Pranks, Academia Edition

You know it's going to be a good day when someone says "I need to prank the shit out of someone."

There is a long history of inspired creativity around these parts, and no better time than April 1st to execute such ideas. What if, hypothetically, a series of emails were sent to an unsuspecting AE (let's call him Z) from an economist, such as Steve Levitt? In particular, it is known that Z despises Levitt and widely disparages his research. So, how would he respond to an attractive job offer from a prominent economist?

These emails were sent from a Hotmail account, rather than a spoofed U of C account. After all, the goal here was to be a jerk, not ruin lives.

Email #1

Z,

Congratulations on your recent admittance to the University of Chicago Economics Department. As you may know, I currently direct the Becker Center on Chicago Price Theory housed at the Booth School of Business. I have familiarized myself with your work on DSGE models, and I believe it is in line with the contributions of the Becker Center. To that end, I thought I would make you aware of an opportunity here at the Becker Center. Each year we take on several Graduate Assistants, these are people who we believe show promise. More than half of our Graduate Assistants have gone on to become Becker Center Research Fellows. This position would allow you to work closely with the Becker Center faculty such as myself to develop your ideas as you progress through your degree. I realize you have not yet finalized your graduate school decision yet, but I hope that this offer may help you to understand all of your options. Please e-mail me if you have any questions or to follow up about the position.

Steven Levitt

Let's review: this email included a rather unusual offer, and was sent on April 1st from a Hotmail account. I thought it would get spotted as fraudulent in about 30 seconds. Much to my shock, Z replied sincerely, saying that he was interested in meeting Levitt and looked forward to seeing him at the Chicago open house tomorrow. What now? Clearly, this is a cue to up the ante and become progressively more outrageous.

Email #2

Z,

Outstanding. While you're here I'd like to make sure I introduce you to Gary. Unfortunately he's been a bit moody recently but the color purple seems to have a soothing effect on him (the doctors have called it "neurochromopathy") so if you can make sure to include it in your ensemble it would be for the best. I look forward to our meeting and discussing some of my research with you. Please e-mail me if you have any further questions.

Steve

That's bizarre enough that warning flags should triggered, right? Or, it could result in Z borrowing a purple sweater...

Time to bring out the over-the-top guns.

Email #3

Z,

Do you mind swinging by Treasure Island on your way over and bringing some Greek style plain yogurt for Gary and I? I really love the luxurious silky texture of the yogurt in my mouth. When I eat it while listening to a bit of Chopin it, it really helps me focus on the current problem. Perhaps you can try it with us.

Steve

At this point, it was time to call it quits before serious damage was done. Z took the news well, and for the record, claims to have known it was a joke. Also, he said that he did not notice the Hotmail address, since Gmail automatically hides headers unless you click "details."

Lessons learned:

1) The most credible pranks are ones that give the prankee something they desire.

2) Never trust email sent from Hotmail.

Changing of the Guard

At a meeting of Associate Economists last fall, our department head casually asked how many of us were applying to grad school or otherwise planned on leaving in the next year or so. Given the competitive nature of grad applications, I am not entirely surprised that there was complete and total silence; no one responded and we all sort of shifted uncomfortably in our chairs. Since the probability of getting rejected from all the grad programs you apply to is quite nonzero, we have pretty strong incentives to ensure that we are not replaced by a new hire. Though, to be fair, many of us (myself included) were uncertain at that point about where we would be in a year.

Flash forward to the end of March, and grad school results are in. A quick survey reveals that 9 out of the 20 AEs currently employed will be gone by next August, a whopping 45% turnover. (I did not include the casework department in these figures.) Of the 11 remaining AEs, at least two are considering pursuit of unrelated fields (not econ/math/business). Perhaps my unorthodox exit strategy is rubbing off on others.

About a year ago, I was pondering the transient nature of my social circle and felt a little left behind. Today, I can say with confidence that I have not stagnated and I am going places. About 7,700 km away, in fact. And despite the large exodus of AEs this summer, life at the Fed will still go on and on and on and on...

Anyway, congrats to everyone who was accepted to grad school this year. Anecdotally, it seems like this year was as tough or even tougher than last year. (I heard of someone who won his school's undergrad thesis award and had two incredibly well-known recommenders who hasn't gotten in anywhere.) So, it is no small feat that many AEs have landed spots in respected econ PhD programs.

Don't Panic, Stochastic Calculus Edition

The midterm results are in, and they're not pretty. With a mean of 33 and a standard deviation of 18, we can safely say that this is not a normal distribution (assuming non-negative scores). It's been a while since I've taken an exam with such a low mean; it almost brings back nostalgia for the Engineering Math sequence. As I waited for the TA to find my test, a slew of 7s, 15s and 18s flashed by, and I began to silently hyperventilate. You know things are not good when your score < your age. Moreover, the stakes are higher now than in undergrad. I not only have my transcript, but $2,500 on the line, since the Fed won't reimburse me for tuition unless I get a C or above.

I knew this wasn't going to be an easy test, but I severely underestimated Prof Mykland's exam-writing abilities. Perhaps I should have known better when he related this anecdote on his PhD class: "I offered my class of ten students automatic As if they showed up for the exam...and 2-3 of them decided they'd rather skip it." When he announced that he wasn't allowing calculators, I thought that simply meant computations would be more tedious. In reality, that meant the exam would be completely theoretical.

In retrospect, perhaps I should have paced myself a bit better. We had 3 hours to complete 3 questions...and it wasn't nearly enough time for me. I ended up getting full credit for the first question, but by the time the 3rd question rolled around, I was so frustrated that I didn't even bother attempting to get partial credit, I just threw out the last page.

Anyways, I managed to beat the mean, though not by a healthy amount. Mykland reassured us that the vast majority of students receive As and Bs overall, and that if we did better on the final, those results would count in full. Never mind that the material covered on the final will be much harder. Mykland did say that he'd try to tone it down a bit for the final, since usually he gets means of "at least 40-50."

Student: "I understand that you don't want to write an exam that's too easy, but how am I supposed to feel about getting a 33 when I'm interviewing for jobs? If someone were to ask me about martingales, I would not say with confidence that I understand them very well."

Mykland: "Well, as evidenced by what's happening on Wall Street, I'd say a great many people don't understand them very well...if anything, I don't want to give anyone the illusion of understanding. The more you know, the more you realize you don't know."

Sigh. Okay, I can figure out the Itô integral of a deterministic integrand in the next three weeks...

Academia

Leland's last day at the Fed was Friday afternoon, and as the economists are wont to doing, an email was sent out to the department inviting everyone to go to Ceres for happy hour.

Despite Erik and Ryan trying to sway me, I'd already made up my mind that I wanted to go home. To be honest, I was never particularly close to Leland, and I'm not sure if any of the AEs could claim close bonds. But we do all have a healthy amount of respect, for his astounding work ethic and passion for economics. The ongoing joke is that the macro team's output is going to halve in the aftermath of Leland's departure. Moreover, Leland certainly has ample amounts of support and kinship from the macroeconomists.

Then Sumit (Chris' economist) came by, and asked why we were still dawdling, and why we weren't at Ceres. We made noises about not knowing anyone on the macro team, whereupon Sumit announced, "Well, that's ok. We're going to this thing and we're having a drink. Grab your bags, we're leaving." I gave Chris a stunned look and hastily grabbed my belongings. How could you not acquiesce? It was about as good as drinking with your profs.

Much to my surprise, a healthy crowd had gathered already, including Jeff and Francois from the macro team, Charlie Evans, the Chicago Fed president, and a handful of other AEs. I ordered a Blue Moon and sat back as they regaled us with Tales of Academia. Aside from Leland, who was leaving for grad school at Maryland, Ana was also there, and she'll be leaving for grad school at Berkeley. What advice then, would you give to an aspiring economist? Doesn't it seem like it's getting harder and harder every year to break into the field? Aren't all the good ideas already taken?

Jeff suggested looking for papers in third-rate journals from first-rate academics; it's an indication that they wrestled with a challenging idea and failed, so perhaps you can take a fresh look and solve the problem. He also suggested keeping up Fed ties, by say, working at the San Francisco Fed. This would also conveniently provide a place for you to escape when you need to write your dissertation.

Charlie gave some thoughts on giving presentations. Unfortunately, the first seminars you give are often your most important ones: job market seminars. If you skimp on background information, someone will say they don't understand the motivation behind this paper. If you give an elaborate literature review, others will invariably say they're only interested in seeing your regressions. How do you reconcile the contradictory opinions? It's practically impossible to strike a perfect balance; the best thing you can do is simply know your audience. Sumit: "Yeah Jeff, remember when I gave a seminar and you said you didn't like the title? I wasn't even past slide one!"

Sumit is a special case of an economist who was in the private sector and then left for a more academic position. (Generally, this only happens in reverse.) We asked if the transition had been easy, and he responded, "My recommendation for you guys is not to do what I did. There's a lot of disdain for private sector economists; you can never really come back after you've gone out there, and in many ways, I'm still paying for the six years I worked in industry." But why turn down the money, the hefty one or two million a year? Besides, it's not as though he doesn't work 12 hour days anyway at the Fed. "Well, that's not the same," Sumit replied. "That's a lifestyle choice. If I suddenly started working 8 hours a day tomorrow, no one would say anything. Even though I'm still working long hours, it's because I want to."

It took some pushing, but I'm glad I went. For the first time, I felt like a part of the economics field, as though I'd been initiated into an ancient guild of craftsmen. I realize this is silly, since I haven't even applied to grad school, nor am I confident that I want to apply, but for that shining hour, I could feel the invisible hand patting me on the back.

By the way, in case you ever wondered, Charlie is a gin & tonic kind of guy. In particular, a Beefeater gin kind of guy.

All-Nighter at Club Fed

Since I like to be masochistic, I decided to take a class this quarter on top of working full-time. Well, that wasn't exactly the reason, but I figured I should dip my toes back into coursework to strengthen my transcript for grad school apps. More importantly, after being out of the classroom for 6 months, I need to reassess whether I want to go back for a few more years of fretting about exams, or just stay in the "real" world. Luckily, the Fed offers tuition reimbursement for "related" classes that improve human capital, which loosely covers all kinds of business, economics and math classes. Have I mentioned lately how much my job rocks?

The first class I'd wanted to take was Intro to Stochastic Processes, but Prof Lalley pretty much told me it was geared toward PhD students and that I should take something else. So, I settled on an "Introduction to Probability Models" class at the U of C (University of Chicago, in local parlance), which looked like it'd be manageable. It also covers stochastic processes, but with a less theoretical treatment and more emphasis on applications. And as we all know, applications = easy (relatively). Finally, in my smartest move yet, I was able to convince Katherine to take the class with me, so that I wouldn't be studying and doing problem sets entirely on my own.

The class is cross-listed as a graduate course, so it's filled with masters statistics students and senior math majors. To be honest, I'm more afraid of the senior math majors, many of whom have serious bowl cuts going on. When I first walked into the class, the room was filled with Asians. Oh wait, there were two white people, and they looked Russian. By the end of week one, we were 3 chapters and 200 pages into the book. The problem sets are due on Thursdays, and I spent the weekend reading the book, and did a first pass of the problem set on Mon night. At this point, I started to worry, and told Katherine that we had to work on this problem set Tues night. We stayed at the Fed until 11 pm, and at that point we'd only covered 3 out of the 7 problems...and the questions only get harder as you go on.

Wed night was even better--we spent the entire night at the Fed. That's right, we went to work at 9 in the morning, stayed up all night doing the first problem set of the quarter, went to class the next morning, and then came back for another 8 hours of "real" work. And because it was the week before an FOMC meeting, we were swamped with work. It wasn't pretty.

On the other hand, I've never been more comfortable with probability in my life. We were in an office with a whiteboard wall, which was covered with crazy scribblings and mathematical notation by the end. I felt really happy with our progress. Between the two of us, we were coming up with all sorts of re-indexing methods, recognizing obscure probability distributions, and transforming ugly algebraic messes into compact sums like no other. There's no way I would've been able to come up with all that on my own. And it was really satisfying to know that I could still think and analyze on a higher-order level.

As much fun as that was, I'm hoping that subsequent problem sets lighten up a bit, because I can't afford to pull an all-nighter every week. Back in my undergrad days, I could easily turn in projects and then sleep for the rest of the day, but that's not an option any more now that I have a job. Erg.

And the Nobel Prize in Economics goes to...

The 2007 Nobel Prize in economics was announced today, and goes to three American economists: Eric Maskin (Princeton), Roger Myerson (Chicago), and Leonid Hurwicz (University of MN). As is often the case, the winners were not on the "short list" of potential candidates, but turned out to be unexpected dark horses.

This is the sort of story that journalists have nightmares about--a bunch of economists, whom they've never heard of, win a Nobel prize for developing a discipline, mechanism design theory, which they've also never heard of. To explain briefly, a mechanism is a framework of rules that enable a market to function efficiently. Many markets don't need mechanisms to work well, but lots do (think organ allocation, public goods like utilities or water, or the sale of rare paintings). Mechanism design can take a variety of forms, like taxation or the creation of auctions.

At age 90, Hurwicz is the oldest Nobel laureate in history. There was some talk that if the academy wanted to award him, they needed to do it soon before he died. As for Myerson, there was no shortage of opinions on him from the Chicago alums around the Fed cafeteria.

"One time, Myerson was running up the stairs so I held the door open for him at the top, and he blew right past me without saying a word!"

"Ha, in his mind he was probably thinking 'And that's the way it should be.' Myerson is notorious for taking things out on his grad students whenever he's angry. Apparently, one time he was pissed at Levitt (of Freakonomics fame) over, I dunno, a hiring decision or something, and at this grad student's seminar presentation, he just completely ripped a new one in him."

In the meantime, I'd like to give a shout out to this year's Ig Nobel Prize winners, who are recognized for quirky, entertaining and sometimes scientifically legitimate research. This year's laureates include the developers of the "gay bomb" which would provoke widespread homosexual behavior amongst enemy troops (Peace), researchers who ironed out the problem of how sheets get wrinkled (Physics), and Cornell's very own Prof. Brian Wansink, who studied mindless eating behavior using self-refilling bowls of soup (Nutrition).