We’re sometimes accused of sitting in an ivory tower, feet up and writing in abstract terms about all kinds of things that are not directly relevant to the real world.
Well, there are academics like that, and there is certainly value to doing fundamental research that will be an important input more applied work done by others, but there are also many others.
For instance, they do consulting, and I have the impression that companies or institutions attach great value to this. There is nothing wrong with that, I believe, as long as it stays within limits and they keep doing research and keep teaching. To the contrary even, I see great potential that this will make them better teachers and researchers, because there teaching and research becomes more relevant to practice. Or they are involved in policy design and designing institutions within the scope of projects financed by third parties.
In a recent essay, Esther Duflo from the MIT has argued that attention to detail is not only interesting but really needed and useful. She suggests that economists should be more like plumbers. Worth reading, especially also for Ph.D. students who are making up their mind about the direction they want to go in.
I’ve earlier briefly described the benefits of using versioning software. In a nutshell, this is what professional coders use to collaborate and to keep track of changes they make to their code. Once you’ve set this up for conducting research projects, you usually don’t want to go back. See Gentzkow and Shapiro’s Practitioner’s guide for some guidance. Highly recommended!
I personally have used SVN for this, but over the last years Git has become more and more popular. I looked into it yesterday and it seems to me that it’s on the one hand more powerful than SVN and on the other hand easier to use. See for instance here for yourselves.
At Tilburg University, the role of the University Council is to represent the views of students and employees. I have now been serving for one two-year term and will serve for another one from September onwards.
This has not always been fun, believe me, but many people on campus don’t realize how much influence this council can have. And due to a teaching reduction that comes with the appointment I am able to stay a 100% scholar, even though I miss some of the teaching tasks, which is why I always viewed this engagement as temporary.
With our initiative TiU International, we have managed to bring a new perspective to the table, which inspired and resulted in a number of small steps that our university has taken—steps that go in the right direction if you ask us, and we feel broad support for this in the academic community.
For instance, our president and rector have said that they want to take the next step and produce most internal documents in English. One should not underestimate what this means: international employees (one in three academics is non-Dutch) will feel more at home, and slowly but surely we will thereby move towards also having a non-Dutch speaking dean, or non-Dutch speaking heads of departments (are there any at this point?). The underlying idea is that international employees and the diversity they add will help us make better decisions as an institution, at all levels, coming closer to achieving our goals. Why is that? They come from all over the world and have seen what works (and what doesn’t). Their experiences are therefore valuable also for us. And academia, to a large extent, is an international affair, and in the end of the day being internationally connected on all kinds of levels also benefits local, Dutch students and Dutch society.
Related to this, also a new language policy is in the making.
Besides, we have repeatedly argued that we have to change the real estate strategy, and that one-size-fits-all directives like the Tilburg Education Profile are misguided. If you ask me, then slowly but surely also these points are picked up. I find this already very motivating and rewarding.
So far for some examples of smaller steps.
But: we still have to think more about the big issues. To start with, what I’ve realized recently, more than anything else, is that there is actually no shared set of goals on campus (despite there being a strategy, formally). Different faculties have different goals.
And I think that this is actually fine, but needs to be acknowledged (in a revised strategy). So far, we have instead tried to unify, to come up with one strategy for the entire university (cf. the education profile). But we don’t need to have the same specific goals all across campus. Our faculties should strive for academic excellence, but importantly they should come up with their own interpretation of what that means. This includes excellent education.
At the same time, we need to define general principles that foster academic excellence. This could become an important part of our strategy in the end.
These should relate to what universities should be all about: creating and transferring knowledge.
For instance: promotions to full professor have to reflect academic performance, and not that somebody agreed to do an administrative task or has been around for long enough. Or brought in some money.
And there have to be no-go’s. People need to leave after their PhDs, and can only come back after having been offered tenure at an institution at least as good as ours. This is the international standard and ensures the young academics become independent of their former supervisors and also get a different perspective elsewhere. Long research visits can’t provide this.
And, in my view, professors are supposed to engage in both, research and teaching. Both inspire one another. But becoming professor should never be based only on performance in one of the two.
So far my thoughts in-between terms. I really hope we can get to discussing some of the big issues in the two years to come.
This, together with the smaller achievements, motivated me to run for a second time.
Einav and Levin write:
Hamermesh recently reviewed publications from 1963 to 2011 in top economics journals. Until the mid-1980s, the majority of papers were theoretical; the remainder relied mainly on “ready- made” data from government statistics or surveys. Since then, the share of empirical papers in top journals has climbed to more than 70%.
Isn’t that remarkable? I certainly was under the wrong impression when I was a Ph.D. student in Berkeley and Mannheim and thought that it’s all about theory and methods. Where does this come from? Maybe it was because one tends to see so much theory in the first year of a full-blown Ph.D. program, which is full of core courses in Micro, Macro and Econometrics, covering what is the foundation to doing good economic research. In any case, my advice to Ph.D. students would be to strongly consider working with real data, as soon as possible. There is certainly room for theoretical and methodological contributions, but this should not mean that one never touches data. At least in theory 😉 everybody should be able to do an empirical analysis. And for this, one has to practice early on. Even if one wants to do econometric theory in the end. But even then one should know what one is talking about. Or would you trust somebody who talks about cooking but never cooks himself? OK, I admit, this goes a bit too far.
After having said this let me speculate a bit. My personal feeling is that one of the next big things and maybe a good topic for a PhD could be to combine structual econometrics with some of the methods that are now used and developed in data science (see the Einav and Levin article along with Varian‘s nice piece). In Tilburg, for instance, we have a field course in big data, by the way, and another sequence in structural econometrics (empirical IO).
At the recent Netspar Pension Workshop I’ve been talking to Susann Rohwedder from the RAND Corporation. We talked about van Gogh and how he spent his youth in Brabant, not far away from Tilburg. The way he was painting at that time can be described as relatively dark and gloomy and not nearly as amazing as what he produced later in his life in the south of France, with the exception of the potato eaters, probably. Here, what dominates, arguably, is good craftsmanship. What I find remarkable is that he learned painting from scratch before moving on and developing something new.
Likewise, also Picasso first learned painting from scratch, producing paintings that were well done, but way more realistic that what he is known for now. Susann remarked that also for modern dancing people often say that one should first learn ballet dancing, in order to get a good grip on technical skills, before moving on. Interesting.
This discussion made me realize that there is a strong communality with my thinking about behavioral economics. There are many people who do research in behavioral economics without ever learning classical economics from scratch, and I always wondered why they do that. Standard economic theory is the simplest possible model we can think of, and it works just fine for many questions we may want to answer. There is of course lots to be gained by studying behavioral aspects of individual decision making, as recently demonstrated once more by Raj Chetty in his Ely lecture. But I think the best way to get there is to first fully understand classical economic theory and only then build on that. In passing, another thing that Chetty pointed out very nicely was that the best way to go about doing behavioral economics is probably not to point out where the classical theory is wrong—any model is wrong, because it abstracts from some aspects of economic behavior in order to focus on others—but to ask the question how we can use the insights from behavioral economics for policy making.
I always thought this was an awful book. I thought so because it sounded so egoistic to me. Win friends, influence people, all to one’s own advantage. What’s wrong with him?
Much to my surprise, I quite liked the book. As he explains, he did about 15 years of research before writing the book, and you can see it. It’s thorough, it’s well written, and it’s useful. And it’s not really egoistic. Of course in the end one benefits from it, but what I find nice is that others will benefit too, so it’s all about that. Somewhere towards the end he writes “The principles taught in this book will work only when they come from the heart. I am not advocating a bag of tricks. I am talking about a new way of life.”
It’s hard to summarize the book in a few sentences. What it’s basically about is to change one’s attitude towards other people, to praise them instead of criticising them, to become a better person, so that one is on the same page and achieves common goals together. In the end, we often have common goals with the IT department at work, with our students, our colleagues, and our bosses. And of course with our partners and families.
Carnegie goes through many examples and then spells out a number of principles that I could repeat here, but they actually only make sense in light of the examples and his explanations. Still, if you’re curious, then you can find them here. What I find fascinating is that the examples and the principles make so much sense—one can really see that a lot of thought went into them.
So what’s wrong with Dale Carnegie’s “How to win friends and influence people”? I think the title. A better one would probably be “How to be a good person and have success and happiness in life at the same time”. I really enjoyed it. Recommended reading.
“You’ve got mail”, Amazon, Hachette, and four changes of an entire industry within just a few decades
Here we go, Amazon finally sealed a deal with Hachette, one of the big book publishers. What’s interesting about this deal is that special financial incentives were negotiated that may or may not be anti-competitive, and I would like to speculate later how these may look like.
But first some background. I personally find the book industry a super interesting one because so much has happened recently, and keeps happening. My dad still laments that book stores are dying, and that this would be a loss to society–and I keep arguing that the transformation of the book industry is one of the great things that happened in the last ten years. Now we can finally buy ebooks on our Kindles and the like, and can take them with us and read them in a more convenient way than ever. We read newspapers and magazines on those devices, too, and in passing also save loads of paper.
Let’s have a look at the business side. The good old corner bookshop (think Meg Ryan in You’ve got Mail) earned about 40% of the price of every book sold. And this is exactly why there were many such shops around. Their assortment was relatively small, and coordination happened via best seller lists. One could argue that this was some sort of collusive agreement between publishers and bookshops, which resulted in everybody buying the same books at high prices. Then came the bookstore chains (think Tom Hanks in You’ve got Mail). Yes, they were evil, because they offered a broader assortment and discounts on best sellers, making money with the remaining titles. Small bookshops began to disappear (which is why people think they were evil). Now more people read different books, and the bestsellers were sold at lower prices. Overall, this sounds like a welfare improvement to me.
Then came Amazon. Amazon was, and still is, trying to offer its Kindle devices to customers at fairly low prices, such as 100 dollars. The hope is, it seems, that people would move to Amazon and do some sort of one-stop-shopping for books, magazines, music and movies, which would ultimately allow Amazon to earn money. It would be sustainable because Amazon is then able to negotiate good deals with publishers and movie distributors. So Amazon would be a big player with lots of bargaining power, and customers may even benefit from it. But in order to make this attractive to customers already now, Amazon needs to make sure that content, such as e-books, is available at a low price not only in the future, but now–otherwise a Kindle for even a cheap price is nothing consumers would care about. This is why Amazon decided to not earn any money on e-books when it sold them for $9.99. At the same time, publishers were unhappy because the e-book sales cannibalised their sales elsewhere, for which they earned more (for instance because they did not have to give them as much of a discount as they had to give to Amazon). The underlying reason is that they did not set the price themselves anymore. Put differently, a higher price for e-books sold by Amazon would have been in their interest.
Meanwhile, also Apple tried to counter Amazon’s strategy by negotiating a deal with the book publishers. Essentially, Apple came up with contractual arrangements where the publishers set the price of the e-books themselves, but offer the same price on all e-book platforms, including Amazon. This led to prices that were about 30% higher, also on Amazon. Smart move, Steve Jobs! But the US Department of Justice then deemed this anti-competitive (rightly so!), and made publishers negotiate new deals. This ultimately led to lower prices, again, last year.
After that, Amazon started to push for lower wholesale prices, that is: discounts from the publishers, still with the aim of having lower retail prices, so that consumers would still find it attractive to buy e-readers and then content from Amazon. The negotiation phase was quite tough, with Amazon temporarily not shipping hard copies of Hachette and not taking pre-orders.
The new deal now means that Hachette will set the price, but at a level that Amazon finds favourable. How can that be? I can also only speculate, but the following must be more or less true. Suppose Amazon wants to set a price x*, and Hachette prefers a higher price y* (note the stars). Then, it must be that for each Euro that Hachette sets the price higher than x*, Amazon receives one Euro per sold copy from Hachette. In practice, Amazon and Hachette could have a deal saying: Hachette is completely free to set its price, but Amazon would be happy to compensate Hachette one-to-one for price cuts below a certain baseline price, such as for instance y* (other ones would work too). And in the end, it will be hard to argue that this is anti-competitive just like that. After all, it provides an incentive to set lower prices to Hachette. And Hachette will like that too, because it will then sell more books.
However, I would not jump to conclusions yet. I have a feeling that this will sooner or later come back to us, but by then Amazon will probably have gained market share and the industry will have changed further. The big question is whether authors will be better or worse off. For now, it seems that they are better off, but what will happen once Amazon has all the customers and pushes for high prices and/or low royalties? This could be seen as an abuse of a dominant position, and my hope is that other players will keep offering a competitive alternative to Amazon’s services. I’m thinking of Apple and Netflix here. But this may become increasingly hard, because of network effects that lead to a competitive advantage of platforms that are already big. And Amazon offers all the content on one platform, so it’s not clear what will happen. Exciting!