UNIVERSITY OF CALIFORNIA, BERKELEY The Econ Exchange · UNIVERSITY OF CALIFORNIA, BERKELEY The Econ Exchange NEWS AND NOTES FROM THE DEPARTMENT OF ECONOMICS VOLUME NINE, NUMBER ONE

UNIVERSITY OF CALIFORNIA, BERKELEY

The Econ ExchangeNEWS AND NOTES FROM THE DEPARTMENT OF ECONOMICS

VOLUME NINE, NUMBER ONE SPRING 2006

Berkeley economist proposes Choose-Your-Charitypolicy: A change in regulations governing charitable giving couldyield enough money to pay for a wealth of social programs

By Kathleen Maclay, Public Affairs12 January 2006

At year’s end, charity officials in the United Stateswere forecasting that 2005 would wind up a banneryear for giving. But a Berkeley professor says thatcould be just the beginning of a major cash flow ofcharitable donations.

In a recent issue of the journal The Economists’ Voice,Aaron Edlin, a professor with dual appointments ineconomics and law, proposes shifting the regulationsfor charitable giving to allowindividuals to target donationsas part of an “ultimatematching grant” program that,he says, would amass a treasurechest for charities.

A former senior economist withthe President’s Council ofEconomic Advisers, Edlinsuggests instituting a tax creditof $1 for each dollar one spendsin charitable giving, with limitson what percentage of incomecan be donated.

If everyone contributed at a limitof 10 percent, Edlin estimates,annual charitable revenues of anextra $400 billion could berealized, which could lay thefoundation for unprecedentedprogress on numerous fronts. “There would be nohomelessness in America. Job retraining would beavailable for all,” he writes in the journal. “And that’sonly on the domestic side,” he continues. “If half thischarity went abroad, U.S. foreign aid would increaseby a factor of 15. Instead of fast becoming one of the

most hated nations in the world, the U.S. couldquickly become the most loved.”

Under a more modest scale where the Choose-Your-Charity contribution limit would be set at 1 percentof a taxpayer’s income, Edlin says the nation’scharitable giving would escalate by $40 billion ayear.

He acknowledges that a common complaint ofthose who don’t give as much as they can afford isthat their donation seems all but irrelevant becauseof the staggering challenges that charities face.

“The problem with good causesis that the very thing that makesa charity a good cause is theenormity of the problem it isfighting,” he writes. “Yetbecause the problem is so vast,my gift is a drop in the bucket.The problem will still be therewhen I am done giving. Theproblem will be there if I do notgive.”

The Choose-Your-Charity planwould create a reasonableexpectation that others wouldalso give, magnifying the impactof each individual donation,Edlin says. Matchingcontributions with more than100 million U.S. taxpayers, hewrites, would result in “the

ultimate expansion of the proven ‘matching’ tacticthat has already helped increase donations tocharities.”

Current tax-deduction rules for eligible charitieswould have to be amended, says Edlin, and

See CHARITY, page 11

In 2004, Americans made nearly $250 billion incharitable donations; 2005 donations could exceedthat amount, with cleanup and rebuilding costs inthe wake of Hurricane Katrina (New Orleans, above)and other U.S. natural disasters. (Source: GivingUSAFoundation)

2 THE ECON EXCHANGE, SPRING 2006

~

A N

ote

from

Cha

ir B

enja

min

E. H

erm

alin

~Greetings!

It is hard to believethat my first yearas Chair is over. Itwas quite alearningexperience. Theyear saw manypositives for theEconomicsDepartment, as well

as a few negatives. Overall, though, Iam happy to report that the state ofthe Department is good.

There were a few changes in personnelthis year. We had a number of staffleave. I was especially sorry to seeCasey Gardner, who had been serving asthe Department’s MSO, leave to pursuea degree in art. While Casey’sdeparture was a big loss, we werefortunate that Rebecca Chavez, whohas been heading the Department’sstudent affairs office, was willing tostep in, first on an acting basis, andthen, with some cajoling, to accept theposition permanently. Rebecca hasbeen doing a terrific job and we areindeed lucky to have her.

On the faculty side, I regret to announcethat Guido Imbens has decided to leaveBerkeley for a position at Harvard. Guidois a gifted econometrician and hisdeparture is a major loss for us.Fortunately, Guido’s is the only retentionbattle we have lost recently (and we havefought and continue to fight many), so onthe whole we remain able to keep our starfaculty.

I would love to be able to contrast Guido’sdeparture with news of new hires, butrecruitment this year has not yet met withany success. We were in a number ofpitched battles with the likes of Chicago,MIT, Princeton, and Stanford, but wereunable to prevail. We still have two offersoutstanding, however, and I remaincautiously optimistic about beingsuccessful with both.

This was a great year for us with respectto recruiting Ph.D. students. Our incomingclass is one of our best ever. We were verycompetitive and won a number ofsignificant battles with our prestigious—and much wealthier—peer institutions. Abig thank you is owed Ken Chay, whoheaded our admissions efforts this year.

Another positive was that several of ourfaculty were honored for their outstanding

scholarship: Dan McFadden was given membership inthe American Philosophical Society this year, GeorgeAkerlof was awarded the 2006 Kiel Institute GlobalEconomy Prize, and David Romer was elected afellow of the American Academy of Arts andSciences. David’s election brings to 10 the numberof our faculty who have been so honored. (Seestories pages 6 &12.)

Other than the unseasonably late rain, this May’scommencement was a wonderful occasion. We weredelighted that Robert Hall (B.A. ’64) was able to be

our commencement speaker.Bob gave a great speech aboutsome of the economicchallenges that we can expectto face in the future.

Returning to facultyrecruitment and retention, thisacademic year saw yet furtherescalation in the salary andother benefits that ourcompetitors are throwing atour faculty and at the people we seek to recruit.While it is wonderful that the students of Berkeleyare taught by precisely the faculty that theHarvards, Princetons, and Stanfords of this worldwant to have as their own—and at a much lowertuition than were they at those institutions—thetruth is that such excellence does not come cheaply.While the University of California remains committedto a world-class economics department, the cost ofthis excellence has outstripped what the state isproviding. Private giving remains essential if we areto stay one of the very best economics departmentsin the world. Hence, a big big thank you to all ofyou who have given generously to us in the pastyear and a big big plea to continue that generositygoing forward.

As always, I welcome your feedback and I lookforward to hearing from you. Feel free to shoot mean email at [email protected].

3THE ECON EXCHANGE, SPRING 2006

TheDepartmentof Economics

gratefullyacknowledgesthe alumni,friends, and

organizations who have

madepledges anddonations to

theEconomics

Annual Fund,CentennialFund, Grace

KatagiriMemorialFund, and

otherinitiatives,

fromDecember

2005through May

2006.

Alumni UpdatesAlumni UpdatesAlumni UpdatesAlumni UpdatesAlumni Updates Michael’s work at the UN thus far has taken him further inthe direction of policy and politics. In the Secretary-General’s Office, Michael has recently been most involved inhelping to structure the UN’s counter-terrorism strategy. Hehas also played roles in the current mandate review processat the UN - which aims to align the Organization’s programswith the priorities of the current world - as well as in therecent establishment of the UN Democracy Fund.

Michael Brunetti (PhD ’03), whose advisor was AlanAuerbach, is the recipient of the Richard Musgrave Prize forthe most outstanding article in the National Tax Journalduring 2005. His paper, “The Estate Tax and CharitableBequests: Elasticity Estimates Using Probate Records”appeared in the June 2005 issue. With this award, theNational Tax Association recognizes both RichardMusgrave’s contributions to the theory and practice ofpublic finance and honors authors of outstanding newcontributions to the field.

Michael H. Jones (BA ’05) is currently working at theUnited Nations in the Secretary-General’s Office, as theAdvisor to the Assistant Secretary-General for PolicyPlanning. Michael originally began working at the UNlast August, sponsored by a fellowship through UCBerkeley and Stanford University. Michael studiedeconomics at UC Berkeley, with a focus on developmenteconomics, but has always been most interested in thepolitical aspects and implications involved.

On a sad note: Ayman Taha, (BA ’97) and aSpecial Forces servicemember, was killed in Iraqon December 30, 2005. According to newsreports, Taha was working with munitions fordemolition when they unexpectedly exploded.Taha was born in Sudan, into an accomplishedMuslim family that later settled in northernVirginia. He left the University ofMassachusetts in 2002 to enlist — only a fewmonths shy of getting his doctorate in

economics — telling family he wanted a break fromstudying and to fulfill what he saw as his patriotic duty. Hehoped someday to work toward improving economicconditions in Africa.

Centennial Fund:

Platinum Circle ($10,000+)

John E. Lee ‘67

Gold Circle ($1,000-9,999)

Marc ’74 and Barbara ‘77Desoer

William Dudley ’80 andAnn Darby

Goldman Sachs & Company

Silver Circle ($1-999)

Marcus Berliant ’81 andClara Asnes

Kevin Gold ‘97Louis ’70 and Barbara

GoldmanAmy Traum ‘87

Annual Fund:

Benefactors’ Circle($10,000+)

Steven Sidener ‘82 and Susan Leong

Centennial Circle($1,000-9,999)

Neil ’77 and Janis BerkmanRichard and Sandra Gilbert

Michael ’55 andShirley ’57 Traynor

Friends of Economics ($1-999)

Priyanka Anand ‘02James Noble ‘75

Letitia Casebeer ‘81Katherine Czuckas ‘91

Daniele Facchini ’84 andSuzanne PalmerSteven Go ‘91

Alfred Gonzales ‘64Robert ‘50 and Virginia ‘49 HomanEdward ’50 and Juliet Johannessen

Raj Kohli ‘86Marsh & McLennan Companies

June Neuhaus ‘48Douglas ’64 and Elke Paul

James ’82 and Joyce ’78 PeoplesRound Table Group, Inc.Kneave and Linda Riggall

Steven ’78 and Deborah RochaPaul Sack ‘76

Marcus ’91 and Jamie ShenClark ’75 and Marsha Silcox

Ramteen Sioshansi ‘01Aram ’80 and Nancy Sogomonian

Eldon ’71 and Ann SpencerCraig Sundstrom ‘85

Lloyd and Lassie UlmanRobert Whittemore ‘49

Yahoo, Inc.

Grace KatagiriMemorial Fund:

Robert BardeGordon and Mariko Ching

David and Antoinette Faris ‘63Iris and Christine Fukui

Milton and Colleen GockleyDavid and Diana Goo

Robert and Marjorie GrunewaldHisako SanoLily Hatanaka

Tatsumi and Kathryn HiramotoGrant Itokazu ‘83

Setsuo and Eleanor IzutsuTsugie and Lucille Kadota

Wataru and Setsuko Kaneshina

Beatrice KennellRuth KobayashiLillian Maeda

Louise MaeharaMary Maehara

Albert and Edith MatsumotoDorothy MitchellFrank Morimoto

Robert Moulenbelt andKathleen Shizuru

George and Yvonne MukaiDavid and Janis Mysona

Jon NakamuraPaul and Ethel NakamuraRobert and Yukiko Nakano

Lloyd and Violet NakaoMakoto and Kumiko OhtaJohn and Patricia OrdwayJerry and Eleanor Osumi

Glenn and Aileen PruiksmaClifford ’60 and

Constance RogersMiles and Florence Shishido

Angel SakamotoJ.R. and Olgha SandmanSamuel and Yoshie ShiraiMinoru and Patsy Sugita

Rikio and Jane TanjiJames and Jean Tominaga

Mary Tomita ‘49Shigeru Tsubota

Himeo Tsumori andLouise Lue

Herbert White and JessHernandez-WhitePundy Yokouchi

Theodore and Clara YamateSeichi Yatsushiro

Doris Yim

(Many donations to theKatagiri Fund were made inmemory of Reverend Mineo

Katagiri)


EconEchoes...a column of recollections ofEconomics at Cal

“Econ Echoes” (a title coined

by alum Dr. Richard E. Jay, PhD ’53)

is a new column in The Econ

Exchange. Alumni (of any vintage),

friends, faculty, and students are

invited to write original essays

which recall special occasions or

people in the Department of

Economics—Commencement, a

favorite faculty member or course or

fellow student, or an event—for

publication under their own byline

in the semi-annual Econ Exchange.

Please send your entries no

later than October 1 (for Fall issue)

or April 1 (for Spring issue) to the

Editor, The Econ Exchange,

Department of Economics, 549

Evans Hall, #3880, University of

California, Berkeley, CA 94720-3880

or email [email protected].

edu. Essays should not exceed 500

words and selection is at the

discretion of the Editor. Please

remember to include your name,

degree, and degree year with your

submission, if you are an alum.

Dear Editor:

I am responding to the opportunity you mentioned in the Fall 2005 issue of TheEcon Exchange: to write a recollection about Economics at Cal. My effort here isreally a micro-essay, in the sense that I am only reflecting on a relationship witha professor that was memorialized by an event.

In 1963, I was finishing up my BA in econ at Cal and among the many econcourses I took was one in Industrial Organization. The professor was LeePreston. [Editor’s Note: Preston was Associate Professor of BusinessAdministration at Cal, and in 1963 taught a cross-listed I.O. course inEconomics.] He was somewhat of a rising star, I believe, having just returnedfrom a tour of duty on the Council of Economic Advisors, or some similar body.[Editor’s Note: Preston served as a Staff Economist on the Council on EconomicsAdvisors, 1961-62.] His specialty, of course, was microeconomics, antitrustpolicy, and similar areas of knowledge. He may have been associated with JoeBain who at that time was a famous price theory professor at Cal.

Professor Preston would stride into class with the Wall Street Journal stickingout of his briefcase. He would open the newspaper to a likely story and engagethe class in a discussion of the latest issues in corporate America: oligopoly,monopoly, etc. At that time the study of the aerospace industry was in itsascendancy and Professor Preston hired me, even though I was an undergrad, tohelp him put together a library of materials on the aerospace industry for aninstitute he was part of which had some funding. This is my first fond memoryof him, as financial support for students is never forgotten.

I remember one incident clearly. Professor Preston sent me to the library to lookup some stuff on the cotton industry—price supports, policy initiatives, etc.—and when I gave him my report he said I had done a very good job. This was apleasant surprise to me because I didn’t think much of my effort. Nevertheless,it was a very nice thing for him to do.

Well, I graduated, I went to Boalt Hall to study law, became disenchanted withthat idea (ie., being a lawyer), and ultimately became a CPA specializing intaxation for Big Four firms. Incidentally, someone should look at whether thepassage of domestic production deductions in Internal Revenue Code Section 199is having any noticeable effect on the relevant sectors of the economy.

So that is my brief look back at an event that happened over forty years ago,and to the memory of a kind and helpful Cal Economics [Editor’s Note: well,business, anyway] professor. I wonder what happened to him, how his careerdeveloped, if he is still living? [Editor’s Note: Professor Preston is retired (1997)from the Smith School of Business at the University of Maryland (1980-present).After leaving Cal in 1969, he taught at SUNY Buffalo’s business school prior tomoving to the University of Maryland. While at Maryland, he directed theManagement Education in Poland program, a cooperative venture with theUniversity of Lodz, from which he received the doctor honoris causa degree in1996, and the Distinguished International Service Award from the University ofMaryland the same year.]

My math skills were not above average so I would not have been a good econgraduate student, but thanks for letting me take part in the activities of thedepartment. You are doing a great job in alumni relations! Good luck, andthanks for reading this.

Dave Faris, BA ‘63


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Bryan Graham: “Social spillovers” in education via Papua New GuineaA new faculty profile

Bryan Graham contends that he came to economics (and his specialties in econometricsand labor/development economics) in a “haphazard” way. Although reared in a reasonablyeducated family in rural Maine, he is the first in his family to pursue a career in academia. Inhigh school, the future Fulbright and Rhodes Scholar imagined a future in “something like” theAmerican Foreign Service and, as an undergraduate, attended Tufts University in Medford,Massachusetts in order to study international relations. Required classes exposed Graham to whathe calls economics’ “insightful and elegant way of thinking about the world” from which evolvedthat “eureka” moment in which he chose economics as (one of) his organizing frameworks forthinking about the world (as well as a change in majors).

Graham’s Fulbright Scholarship took him to the National Center for Development Studiesat the Australian National University, where he focused on questions of economic developmentwith Ronald Duncan. Traveling to Papua New Guinea and Indonesia for fieldwork, Graham studiedthe effects of financial dependence on minerals on patterns of economic development in these two countries. It was as aFulbright Scholar in Australia that Graham learned to love research and decided to pursue graduate studies in economics. Tothat end, Graham applied for and won the prestigious Rhodes Scholarship (held in the past by prominent Americans rangingfrom economist Lester Thurow, to President Bill Clinton and many members of his government— Robert Reich, Strobe Talbott,Ira Magaziner, Robert McCallum, Jr., and George Stephanopoulos— to journalists Nicholas Kristof, Michael Kinsley, E.J.Dionne, and Paul Blustein, and musician/actor Kris Kristofferson). Graham used his two years at Oxford University to furtherprepare himself for his doctoral studies. He found that St. Antony’s College provided the “balanced environment” he wanted.During his second year, Graham chose two areas to focus on—econometrics and history of economic thought—whichsolidified his interest in empirical economics and provided an additional teaching area.

Returning to Boston from Oxford, Graham began his PhD studies at Harvard University, working with Professors GaryChamberlain, Caroline Hoxby, Michael Kremer, and Economics alumnus Larry Katz (BA ’81). Research for his dissertation “Essayson the Econometrics of Social Interactions” produced a new method for detecting and assessing the strength of socialinteractions. Graham employed this new estimation strategy to test for the presence of peer effects in learning using datafrom the Tennessee class size reduction experiment Project STAR. His findings suggest that differences in peer composition areat least as important as those in teacher quality for explaining variation in academic achievement within Project STAR schools.Graham has extended this research since arriving in Berkeley in Fall 2005, which followed his participation in the Review ofEconomic Studies Tour, an honor shared by many of Graham’s junior colleagues in the Department. He plans to spend thecoming years engaged in his current research on social externalities or “social spillovers,” which he feels could have powerfulpolicy implications for hot-button educational issues such as ability tracking, busing, and school vouchers. Graham hopes tocreate a so-called “tool kit” for using data to detect and measure these spillovers as well as characterize them.

Graham says that he has been extremely productive since coming to Cal. Along with the great intellectualenvironment, he loves the ambience and collegiality in the Department; for instance, he often joins department faculty, of alllevels, who lunch together daily (and can often be found on one of the semicircular walls at the campus’ North Gate, weatherpermitting). He also mentioned that the distribution of faculty in Economics includes all cohorts in terms of age andprofessional rank, which for him makes the Department feel very “complete.” He finds the undergraduate students at Cal asable as those at Harvard, but their general demeanor more pleasant—more laid back, more tolerant, less high strung. Andthough Economics graduate students at Cal are as excellent and as competitive as those at Harvard, he delights in what heperceives as a rare solidarity among Cal’s group.

Bryan Graham claims that he chose Cal when, on the morning of his job talk, he took a run in the Berkeley hills, sawthe vista of the Bay Area spread out before him, and knew that Berkeley was the place for him. (But don’t tell Rich Gilbert,who worked hard to recruit him!) He greatly appreciates then-Chair Gilbert’s efforts with the Graduate School of Education tofacilitate an appointment for his wife, Erin Murphy-Graham, who joined the school last fall as an adjunct assistant professor.This active couple enjoys running, hiking, road biking and camping but, with a newly-arrived baby boy (Liam Thomas MurphyGraham), are staying fit these days primarily by swaddling. Welcome to Cal all three Grahams!


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Faculty News & NotesPranab Bardhan continues as Co-Director of the MacArthurFoundation-funded ResearchNetwork on Inequality andEconomic Performance. Duringspring 2006, he was invited toaddress the executive directors ofthe World Bank in Washington, DC,on issues including governance andeconomic development. In January,Bardhan was in India, where hepresented the Silver Jubilee Lectureon the topic of land reform at theCenter for Economics and SocialStudies in Hyderabad, and the CSLGDistinguished Lecture on democracyand governance issues atNehru University in NewDelhi. In February, he gavea lecture on agriculturaltrade liberalization at theFood and AgricultureOrganization (FAO) inRome, Italy. His article,“Globalization and Poverty”was published in the April2006 issue of ScientificAmerican. That samemonth, a collection ofessays in honor ofProfessor Bardhan, editedby Tim Besley of theLondon School ofEconomics, was publishedas a special issue of theJournal of DevelopmentEconomics.

Professor Clair Brown andGreg Linden (Econ PhD,2000) conducted nearlytwenty interviews withsemiconductor companies inBangalore, India, during November2005. The semiconductor industryin India is dominated bymultinational subsidiaries, withstart-ups playing a limited role—the mirror image of how theindustry has emerged in China.Their research suggests that muchof the work done by US chipcompanies in India complements,rather than substitutes for, thework done in the US. For example,lower-cost Indian teams are used toexpand into cost-sensitiveconsumer markets for which USengineering is too expensive. Theypresented their paper

“Semiconductor Design in a GlobalKnowledge Network” at the SloanIndustries Conference at MIT inDecember. Brown also gave akeynote talk in February at theInternational Solid-State CircuitsConference (ISSCC) Annual Meetingin San Francisco on “Offshoring: ICDesign Jobs or IC Design Future?”She spent Spring Break in Beijing,where she conducted interviews atsemiconductor design companies,and then attended the Conferenceon Labor Standards, where shedelivered a talk on the Chinese andUS labor markets for engineers.

Barry Eichengreen, together withMarc Flandreau (Sciences-Po, Paris),received a two-year grant from theNational Science Foundation (NSF)to study the past and future ofreserve currency competition, witha focus on whether the dollar willremain the dominant internationalcurrency. In May, received thedoctor honoris causa from theAmerican University in Paris.

Bronwyn Hall spent her first yearas Professor in the Graduate Schoolas a visiting professor at a numberof European institutions: theCatholic University of Leuven in

September 2005, the Ludwig-Maximiliens University of Munich inDecember 2005, and the Ente “LuigiEinaudi” Foundation in Rome forFebruary-June 2006. She gave thekeynote talk at the ECLAC-UNCTADconference on “Globalization ofR&D by Transnational Corporations”in Santiago, Chile, and an invitedtalk at the Triple Helix conferencein Torino, Italy. Together with anumber of European economists,she helped to found a neworganization, EDIP (European Policyfor Intellectual Property) in October2005, and serves on its initial

board.

In February 2006, ChairBenjamin Hermalinreported that David Leewas promoted to associateprofessor with tenure inthe EconomicsDepartment.Congratulations, David!

Edward (Ted) Miguel hasbecome the Co-Editor ofthe Journal of HumanResources. His article(with Michael Kremer) “TheIllusion of Sustainability”was recently highlighted inan article in the Frenchdaily La Liberation (byEsther Duflo) entitled“Reinventir ledeveloppement durable,”from February 13, 2006.

Martha Olney has once again beensingled out for her teachingprowess. She has been named afaculty “Everyday Hero” based onthe Undergrduate Experience Survey.(See the Student News highlightson page 9 about SAO Sandy Jaegerand three Economics GSIs).

John Quigley spoke in the fall at aconference on credit guaranteessponsored by the Federal ReserveBank of St. Louis. His paperanalyzed the distribution of costsand benefits of the GovernmentSponsored Housing Enterprises,

See FACULTY pg. 11

Dan McFadden elected Member of theAmerican Philosophical Society

Dan McFadden joined a very select group ofeconomists when he was elected a Member of theAmerican Philosophical Society in April. TheSociety’s 2006 class includes Cal’s Chancellor, physicistRobert J. Birgeneau and Professor of SociologyMichael Hout, as well as Ben Bernanke, Chairman ofthe Federal Reserve Bank, Associate US Supreme CourtJustice Ruth Bader Ginsburg, and John F. Nash, Jr.,McFadden’s fellow Nobel laureate in economics. Twolate department faculty, Carlo Cipolla and GerardDebreu, were also thus honored during the 1980’s.Society Members also include other economics Nobellaureates Jan Tinbergen, Kenneth Arrow, AmartyaSen, Milton Friedman, and Joseph Stiglitz. Also inApril, McFadden, a North Carolina native, received anhonorary Doctor of Science degree from North CarolinaState University.


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Faculty News & Notes

From Paul Ruud, Professor ofEconomics:

Jim Powell, Paul Ruud, and friends rocked thehouse Saturday, February 18, at a party hosted by

Roger Craine at the Pt. Richmond Yacht Club. Jim playsbass and Paul plays guitar. They were joined by the rest of their

band, the New Remnants, which has been together for several years.Also sitting in were Vance Martin (Economics, University of Melbourne) ondrums and John Knox (Berkeley PEIS alumnus) on keys.

Jim Powell is the catalyst behind all the music. Shortly after he joined theDepartment, Jim bought an electric guitar and a small practice amp. Afterdinner one evening, Paul noticed the guitar and decided that he also hadto have one. A year later, Jim formed a band with classmates from a

Diablo Valley College course about rock and roll bands. Paul joinedabout a year ago, after a breakup of the original group. Amy Lovern(vocals), John Savoy (guitar), Michael Hedtke (vocals), and Rich Bass(drums) comprise the rest of the band. The New Remnants play coversof popular music from the 60’s to the present.

Vance Martin is an econometrician, as are Jim and Paul. And Vance isalso a former professional rock drummer. The three, and Roger Craine’sneighbor John Knox, first played together at a soiree at Roger’s housefive years ago. Since then, they have been looking for anotheropportunity to jam.

Several graduate students also participated. Pamela Jakiela, RachelPolimeni, and Owen Ozier sang the Beatles’ All My Loving and VanMorrison’s Brown-Eyed Girl. Paul Ruud thinks that ignited the roomand led to some serious fun: “After those three, even I was dancing.”

Econometr

ician

s Rock

!


Mathematical Economics conference atBerkeley in honor of Gerard Debreu

From Chris Shannon, Professor of Economics and Mathematics, Conference

Organizer

The 2005 NSF/CEME Mathematical Economics Conference was held at

Berkeley, October 20-23, 2005, in honor of our late colleague and Nobel

laureate Gerard Debreu. The conference included a number of talks about

Gerard’s life and work, in addition to the conference’s regular academic

program. Over 90 scholars from the US and abroad gathered in

Berkeley to reflect on the past, present, and future of mathematical

economics and economic theory, and the pivotal and signal role that

Gerard Debreu and other Berkeley colleagues played in the

establishment of the field.

Conference activities also included a public reception and

memorial Friday, October 21, at the Bancroft Hotel. This event featured

a moving keynote address by Hugo Sonnenschein, the Adam Smith

Distinguished Service Professor and President Emeritus at the

University of Chicago, who spoke with elegance and humor about his

long distance academic relationship with Debreu, which resulted in the

signal Sonnenschein-Debreu-Mantel (SDM) Theorem. Several other

former students and colleagues of Debreu’s gave reminiscences and tributes to

Gerard’s legacy, including Graciela Chichilnisky, Drew Fudenberg, Larry Jones,and Xavier Vives.

The conference banquet on Saturday evening, October 22, at the

Berkeley City Club also featured keynote addresses, this time by WernerHildenbrand and Andreu Mas-Colell, who were both close personal and

professional colleagues of Gerard’s. Former Berkeley students or faculty who

attended included Chichilnisky, Jones, Fudenberg, and Vives, as well as BethAllen, Marcus Berliant, Truman Bewley, HarrisonCheng, Gregory Duncan, Federico Echenique,

David Gale, Jean-Michel Grandmont, AlejandroManelli, Andreu Mas-Colell, Dan McFadden, RoyRadner, Suzanne Scotchmer, MaxwellStinchcombe, and John Quah.

Top Right: Hugo Sonnenschein addresses the audienceat the Gerard Debreu Memorial; a large audiencegathered for the event. Right: Kenneth Arrow presentshis paper at the conference. Right: three Economics“alumni”: Professor Emeritus Steven Goldman, BethAllen (PhD, ’78), Drew Fudenberg (assistant professor,1981-85).


2005-06 EconomicsDepartmental Prize Winners

Eliot J. Swan Prize: The Eliot J. SwanPrize is awarded for the best performancein the first year of the Ph.D. program. Itincludes a cash component to recognizethe discipline and dedication of thisachievement. Eliot J. Swan was agraduate student, teaching assistant andinstructor in the Department of Economicsat UC Berkeley from 1932-1941. He thenwent on to a career at the San FranciscoFederal Reserve Bank, where he eventuallyserved as President. He retired from thebank in 1972, after 31 years of service.

Eliot J. Swan Prize: Matthew Levy

Journal of Development EconomicsAward: The Journal of DevelopmentEconomics Prize is awarded in recognitionof outstanding work or research inDevelopment Economics completed duringthe academic year. Its goal is to supportstudents in their thesis writing. Thedecision is made by the faculty members

Commencement 2006 - May 19, 2006 - Greek TheatreCommencement 2006 - May 19, 2006 - Greek TheatreCommencement 2006 - May 19, 2006 - Greek TheatreCommencement 2006 - May 19, 2006 - Greek TheatreCommencement 2006 - May 19, 2006 - Greek Theatre

who specialize in DevelopmentEconomics. A cash component isincluded to recognize the student’saccomplishment.

Journal of DevelopmentEconomics Prize: Raj Arunachalam

The Grace Katagiri Prize: The GraceKatagiri Prize was awarded for the firsttime this year. Grace Katagiri was alongtime employee of the economicsdepartment. This is awarded for thebest empirical metrics paper submittedby a second year graduate student. Acash component is included torecognize the student’saccomplishment.

Grace Katagiri Prize: MarinaCynthia Halac

Department of EconomicsGraduate Student Award for PublicPolicy Research: The Public PolicyPrize is awarded to a studentperforming research in Economicsrelating directly to issues of PublicPolicy. Typical subjects include (but arenot limited to) Public Finance,Regulation, Health, Transportation andEducation.The decisionis made bythe facultymemberswhospecialize inPublicPolicy. Acashcomponentis includedto recognizethestudent’saccomplishment.

Graduate Student Award in PublicPolicy Research: Kristy Piccinini

George Break Prize in PublicFinance: The George Break Prize inPublic Finance is awarded to a studentwith outstanding performance in thePublic Finance field courses. The prizewas established in honor of GeorgeBreak, a leading figure in publicfinance and a professor in theEconomics Department for 40 years.

George Break Prize in PublicFinance: Marit Rehavi

Ph.D, Recipients, DissertationTitle, Advisor, & FutureOccupation

*Tanguy Brachet“Essays on the Effects of MaternalSmoking”Dissertation Advisor: DavidCardTanguy has accepted aposition as an AssistantProfessor of Anesthesiologyand Critical Care Medicine atthe University ofPennsylvania School orMedicine and the Children’sHospital of Philadelphia

*Leonidas Eugene de laRosa“Overconfidence in thePrincipal-Agent Framework”Dissertation Advisor: Botond KöszegiLeonidas has accepted a position asan Assistant Professor of Economicsat Oberlin College

*Rui Pedro Esteves“The Institutional Foundations ofthe International Market forSovereign Debt before 1914”Dissertation Advisor: BarryEichengreenRui has accepted a position as anAssistant Professor of Economics atSimon Fraser University

*Justin Robert Falk“Essays in Political Economy andPublic Finance”Dissertation Advisor: Kenneth ChayJustin has accepted a position as aSenior Analyst in the CongressionalBudget Office

*Tina Renee Green“Essays on the Political Economy ofFiscal Policy”Dissertation Advisor: Edward MiguelTina has accepted a position as anAssociate with Cornerstone Research

*Sally Yoon-kyung Kwak“Essays on the EconomicImplications of Educational Policy”Dissertation Advisor: David CardSally has accepted a position as anAssistant Professor of Economics atthe University of Hawaii

*Mario A. Lopez“Entry and Location Choice in RetailMarkets”Dissertation Advisor: Richard GilbertMario has accepted a position as aSenior Consultant with NERAEconomic Consulting

*Ting Lu“An Empirical Study on China’s State-owned Enterprise Privatization”Dissertation Advisor: Yingyi QianTing has accepted a position as an

Economist with Merrill Lynch,Asia Pacific.

*Carolina Marquez“Essays on ResidentialMortgage Termination”Dissertation Advisor: Paul RuudCarolina will be on the jobmarket in the fall.

*Florence Neymotin“What Happens in Schools toAffect Student Outcomes?”Dissertation Advisor: DavidCardFlorence has accepted a

position as an Assistant Professor ofEconomics at Kansas State University

*David A. Reinstein“Empirical Studies on ConsumerDemand and Philanthropy”Dissertation Advisor: Emmanuel SaezDavid has accepted a position as anAssistant Professor at the University ofEssex in the United Kingdom

*Justin Sydnor“Risk Aversion in Markets”Dissertation Advisor: Matthew RabinJustin has accepted a position as anAssistant Professor at Case WesternReserve University.

See GRADUATION, pg. 11


Among the Cal students who chose constructive ways to spend their Spring Breakthrough the Alternative Breaks Program this year was undergraduate Erin Cooper, a double

major in economics and English. While some ABP students traveled to the Gulf Coast to assist HurricaneKatrina victims, Cooper led a group of fifteen students to the San Diego-Tijuana area to study immigrationand border issues. Her group met with local organizations on both sides of the border to learn about topics

including undocumented immigration, border security, health and safely conditions and the effects ofNAFTA. The students also served meals and did other community service projects in La

Morita, Tijuana.

�Everyday Hero�Sandy Jaeger

Undergraduate StudentAffairs Officer, Economics

[Editor’s Note: Undergraduate Advisor Sandy Jaegerwas recognized for her excellence by Cal undergrads,

4000 of whom responded to the UC UndergraduateExperience Survey conducted by the Office of StudentResearch. Students were asked to anonymously name astaff person or instructor who “made an extraordinary effort to make yourundergraduate experience – and that of your fellow students – better, resolved adifficult problem for you, or otherwise went beyond the call of duty on yourbehalf.” Students were then asked to describe the act. Sandy’s heroic deed isrecounted below.]

“I’m sure Sandy has gotten the same questions at least five timesevery day: ‘Econometrics is overenrolled – how can I get into this

class?’ Yet when it was my turn to ask it, after the frighteningrealization that I couldn’t graduate without it, she helped

me through the process thoroughly and patiently. Sandygives the cold, informal economics department a

much-needed air of humanity.”

MoreMoreMoreMoreMore“Everyday Heroes”“Everyday Heroes”“Everyday Heroes”“Everyday Heroes”“Everyday Heroes”in Economics!in Economics!in Economics!in Economics!in Economics! Threedepartment Graduate

Student Instructors (GSIs)have joined Sandy Jaeger

and Martha Olney as campusfolks who went “above andbeyond the call of duty” to

help students at Cal. They areElise Couper, Jeffrey Saret,

and Michael Schihl. All“heroes” received letters fromChancellor Birgeneau extollingtheir excellence in providing

an inspiring and humaneenvironment in whichstudents can succeed.

Congratulations!

Dan Acland reportsthat he is in the first group

of six recipients of a two-yearfellowship from the newly-formed

Integrated Graduate EducationResearch and Training Program inPolitics, Economics, Psychology, andPublic Policy (IGERT/PEPPP), which wasrecently established jointly by Public Policy,Psychology, Political Science, andEconomics. The program providesfinancial support for Ph.D. students inany of these four disciplines—

beginning either their second orthird year—who have not yet

advanced to candidacy.

NEWS FROM

OUR STUDENTS

David Yves Albouy is one of 13recipients of the Chancellor’s Dissertation-Year

Fellowship for 2006-07. This prestigious award pays agenerous stipend and all student fees and tuition, thereby freeing

recipients to spend the year writing without distractions, such as workingor teaching. All recipients are expected to file their dissertations by May, 2007.

Albouy’s dissertation addresses how the Federal tax and transfer system, by notadjusting for local costs of living, encourages workers to crowd into areas whichoffer nice amenities away from areas where their productivity may be highest. Overall,this seems to hurt workers in areas like the San Francisco Bay Area and theNortheast, encouraging them to take jobs elsewhere, which in the end createsinefficiencies in the national labor market, which in turn hurts all workers.

Albouy also presented his paper “The Earnings Gap betweenFrancophones and Anglophones: A Canadian Perspective, 1970-

2000” at the Canadian Economics Association meetings atConcordia University in Montreal in late May.

Secondyear graduate

student JeremiahDittmar was

awarded a three-year(2005-08) Graduate

Student Fellowship fromthe National Science

Foundation. His researchconcerns institutions and

economic growth – inparticular historical

patterns of institutionalchange and institutionalpersistence, and theirimpacts on economic

performance. He plans toreview available cross-country literature andthen look specifically

at South Asia.


From Joshua Tasoff:On February 28th, three other students (Sebastien Betermier from

Finance, Tamera Lee Stover from Sociology, and Rebecca Hamlin fromPolitical Science) and I put together the first-ever Graduate Student Social

Science Colloquium. Professor George Akerlof wasthe keynote speaker.

Students across disciplines were placed attables based on research similarities. Students thenengaged in a loosely-structured conversation toshare their research. Here is some of the feedbackthat we got: “This was really great, wouldn’t doanything differently.” - Mathew Baxter (attendee)“I enjoyed sharing my research topics with peoplefrom different disciplines. Theirsuggestions enriched me greatly. I suggestthat this should be held every semester.” -Maoyong Fan (attendee)

Roughly 20 economics students attended.

replaced with the new credit of$1 for every dollar thatindividuals spent oncontributions to the specificcharity of their choice.

The change would allow peopleto choose whether to contributeto charities that directly helpthe needy, provide domestictraining or infrastructureprograms of a more self-reliantbent, or even opt not to take thecredit and, in essence, make agift to the government, he says.

Liberals will support the planbecause it would route morefunds to their favorite causes,Edlin predicts. Meanwhile, heexpects that conservatives willlike it because they favor privatesolutions rather than public onesand have long contended thatprivate charity is more efficientthan higher taxes, and that biggovernment bureaucracies areoften ineffective and inefficientin tackling problems.

In addition, Edlin says, theexisting competition amongcharities would increase as theywork harder to prove their valueand efficacy.

“The point is,” he concludes,“that the Choose-Your-Charitytax … could convinceindividuals to listen to theirhigher selves — not their innateselfishness — with theassurance, through ‘matching,’that they are not alone in doingso.”

Fannie Mae and Freddie Mac, as wellas the Federal HousingAdministration. Since last spring,he has published research papers onthe effects of regulation in drivingup housing prices and on housing“affordability.” He has alsoproduced research papers on themeasurement of returns toinvestment in venture capital, onthe so-called dividend pricingmodel as applied to propertymarkets, and on index-based futuresmarkets to diversify the risks ofinvestment in owner-occupiedhousing. He spoke on “spatialeconomics” at a symposium inShanghai sponsored by the ChineseAcademy of Sciences, and lecturedat the Royal Institute of Technologyin Stockholm. He also spoke at theWharton School, the University ofBritish Columbia, and West VirginiaUniversity. This fall, he presentedpapers at academic conferences inBoston, Washing-ton, Las Vegas,Santa Fe, and Mexico City.

David Romer has been elected tothe American Academic of Arts andSciences in the Academy’s Class of2006. He now shares thisprestigious status with colleaguesGeorge Akerlof (’85), AlanAuerbach (’99), Barry Eichengreen(’97), Maury Obstfeld (’04),Matthew Rabin (’02), ChristinaRomer (’04), Hal Varian (’95),Oliver Williamson (’83), and JanetYellen (’01). Former departmentfaculty or alumni members includeLarry Katz (’01), Andreu Mas-Collel (’85), Douglass North (’87),Roy Radner (’70), and Hal Varian(who is both an alum and adepartment faculty member!)

FACULTY, from pg. 6

CHARITY, from pg. 1

U.S. charity officials reported$248.5 billion in gifts for 2004,according to the Giving USAFoundation. Many feel that reliefefforts in the aftermath of suchdisasters as the Asian tsunamiand Hurricane Katrina, alongwith a one-time tax breakallowing donors to deduct giftsup to 100 percent of theiradjusted income, were likely to

Graduate Student InstructorAwards: These awards are presented tooutstanding graduate studentinstructors, selected by the Departmentbased on teaching evaluations.

Raymundo Campos, Ada Chen,Matias Cattaneo, Paul Chen, EliseCouper, Li Zeng

Departmental Citation and theEarl Rolph Prize: The DepartmentCitation and Earl Rolph Memorial Prizeare awarded to the author of the bestundergraduate honors thesis inEconomics. The Earl Rolph Prize alsoincludes a cash component inrecognition of outstanding academicachievement. Earl Rolph was aProfessor of Economics from 1937-1977at UC Berkeley. He was fascinated bythree things: economics, golf, and cars.He believed strongly in the idea thatincentives should guide one’s behavior.In light of that philosophy, his familyestablished the Earl Rolph Prize in hismemory.

Department Citation/Earl RolphPrize: Anya Klotz

GRADUATION, from pg. 9

The Econ Exchange is publishedsemiannually for alumni and friends

of the Department of Economics,University of California, Berkeley.

DEPARTMENT OF ECONOMICS

Benjamin E. Hermalin Chair and Professor ofEconomics

James Powell Vice Chair andProfessor of Economics

Department Office (510) 642-0822

Department Website: http://emlab.berkeley.edu/econ/

THE ECON EXCHANGE

Editor & LayoutJane Turbiner

ContributorsBonnie Azab Powell

Dave Faris ‘63Benjamin HermalinKathleen Maclay

Paul RuudChris ShannonJane Turbiner

NEWS AND NOTES FROM THE DEPARTMENT OF ECONOMICS

UNIVERSITY OF CALIFORNIA, BERKELEY

The Econ Exchange

Non Profit Org.US Postage

PAIDUniversity of California

UNIVERSITY OF CALIFORNIA

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The Econ Exchange549 EVANS HALL #3880BERKELEY, CA 94720-3880

2006 Kiel Institute Global2006 Kiel Institute Global2006 Kiel Institute Global2006 Kiel Institute Global2006 Kiel Institute GlobalEconomy Prize to GeorgeEconomy Prize to GeorgeEconomy Prize to GeorgeEconomy Prize to GeorgeEconomy Prize to GeorgeAkerlofAkerlofAkerlofAkerlofAkerlofOn Sunday, June 18th, Cal’s GeorgeAkerlof, 2001 Nobel Laureate in theEconomic Sciences, was the recipient –along with former EU CommissionPresident Jacques Delors and Nokia CEODr. Jorma Ollila – of the second GlobalEconomy Prize from Germany’s KielInstitute for the World Economy.Although the prize was just inauguratedin 2005, this already-significant newhonor will be awarded annually to one politician, one academic,and one person from industry, each of whom has proposed creative,path-breaking initiatives to deal with globalization. The GlobalEconomy Prize highlights the achievements of those who viewglobalization as an opportunity to tap our creative potential andwho have made outstanding contributions to establishing a justand protective society based on individual initiative andresponsibility.

The Kiel Institute decided to award this prize because thechallenges of globalization, such as structural change in labormarkets, the increasing integration of international financialmarkets, the development of new products and new productionmethods, new types of vertical and horizontal integration ofmultinational companies, increasing worldwide demand forresources, and offshoring and outsourcing, can be deemed to posea threat, or to constitute a force that unleashes the creativepotential of open societies. The prize winners recognize that ourstandard of living can be protected only through free marketactivity itself. Success in the globalization process requiresadequate incentives to work, save, invest, and obtain training andeducation. By these means, societies promote economic activitybased on individual initiative and responsibility and avoid wastingour physical and human resources. Melding economic efficiency andsocial justice requires an intensive dialog between economists,politicians, and businesspeople. For more information, please see:http://www.uni-kiel.de/ifw/prizes/wwp/wwp_e.htm.

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UNIVERSITY OF CALIFORNIA, BERKELEY The Econ Exchange · UNIVERSITY OF CALIFORNIA, BERKELEY The Econ Exchange NEWS AND NOTES FROM THE DEPARTMENT OF ECONOMICS VOLUME NINE, NUMBER ONE