery.” NES had always charged a small registration fee and heft ier tuition fees for English and mathematics preparatory courses and entrance examinations. Th ese revenues covered the costs of the admission process, more or less. Most outreach activities were fi nanced by grants (see Chapter 6) and the share of self-fi nancing by clients and their institutions was growing, if only gradually. NES also tried to arrange outside funding for faculty members who taught at EERC workshops – this was one perceived benefi t of the lengthy merger talks that we had held – but with very limited success. Th e faculty salaries were not that high to begin with and the members appreciated the extra pay that they received for the

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workshops. Th ere was some experimentation with variants of executive training courses but with only modest success. Here and there, NES staff provided consulting services to business fi rms in NES’ name and shared the proceeds.

Debating the possibilities of taking cost recovery to a higher level, we focused on two items: introducing signifi cant tuition fees and establishing an undergraduate program. Although the latter was a fundamental issue in many other respects, it was rejected each time it came up, mostly because we hadn’t the capacity and the energy to tack another major project onto an already very dense agenda. A corollary of the idea – joining or merging with an existing school that had an undergraduate program – had been raised but had gone nowhere except for a time in 1998 when CEMI hosted an undergraduate program in economics of the University of the Academy of Sciences, a tuition-free state institution that had also been a potential candidate for takeover by NES.6

Tuition and the Student Loan Fund

NES charged very low tuition in its fi rst years and provided many if not most of its students with tuition waivers and/or fellowships to cover basic living expenses. Th e combination of Russia’s grave economic situation, the still not well recognized name of NES, and the time-honored Soviet tradition of free education had made this policy self-evident. Th e main arguments against introducing substantial tuition at that point were that it would dampen enrollment signifi cantly and exclude good but fi nancially poor candidates. Aft er lengthy discussions and some improvement in Russia’s economic condition, NES introduced a formal tuition of $2000 a year

6 Only much later, in autumn 2011, did NES introduce an undergraduate program in collaboration with HSE, but this falls much beyond the time frame of this report.

for the class entering in the autumn of 1997. In deference to the opponents of this novelty, it was decided to proceed carefully and incrementally in both the tuition level and the number of waivers off ered. We also decided to create a student loan fund that would cover the full tuition and be available to every student upon request. Th e very idea of a loan fund in Russia was received by most, but especially by the Russian partners, as a fl ight of fancy imported directly from a fairy tale, absolutely alien to the country and utterly unrealistic under the prevailing conditions. Although this argumentation was valid, others considered it an argument in favor of the loan facility. Th eir reasoning was that it should be introduced much more widely among higher education institutions in Russia to help close the gap between the state’s inability to fi nance higher education adequately and the spread of private tuition-based institutions that fi ltered out everyone but the off spring of rich families. A second argument against the program was that no bank in Russia would agree to fi nance and administer it. Th us, we sought the support of foreign foundations or banks to run the program for us, at least at fi rst. It turned out to be a long process. By the autumn of 1997, we were resigned to having the fund fi nanced and managed by AFNES alone, but the arrangements for this were not ready in time and the introduction of the scheme was postponed to 1998. Th e national fi nancial crisis struck a few days before classes were to open that year, leaving NES no choice but to put off the tuition and loan program once again until things could turn around.

Th e combined tuition and student loan fund package was applied to the class of 2003, the entering class of autumn 2001. Again the main burden of updating the earlier scheme fell on the shoulders of Barry and Oxana. NES adhered to the $2000 tuition level proposed for earlier years combined with around forty full tuition fellowships. Six of the fi ft een entering students with no tuition waivers took the loan, which was still fi nanced and administered by AFNES. Several others paid tuition in installments

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with each module. When the IAB convened on November 4, 2001, a debate about what to do next broke out again with many of the earlier arguments repeated, mainly the expected adverse eff ect that tuition would have on the size of the entering class. Skepticism remained high. Th e pro-tuition camp countered by reasoning that once only a minority of applicants would receive fellowships, i.e., once tuition became the norm and fellowships the exception, it would be more favorably accepted.

In 2001/02, AFNES continued to run the loan program by itself as we continued to hunt for a bank to take it over. Th e AFNES connection solved the problem for the students but not for NES, which needed the tuition money very badly. Th e Higher Education Support Program (HESP), which was already running such schemes for several business schools in Eastern Europe, attempted to arrange such a program for us through the European Bank for Reconstruction and Development (EBRD) but nothing came of it. Some time during 2002, Bill Newton Smith, the head of HESP, managed to interest the World Bank’s International Finance Corporation (IFC) in the scheme. Th is set off a lengthy process of negotiations. Unsure about why the talks had to take so long, we worked hard to convince IFC that our group of NES graduates posed a much smaller default risk than the participants in many existing loan fund schemes anywhere, let alone those in a similar but more general program in Russia. Our graduates, we pointed out, belonged to the Alumni Association, a well organized group that had close relations with (and aff ection for) NES; we added that most of them were studying at and/or working for institutions of the sort that would deter them from reneging. Even so, IFC asked the NES donors to guarantee the program. Th e Soros people who looked into the matter refused, reasoning that if they were to take the risk they could just as well run the program. Aft er another interlude, the Russian bank KMB, owned partly by Soros, expressed readiness to run the program on behalf of

IFC but wanted to examine it fi rst, thrusting us into another lengthy round of discussions and explanations. Finally, in 2004, aft er three years of negotiations, a draft agreement between IFC and KMB was presented to NES. Although convinced that the terms of the deal were too harsh, we needed the money and the program too badly to turn them down.

Just before signing, however, Sergei Guriev, the incoming rector of NES, invited bids from several Russian banks to run the program. Th e best terms were tendered by a private Russian bank, Russian Standard (RS), with no IFC involvement and with better conditions than the IFC proposal (!!!). Th e loan carried 10 percent U.S. dollar interest, low by Russian standards at the time, but would have to be partially guaranteed by NES anyway. It would be paid back over ten years, starting two to four months aft er the borrowers’ graduation. We accepted it. It started in August 2005, covering the classes of 2006 and 2007. Fift y-two members of the fi rst incoming class, that of 2004/05, took the loan (then still run by AFNES) and twenty students paid tuition. By the 2005/06 academic year, tuition fees brought in around $1.9 million, covering 21 percent of the NES budget. At the present writing, the payback of loans to RS Bank has been nearly perfect. During 2005-2012 the program paid NES more than $4 million.

One bright spring day in 2001, George Soros received in his offi ce in New York City a stranger from Russia. Th e visitor, Pavel Teplukhin, handed Soros a check in the sum of $15,000 in repayment of a fellowship that OSI (Soros Foundations) had given him a few years earlier to study at LSE. He was working as an economist for Troika Dialog, the aforementioned fi nancial group in Moscow. Mr. Soros saw the potential of the episode and, in his next visit to Moscow, invited Mr. Teplukhin to come with him to NES, replay the repayment scene, and then endorse the check to NES. By doing this, he would demonstrate how one fellowship could be multiplied

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and serve an endless sequence of students. Th is, of course, is the basic idea behind the fi nancial support that Western alumni associations provide their alma maters. We used the little ceremony and the coming graduation exercises to elaborate on the issue. Th e main message was that our graduates, all of whom had studied tuition-free, owed NES at least the cost of their training. We mentioned above the $25,000 that alumni raised in 2002, ahead of the tenth anniversary. Alumni support is the third leg of long-term fi nancing for institutions such as ours, in addition to tuition and student loans and to foundation and donor support. It is also the farthest into the future. Th e Teplukhin episode and the fi rst grant from our alumni signaled the arrival of that future. As this essay go the printing press, Mr. Teplukhin serves as a top offi cial of Deutsche Bank in Moscow.

Th e next signal related to the endowment fund must await a digression back to 1997/98. As we at NES debated the tuition and loan fund issues, we discussed the same matters with our donors, mostly Eurasia and HESP. While tuition should be

introduced, we argued, one could not expect it to cover the cost of a graduate program. If we set tuition at $5000 a year, even by enrolling 100 students in each of the two classes we could cover only one-quarter to one-third of the operating budget at best. No graduate department of economics in the West fi nances its expenses by means of tuition, we continued; the lion’s share of the replacement of Western support would eventually have to come from similar support in Russia. In the longer run, however, a large share of fi nancing for NES would need to originate in an endowment fund – again, fi rst from Western sources, showing the way to Russian institutions, corporations, and individuals, NES alumni in particular.

In summer 1999, as the eff orts to create the student loan fund advanced, I faxed a letter to George Soros, raising the issue of a NES endowment fund. A long-term commitment to tenure-track faculty, I noted, must be fi nanced by an equally long-term standing fund. Mr. Soros responded by telephone that very day, agreeing in principle to convert the annual support from HESP into a capitalized sum as one piece of an endowment. As usual, this came with a string attached: others must join in. Also as usual, no letter expressing this commitment followed. Th e construction of the NES endowment fund became a cornerstone of our business plan for the second decade, but Mr. Soros’ pledge had to wait until 2005, when the MacArthur Foundation came aboard. Th e irony of it is that my original draft letter to Soros included a request for a grant toward a new building for NES; Roman Frydman convinced me to ask for an endowment fund and helped me to draft a new letter. When the grant was fi nally executed a few years later, it was earmarked for a new building.…

Since 2005, NES has had a stable and successful student loan fund, fi nanced by RS bank, and at this writing (2012) more pledges are being raised from wealthy Russian entrepreneurs than from their Western counterparts. Our persistent claim that this would eventually happen has been vindicated.

Pavel Teplukhin is handing George Soros the check, that Soros is endorsing for NES. From left to right: Gur Ofer, Valery Makarov, George Soros, Pavel Teplukhin, Maxim Boiko, 2001

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Budgets, Deficits and Arrears

Despite all these fundraising eff orts, our budgets from the late 1990s to 2003/04 showed a cumulative defi cit of about $200,000, more than 10% of the $1.8 million – $1.9 million annual budget at the time. Each year brought specifi c reasons for the defi cit and hopes to cover it by year’s end. In the early 2000s, arrears were mostly the result of prolonged discussions with Eurasia Foundation (EF) over the next grant, which EF had tied to a merger between EERC and NES, and the unexpected delay in the introduction of the tuition-plus-loan scheme. While most of the arrears were amassed on account of people on the “outside” – visiting professors, the IAB and the like – some also took place in Moscow. It was left for the new NES board, established in the autumn of 2004, to start afresh with a balanced budget.

Zvi Griliches – in Memoriam

On November 4, 1999, Zvi Griliches died of cancer at sixty-eight, costing the NES community one its founding fathers and a dedicated companion and mentor. His love of and dedication to NES and each member of its community was limitless. He was a source of support and inspiration to all of us. Zvi and I had been personal friends long before NES was created, but aft er the new venture began I spent hours and hours with him in his kitchen in Cambridge, in Moscow, on long-distance phone lines, and in innumerable e-mail exchanges, mainly discussing NES. Many of the innovative ideas with regard to NES were his, as these pages testify. He was a great economist but also a caring person, a mentch. In his memory, NES established a series of “Zvi Griliches Distinguished Lectures in Economics.” Th e fi rst presenter was Olivier Blanchard in autumn 2001; a line of distinguished economists followed (including Ariel Pakes, Roger Myerson, Alberto Alesina, Ken Rogoff , Bengt Holmstrom, Avinash Dixit, Elhanan Helpman, Eric Maskin, Th orsten Persson, Ariel Rubinstein and Tom Sargent). Although irreplaceable at

NES, Zvi Griliches “lives on” in the part of his library that his wife, Diane Asseo Griliches donated to NES aft er his death.

Th e short biography of Zvi that appears on his web site is an academic one, with which he carved out an honorable place in economics. For us, it may also be interesting to know that Zvi was born in Kovno (Kaunas, Lithuania) in 1930 to a family that goes back to coin engravers at the Tsars’ mint in St. Petersburg during the second half of the nineteenth century. Zvi used his many visits to NES to visit Kovno, Vilna (Vilnius) and St. Petersburg to gain more knowledge about his family and the community around it. He dedicated one of his last scientifi c publication to tell this amazing story of his ancestors, “Th e Griliches engravers” Journal of the Russian Numismatic Society, January 1999. Zvi survived the Nazi occupation – as many of his family did not – immigrated to Israel, attended the Hebrew University of Jerusalem, and continued his studies in the U.S. Th e rest is known.

A Concluding Note

By its tenth birthday, NES had developed almost all the elements of a “center of excellence,” the high-level school of economics that had been envisaged at the time of its creation. It had grown in size, enrollment, courses, teachers, research work, academic infrastructure, and physical space. It had also grown in depth, diversifying its curriculum, research and outreach, and, most critically, taking fi rst steps toward the creation of its own indigenous faculty, dominated by young PhDs who had returned from the West. NES had also improved the quality of its governance and its fi nancial base by making initial progress toward the creation of sustainable, long-term Russian fi nancial support – the introduction of tuition and a loan fund and a beginning of an endowment fund, some of it in Russia. Talks and planning toward the creation of the “House of Economics” had begun. NES was

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recognized abroad and in Russia as a successful center of excellence and it enjoyed, together with CEFIR (which had been moving closer and closer to NES), growing visibility and repute in academia as well as in the economic policymaking community. Above all, nearly 200 graduates were already working in all parts of the Russian economy, contributing their knowledge and skills to the cause of transition.

In 2002, NES turned ten, as did the new Russia and a multitude of new Russian institutions and organizations. Th e tenth anniversary was a signifi cant milestone in the school’s development, an appropriate occasion to celebrate and demonstrate internal success and enhanced visibility to the outside community. Aft er enumerating and describing the stages of development above, it is now time to document the festivities.

Gur Ofer, Olivier Blanchard and Barry Ickes, 2001

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2002 – The Tenth Anniversary

Chapter VIII

Th e tenth anniversary of NES was an important watershed in the history of the school and a spectacle of major magnitude on its own. Celebrated at the Hotel Renaissance on December 19 – 21, 2002, it managed to combine in two and a half days the many elements that NES symbolized plus a few that it aspired to. First, we wanted to showcase NES’ academic achievements and accomplished this foremost by engaging masses of graduates, in Russia and abroad, in a two-day conference titled “Th e State of Economics and of Transition.” Twenty of the thirty-four papers presented in the parallel sessions of the conference were by NES graduates, including a few who had already become faculty members; the other papers were presented by members of the NES community, mostly visiting professors. We then wanted to bring to Moscow, under the NES emblem, a group of leading economists who would present the state of the art, each in his or her fi eld. Th is also came to pass: we devoted the aft ernoon plenary sessions of the conference to this, with presentations by Ariel Pakes, Phillip Aghion, Joel Mokyr, Daniel Hamermesh, Gerard Roland, and Suzanne Scotchmer. Never before had such a broad survey of what economics is all about been presented in Moscow at such a level. To top it off , Stanley Fischer presented the keynote address of the conference on the opening night, speaking about “Globalization and Its Challenges.”

Aft er opening with Globalization, the academic program of the conference concluded with a round-table discussion on Post-Crisis Russia, chaired by Evgeny Yasin, featuring a keynote address by Yegor Gaidar1 and a panel discussion by Arkady Dvorkovich,

1 Yegor Gaidar died on December 12 2009. He was a dear friend of NES.

Richard Erickson, Evgeny Gavrilenkov, Barry Ickes, Andrei Illarionov, and Oleg Viugin. By choosing this topic and this lineup of participants, NES not only represented modern global economics but also provided a bridge to Russia and the transition.

Th e anniversary events also aimed to bring together as many members as possible of what may be called the NES international community and network: students, graduates, visiting professors, staff , and faculty. Indeed, about two dozen visiting professors and thirty graduates came from abroad and were joined by some 120 graduates living and working in Moscow. Members of the NES community were all over the place throughout the festivities, current students manning the registration stands and providing assistance, guidance, and other services. Th e entire event, especially the receptions and dinners on the opening evening and the gala dinner on the second night, were venues of mass mingling, hugging, kissing, and nostalgia. Th e festivities culminated on the closing night with a splashy “birthday party” including a beautiful stage

Richard Ericson, professor, East Carolina University and Kostya Sonin (MAE’1998), one of the fi rst tenured professors at NES, 2002

95

2002 — The Tenth Anniversary

show, prizes, music, much nostalgia and laughter, and of course drinking and dancing into the wee hours.

Amid the revelry, NES also wanted to thank its supporters for their years of service and demonstrate our achievements and joy. Th e dinners on both nights were devoted to this as representatives of the supporting foundations and institutions, sister organizations in Russia and abroad, and various Russian government agencies – as well as friends – were invited, many delivering congratulatory remarks. Th e main speaker on the opening night was Bill Maynes,2 President of Eurasia Foundation, who spoke on behalf of the other foundations including Ford and MacArthur. Th e latter sent a representative of its own, who (among others) expressed his support for the triple “House of Economics” merger and off ered a $50,000 grant (to be matched by others) to fi nance a study and the preparation of a merger plan. At this event and on the next night there were short presentations by U.S. Ambassador Alexander Vershbow, William Newton Smith of HESP (who also read out a letter from Mr. Soros), Boris Pleskovic of the World Bank, and Andrei Illarionov, then the economic adviser to President Vladimir Putin of the Russian Federation. At the end of his own speech, Andrei gave us a total and much appreciated surprise by reading out a formal letter of greetings from Mr. Putin. Th e history, mission, and achievements of NES were presented at the festivities by a beautiful exhibition consisting of a series of dozen large posters, positioned in a number of entrance halls; a new brochure titled “NES at Ten”; a compendium of research works done at NES; and a CD that included the papers of the conference and the materials mentioned above. To top it all, a twelve-minute movie about NES was shown. If all this weren’t enough the gala dinner featured a “real paper” (some 30 minutes long) by Gur Ofer on the concept of NES and its achievements in the context of the spread of modern economics in modern

2 Now deceased.

From left to right: Andrey Illarionov, Advisor to the President of the Russian Federation; Boris Plescovic, the World Bank; Alexander Vershbow, Ambassador of the United States to Russia, 2002

From left to right: Gur Ofer and William (Bill) Maynes, President of the Eurasia Foundation; Eric Livny, Director of the Economics Education and Research Consortium, 2002

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history and across borders, and that of the transition. Th is rather serious intervention in the otherwise jolly festivities, not unlike my own speeches at the annual graduation ceremonies, enriched the occasion with an additional touch of academic content and respect – those who witnessed it said.

A key initial decision about the anniversary was to have it in a central place in town. In addition to the obvious logistical considerations, the goal was to reach the largest possible portion of the community of economists and policymaking executives in Moscow. Th is we could never do at our modest and intimate home in the CEMI building. Th e Hotel Renaissance (formerly Hotel Panda) was chosen on the basis of EERC’s good experience with the facility in both service and cost as the venue of its biannual workshops. Indeed, attendance at the event was one of its great successes. We had asked people to RSVP

their participation but many “crashed” the festivities anyway, shattering our previous record and sometimes overwhelming the restaurants. More than 700 people attended the opening ceremony and Fischer’s lecture, forcing us to televise it to a second hall; more than 500 attended the conference and the other events. Th e media covered us well – although sometimes focusing more on the dignitaries in attendance than on the reason for their participation – including lavish reports in Th e New York Times and Th e International Herald Tribune. NES was clearly getting out of the closet, if it had not done so previously.

As usual at NES when important issues come to the fore (and in contrast to the image held by some), preparations for the tenth anniversary had started well in advance, nearly two years ahead of the event. Th e early discussions and decisions about the main parameters took place in the fi rst half of

Th e Tenth Anniversary: “We give you our hearts”. From left to right:Gur Ofer; Natasha Volchkova (MAE’ 1998), Assistant Professor;Barry Ickes, 2002

Gur and Dalia Ofer at NES 10 year Anniversary, 2002

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2000. A large planning meeting on July 12, 2001, yielded a preliminary program comprised of the main activities, the venue, and an initial division of labor. Several draft business plans were prepared and adjusted periodically, including the establishment of teams for every task and an outline of the division of labor, the budget, the requisite funding, and the timetable of each task. Totally aware from the outset that NES would need outside administrative and logistical support, we were very thankful to EERC, Eric Livny, and his staff for agreeing to take part. Aft er discussions and an agreement early in 2002, EERC undertook to set up a logistic system for invitations, to be operated by NES (specifi cally, Zhenya Nikolaeva and Lena Smirnova), to handle the entire task of negotiating and making arrangements with the hotel (with the intensive participation of Oxana), and to transport guests from the airports and back. Barry Ickes, Valery Makarov, and I took responsibility for the conference with the help of a conference committee, and CEFIR, SITE (University of Stockholm), and WDI (the William Davidson Institute at the University of Michigan) agreed to co-sponsor it with NES. Sergei Guriev was responsible for the reception and the formal dinner, Zarema for the “birthday party,” the movie, and (with Karina Ter-Akopyan) the exhibition and the recruitment of students and graduates for all needed tasks; and Vanessa Fuller, with Oxana and others, for all the printed materials.

I assumed overall responsibility for the anniversary, spent longer periods of time than before in Moscow, including the few weeks leading up to the event,3 and indeed felt the pressure. Heading for those last weeks, I found an urgent e-mail (dated November 26, 2002) from me and Makarov to the faculty and staff , encouraging (exhorting) them to put more eff orts into the preparations at this time. Like many organizations and in the good old Soviet tradition, winding things up by rushing the barricades was part of the game. Despite my longer stay in Moscow, the elaborate

3 I had retired from the Hebrew University by then. NES 10 year Anniversary Cake, 2002

NES 10 year Anniversary: Maxim Boiko, General Director of JSC “Group” Video International; Barry Ickes, NES Resident Academic Coordinator (1994-95), NES Visiting Professor, IAB member, American Friends of NES, President, 2002

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program and stage show of the “Birthday Party” came as a complete surprise to me. Since the various draft s of the working plans provided no specifi cs about these things, I had assumed that it would be essentially a non-programmed evening with greetings, music, dancing, and food. In my long years of coming and going at NES, I had fallen into the behavioral pattern captured by the expression “Gur (Gogol’s revizor) is coming” but this was a complete surprise and a very enjoyable and gratifying one.

I was utterly elated by the anniversary and what went into it: meeting so many people who were part of the NES story, the level of performance, everyone’s dedication, and the

NES team: faculty and staff at the entrance of CEMI, 2003

glowing appreciation for NES that everybody expressed publicly and directly. An added pleasure for me, and a great one, was the presence of my wife Dalia in her second visit to NES during all these years; two additional visits would follow. Believe it or not, I even danced…. Th en I made an announcement: I would be transferring my share of responsibility for NES to others within two years, when I turn seventy.4 In the meantime, there was still much to do, not least to prepare for and make the transition successful.

4 As indeed happened.

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The Last Two Years under the Ancien Regime

Chapter IX

Going “back to school” aft er the tenth anniversary, I encountered a mixed bag of favorable developments and diffi culties, both of which demanding strenuous eff orts and generating tensions. On the academic front, most developments were on the positive side: the admission process was expanded and improved, raising the number of applicants to more than 200 and enhancing enrollment – eighty-fi ve in the fi rst class and about sixty graduating, despite the increase in tuition and the number of students who were asked to pay it. Th e student loan fund remained under the management of AFNES – the outside banking scheme was still advancing too slowly – but more and more students signed on. Th e number of elective courses grew steadily, with the focus on improving those in the “applied” fi elds. Th us, NES was able to introduce a fi eld-of-specialization note in the graduates’ diplomas. In two rounds of hiring aft er the tenth anniversary aff air, NES made four new appointments. Th e work of the research center expanded and its quality improved. Th e pattern of two research conferences a year, devoted almost exclusively to research done at NES, was fi rmly established and more papers were published. Outreach expanded to areas beyond the Urals and the Russian borders. NES’ visibility became brighter; people there and at CEFIR got involved in more and more academic and policy activities outside the school.

In the meantime, Russia was emerging from the 1998 crisis. Th is had a mixed impact on NES: as the Moscow labor market revived, more graduates opted for positions in Russia and fewer tended to go abroad for PhD studies – a

positive shift to my mind. At the same time, students took jobs before graduating, meaning that more dropped out and others reduced their attendance further. Th e economic rebound also helped NES to improve its fundraising record in Russia: domestic contributions grew from pittances to nearly $250,000 in 2004, with a promising upward trend ahead. Th is outcome was abetted by an improvement in organized fundraising occasioned by the appointment of Sergei Guriev to the new position of vice rector for development, the formation of the Russian Advisory Board, and also, as we like to believe, the successful anniversary celebration and what it represented.

Th e improved economic situation in Russia also created, for the fi rst time, a threat to the human capital of NES and CEFIR in the form of competition from the private sector. A new think tank, the Open Economy Institute (OEI), was established early in 2003 by a group of major stockholders of the Yukos oil company, headed (that is the think tank) by Konstantin Kagalovsky. Th e new institute off ered to buy up CEFIR, stock and barrel, for a price that was very diffi cult to turn down. Th e internal strength of the CEFIR team and its leader, Eric Berglof kept this from happening. Still, while pleased to have kept CEFIR in our fold, we were encouraged by such a demand for good economists. Apart from its being a positive development that we wanted to promote and even help, we hoped it would mark the beginning of a trend and a channel for the dissemination of modern economics in Russia. Th us, we off ered to help OEI recruit staff among our graduates and the “Diaspora” and indeed, several of them joined OEI and more graduates of NES followed later. In return, OEI donated a professorship chair to NES on the basis of annual funding. A dilemma arose when one member of our faculty, Kirill Sosunov, asked for a year of leave to try out a career with the new institution. Following lengthy discussions and hesitations, we decided to allow it and even to let Sosunov continue teaching at

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The Last Two Years under the Ancien Regime

NES part-time and conduct a joint research project with OEI. At the end of the year, Kirill resigned from NES to stay full-time with OEI. Parallel to the early negotiations with OEI, we were invited to a dinner meeting with Mikhail Khodorkovsky, the president of Yukos, followed by his visit to and lecture at NES. None of these produced the hoped-for fi nancial support. Subsequent unfortunate events at Yukos forced Kagalovsky to leave Russia and OEI to reduce its activity and eventually to close its doors in 2005. At that point, Sosunov accepted an academic position at HSE, thereby fulfi lling another part of the NES mission.

While this was going on, new diffi culties developed in fundraising in the West, particularly in our relations with Eurasia. Like the Ford Foundation, Eurasia moved its Russian operation headquarters to Moscow; this created yet another bureaucratic barrier, both institutional and personal. Th e failure of our great eff orts to tap into the World Bank’s Strategic Grant Facility (see Chapter 7) also traces to this time. Delays in payments from several foundations and in the creation of the bank-supported student loan fund, coupled with a small accumulated defi cit, made NES fall behind on payroll again. Since this happened immediately aft er the anniversary, it created much more bitterness and tension than before, occasioning (among other things) a strong letter from Makarov that implied wrong priorities if not bad intentions (a sentiment shared by others at the school) and elicited a letter of resignation from Oxana and the same from Barry, no less, citing insuffi cient support on my part. I felt fully responsible and did my best to mitigate the tensions and help solve the underlying problem. I am not sure that I chose the right strategy but I tried to convince Barry and Oxana to ask the donors to allow us to “borrow” from funds that were designated for future use, e.g., Wolfensohn’s three-year grant or the World Bank research grant for 2003 – 2005 – both of which we had received in a lump sum – or to ask HESP for a loan that NES would repay from future year grants.

I thought we were responsible enough not to misuse this opening as an excuse for overspending, but Barry and Oxana, who held the direct fi nancial responsibility, deemed this unacceptable and risky. Finally, I accepted their position.

Th e fi nancial guillotine descended with greater celerity at the end of 2003, when the Russian Academy of Sciences raised NES’ rent sixfold (from about $25,000 to $150,000 a year). Makarov and I tried diff erent ways to rescind or circumvent the decision, to no avail. Here we had to ask HESP for help, which it provided. Several months earlier, an identical rent increase had descended on the Shanin School, located at the campus of the Academy of the National Economy, so it paved the way for us. Th is prompted HESP to move in the direction of seeking a house for both schools – another elusive plan that was not fulfi lled.

Some of NES’ pervasive liquidity problems over the years traced to late reporting to the grantor foundations due to the school’s antiquated and primitive accounting and internal reporting systems, and the failure to fully integrate our two fi nancial and budgetary systems. When fi nancial pledges were honored late and took long to incorporate into the system, reports went out late as well. Not to forget the underlying system of annual, short term grants. Other delaying factors were the annual audits that had been introduced at NES in 1999 and preparations for the elusive merger. In 2003, the obsolete accounting and reporting systems were fi nally replaced with a modern system, a team of new accountants, and proper machines, all under Oxana’s roof. By the end of 2003, despite no small diffi culties, the new system was in place.1

1 I note again that while various auditors who visited NES annually had many critical comments about the system, they never encountered or cited any misuse of funds.

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The “Russian Houseof Economics” (RHE) or the “Dom Ekonomiki”

Chapter X

In his talk upon the tenth anniversary of NES, Bill Maynes, president of the Eurasia Foundation, announced a goal of a merger of EERC, NES, and CEFIR into one institution, the House of Economics. EF would donate USD 50,000 to hire a consultant group to produce strategic and business plans for the new organization. Th is announcement solidifi ed previous informal discussions and consultations about the merger. Also around this time, Eurasia decided to discontinue its direct ownership of EERC and seek an alterative “institutional home” for it. We at NES had been favorably disposed to merging with EERC from the time the latter had been established and felt this way even more strongly about CEFIR from its beginning, when the group led by Erik Berglof won the EU tender to run RECEP (1997). Th e fact that the three institutions had recently moved into the same building and had collaborated in producing the NES tenth anniversary gave an added impetus to go ahead. Maynes’ positive response to the challenge, in addition to the enlisting an outside consulting was to instruct a team representing the three parties to draw up an “action plan” for the RHE. In what followed, however, the plan fell through time and again, each time due to the appearance of alternative options that some considered superior.

Th e merger was expected to deliver the following benefi ts: better coordination of services, e.g., concentration of all outreach activities under one management, eff ective

division of research activities, and optimal use of academic personnel among the three institutions; more effi cient use of main in-house support services such as ICT, library, administration, etc.; better coordination in fundraising; and higher visibility and more effi cient systemic impact on the Russian academic and economic policy sectors. It looked like an obvious positive-sum game with win-win prospects.

Just the same, some of the leadership and rank and fi le at all three organizations resisted the move vigorously. Among the NES ranks, it was feared that the merger would result in layouts and loss of work status. Th e members of CEFIR who had not wanted to join NES in the fi rst place were concerned about possible loss of their intimate and family-like working environment, their presumed fi nancial security, and their job status by being subordinated to the “old guard” of NES. “Th e absence during the 2003/04 academic year of two strong advocates of the merger – Sergei Guriev and Katya Zhuravskaya, on sabbatical in Princeton – didn’t help. Some at EERC, like a few CEFIR, feared that the new organization, dominated by NES, would shift funds to the covering of NES’ defi cits and arrears and its faculty’s needs at the expense of outreach. Such fears were predicated on NES’ fi nancial situation, which was perceived as weaker than theirs. Our repeated promises to prevent such transfers, backed by a commitment to fi rewalling among the three organizations’ budgets for the fi rst years, fell on deaf ears.

Two consulting teams were working on the merger at this time: a local Moscow team from the Process Consulting Company, headed by Alexei Kuzmin, followed by a group from Grant Th ornton (GT), based in Boston, headed by Th omas McLaughlin. Both put the managers and the rank and fi le through extensive interviews, adding to the rumor-polluted atmosphere of uncertainty. Mr. Kuzmin gave up in midstream without preparing a report; GT fi led its report on October 2004. In the meantime, we at NES

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The “Russian House of Economics” (RHE) or the “Dom Ekonomiki”

decided to move ahead in view of our own concept of institutional and governance transition. With Sergei and Katya back in Moscow, the merger of NES and CEFIR was agreed upon and approved as part of the institutional and governance changes that both the IAB (June 1 – 2, 2003) and the RAB (July 2003) had discussed and endorsed.

Th e GT report recommended the three-way merger at a delay of about half a year, during which time NES’ fi nancial position would be stabilized. With this exception, the main recommendations of the report closely resembled the structure of governance that NES had approved already in 2003 and again on September 12, 2004. But it did not go ahead: the prerequisite relating to fi nancial stability was met in late 2004 – the new board of NES had been installed by then – but a new obstacle to the EERC – NES merger appeared each time.

Back in October 2003, EF issued a tender for the takeover of EERC. Two suitors applied: NES and a newly created New Eurasia Foundation, headed by Andrei Kortunov1..NEF’s main mission in life was to support social and academic institutions, including those previously subventioned by Western foundations. On February 6, 2004, the EERC-Russia board of trustees chose NES to become the “institutional home” of EERC, adding a lengthy list of conditions and requirements including the hiring of a professional person to steward the process.

Th e story of the EERC NES merger had a bizarre end: On a Friday aft ernoon of the EERC board meeting Eurasia Foundation put on the table a document that ask AFNES

1 Andrei Kortunov is the president of the New Eurasia Foundation in Moscow, Russia. He is the president of the Information Scholarship Education Center (ISE) and a member of the Educational Board of the Open Society Institute.

to take control over EERC, presumably agreed by all the parties. On Saturday the board voted to reject it. Over night Livny and other members of the board changed their mind. Th e outcome of the merger saga was that CEFIR joined NES in a very fruitful union and EERC-CIS moved to Kiev, where it joined its academic sister, Kiev School of Economics (KSE), in an arrangement similar to one of the variants that had been proposed for its merger with NES.

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Changing of the Guard and Beyond

Chapter XI

Following the tenth anniversary, the growing young faculty and the rapid rapprochement between NES and CEFIR made it time to think seriously about a change of regime at NES. Th e thinking moved in two directions at once: transfer of governance and management of the school from the founders’ generation to the young, and shift ing from the dominance of outsiders to domestic (Russian) control. Th e main thrust in the fi rst direction was the transfer of the position of the rector and, of the second, the handover of management responsibilities from the IAB and its chair to a fully sovereign board, dominated by Russians. Th ese changes, it was hoped, would coincide with the merger of NES with CEFIR and EERC-CIS but, as noted, only a partial merger, that with CEFIR, would actually take place. It had been thought at fi rst that the merger would deliver the changeover as a byproduct. Events, however, moved in the opposite order: the change of governance at NES came fi rst and expedited the subsequent merger with CEFIR.

Th e transfer of power to the young generation was a logical outcome of the NES mission. Th e young faculty, home aft er training in the West, was very well versed in state of the art economics and its curriculum. What is more, they had spun for themselves and NES a web of connections in the economics profession in the West through joint research and publications, reciprocal visits, participation in conferences, and so on. Several had gone the additional mile of developing good connections with colleagues, including NES graduates, in the public and business sectors in Moscow.

In short, they were ready and eager to take over. Among the Russians, as noted above, our partners at CEMI fully understood and supported this part of the NES mission, which, in fact, could not be advanced and fulfi lled without such support. Yet when it came to changing governance, they began to hesitate. Th e young faculty also aspired to a change in governance, refl ected in the challenge that they had posed by returning to NES and Russia to lead the new experiment. Generational change was also called for to better refl ect the evolving reality on the ground at NES. Although named vice rector for development in 2002, Sergei Guriev had been coaxed into taking part in many other necessary decisions by dint of his energy, his capabilities, and the fact that his offi ce was on the seventeenth fl oor. Th is suggested another reason to make the change: the growing mismatch between offi cers’ titles and their real authority and power over time. Specifi cally, as the members of the IAB repeated time and again, NES needed a full-time chief executive “on the ground.” Finally, there was the simple eff ect of biology: while U.S. academia imposes no obligatory retirement age and academics in many other countries are allowed to continue working despite such a rule, leadership and management in most of these cases moves to the younger generation.

Since his fi rst year at NES, Sergei Guriev had been marked as the future rector. He embodied the magic combination of top-notch academic talent, exceptional administrative abilities, more than enough energy and drive to put both to work, and dedication to the NES mission. Th e timing of the changeover depended on Sergei’s readiness to take up the post, and everyone agreed that this could happen only aft er he would be promoted to tenured professor. It took him a sabbatical year at Princeton (2003/04) to cross this threshold. Sergei was the fi rst candidate to go through the Academic Appointment Committee promotion process and obtain a vote of approval from the Committee’s parent, the IAB. Once this was done, the prerequisites had been satisfi ed and Sergei

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Changing of the Guard and Beyond

was elected rector. At this point came the time for the next move. As far back as the tenth anniversary, I had announced my intention to step down as chair of the IAB upon reaching age seventy in 2004. At the IAB meeting in September 2004, I kept my word. With this, many of my de facto responsibilities were transferred to the new rector. Th is did more than assure better management of NES on the ground; the new leadership was also much better equipped to deal constructively with NES’ relations with its Russian environment, from academic partnerships through policymaking to fundraising.

Th e second major change was the shift of real authority from the IAB to a Russian-dominated board of directors that started off with fi ve members and expanded later. It was chaired by Maxim Boycko, a partner of Video International Group at the time. Th e other original members were Arkady Dvorkovich, a member of NES’ fi rst graduating class (1994) and then the head of the Presidential Expert Directorate, and Valery Makarov, who surrendered his post as rector and became the president of NES. Later additions to the board were Michael Dmitriev, president of the Center for Strategic Research, and Vladimir Preobrazhensky, CFO of the Siberian Coal Energy Company, a private fi rm. Th e board had two non-Russian members: Erik Berglof, my successor at the helm of the IAB, and Barry Ickes, president of AFNES and, as a member of the IAB, secretary and then member of the NES Academic Appointments Committee. I declined to join the board but stayed on as a member of the IAB and of the AFNES board. My announced resignation helped to make all these changes a collective move on the part of the entire veteran leadership.

AFNES, while retaining its traditional role, became fully subordinate to decisions of the board insofar as such decisions did not transgress U.S. law. Th e IAB retained its academic advisory role and also, for the time being, responsibility for and, indeed, authority over academic

appointments and promotions. It was understood that the board would respect those decisions and not reverse them unless they carried severely dire fi nancial implications.

Erik Berglof, a member of the IAB since 1994, established the Center for Economic and Financial Research (CEFIR) when the group he led failed to win a second term in running the EU-affi liated Russian – European Center for Economic Policy (RECEP). Having done this, he then stayed on as its president. Since CEFIR had been staff ed from the beginning with young PhDs and graduates of NES, Erik appointed members of this group to the day-to-day management of his organization. Ekaterina (Katya) Zhuravskaya, back from Harvard, and Ksenia Yudaeva from MIT shared these duties. Th us, when the chair of the IAB of NES was off ered to Erik with a view toward the eventual merger of CEFIR and NES, it was assumed that a similar pattern would be followed at NES: the domestic leadership would be given full authority to run things at home (in Moscow) while the IAB would focus its eff orts on fundraising abroad and longer-term academic matters including new appointments and promotions. Th is also fi t better with Erik’s many other responsibilities, including chief economist of the EBRD, an appointment that he received shortly aft er he accepted his NES assignment. Th e selection of Erik as the IAB chair also corresponded to the convergence of NES and CEFIR that was under way. Indeed, it was around then that CEFIR was renamed “CEFIR at NES.” Th e two institutions were placed under the authority of the same board (initially, “almost” the same), the two faculties were unifi ed under the same academic and appointment processes, and teaching responsibilities and outreach activities were largely standardized. A few years later, by 2005, the natural gravitation of NES and CEFIR toward each other culminated in a full legal merger that left CEFIR with only two vestiges of its former status: its trade name and a degree of autonomy. Th e merger, facilitated chiefl y by the generational transition of the NES

105

management and a decline in CEFIR’s fi nancial strength, was not only desirable but also successful, as symbolized in Katya Zhuravskaya’s decision to start teaching at NES as of 2005/6.

Passing the baton of authority is a delicate and diffi cult operation in any organization. In many cases, the old guard refuses to give up and the change is postponed, or appropriate processes and preparation toward the changeover are not applied. NES seems to have dodged these bullets. Partly by luck and partly by planning ahead, it enjoyed a smooth transition and avoided struggle for leadership positions. One sometimes hears that members of the old guard indulge in jealousy if the new leadership succeeds. NES appears to have escaped this illness as well: the veterans feel only great satisfaction and joy when they observe the dynamic development and prodigious success of “their” school. Th ose who have had anything to do with such a process know that it lies in careful work and preparations that took place before.

Epilogue –Four Concluding Summaries

Chapter XII

Stephen Kotkin’s Qualitative Evaluation

In 2006, as noted in Chapter 5, the Ford Foundation invited Professor Stephen Kotkin of Princeton to evaluate the impact of Ford’s fi nancial support of higher education in Russia. NES was one of three small private schools covered by Kotkin’s report and the only one devoted exclusively to economics.1 Th e report also discussed the Higher School of Economics (HSE), a university-level state school established in 1992 and not supported by Ford. Kotkin included HSE because it aimed to adopt an innovative post-Soviet paradigm and to posit a benchmark for comparison with the private schools. Th e report was based on information and observations collected during the fi rst six months of 2006 and applied to this period, less than a year and a half aft er the institutional and governance transition at NES.

Below are several quotations from the Kotkin report that address NES’ main qualitative achievements and innovations, and some of its problems, as it reached its fourteen’s birthday:

Th e small New Economic School (NES) is hands down the most impressive institution of higher learning in Russia. Th is

1 Th e other two were the Moscow School of Social and Economic Sciences (MSSES) and the European University at St. Petersburg (EUSP). Most of Kotkin’s report concerned matters that are not relevant here, e.g., Ford’s support for faculties of sociology and political science.

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Epilogue — Four Concluding Summaries

applies to the level of scholarship – NES is the best economics department in Russia and probably one of the best in all of Europe. And it applies to governance and management, which is just as hard to get right as the scholarship (p. 51).

NES has an excellent M.A. program. It runs summer schools and mini-courses, expanding its reach. And NES has an internal research institute, CEFIR, which has an enviable publishing record […]. Even more than EUSP and the Moscow School, NES does what very few in Russia do – it combines high-quality teaching with research (p. 51.)

What is more, NES succeeded in introducing a real tenure process for faculty. And it conducts real professional fundraising, including among the business community, which has produced results [....]. Th e introduction of tenure has meant that people within NES take a long-term perspective, committing to their own and the institution’s development, with a clear understanding of the goals and measuring rod. And people denied tenure at NES have been hired at top-ranked state universities in Russia – another indication of its trajectory, and its place in a larger system (p. 51).

In a further unmistakable sign, NES achieved state accreditation for its M.A. program. Th e accreditation of the M.A. at NES happened even though foreign PhDs are not recognized in Russia and the vast majority of the faculty at NES have foreign PhDs. (p. 51).

[…] NES has a real board of directors (about eight members), which oversees the school […]. NES has achieved this impressive degree of institutionalization and solid management despite the manifestly unreformed Russian governance environment outside its walls (pp. 51 – 52).

To see the level of achievement in economics in Russia, it is enough to glance through the faculty of the New

Economic School – they earned PhDs from MIT, Harvard, Toulouse, Wisconsin, Michigan, Tilburg, CEMI in Russia.2 “What is striking,” one person commented, “is that this group could earn foreign PhDs, come back, and it was not considered treason.” At the same time, back in Russia, they are co-authoring papers in refereed journals with professors at the major institutions in the United States. Th is is impressive. Several of the positions at NES are endowed, testifying to the school’s ability to raise funds among Russian and international business (p. 71).

Sustainability remains a burning issue. NES offi cials estimate that to become sustainable it needs an endowment of $30 million (which they concede is a lower-end fi gure). At the same time, whereas 91 percent of its $1.15 million budget in 2001-2 came from international foundations and the World Bank, in 2005-6 less than 50 percent of its $1.85 million budget came from such sources. A substantial part of the NES budget now comes from Russian sources. Something near 40 percent is covered by the existing endowment (p. 52).

Finally, this review suggests that there is a powerful need to pay attention not simply to “Westernization” but to the sense of developing a discipline. Th e latter is the surpassing achievement of the foundation-supported New Economic School. What is more, the additional success of NES in the sphere of management and governance is equally impressive and important. Because of the fortuitous circumstances of the Higher Economics School’s inordinate ambitions and resources, NES could turn out to provide the basis for the long-sought systemic impact (p. 67).

If so, NES owes its high academic caliber to (1) training its teachers in Western institutions, (2) preserving constant academic openness and cooperation in research and

2 http://www.nes.ru/english/people/faculty/professors.htm .

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publication as part of the global network of economics, and (3) adopting key academic institutional elements, also from the West: the combination of teaching and research and the introduction of a tenure-based academic system. Kotkin was astonished to fi nd that NES had received formal accreditation even though almost all its faculty was foreign-trained and held Western PhDs. Whenever asked, authorities liked us and considered us to be an important exception and a demonstration model.

Th e Kotkin Report then highlighted the importance of the introduction of modern governance and effi cient and successful fundraising that focused on the amassing of an endowment fund. Th e reporter failed to mention the inauguration of the student loan fund program as an important tool that helps students to pay tuition and an additional source of fi nancing for a private school such as ours. Indeed, at this writing tuition plus student loan fund generates 20 – 25 percent of all revenues. Since government budgets in transition countries are typically under acute stress, tuition and student loan fund programs help to lower the public budget without hurting the quality and quantity of the production of human capital. Finally, Kotkin lauded the high visibility that NES had achieved and contrasted it with “the feeble impact of the higher education system”, even at modern universities like HSE”. In fact, Kotkin emphasized the high potential for systemic change that would exist if HSE resolved to follow in NES’ footsteps. To increase the chances of a positive systemic impact, Kotkin recommended a merger of NES into HSE. I happen to doubt whether a merger is necessary for this. NES did have an impact on HSE and HSE will eventually pass on the required reforms across the higher educational sector. Th e weak systemic impact of NES on the Russian university sector refl ects fi rst of all the smallness of the school but also, and possibly more so, the strong conservative forces and resistance to change of the higher education sector in Russia. Th is is but one manifestation

of the disharmony between the rapid pace of development and change at NES and the creeping cadence of institutional reform in other relevant sectors, in this case higher education.

The Budapest Conference

On June 14 – 15, 2005, the World Bank and HESP held a conference in Budapest on “Capacity Building in Economics Education and Research.” Th e presentations surveyed the main economics education projects in Eastern Europe and the former Soviet Union that were being supported by the West. Bill Newton Smith, head of HESP, presented a paper that summarized HESP’s take on how to build “capacity,” not necessarily in economics. His main recommendation was to “enhance and not create [new institutions].” Disseminating sideways, he said, costs less and is more likely to succeed. If one decides to create a new institution anyway, or if one happens to be around (or happens to be) a “charismatic and driven” individual who is ready to establish a new center of excellence, then one should make sure of three things: (a) there is a demand for the product you intend to provide; (b) to survive, you must charge signifi cant tuition but make sure it comes together with a student loan fund; and (c) you should have a powerful board in place from day one. Finally, BNS admitted that doing things his way might mean producing “Ladas rather than Cadillacs.”3

NES was created basically as a new institution in the sense that it produced a new product not only for itself but for Russia as a whole. Yes, it had a charismatic team of local and external enthusiasts from the start; it set out to produce a product that must have been in great demand but was recognized as such only by a small minority of scholars; it could not charge

3 Th e Lada is a Soviet-manufactured Fiat that was notorious for mediocre, though working quality.

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signifi cant tuition at fi rst due to the state of the economy (declining output and “disorganization”); it stood no chance of creating a sustainable student loan fund; and, fi nally, the creation of a board at an early stage was unwarranted because the panel inevitably would have had a majority of external members and representation of “conservative” members among domestic people. It was correct to hold off on establishing a board of governors until the young generation of scholars, products of the school, could rise to dominance on the new board. As everything written above shows, NES eventually met all of BNS’ conditions a dozen years aft er its creation, when it was ready. Th e road to this point was not simple, partly due to less than full understanding of NES’ needs – especially the confl ict between the longer-term fi nancial needs of a higher education institution and the short-term fi nancial support provided. (By saying this, I imply no ingratitude to any of our supporters, long and short term.)

Yes, at NES we have been producing “Cadillacs” all along, and in large quantities, for the academic, public, and business sectors, and left the production of “Ladas” to others. Stephen Kotkin’s report points to a large number of critical diffi culties that impair even the quality of the Ladas (without using the metaphor) both in academic and government spheres.

Th e last word on this issue was left to Bill Newton Smith. He resolved the apparent disagreement between us by stating, in parentheses, “I am not thinking here of institutions providing graduate level training in economics.”

NES in Figures: 1992 – 2004 – Today

Th is subsection summarizes a number of quantitative parameters of NES since 1992. In this edition of the book we look mostly at numbers and characteristics of students and graduates. We hope to be able to add in a

future edition discussion about faculty and a number of fi nancial aspects. Some of the diagrams and tables cover the 1992-2011(12) period annually, so that they show and discuss data also for the midway, the period covered in this volume. Other Tables focus only on the present.

Students: As NES approaches its twentieth anniversary, its thousandth graduate has left its gates. About half of all alumni graduated in the first twelve years and twelve classes. Entering classes were smaller and more variable in size at first; the second period saw larger classes that were also more stable in size (Diagram 1). In recent years, a steady state of sorts has taken hold: 200+ applications, 100+ admissions, and 80+ graduating. To this day, about 20 percent of admitted students do not graduate; one wonders why. The main hypothesis is that some applicants do not have clear ideas as to what they are applying for. From the start, male students have outnumbered female students by a ratio of three to one (Diagram 2.1). Despite efforts to improve the gender balance, things have only gotten worse: in recent classes, only 20 percent of the students are female. As for why, one connects it with the large and growing number of applicants coming from mathematics and physics departments, half of all NES students, (Diagram 2.2) and from leading universities (three quarters of all NES students coming from MSU and MIPT, Moscow Institute of Physics and Technology, departments that are known for high concentration of male students). Another explanation is the image of NES in the eyes of potential applicants as a place that offers highly demanding program in theory and mathematics – “male” disciplines according to deeply ingrained social beliefs in Russia about the nature of the gender gaps. Further on, more than a third of NES students pursued doctoral degrees elsewhere while attending NES. Finally, in recent years only about a quarter of all students come from families originate in Moscow. Over the years

109


their share declined from around a third. Most of those not originally from Moscow, however, come to NES from leading universities in Moscow (Diagram 2.3)

Graduates: By July 2011, marking the eighteenth commencement, NES crossed the thousand-graduate line (1022 in all), creating an appropriate landmark to check their whereabouts. Table 1 presents the distribution of 901 NES graduates about whom information exists4 by geography (Russia and the CIS vs the West, mostly the USA and the UK, but more than thirty countries in all); type of employment, and continued studies (PhD). Of the 658 graduates who stayed and worked in Russia (along with a few in other FSU states), 556 landed positions with leading companies in the private sector, in banks, at branches of Western top multinational consulting, and in manufacturing. Only 15 work in the public sector and 82 in academic institutions, including 38 at NES or CEFIR. At that time, 332 graduates were working (247) or studying (85) abroad, mostly toward PhD degrees in economics. Of those employed, 109 held academic appointments in more than twenty countries, some in leading universities; and nearly the same number (121) were employed in the private sector. Like in Russia, only a few of those abroad worked in the public sector or for international organizations. Table 3 shows the distribution of graduates working in Russia and the CIS among a number of major employers.

Table 2 take account of NES graduates with a Western PhD By 2012, 175 graduates of NES earned PhD degrees in the West, and most of them, 144, stay and work abroad, mostly in academic institutions. Only 31 came back to Russia and most of them (25) took academic positions, more than half of them (17) at NES and CEFIR, half a

4 Missing is information on 98 graduates and on at least 23 graduates in the class of 2011 that have not settled yet.

dozen or so among them moved later to another school, mostly to HSE. At the same time, NES appointed several non-NES graduates to its tenure-track faculty.

Most of those who earned Western PhD stayed in the West, mostly in the US and the UK and one or two each in more than a dozen countries. Many non-returnees probably intend to stay in the West under most circumstances. Some, however, would probably come back if invited by universities that go through a process of structural reforms – let’s not demand too much, along the pattern of HSE – including cooperation with Western universities. It would probably also help if Russia intensifi ed its eff orts toward structural economic reforms and improved its atmosphere vis-à-vis the West. In all these respects, it may be claimed that NES has been moving ahead faster than Russia and that one of several results thereof is a thinner fl ow of young PhDs back to Russia. Yet, members of the international branch of the alumni association of NES have been involved over the years in traveling to Moscow to teach courses; participating in outreach activities, joint research projects, and conferences; and fi nally in providing fi nancial support to their alma mater. Under the present environment in Russia this networking activity is also concentrated mostly around NES and HSE. In this way NES also became a central knot of a network creating what the literature dubs “brain circulation”.

Applying a simplistic cost-benefi t calculation to the activities of NES, we fi nd that the training of some thirty teachers in modern economics for NES and a few other economics departments cost Russia approximately 140 PhDs – those who stayed abroad, a considerable wave of brain drain. A more reasonable calculation has it that without NES Russia would have very few Western-trained teachers of economics, that those trained would be even less likely to return, and that these few would have little chance of obtaining proper training in other occupations. Without NES as a “center

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of excellence” serving as a bridge and an anchor for high-level teaching and research activities, Russia would have a weaker Diaspora and a less involved network that could support the fi eld of modern economics and create a solid base for brain circulation. Add the bonus of more than 600 NES-trained professional economists, most of whom serve Russia’s business core. Th at so few graduates serve the public sector may be regrettable, but it is a source for pride that one of the few, a graduate of the NES fi rst graduating class, Arkady Dvorkovich, was recently nominated as Deputy Prime Minister of the newly created Russian government. Also, Ksenia Yudaeva was appointed recently as the head of the expert department of the president and its G20 desk. Another two graduates of NES Mark Shmulevich is a deputy minister of telecoms and Igor Fedyukin, a NES/CEFIR researcher (PhD in history from UNC) is deputy minister of science.

Finally, one may lament the loss of many more Western-trained economists who would have come back had the structural reforms in higher education and at the national level moved faster, and followed better relationship with the West.

A Personal Perspective

Many people at NES and beyond keep asking me how and why I got so intensively involved in the NES project. Why hadn’t I responded to Makarov’s appeal to create NES as Richard Portes had (see Chapter 1)? Well, I must not have had any such intention; evidence of this is my meeting with Soros before I met with Makarov, where I raised with Soros the issue of training in modern economics in Russia. I was defi nitely looking for a niche to get involved in. Th e introduction of modern economics in Russia as a substitute for the Marxian version was a natural choice for a teacher in economics who specializes in the Soviet economy. Added

to this was the somewhat similar introduction of modern economics in Israel some forty years earlier, which I had witnessed and experienced as a guinea pig. At the meeting with Soros, I raised the possibility of establishing an Open Society center in Israel for the nearly one million residents of the USSR/FSU who had immigrated to Israel or, alternatively, engaging qualifi ed immigrants in transition projects in Russia and other FSU states. Soros shot down the fi rst idea right away; the second one, while not rejected out of hand, played a rather small role in the NES project, as we know today. While Israeli economists accounted for a signifi cant share of the more than one hundred visiting professors who came to teach at NES over the years, as can be observed in the list of visiting professors appended in this volume, very few of them were recent immigrants to Israel. Several others had been born earlier during the Soviet period – examples are Nissan Leviatan (born in Lithuania), Moshe Kim, and Eugene Kandel – or had a nostalgic attachment to Russia and the USSR as second- or third-generation emigrants from those countries. Eric Livny, who came to Israel from the USSR as a boy, returned to Moscow at my invitation in the early 1990s; he is probably a representative of a group of one who fi t my thinking about the potential contribution of immigrants to the transition. At times we found ourselves in disagreement but remained friends throughout.

If this presentation of why and how I got involved with NES fails to convince, I may add the sense of compensation that it gave me for the many years that I was barred from the USSR and, fi nally, an urge to be counted as an active participant in such a historical event rather than just an academic witness. Still, as I have witnessed dozens of failed initiatives and projects, many instigated by representatives of large and affl uent institutions, I must have assumed at the time that the NES initiative didn’t stand a better chance of success, even in the still lower chance that Soros would give us the go-ahead.

111


I fi rst visited the USSR and Moscow in January 1989 as a member of a large team assembled by Soros to collaborate with the Soviet Government on a transition plan designed by Soros himself. Th e main idea behind the plan was the establishment in the USSR of an “open free zone” that would be run according to market economy principles. Th e zone would be virtual – not geographic – and would invite such companies as were ready and qualifi ed to play by market economy rules. Th e transition would proceed gradually, powered by a stream of companies joining in. I happened to be on sabbatical at the Brookings Institution in Washington, D.C., and was invited to join the project by the late Edward Hewett, who was working there on the Soviet economy and whom Soros had invited to serve as the academic head of the project. Th e project provided me with a few consecutive trips to Moscow until it was called off in mid-1990. Th en, however, further transition initiatives by Soros created more opportunities for visits to various venues in Moscow including taking part in many conferences. I mention these early visits because they gave me a last-minute opportunity to observe the “face” of the USSR and of Moscow much as they looked under the Soviet regime: very wide streets with very few cars, no neon advertising (indeed, dark streets at night), empty shelves in stores, the presence of security “tails,” no-charge tips about eavesdropping on telephone lines, room and board for Dalia and me in occupied private apartments at the order of the inviting institute’s security offi cers, etc. … and also the early signs of change: a few private restaurants, hidden in basements, where you had to use “connections” to get a seat, private cars that operated as taxis, collective (private) farm markets full of everything, (they existed also under the old regime) and a few branches of foreign retail chains, selling at very high prices … and a glimpse into the main eff orts to set government agencies on a course to transition. I vividly remember fi nding myself together with the Five Hundred Days group on the day

they published their notorious report and the crossover of Yasin from the government team. All these provided a benchmark against which the changes that I observed fi rst-hand in the following two decades could be compared. Indeed, Moscow revolutionized its appearance during these two decades, especially in the center: it developed into a modern capital city full of action, lights, traffi c, and crowds.

My routine when visiting NES was to stay, if possible, in one of the apartments that NES had rented, do my own shopping, and take long walks in the vicinity of the apartments or, lacking them, the hotels where I was staying. I used the metro for transportation whenever possible, as congestion in the streets of Moscow grew much faster than the country’s GNP did. My spare time being limited, I attended the Bolshoi or visited museums less frequently. I initiated outside dinner meetings with members of the NES community and local and visiting professors in restaurants that were highly limited in availability at fi rst; I watched this industry grow in size, diversify, and prices. Almost each visit included a home dinner with Julia and Victor Polterovich, with other invitees in earlier years and mostly alone with the hosts in later years, always accompanied by lengthy discussions on issues related to NES and the Russian economy and polity. Th e hotels that NES used for IAB meetings or Western conferences were basic by Soviet hotel standards, many grades below those that the World Bank and other international organizations used. I stayed in the latter when I managed to combine World Bank missions with visits to NES.

Th e agenda of a typical visit to NES included major events like IAB meetings, a NES conference, graduation ceremonies, committee meetings, and personal meetings with almost everyone in charge, starting with a lengthy meeting with Makarov and heading down the hierarchy to the students. When dependable e-mail became available, such meetings were natural continuations of discussions

112


and responses to long-distance exchanges online. Th e advent of the Internet made possible daily involvement in all kinds of decisions; it is hard to imagine how the activities described could have taken place without this tool. I remember an episode that required discussions with Makarov, he in his dacha in a forested area a hour’s drive west of Moscow, and I on a mountaintop in the Dolomite region of northern Italy: decision making by remote control.

Back in Moscow, I usually tried to schedule outside meetings with friends of NES, members of the reform group, and others to discuss NES-related business, help in fundraising, the initiation of joint activities with NES, research projects, and the like, and economic and political aspects of the transition. While in Moscow, I had the opportunity to attend many conferences, seminars, and meetings with small groups. Among them, I vividly remember a full-day visit at the hideout of the Gaidar transition team on the day Yeltsin invited Gaidar to serve as Prime Minister of Russia. A World Bank team came to lecture the group on how to run the banking sector in a market economy. It was evident that the members of the Gaidar team didn’t pay attention as they were busy considering how to run the Russian government starting the next day. On the ride to town that aft ernoon – Gaidar had off ered to drive me back to NES – we discussed what to do about the price of oil when most other prices would be liberalized. Another exciting meeting I attended was with the St. Petersburg group, members of which held several key positions in the Russian Government in Moscow. Anatoly Chubais, responsible at the time for the mass privatization of large fi rms, reported on how he had won a battle with the Russian Parliament by taking advantage of the legislature’s summer recess. Th e meeting, attended by several guests from abroad, sounded like a victory party for the St. Petersburg group over the conservative Moscow bureaucracy and polity. Some of

the meetings that I attended took place in mythological buildings that dated to the old regime if not the Tsarist period, such as the Kremlin, Staraya Ploshchad (Th e Old Square), the White House and the old Gosplan building, now the seat of the Russian Parliament, adding an aura of mystery and grandeur to the meetings.

My intensive work with NES took its toll on my academic work on the FSU and the transition, slowing it but not forcing me to give it up. Th e many visits to Moscow and meetings with the key players on the side of the reforms, compensated for the loss of time, as did the taking of two sabbatical leaves and then early retirement from the Hebrew University in 2000.

In conclusion and thanks: Here I leap from the tenth anniversary celebrations to the special gathering of the NES community on May 13, 2005, devoted to my retirement. I received a lot of love and sincere appreciation and gratitude from everybody who attended these events, to my deep gratifi cation. It is my deep conviction that the success of NES, especially during the stormy early years when every need, obtained routinely in normal times, was met only with great eff ort and persistence, hinges on the high qualifi cations of the leading staff and even more so on their dedication, commitment, and readiness to work, most of the time, as a cohesive team. Th is is one of the secrets of NES that many outsiders sometimes fail to see. If so, it is here that I wish to deeply thank all members of the NES (and CEFIR) community – leaders, staff , teachers, alumni, and students – for their contribution to the success of NES, each in the role that she or he played in the orchestra that made NES what it is today. Allow me also, however, to select a few of you for special thanks for outstanding performance, dedication and cooperation. I begin with Barry, Oxana, Valery, Victor, Zarema, and Zhenya. All helped to lead NES through the fi rst decade as a cohesive team and when

113


the time came to help smooth the transition to the new leadership and steward it in the same spirit of mission and dedication. Deep thanks go to Sergei, who took over as rector of NES and developed the institution to unthinkable new territories and heights; and to Katya Zhuravskaya, who led CEFIR from the start and eventually also to NES, its natural home. Sincere thanks go to the members of the IAB with special remembrance of Zvi during the years there was a turnover of membership in the IAB. Joining the IAB were Philippe Aghion from Harvard, Beth Allen from the University of Minnesota, Donald Andrews and Larry Samuelson both from Yale, Eric Berglof from the University of Stockholm, Olivier Blanchard and Bengt Holmstrom from MIT, Avinash Dixit from Princeton, Saul Estrin from the London Business School, Stanly Fischer then from CitiBank, Roger Myerson and John Cochrane both from Chicago, Gerard Roland From Berkeley and Aleh Tsyvinski from Yale. During the early years most meeting of the IAB took place at NES in Moscow but since NES joined the Job market at the annual AEA congress most of the meetings took place there. Th anks for your contribution to facilitate and smooth in so many ways the road for NES to join the global economic profession.

Special thanks are owed to all of NES’ outside supporters, in Russia and abroad, whether their support has been fi nancial or other. Here I would like to mention Boris Pleskovic of the World Bank who accompanied the development of NES during the entire period and had been responsible in various ways for much of the fi nancial support to NES by the World Bank.

Special gratitude goes to George Soros, who has been supporting NES from its birth to this day, as described in these pages. In addition to fi nancial support, Soros has visited NES on various occasions, spoken with students and staff , headed or joined fundraising NES initiatives in

New York and at the World Bank, and chaired the relevant meetings. He went out of his way to urge foundations and individuals to support NES and pioneered the initiatives that set the endowment fund in motion and fi nanced a new building for NES. Soros chose NES as the proper venue to announce such initiatives. It was HESP and its head, Bill Newton Smith, who came to the rescue when unexpected needs arose. Bill attended many NES activities and oft en took part in discussions concerning major policy and fi nancial issues at NES. While Soros was our main address in the early years, he asked us to work through HESP once the latter institution got organized. We honored Soros’ wish in most cases but also tried to maintain a direct line of communication with him on major issues or just on an annual basis. Although I tend to believe that these meetings were important, I take this opportunity to apologize if such interventions on our part sometimes caused unpleasant feelings.

Finally, thanks go to the entire community of NES, the administrative and the academic staff , the more than one hundred visiting professors, and the more than one thousand graduates of NES, turning Alumni, in Moscow and around the CIS, and in dozens of countries in the West, supporting NES fi nancially, but more important, by creating a global network of scientifi c activities, of “brain circulation”, internal in Russia and global around the world; thanks to all.

My involvement with NES changed my life in many respects. It is gratifying to think that it also improved the lives of many young people and gave them tools with which they could contribute to the quality of life to many more – hopefully, too, making a positive dent in the transition, albeit a very small one. I hope but also trust that this feeling is shared by many members of the fi rst generation of NES, teachers, staff , and graduates, and that this commitment is being transferred to the next generation at NES.

114

Appendixes

115

Appendixes

Footnote: MAE’1999 – refers to graduating class of 1999 of the Master of Arts in Economics program. Analogous abbreviation is used to refer to all other MAE graduating classes.

116

Appendixes

117

Appendixes

118

Appendixes

119

Appendixes

AAC – Academic Appointment CommitteeABC- hornbookACE/TACIS project – Technical Assistance for the

Commonwealth of Independent States(Th e European Union’s Tacis Programm)

ACTR & ACCEIS – American Councils for International Education

ACTR- American Council of Teachers of Russian AEA – American Economics Association AFNES- American Friends of NESANU – Australian National University (Canberra,

Australian Capital Territory, Australia)BNS – Bill Newton SmithCEFIR – the Center of Economic and Financial ResearchCEMI- Central Economics and Mathematics Institute CEPR – Center for Economic and Policy ResearchCERGE-EI Center for Economic Research & Graduate

Education – Economics Institute, PragueCES – CEMI Econometrics SchoolCEU – Central European University (Budapest, Hungary)CI – Cultural InitiativeCIS – Commonwealth of Independent StatesCSR – Center for Strategic ResearchDECPO – Development Economics Department (World Bank)EBRD – European Bank for Reconstruction and DevelopmentECA – Europe and Central Asia ECAVP – Europe and Central Asia Vice President (World Bank)EDI – Economic Development Institute EERC – Th e Economics Education and Research Consortium EERC-Kiev – Th e Economics Education

and Research Consortium in KievEERC-CIS – Th e Economics Education

and Research Consortium in CISEERC-Moscow – Th e Economics Education

and Research Consortium in MoscowEF – Eurasia Foundation ESH – Ekonomicheskaya Shkola

EU – European UnionFSU – former Soviet UnionGDN – Global Development NetworkGET – Research Center of NES, Transforming

Government in Economies in Transition (GET)GRE – Graduate Record Examinations (English test widely used

for admission students from non- English speaking countries)HEC – “House of Economics”HESP – Higher Education Support ProgramHIID – Harvard Institute of International DevelopmentHSE – High School of Economics HU – Hebrew University of JerusalemIAB – International Advisory Board ICEF – International College of Economics

and Finance at HSE, MoscowIEA – Institute of Economic Analysis IET – Institute of Economic Transition (the Gaidar Institute)IFC – International Finance CorporationIHEP – Institute for Higher Education Policy, Washington, DCIMEMO – the Institute of the World Economy and International

Relations of the Russian Academy of Sciences, RANIMF – International Monetary Fund IRIS – Center for Institutional Reform and the Informal

Sector (IRIS) at the University of Maryland (the city of College Park in Prince George’s County, Maryland, US)

ISET – the International School of Economics in TbilisiKSE – Kiev School of EconomicsLSE – London School of EconomicsMIPT – Moscow Institute of Physics and TechnologyMISEX – (Moscow) Interbank Stock ExchangeMIT – Massachusetts Institute of TechnologyMSSES – Moscow School of Social and Economic Studies MSU – Moscow State UniversityNES – New Economic School NYU – New York UniversityOEI – Open Economy Institute OS – Open Society OSI – Th e Open Society Institute RAB – Th e Russian Advisory Board RAO-UES – RAO United Energy Systems

Abbreviations

120

Appendixes

RECEP – Russian European Centre for Economic PolicyREPEC – Research Papers in EconomicsSSRN – Social Sciences Research NetworkRESH -Russian Economic SchoolRHE – Russian House of EconomicsRS – Russian Standard (Bank) RSVP – request for a response from the invited personSAT – a standardized test for college

admissions in the United StatesSF – Soros Foundations SGF- Special Grant FacilitySITE – Stockholm Institute of Transition EconomicsSSRN – Social Science Research NetworkTAs. – Teaching assistantsBEA – Bureau for Economic AnalysisTOEFL – Test of English as a Foreign Language –

commonly used English testUBC – Th e University of British Columbia

(Vancouver, British Columbia, Canada)USAID- United States Agency for International Development WBI – World Bank Institute WDI – the William Davidson Institute at the University

of Michigan (Ann Arbor, Michigan, US)

Name Index

Aganbegyan, Abel – 38, 46, 56Aganin, Alexander

(Sasha) – 44, 47, 79Aganina, Irina – 44Aghion, Philip – 94, 113Aivazian, Sergei – 19, Alan, Gelb – 32 Alesina, Alberto – 92Alexashenko, Sergei – 38, 83, 85, Allen, Beth – 68, 113Anatolyev, Stanislav

(Stas) – 23, 66, 67 Andryakov, Alexander – 78Arbatskaya, Maria – 69, 70Arrow, Kenneth – 27Atkinson, Anthony – 21Aven, Peter – 38, 68, 83, 84, 85Bader, William – 39, 40, 87Bar-Lev, Haim – 86Beyrle, John – 86Ben-Porath, Yoram – 14, 16 32Bentlee, Marie – 35, 59Berglof, Erik – 12, 69,

99, 101, 104, 113Blanchard, Olivier – 113Blitzer, Charles – 86, 87Bogomolov, Oleg – 38Boycko, Maxim – 38, 84, 104Budjko, Oxana – 25, 41, 59, 80, 81Burns, William (Bill) – 84Carlton, Kimberly (Kim) – 41Cheetham, Russell – 32Collins, James – 86Ofer, Dalia – 6, 8, 9, 16, 30, 40,

46, 51, 56, 63, 85, 89, 93Danilov, Vladimir – 42

Davidson, Dan E. – 26, 97Davydov, Dmitry (Dima) – 79De Melo, Martha – 53Denisova, Irina (Ira) – 32, 69Deviatov, Alexander – 45, 69Dixit, Avinash – 92, 113Dmitriev, Mikhail –

38, 51, 83, 104Dower, Paul – 45Dubinin, Sergei – 84Dvorkovich, Arkady – 36,

78, 85, 94, 104, 110Dvornikova, Anna – 79Egorov, Georgy – 47Eismont, Oleg – 43, 67Enikolopov, Ruben – 47, 74Entov, Revold -19, 43Ericson, Richard – 94Fanton, Jonathan – 86Fedorov, Boris – 38, Fedorova, Ekaterina – 47Fedyukin, Igor – 110Fischer, Stanley – 94, 96, 113Friedman, Leonid – 43Friedman, Alexander

(Sasha) – 19, 29, 58, 60, 64Friedman, Alla – 33Frydman, Roman – 19, 21, 25Fuller, Vanessa – 45Gaidar, Yegor – 37, 38,

40, 84, 94, 112Gelman, Lev – 33, 74Glavatskaya, Tanya – 34Glaziev, Sergei – 38Golan, Amnon – 18, 40Gorbachev, Mikhail – 13, 14, 60

121

AppendixesName Index

Goriaev, Alexei – 69Greenwood, Naft ali – 13Griliches, Diane Asseo – 92, Griliches, Zvi – 18. 19. 22.

23. 27, 29, 32, 34, 38, 49, 50, 65, 66, 67, 92,

Guriev, Sergei – 9, 12,13, 67, 68, 69, 74, 76, 81, 91, 97, 99, 101? 103

Gurvich, Evsey – 14, 78Hale, Galina – 70Hamermesh, Daniel

(Dan) – 34, 94, 122Hanoch, Gutfreund – 14Hardin, Kathrin, (Kate) –

30, 31, 41, 42Hanoch, Gutfreund – 14Harris, Andrea – 54Hart, Sergiu – 19, 22, 32Helpman, Elhanan – 21, 32, 92Holmstrom, Bengt – 92, 112Hewett, Edward – 111Ickes, Barry – 10-132 5, 29, 34, 40,

44-50, 68, 74, 84, 93, 94, 97, 104Illarionov, Andrei – 38, 50, 95Ingram, Gregory (Greg)- 87Itskhoki, Oleg – 47Izmalkov Sergei – 45, 70, 100Kagalovsky, Konstantin -, 99, 101Kahn, Danny – 34, 59Kandel, Eugene – 110Kasabieva, Zarema – 12, 13,

25, 26, 31, 35, 42, 58,-60, 79Katyshev, Pavel – 30, 34, 68, 76Khodorkovsky, Mikhail – 100, 118Khouri, Penti – 88Kim, Moshe – 29, 41, 46, 58, 110Kolesov, Vasilii – 31Kortunov, Andrei – 102Kossenok, Grigoriy (Grisha) -69Kotkin, Stephen – 51, 59, 105-108Kovtunenko Boris – 47Kravis, Josee-Marie – 88Krupina, Valentina – 59, 60

Kuchins, Andrew (Andy) – 86Kudrin, Aleksei – 83Kulikov, Maxim – 78Kuzmin, Alexei – 101Kuzminov, Yaroslav – 56, 57Leitzel, Jim- 59 Levin, Aryeh – 14, 15, 25, 37Levin, Mark – 35Livny, Eric – 45, 52, 55,

59, 94, 97, 104Lloyd, John – 46Magnus, Jan – 23, 34, 68, 76Makarov, Dmitry – 72, 134Makarov, Valery – 11, 14-

21, 24, 31-34, 37, 38, 43, 46, 58, 60, 65, 66, 83-85, 91, 97, 100, 104, 110-112

Markevich, Andrei 74Mas-Colell, Andreu – 32, 39Maskin, Eric – 94Mau, Vladimir – 38Maynes, William

(Bill) – 54, 94, 101McAuley, Alastair – 61, 66, 73, 82, McFaul, Michael (Mike) – 86McLaughlin, Th omas – 100Medvedev, Dmitry – 78Meliantsev, Vitaliy – 43Michael, Bruno – 18, 39, 54, Mitra, Pradeep – 13, 88Moisseeva, Inna Michailovna – 35Mokyr, Joel – 93Myerson, Roger – 92, 112 Nabieva, Svetlana – 13Newton-Smith, William (Bill) –

39, 63, 90, 94, 107, 108, 113Nijenhuis, Hans – 46Nikolaeva, Zhenya – 58, 97Obama, Barack – 46Ofer, Gur – 9, 10, 11, 18,

19, 32, 42, 48, 53, 58, 65, 87, 91, 93, 95, 96

Ofer, Dalia – 13, 61, 96, 98, 111Onatski, Alexei – 70

Pakes, Ariel – 92, 94Patinkin, Devora – 29Patinkin, Don – 16, 26, 27,

29, 31, 32, 33, 34, 122Pavlova, Anna – 70Peresetsky, Anatoly – 34, 36, 67Persson, Torsten – 92Petrova, Maria (Masha) – 46, 74Phipps, Ron – 62,63, 81Piankov, Nikita – 46Pickering, Th omas – 86Pleskovic, Boris – 13, 87, 95, 113Polak, Ben – 34 Polishchuk, Leonid – 42, 59, 73Polterovich, Victor – 17-

19, 24, 32-35, 42, 48, 52, 58, 59, 65-68, 73, 77, 84

Popov, Vladimir – 24Portes, Richard – 14, 110Possazhenikov, Alexander

(Alex) – 69 Preobrazhensky, Vladimir – 104Prudnik, Sergei – 79Putin, Vladimir – 78, 95Repkine, Alexander – 69Rogoff , Kenneth (Ken) – 92Roland, Gerard – 94, 112, 113Rubinstein, Ariel – 92Ruehl, Christof- 87Sadovnichiy, Victor 18, 32 Saltykov, Boris – 31Samuelson, Larry – 113Sargent, Th omas (Tom)- 92Sargsyan, Murad – 85Sarychev, Andrei – 70Schull, Joseph – 49Scotchmer, Suzanne – 34, 94, 123Shanin, Teodor – 56-57, 100 , Shapiro, David – 121Shapiro, Judith – 59, 121 Shenhar, Aliza – 86Shmulevich, Mark – 110Shokhin, Alexander – 57

Shorrocks, Anthony (Tony) – 59 123

Shaw, Stuart – 45Slocum, John – 86Smirnova, Elena – 79, 97Solntseva, Ludmila (Luda) – 13Sonin, Konstantin 13, 58,

69, 74, 89-90, 94Soros, George – 10-14, 17-19,

21, 24, 25, 31, 32, 37, 39, 40, 45, 51-54, 56-58, 66, 76, 77, 82, 85-91, 95, 110, 111, 113

Sosunov, Kirill 67, 99, 100 Stern, Nicholas – 87Styrin, Konstantin (Kostya) – 47 Tankilevich, Evgenia (Zhenya) 13 Telegina, Evgenia – 19, 27, 29Teplukhin, Pavel – 90, 91Ter- Akopian, Karina – 28, 97Th omsen, Poul – 87 Th ornton, Grant – 101 Urinson, Yakov – 85Ustinov, Alexander (Sasha) – 36, 79Vardanian, Ruben – 32, 85Vasiliev, Sergei 38, 82–83, 85Vavilov, Andrei 38, 85Vershbow, Alexander – 86, 95 Vinogradov, Vladimir – 83Viugin, Oleg – 38, 85, 94Vorobiev, Sergei – 83 Wermuth, Jochen – 78Witztum, Amos – 22,

26, 33, 35, 41, 59Wolfensohn, James – 87, 100 Yaremenko, Yury – 13Yasin, Evgeny – 38, 57, 94, 111Yeltsin, Boris – 38, 57, 94, 111Yudaeva, Ksenia – 69, 104, 110Zakharov, Alexander – 85Zamulin, Oleg – 69, 76, 77Zhitkov, Vladimir – 19, 37Zhuravskaya, Ekaterina (Katya) –

46, 48, 69, 74, 101, 105, 113

122

Appendixes

NES visiting professors 1992–2004

Luca Anderlini, University of Cambridge, 1994/951

Ilona Babenko, Hong Kong University of Science and Technology Business School, 1998/99

Avner Bar-Ilan, University of Haifa, 1995/96

Souren Bassov, Boston University, 1998/99

Michael Baye, Pennsylvania State University, 2000/01

Michael Beenstock, Hebrew University of Jerusalem, 1999/00

Benjamin Bental, Technion – Th e Israel Institute of Technology; University of Haifa, 1997–2003

Daniel Berkowitz, University of Pittsburgh, 1993/1994

Sudipto Bhattacharya, London School of Economics, 2002/03

Eric Bond, Pennsylvania State University, 1994/95

Galina Borisova, MAE’1996, University of California Berkeley, 1999/00

William Branson, Princeton University, 1999/00

Selcuk Caner, US Treasury School, 1993/94

Dov Chernichovsky, Ben Gurion University of the Negev, 1995–1997

Francesca Cornelli, London Business School, 1993/94

1 Years of teaching at NES

Ed Coulson, Pennsylvania State University, 1994/95

Svetlana Danilkina, MIT, 1998/99

Henry Darakhovskiy, Washington Mutual Bank Seattle WA, 2009/10

James Durbin, London School of Economics, 1995/96

Zvi Eckstein, Tel-Aviv University, 1994/95

Benjamin Eden, University of Haifa, 1994/95

Michael Ellman, University of Amsterdam, 1997/98

Richard Ericson, Columbia University, 1995/96

Leonardo Felli, London School of Economics, 1993/94

John Fender, University of Birmingham, 1997/98

Chaim Fershtman, Tel Aviv University, 1995/96

Scott Freeman, University of Texas

Roger Gordon, University of Michigan, 1995/96

Nils Gottfries, Stockholm University, 1992/93

Simon Grant, Australian National University, 1993/94

Brigette Granville, Th e Royal Institute of International Aff airs; Th e Russian European Center for Economic Policy, 1996/97

Pavel Grigoriev, MAE’1997, MIT, 1999/00

Zvi Griliches, Harvard University, 1995/96

Olesya Grishchenko, Pennsylvania State University, 2009/10

123

Appendixes

Reuben Gronau, Hebrew University, 2001-2005

Bronwyn Hall, University of California Berkeley, 1993/94

Daniel Hamermesh, Michigan State University, 1992/93

Arye Hillman, Bar-Ilan University, 1994/95

Barry Ickes, Pennsylvania State University, 1993-1997

Daniel Kahn, Georgetown University, 1995/96

Eugene Kandel, Business School, Hebrew University, 1993/94

Michael Keane, University of Minnesota, 1996/97

Moshe Kim, University of Haifa, 1995/96

Stanislav Kolenikov, MAE’1998, University of North CarolinaChapel Hill, 2002/03

Charles Kolstad, University of California Santa Barbara, 1997/98

Igor Kopylov, MAE’1998, University of CaliforniaIrvine, 2001/02

Elli Kraizberg, Bar Ilan University, 1996/97

Kenneth Kuttner, Oberlin College, 1994-1997

Derek Laing, Pennsylvania State University, 1998/99

Michael Landsberger, University of Haifa, 2002/03

John Lane, London School of Economics, 1993/94

James Leitzel, NES University of Chicago, 1997/98

Nissan Liviatan, Hebrew University of Jerusalem, 1999-2001

John Logan, Australian National University, 1995/96

Jan Magnus, Tilburg University London School of Economics, 1992/93

Dimitrios Malliaropulos, London Guildhall University, 1993/94

Julian Manning, Norwegian School of Management, 1996/97

Alastair McAuley, University of Essex, 1996/97

Omer Moav, Hebrew University of Jerusalem, 2002-2005

Badri Narayan, Rail Bhawan (New Delhi), 2001/02

Gur Ofer, Hebrew University of Jerusalem, 1994/95

Alexei Onatski, Harvard University, 1999/00

Galina Ovtcharova, MAE’1995, Th e University of Chicago Th e Graduate School of Business, 2000-2005

Ann Owen, Brown University, 1993/94

Don Patinkin, Hebrew University of Jerusalem, 1992-1994

Motty Perry, Hebrew University of Jerusalem, 1993 /94

Nikita Piankov, Harvard University, 2000/01

David Pines, Tel-Aviv University, 1993/94

Rohan Pitchford, Australian National University, 1995/96

Russell Pittman, US Department of Justice, 2003-2005

Yakir Plessner, Hebrew University of Jerusalem, 1993/94

124

Appendixes

Ben Polak, Yale University, 1992/93

Leonid Polishchuk, University of Maryland, 1997-2004

Geert Ridder, Th e Free University of Amsterdam, 1995/96

Mark Roberts, Pennsylvania State University, 1994/95

Michael Rockinger, Hautes Etudes Commerciales, 1995-1997

Christof Ruehl, the World Bank Moscow Offi ce, 2002-2004

Suzanne Scotchmer, University of California Berkeley, 1992/93

Yochanan Shachmurove, University of Pennsylvania, 1996/97

Avner Shaked, University of Bonn, 1996/97

David Shapiro, Pennsylvania State University, 1997/98

Judith Shapiro, Royal Institute of International Aff airs (Chatham House) London, 2000-2003

Zalman Shiff er, Th e Bank of Israel, 1992-1994

Anthony Shorrocks, University of Essex, RECEP, 1999-2001

Avi Simhon, Hebrew University of Jerusalem, 1998/99

Th omas Sjoistrom, Pennsylvania State University, 1999/00

Michael Spagat, Brown University, 1996/97

Oren Sussman, Hebrew University of Jerusalem, 1993/94

Pavel Svad’bin, MAE’1995, PhD University of Rochester, 2001/02

Moshe Syrquin, University of Miami, 2002/03

Gabriel Talmain, State University of New York at Albany, 1993/94

Poul Th ompsen, International Monetary Fund, 2002-2004

Giovanni Urga, City University Business School, 1997-2000

Dudley Wallace, Duke University, 1994/95

Klaus Wallner, Stockholm School of Economics, 1997/98

Andrew Warner, Harvard University, 1995/96

Michelle White, University of Michigan, 1995/96

Amos Witztum, London Gildhall University, 1992-1995

Joseph Zeira, Hebrew University, 1993/94

Itzhak Zilcha, Tel-Aviv University, 1993/94, 1997/98

125

Appendixes

NES is grateful to sponsors, including anonymous contributors1

1 We sincerely apologize if we have forgotten to include anyonein this list.

Alcoa FoundationAlfa BankAltai CapitalAltera CapitalAmerican AppraisalBank of Moscow Bank of America Merrill LynchBank UralsibBarkli CorporationBarclaysBCGBoeingBPBVSPCiti FoundationDeutsche BankDynasty Foundation

of Dmitry ZiminEgor Gaidar FoundationE.ON RussiaEBRDEn+ GroupErnst & YoungEurasia FoundationEuropean Commission Exxon MobilFord FoundationFrance Club AssociationGazprom Neft Goldman SachsGroup MHPHuman Capital FoundationING Bank

Institute for Financial StudiesInstitute for Open Economy J.P.MorganJohn DeereKinross Gold CorporationKPMGMetalloinvestMetro GroupMorgan StanleyMoscow Public Science

FoundationNadezhda Brezhneva FoundationNalcoNational Bank TRUSTNational Reserve BankNational Training FoundationNestleNew Economic Education

FoundationNORDEA BankNovartisOpen Society Institute OrgresbankOxford Russia FundPBN Hill+Knowlton StrategiesPepsi Co.Pine FoundationPromSvyazBankPwCRaiff eisenbankRAO “UES of Russia” Renaissance CapitalRenova Group of Companies RUSAL

Russian Humanitarian Science Foundation

Sberbank of RussiaSeverstalSibur Skolkovo FoundationSlon.ruSovcomfl otSUALSUEK Summa GroupSUN GroupTelenorTerraLinkTh e John D. and Catherine T.

MacArthur Foundation TNKTransneft TransTeleCom(TTK)Troika DialogUBSUSAIDVerno CapitalVISAWarburg Pincus FoundationWard HowellWorld Bank

Alexander AbramovPeter Aven (Alfa Bank)Christopher BarterMaxim BoyckoKirill DmitrievAlexander DolginEdward EislerJonas Af JochnickAlexander LebedevLeonid MelamedAndrei MelnichenkoLeonid MihelsonBoris MintsAlexei MordashovAlexander MorozovPeter NecarsulmerDmitry PumpyanskiiJean RabyCharles RyanKurt SchmidJoseph SchullSusan Th urmanAndrei VavilovVictor VekselbergDavid YakobashviliPaolo Zannoni

126

Appendixes

NES is grateful to alumni donors, including anonymous contributors1

1 We sincerely apologize if we have forgotten to include anyonein this list.

Aleksandr Abolmasov, MAE'2002Aleksandr Aganin, MAE'1995Irina Aganina, MAE'1995Denis Agentov, MAE'2001Akhmed Akhmedov, MAE'2000Grigory Akshonov, MAE'2005Marina Akushskaya, MAE'2003Aleksandr Alekseev, MAE'2003Yaroslav Alekseev, MAE'1997Mikhail Alexandrovski, MAE'1996Stanislav Anatolyev, MAE'1995Nikolay Anauashvili, MAE'2007Yuriy Andrienko, MAE'1998Mikhail Andriyanov, MAE'2011Aleksandr Andryakov, MAE'1999Vadim Antonyuk, MiF'2010Maria Arbatskaya, MAE'1995Olga Arhangelskaya, MAE'1997Konstantin Arshakuni, MAE'2002Ekaterina Atanassian, MAE'1995Maksim Avdonin, MAE'2003Pavel Azgaldov, MAE'2003Oksana Azgaldova, MAE'2009Kirill Bakhtin, MAE'2009Andrey Balakirev, MAE'2003Aleksandr Barinov, MAE'2003Yakov Bart, MAE'2000Oleg Basov, MAE'1999Konstantin Bayandin, MAE'2008Ekaterina Bayan-ool, MAE'1999Dinara Bayazitova, MAE'2005Roman Bebenin, MAE'1998Yury Bednyy, MAE'2010Aleksey Belkin, MAE'2007

Anton Belkin, MAE'2007Anna Belomestnova, MAE'2002Sergey Belousov, MAE'2005Boris Belov, MAE'2002Ilya Belyaev, MAE'2005Victoria Belyakova, MAE'2008Dmitry Bianko, MAE'2006Andrey Bobyshev, MAE'2001Anton Bogdanov, MAE'2008Valentina Bogomolova, MAE'2005Oleg Bogoslavskiy, MAE'2004Rostislav Bogoslovsky, MAE'2006Gleb Boreskov, MAE'2002, MiF'2009Michael Borisov, MAE'2004Sofi a Borisova, MAE'2006Andrei Bremzen, MAE'1999Ivan Brigida, MAE'2010Ilya Bryukhanov, MAE'2005Maria Bulytcheva, MAE'2006Dmitry Burlay, MAE'2006Vitaly Busko, MAE'2008Andrei Bytchkov, MAE'2004Eugeny Byzalov, MAE'2008Georgy Chabakauri, MAE'2003Nina Chebotarieva, MAE'1994Sofi a Cheidvasser, MAE'1996Marina Chestakova, MAE'2004Ivan Chibisov, MAE'2011Egor Chistyakov, MAE'2006Elena Chistyakova, MAE'2007Ruslan Churbanov, MAE'2005Artem Churkin, MiF'2010Tatyana Damjanovic, MAE'1994Svetlana Danilkina, MAE'1995

Artem Danilov, MAE'2007Pavel Danilov, MAE'2007Oleg Darg, MAE'1995Sergey Davydenko, MAE'1999Dmitry Davydov, MAE'1995Alexey Debelov, MAE'2004Danila Deliya, MAE'2007Irina Demidova, MAE'2003Svetlana Demidova, MAE'2002Alexey Devyatov, MAE'1996Fedor Dobrica, MAE'1997Anna Dodonova, MAE'1998Sergey Dolgopolov, MAE'2002Sergey Donskoy, MAE'2002Boris Dorin, MAE'2002Olga Doronina, MAE'2011Mikhail Drugov, MAE'2001Dmitry Druzhinin, MAE'1996Dmitry Dubasov, MAE'1994Aleksandr Dubniakov, MAE'2007Dmitry Dubovskiy, MAE'2006Igor Dubovskiy, MAE'2007Artem Durnev, MAE'1996Arkadiy Dvorkovich, MAE'1994Oksana Dynnikova, MAE'1994Dzhangir Dzhangirov, MAE'2004Albina Dzhioeva, MAE'2005Anton Efremov, MAE'2010Georgiy Egorov, MAE'2003Ruben Enikolopov, MAE'2002Mark Eremenko, MAE'1996Oleg Eremin, MAE'2006Anatoliy Ereschenko, MAE'1997Dmitry Ermolin, MAE'2004Tatyana Evstigneeva, MAE'2003Aleksandra Evtifyeva, MAE'2008Pavel Fadeev, MAE'2009Mikhail Filkin, MAE'2007

Konstantin Fominykh, MAE'1994Nikolay Frolov, MAE'2009Mikhail Ganelin, MiF'2008Dmitry Garanin, MAE'2003Yuriy Garbuzov, MAE'1994Alexander Garifulin, MAE'2008Vasily Garshin, MAE'2002Alexander Gerko, MAE'2003Maria Godunova, MAE'1997Elena Goldman, MAE'2009Sergey Golovan, MAE'1999Tatyana Goltseva, MAE'1995Elena Gorbacheva, MAE'1998Maria Gorban, MAE'1994Vyacheslav Gorovoy, MAE'1997Igor Gorshunov, MAE'2004Eugeny Goryunov, MAE'2000Maksim Grishan, MAE'1999Anna Grishina, MAE'2006Anna Gulevich, MAE'2002Andrey Gureev, MAE'2008Anna Guschina, MAE'1994Dmitry Gvozdenko, MAE'2003Galina Hale, MAE'1996Marat Ibragimov, MAE'1997Sergey Ilchenko, MAE'2007Oleg Itskhoki, MAE'2004Aleksandr Ivanov, MAE'2009Lev Ivanov, MAE'1996Maksim Ivanov, MAE'1998Nadejda Ivanova, MAE'1995Sofi a Ivanova, MAE'2001Sergey Izmalkov, MAE'1997Aleksey Kalitin, MAE'1994Marina Kamenskikh, MAE'2003Ilya Kanaev, MAE'2003Natalia Kapelko, MAE'2010Mikhail Karev, MAE'2001

127

Appendixes

Vladislav Kargin, MAE'1996Ruslan Karmanny, MAE'2004Anastasia Kartasheva, MAE'1998Georgy Kartashov, MAE'2006Andrey Kartashyan, MiF'2010Nail Kashaev, MAE'2010Daria Kaygorodtseva, MAE'2006Vitaliy Kazakov, MAE'2003Grigory Khatsevich, MAE'2010Igor Khmel, MAE'2006Konstantin Khorev, MAE'2005Eugeny Khotulev, MAE'2002Sergey Khovansky, MAE'1997Natalia Klykova, MAE'2004Andrey Kobelev, MAE'2004Victor Koledenkov, MAE'1994Stanislav Kolenikov, MAE'1998Georgiy Kolpachev, MAE'2003Tatyana Komarova, MAE'2003Igor Kondrashin, MAE'1995Aleksey Kononenko, MAE'2004Denis Kontsevoy, MAE'2010Igor Kopylov, MAE'1998Sergey Kopylov, MAE'2004Sergey Korepanov, MAE'2003Anna Kormilitsina, MAE'2003Tatyana Korobeinikova, MAE'1997Vasily Korovkin, MAE'2012Leonid Koryukin, MAE'1994Grigory Kosenok, MAE'1995Andrey Koshelev, MAE'2009Yuliya Kossykh, MAE'1995Elena Kostyukova, MAE'1994Olga Kostyurina, MAE'2006Olga Kotsur, MAE'2009Sergey Koulayev, MAE'2003Alesya Kovaleva, MAE'2010Anna Kovaleva, MAE'2008Sergey Kovbasyuk, MAE'2006Iana Kovrigina, MAE'2006Andrei Kozlakov, MAE'2008Konstantin Kozlov, MAE'1999Ekaterina Krasnenko, MAE'2007

Eugeny Kruglov, MAE'2002Natalia Kryzhanovskaya, MAE'2009Aleksandra Ksenofontova, MAE'2000Konstantin Kucheryavyy, MAE'2009Viktor Kudinov, MAE'2004Ekaterina Kudyukina, MAE'2010Maksim Kulikov, MAE'1994Aleksandr Kurshev, MAE'2003Alexey Kushnir, MAE'2006Aleksandr Kuznetsov, MAE'2002Artem Kuznetsov, MAE'1998Vyacheslav Kvasnevskiy, MAE'1997Dmitry Kvasov, MAE'1999Aleksandr Labutin, MAE'1997Diana Lachinova, MAE'2008Edgar Lakalin, MAE'1996Oleg Larichev, MAE'1995John Lazarev, MAE'2006Georgiy Legotin, MAE'2003Ivan Levashov, MAE'1998Ilia Lipkes, MAE'2008Andrey Liscovich, MAE'2007Dmitry Lisitsyn, MAE'2006Julia Litvinova, MAE'1999Boris Livshits, MAE'2004Alexey Lobko, MAE'2012Uliana Loginova, MAE'2007Elena Lukoyanova, MAE'1998Oleg Maitak, MAE'2003Dmitry Makarov, MAE'2002Alexey Makrushin, MAE'2000Iya Malakhova, MAE'2006Andrey Malenko, MAE'2006Nadya Malenko, MAE'2006Irina Malkova, MAE'2008Andrey Malokostov, MAE'2010Dmitry Malykhin, MAE'1998Victoria Mamaeva, MiF'2011Dmitry Maniakov, MAE'2004Dmitry Maroushkevitch, MAE'2006Olga Martynova, MAE'2006Kirill Masalov, MAE'2012Aleksandr Matros, MAE'1997

Andrey Mazo, MAE'1997Aleksey Medvedev, MAE'1996Araz Mekhtiev, MAE'1995Nataliya Melenteva, MAE'2000Kirill Melkumyants, MAE'2008Konstantin Melnik, MAE'1997Maria Melnik, MAE'1997Tatiana Mikhailova, MAE'1997Anna Mikousheva, MAE'2002Ivan Mirgorodskiy, MAE'2008Ivan Mironets, MAE'2009Maxim Mironov, MAE'2003Yana Mischenko, MAE'2002Evgeniya Mogilevskaya, MAE'2007Alexey Moiseev, MAE'1999Julia Moore, MAE'1999Alexander Morozov FriendSergey Morozov, MAE'2000Alexey Moskvichev, MAE'2004Ilya Muratov, MAE'2009Dmitry Muravyev, MAE'2006Daniil Musatov, MAE'2008Vitaliy Natarov, MAE'1996Daria Nehoroshih, MAE'2003Natalia Nelyubina, MAE'2009Vladislav Nigmatullin, MAE'2004Anton Nikitin, MAE'2008Yuliya Nikulicheva, MAE'1995Svetlana Novik, MAE'2002Artem Novikov, MAE'1998Dmitry Novikov, MAE'1998Oleg Obrezkov, MAE'2004Sergey Oglouzdine, MAE'1998Aleksey Onatskiy, MAE'1996Oleg Ordin, MAE'1998Eugeny Orlov, MAE'2000Galina Ovcharova, MAE'1995Elena Paltseva, MAE'1998Taisiya Paltseva, MAE'2008Pavel Panasov, MiF'2011Mikhail Panfi lov, MAE'2008Elena Panova, MAE'1998Yulia Paramonova, MAE'2009

Nina Parfi nenko, MAE'1998Alexander Pavlov, MAE'2008Anna Pavlova, MAE'1995Yaroslav Peredriy, MAE'1996Snejana Peretyagina, MAE'2000Konstantin Petrov, MAE'2006Maria Petrova, MAE'2004Maria Petukhova, MAE'1994Nikita Piankov, MAE'1997Elena Pikulina, MAE'2009Aleksandr Piskunov, MAE'1998Dmitry Podkopaev, MAE'1994Oleg Pogorelov, MAE'2000Gleb Pokatovich, MAE'2003Semen Polbennikov, MAE'2001Sergey Popov, MAE'2005Olga Popova, MAE'2007Aleksandr Possazhennikov, MAE'1995Konstantin Pravednikov, MAE'2006Maksim Predtechenskiy, MAE'2007Valentin Preobrazhenskiy, MAE'2010Petr Prikhodko, MAE'2003Ilya Prilepskiy, MAE'2009Evgenia Prosteva, MAE'2003Sergey Prudnik, MAE'1995Andrey Prudnikov, MAE'2004Nataliya Puzyrnikova, MiF'2009Bella Rabinovich, MAE'2006Andrei Rachinsky, MAE'2001Andrei Rachkov, MAE'2006Alexander Radaev, MAE'2006Sofi a Ragulina, MAE'1999Aleksey Rezvov, MAE'2003Mikhail Rodionov, MAE'2001Nikita Roketskiy, MAE'2006Elena Romanova, MAE'1996Vitaliy Roud, MAE'2008Oleg Rubanov, MAE'2009Daria Rudneva, MAE'2008Sergey Rumyantsev, MAE'2002Elena Rusanova, MAE'2003Oleg Rytchkov, MAE'2002Mikhail Safronov, MAE'2009

128

Appendixes

Petr Sak, MAE'2002Aleksey Samoukov, MAE'1994Bulat Sanditov, MAE'1999Fedor Sapronov, MAE'2001Elena Saraeva, MAE'2009Andrei Sarychev, MAE'1995Alexey Savvateev, MAE'1997Vadim Sayafarov, MAE'2010Aleksey Sazanov, MAE'2009Oleg Schetinin, MAE'2003Alexander Semenov, MAE'2004Vitaly Sergeychuk, MAE'2006Alexandra Serova, MAE'2010Dmitry Shakin, MAE'2003Artem Shamgunov, MAE'2007Kristina Shampanier, MAE'2002Diana Shamsutdinova, MAE'2005Dmitry Shapiro, MAE'2001Dmitry Shaposhnik, MAE'1999Elena Sharipova, MAE'1994Nikolay Shevyrev, MAE'2008Kristina Shimko, MAE'1997Ilya Shirokov, MAE'2004Olga Shirokova, MAE'2004Alexey Shishkin, MAE'2005Roman Shkoller, MAE'2008Alexander Shulzhenko, MAE'2006Andrei Shumilov, MAE'2000Sergey Sidelnikov, MAE'2009Maria Simatova, MAE'2002Valery Sinyaev, MiF'2010Sergey Skopintsev, MAE'2009Rodion Skovoroda, MAE'1999Irina Slinko, MAE'1999Vladimir Smirnov, MAE'1998Aleksandra Smirnova, MAE'2002Aleksandr Smoliak, MAE'1994Anna Sokolova, MAE'1997Ludmila Solntseva, MAE'1998Kseniya Solodnikova, MAE'2003Stanislav Song, MAE'1994Konstantin Sonin, MAE'1998Kirill Sosunov, MAE'1996

Dmitry Sotnikov, MAE'2002Dmitry Spryskov, MAE'2000Vasily Starostenko, MAE'2004Mikhail Staroverov, MAE'2005Anton Startsev, MAE'2004Svetlana Stepaniants, MAE'1997Sergey Stepanov, MAE'2000Viktoriya Stepanova, MAE'2007Pavel Stetsenko, MAE'2005Ilya Strebulaev, MAE'1999Elena Suslova, MAE'2006Fedor Susov, MAE'2008Anton Suvorov, MAE'1999Pavel Svadbin, MAE'1995Robert Tchaidze, MAE'1996Anton Tcheremukhin, MAE'2005Yuliya Timonina, MAE'1997Irina Titell, MAE'1994Alexander Tonis, MAE'1998Natalia Tourdyeva, MAE'1995Pavel Trisch, MAE'1999Aleksei Trubach, MAE'1996Aleksandr Tsependa, MAE'2007Anton Tsoy, MAE'2009Alexey Tsukanov, MAE'2009Natalia Tsybouleva, MAE'1998Natalia Tsyganova, MAE'1994Gauhar Turmukhambetova, MAE'1998Konstantin Tyurin, MAE'1994Linda Undalova, MiF'2009Artem Uskov, MiF'2008Andrey Uspenskiy, MAE'1994Aleksandr Ustinov, MAE'1994Tatiana Vashchilko, MAE'2000Andrew Vashevnik, MAE'2004Anna Vasileva, MAE'2002Eugeny Vasin, MAE'2005Andrey Vasnev, MAE'2001Pavel Vazhnin, MAE'2009Aleksey Verbeckiy, MAE'1996Olga Vilenskaya, MAE'2009Natalya Volchkova, MAE'1998Aleksandr Volgin, MAE'2007

Yaroslav Volkov, MAE'2006Andrey Voltornist, MAE'2005Ilya Vorobiev, MAE'2005Maksim Vorobiev, MAE'2006Anton Voronin, MAE'2008Viktoriya Voronina, MAE'1994Olga Voytkova, MAE'1999Andrey Vykhristiouk, MAE'2003Irina Yakadina, MAE'1994Nadejda Yakovleva, MAE'1999Oleg Yakubov, MiF'2008Olga Yasko, MAE'2004Natalia Yeremeyeva, MAE'2004Kseniya Yudaeva, MAE'1994Sergey Yudakov, MAE'2000Eugeny Yuzefovich, MAE'1996Alexey Zabotkin, MAE'2005

Marat Zaidullin, MAE'2005Sergey Zaitsev, MAE'1995Alexey Zakharov, MAE'1999Yaroslav Zakolyukin, MAE'2009Sergey Zemelkin, MAE'2006Oleg Zenkov, MAE'2002Evgenia Zhabitskaja, MAE'2003Ilya Zharov, MiF'2011Roman Zhdanov, MAE'2008Nikita Zhelezny, MAE'2006Dmitry Zhidko, MAE'1997Aleksey Zhiltsov, MAE'1997Ekaterina Zhuravskaya, MAE'1994Roman Zilberman, MAE'2005Nikolay Zouikov, MAE'2003Mikhail Zrelov, MAE'1998Dmitry Zubatyuk, MAE'2003

Picture Gallery2005–2012

First graduating class of the Masters in Finance Program, 2008

Open House of the Masters in Finance Program (MiF), 2010. From left to right: Sergey Sanzhar, PhD LBS, UNC Kenan-Flagler Business School; Oleg Yakubov (MiF’2008); Andrey Amelin (MiF’2009)

Alexei Goriaev, Director of the Masters in Finance Program, Ph.D. in Finance, Tilburg University

Colleagues from Stockholm Institute of Transition Economics (SITE) visiting NES fi nance department. From left to right: Eva Andersson, Chief accountant, SITE; Julia Kushnarenko, Chief Accountant, NES, Oxana Budjko, CFO, NES; Gun Malmquist, Offi ce manager, SITE. 2010

NES tenured faculty

Stanislav Anatolyev (MAE’1995),Access Industries Professor of Economics,Director of the Master of Artsin Economics Program,PhD, University of Wisconsin-Madison

Valery MakarovNES President, Bank of Moscow,Professor of Economics, Academician RAS

Sergei GurievRector, Professor of Economics

Grigory Kosenok (MAE’1995)RENOVA Foundation Professor of Economics, PhD, University of Wisconsin-Madison

Konstantin Sonin (MAE’1998),Professor of Economics and Vice Rector at NES, PhD (kandidat) in Mathematics, Moscow State University

Ekaterina Zhuravskaya (MAE’1994), Professor of Economics, NES and PSE,PhD, Harvard University

Victor Polterovich,Professor Emeritus, Academician RAS

Vladimir Popov,Professor Emeritus, Doctor of Science

Eft hymios Athanasiou,Assistant Professor,PhD, Center for Operations Research and Econometrics

NES Emeritus faculty Tenure-track faculty

Estell Dauchy,Assistant Professor, PhD,Economics, University of Michigan

Irina Denisova,Assistant Professor, NES and CEFIR, PhD, University of Manchester

Paul Dower,Kinross Assistant Professor of Development Economics, PhD, New York University

Tenure-track faculty

Ruben Enikolopov (MAE’2002),Nordea Assistant Professor of Finance, PhD, Harvard University

Ozgur Evren,Assistant Professor, PhD, New York University

Sergei Izmalkov (MAE’1997),BP Assistant Professor of Economics, PhD, Pennsylvania State University

Patrick Kelly,Edward Eisler Assistant Professor of Finance,PhD, W.P. Carey School of Business at Arizona State University

Igor Kheifets (MAE’ 2004),Assistant Professor, PhD, University Carlos III of Madrid

Stanislav Khrapov,Assistant Professor, PhD, UNC at Chapel Hill


Olga Kuzmina,Promsvyazbank Assistant Professor of Finance,PhD, Columbia University, Graduate School of Business

Dmitry Makarov (MAE’2000),Christopher Barter Assistant professor of Finance, PhD, LBS

Andrei Markevich,Assistant Professor of Economic History,PhD in History, Post-doc in Economics, University of Warwick

Tatiana Mikhailova (MAE’1997),Assistant Professor, PhD,Pennsylvania State University

Luke Miner,Assistant Professor, PhD,London School of Economics

Maria Petrova (MAE’2004),UBS Assistant Professor of Economics, PhD, Harvard University


Alexei Savvateev (MAE’1997),ALCOA Foundation Assistant Professorof Economics, PhD, CEMI, post doc, CORE, Catholic University of Louvain

Oleg Shibanov,Assistant Professor, PhD in Finance, London Business School

Sergey Stepanov (MAE’2000),Human Capital Foundation Assistant Professor of Corporate Finance, NES and CEFIR, PhD, ECARES, Universite Libre de Bruxelles

Konstantin Styrin (MAE’2001),Renaissance Capital Assistant Professor of Macroeconomics, PhD, Harvard University

Natalia Volchkova (MAE’1998),Exxon Mobil Assistant Professorof Energy Economics, NES and CEFIR, PhD CEMI, post-doc MIT

Evgeny Yakovlev,Assistant Professor, PhD in Economics, University of California, Berkeley

Weekly public seminars at NES. Among special guests were:

Peter Mandelson, Lord, President of the UK Council 2009-10

Alexander Privalov, Science Editorof “Expert” magazine

Sergey Vorobyov, Chairman, Board of Directors, Ward Howell

Jeff rey Costello, Chief Executive Offi cer of Russia Operations and Managing Director of Russian Operations, JPMorgan Chase and Co.

Patricia Cloherty, Chairman and CEO of Delta Private Equity Partners

Nikolay Kovarsky, Expert Council Member, Government Commission for Increasing Development Stability in Russian Economy

Lloyd Blankfein, CEO, Goldman Sachs

Alexey Venediktov, Journalist, Editor-in-Chief and Partner, the Echo of Moscow radio station; President, the Echo TV Russia

President Barak Obama awarding Oxana Sytnova (MAE'2009) the Don Patinkin Award for the Highest Academic Achievement, 2009

Graduating Class 2009 of Th e Master of Arts in Economics Program, 2009

Morgan Stanley Distinguished Lectures in Finance: launched in 2007 an annual series at NES. These lectures are given by leading finance professors for the Russian business community and are open to general public

Th e fi rst lecture was taught by Professor Kenneth A. Froot of Harvard Business School "Th e Intermediation of Financial Risks: Lessons from the Catastrophe Reinsurance Market" on June 15, 2007.

Th e second lecture titled "Th e New Financial Order and Th e Current Financial Crisis" was delivered by Professor Robert J. Shiller, Yale University, the author of bestsellers Irrational Exuberance and New Financial Order. Th e lecture was held at the Moscow Interbank Currency Exchange (MICEX) on March 14, 2008

In 2009 Raghuram G. Rajan, Eric J., Gleacher Distinguished Service Professor of Finance, Th e University of Chicago Booth School of Business gave the third Morgan Stanley lecture: "Th e Credit Crisis: Causes and Consequences" on February 5, 2009

Th e fourth lecture was given by Robert Engle, the 2003 Nobel Prize Winner in Economics, Professor of Finance, Th e New York University Leonard N. Stern School of Business, titled "Th e Global Financial Stability and Long Run Risks" on September 3, 2009

Th e fi ft h lecture titled "Discount Rates" was given by John H. Cochrane, Professor of Finance at the University of Chicago Booth School of Business, President of the American Finance Association and the author of bestselling textbook Asset Pricing on April 13, 2011

Th e sixth lecture titled "Mortgage Market Design" was given by John Campbell, Professor of Economics and Chair of the Department of Economics at Harvard University on June 18, 2012

It would be diffi cult to imagine NES without Barry Ickes with his signature pipe

Eric Maskin, Nobel Prize Winner in Economics 2007, honorary lecturer at the NES annual Zvi Griliches Memorial Lectures, 2010

Endowment Campaign at the Chess House. From left to right: Zarema Kasabieva, Arkady Dvorkovich, Sergei Guriev, 2011

Reversing Brain drain: from Russia to Harvard and back!

Ruben Enikolopov (MAE’2002), Nordea Assistant Professor of Finance, PhD, Harvard University

Maria Petrova (MAE’2004),UBS Assistant Professor of Economics, PhD, Harvard University

Konstantin Styrin (MAE’2001), Renaissance Capital Assistant Professor of Macroeconomics, PhD, Harvard University

Faces of NES

Sergei Golovan (MAE’1999), Lecturer, Soft ware Developer. Th e best Teaching asssitant of NES for many generations of NES students

Yulia Gurskaya, Accountant who has been responsible for salary payments since 1993

Ivan Ivanyuk, Maintenance Engineer. No event is complete without him

Zarema Kasabieva, Vice-Rector for Academic, Student and Alumni Aff airs: the soul of NES

Olga Kulagina, Admission Secretary, Preparatory Courses Coordinator Registrar. NES applicants undoubtedly feel the spirit of NES aft er her warm welcome

Julia Kushnarenko, Chief Accountant

Faces of NES

Ekaterina Maksimova, Executive Director, Bachelor of Arts in Economics

Yulia Mushenko, Offi ce-manager. Can simultaneously manage 7 diff erent tasks!

Svetlana Volkova, Director of the Career Center. Can fi nd the perfect job for any graduate!

Gulnara Okhramenko and Ludmila Solntseva (MAE'1998) presenting NES programs at a Career Fair at Lomonosov Moscow State University, 2009

Second annual basketball tournament — NES Basketball Challenge 2011. Th e fi rst basketball tournament was organized by the initiative of Arkady Dvorkovich in February 2010

Th e First Charity Run — New Economic Start, September 2009. Azamat Ziyatdinov (MiF'2010) and Georgy Kartashov (MAE'2006): creators and organizers of the fi rst New Economic Start

NES fl ag 4400 m above sea level with a view on Lenin’s peak. Dmitry Dubovskiy (MAE’2006) and his friend, 2012

Case competition from Strategy Partners at NES, 2011

Case competition from Boston Consulting Group at NES, 2012

Professor Sergei Izmalkov (MAE’1997) gives lecture “Mechanism design” at the Polytechnic Museum, March 23, 2011. Th e series of NES Public Lectures at the Polytechnic Museum started in 2010

From left to right: Oleg Zamulin, fi rst Director of the Master of Arts in Economics Program; Oleg Eismont, Senior Lecture; Victor Polterovich, Academician RAS, 2006

Stanley Fishert, Governor , the Bank of Israel awarding Stanislav MazurenkotheDon Patinkin Award for the Highest Academic Achievement, 2011

Olga Aksakalova, Director, Writing and Communication Center. Literature class for bachelor’s students, 2011.Students of the Joint HSE/NES Bachelor of Arts in Economics Program, October 2012

Students of the Joint HSE/ NES Bachelor of Arts in Economics Program. October 2012.Th e program was launched in September 2011, marking an important milestone in NES’ history

NES choir, 18th Commencement Ceremony. Th e NES choir was formed in February 2011. Tatiana Konina, Choir Conductor, post-graduate of the Moscow Conservatory

First-year students of the Joint HSE/NES Bachelor of Arts in Economics Program:Valentin Udaltsov, Katya Zaitseva, Nikita Kiktenko. Commencement Ceremony, July 2012

Daria Vertkina, Program Coordinator, Bachelor of Arts in Economics Program and Olga Suchkova, Event and Travel Director at the Welcome Party, 2012

Th e NES community has been visiting the Obidimo Orphanage in the Province of Tula since 2006, organizing projects focusing on helping the children to develop emotionally, socially and educationally, 2012

Biannual Blood Drive at NES. Larisa Kryuchkova, Head Librarian at NES, June 2011.

Arkady Dvorkovich (MAE'1994), President of the NES Alumni and Friends Association, at a meeting with NES students and graduates, 2011

Team building: rope course for MAE students, October 2011

Girls at NES are always treated like princesses. Orientational session, 2010

Galina Benevolenskaya, Executive Director, Master of Arts in Economics Program. Receiving Th e Outstanding Employee Award, 2011

Th e NES Student and Alumni Aff airs team: from left to right: Kristina Kuralenya, Zarema Kasabieva, Svetlana Nabieva, Irina Kruglova at Commencement ceremony, July 2012

Andrei Bremzen (MAE'1999), Assistant Professor, PhD in Economics, MIT, receiving the Excellence in Teaching Award, 2012

Erik Berglof, Chief Economist, European Bank for Reconstruction and Development; Coordinator, International Advisory Board, NES, 2012

Arkady Dvorkovich, Deputy Prime-Minister of the Russian Federation and the President of NES Alumni Association presents a photo made by himself with iPhone given to Arkady by Steve Jobs. Th is remarkable auction item brought $51,000 to NES 20th Anniversary Scholarship fund at the charity auction. October 15, 2012

Documents

The Miracle of NES: The Foundations of Modern Economics in Russia