Three years ago Gary Becker won the Nobel Memorial Prize in Economic Sciences, securing his status as a member of the world’s intellectual elite. Suddenly, he was on everybody’s party list-colleagues at the University of Chicago, the president of the United States, the king and queen of Sweden.
The day the prize was announced, there was a hastily arranged but joyous gathering of faculty and graduate students on campus, with Champagne and backslaps, and several weeks later there was a black-tie dinner thrown by the university at a downtown hotel.
There was, of course, the photo opportunity at the White House. And there was a photo album’s worth of events during the Nobel ceremonies in Stockholm, with King Carl XVI Gustaf issuing Becker a diploma and gold medal, a limousine at his disposal at all times and a police escort to a doctor’s office when a sore throat left him hoarse.
Then there was the raucous celebration in Grant Park.
“Macro! Micro! Who’s the best? Chicago!” the masses chanted. Mayor Daley donned a Maroons baseball cap and a Milton Friedman T-shirt in honor of the third straight Nobel for a U. of C. economist-an unprecedented feat. Becker, Ronald Coase (the 1991 winner) and Merton Miller (1990) joined a kick line with the Luvabulls (temporarily renamed the Luvabull-Markets) and the crowd roared “Four-peat! Four-peat!”
Not quite. The police escort for the sore throat did, in fact, take place. So did the four-peat (Robert Fogel won in 1993). The rally in Grant Park did not.
As academic dynasties go, Chicago’s Hyde Park is home to one of the greatest this century-a fact we were reminded of again in October when the U. of C.’s Robert Lucas Jr. was awarded the Nobel in economics. Yet this is something most of us usually forget by the time the world-renowned economist picks up his Nobel in Stockholm in December. (The ceremony is always on the 10th because the 10th is the anniversary of the death of Alfred Nobel, the inventor of dynamite and founder of the eponymous prize. Nobel died in 1896.)
Unlike the theories of the Nobel Prize winners, this phenomenon of world-wide recognition and local ambivalence can be boiled down easily. Call it the Theory of Obscurity: Dense Subject plus Tweed plus Nobel equals One-third the Fame of a Chicago Bulls’ Assistant Coach. Another way of looking at it: Chicago is big shoulders; the Hyde Park academic scene is bushy eyebrows. Brilliant leaps of logic are not as photogenic as high-flying slam dunks.
For those reasons and others, no one, not even the folks at U. of C., really expects the Nobel awards to be celebrated in Grant Park. But maybe, just maybe, the rest of us-the economic illiterates, the Nobel know-nothings and the “trickle-this” skeptics-have been missing something.
Spend some time with the U. of C. stars and their colleagues, and econ becomes only slightly less esoteric. But the econ dynasty at the U. of C. suddenly seems more tangible. The qualities that make the so-called Chicago School what it is, and the culture that has nurtured these laureates, can be appreciated even by someone who thinks the Phillips Curve is something Shawon Dunston would have trouble hitting.
The Chicago School’s success has been created out of elements we all can relate to: the capacity for hard work that resurrected the city after the Great Fire, the propensity for grand, even radical ideas that produced skyscrapers and deep-dish pizza, a dash of the same irreverence that infused the “Front Page” and Second City and a heaping helping of the competitive spirit that made the ’85 Bears the toast of the city.
This, then, is An Everyman’s Guide to Econ, Chicago Style. Or, Five Reasons to be Proud the Masters of the Midway Kick Butt in a Macro Way.
Reason No.1: They win
Since 1990, the Royal Swedish Academy of Sciences has awarded U. of C. professors the Nobel in economics five times. Going back to 1969, when the Nobel in economics was instituted, U. of C. professors from the econ department, the business school and the law school have won eight times. (Because of shared prizes, there have been 38 winners.)
Sports championships are not yet so commonplace here that we should neglect glorious triumphs elsewhere in the city. During that same time period, the Bears and the three-peating Bulls have four world championships; for the entire history of the World Series, dating back to 1903, the Cubs and Sox have four championships-combined.
Reason No. 2: Tough guys make tenure
Of all the world’s economics programs, Chicago’s has carved a reputation as the roughest, the least forgiving, the most forthright. This is a place where they crunch egos as well as numbers. Econ, at Chicago, is a contact sport.
The most brutal hits are inflicted in seminars (also referred to as workshops), where U. of C. faculty and professors from elsewhere present papers. A sampling from one week (and 24 seminars): “Adaptive Scalar Quantization Based on Quantized Past,” “Efficient Intra-Household Allocations: A General Characterization and Empirical Tests,” “The Transformation of the U.S. Commercial Banking Industry: What a Long Strange Trip It’s Been.”
At other schools these seminars often are poorly attended, genteel affairs. You can expect few in the audience to have actually read your paper beforehand. So, basically, you give a lecture about your work, show some transparencies on an overhead projector and answer a few polite questions.
At a U. of C. seminar you defend your methods, your ideas and your academic honor.
“If I’m going to Harvard, I know I’m going to have twice the overheads because no one interrupts me,” says Tomas Philipson, 33, an associate professor of economics at the U. of C. “I come here, I put up the first slide and there’s five minutes of discussion. I use half the overheads I would use at another place.
“It can be very rough in those seminars. People tell you: ‘This is stupid; why are you doing this?’ You get that in your face.”
Becker, 65, calls these confrontations “the gunfighter’s challenge.”
It is said that Scottie Pippen became a great player because he had to practice against Michael Jordan. Lesser athletes have seen their confidence shattered by Jordan’s merciless competitive streak; but Pippen endured and then blossomed.
The same patterns hold true at the U. of C. If your ego can survive the seminars, you become a better economist.
Chicago economist Steven Kaplan, 35, a professor of finance in the business school, says the last paper he presented aimed its criticism, with typical Chicago audacity, at the work of a colleague. The colleague responded as though it were high noon in Dodge City.
Kaplan recalls the showdown: “I spoke three words, and then he raised his hand, and said, ‘Now, are you saying, based on this paper, that all research in the area is screwed up?’ And then he went on to hold a deposition for the entire time of the seminar. We were going back and forth, and it was a very contentious thing. But when it was over, it was fun. He made some comments that helped.”
U. of C. economists maintain that the gravest insult at a U. of C. seminar is for the assembled academics to listen and not react; this is a deadly sign the work being presented has not stirred their competitive juices or is too easy a target for their deductive firepower. But those who have been subjected to U. of C. grillings do not always see it as a compliment.
One visiting professor-“a very senior guy whom we like,” Kaplan says-was deluged by questions shortly into his presentation. “The next 15 minutes, the guy does not put a transparency up,” Kaplan says. Finally, a senior U. of C. economist halted the slaughter.
“Enough with this foreplay,” he said. “Let’s see some results.”
“Sure felt like a lot more than foreplay,” the visiting professor responded.
Graduate students, even those considered potential stars, also find they aren’t coddled once they arrive on campus. The U. of C. is notorious for flunking out and wearing out its grad students. (“Don’t go to Chicago,” was the advice an academic adviser gave a grad student now at the U. of C. “It’s like a shark attack.”)
Happy hour at The Pub, an on-campus bar. It’s Friday and one sullen grad student says he hasn’t slept much all week. He looks it. An excruciating “problem set” had been due in Becker’s class, the same week Lucas was giving a test. The student sounds shell-shocked. Everyone had told him Chicago would be tough. “There’s so much work, you can’t possibly imagine,” he had heard more than once. Now he’s beginning to comprehend what was meant by that warning and why a smile, more sadistic than sly, had crept across the face of one professor who uttered those words.
Do the school’s Darwinian methods seem cruel to him?
“I don’t think so,” he replies, “because it’s so impersonal. It’s a little absent-minded.”
In other words, for the methods to be truly cruel the professors would have to be cognizant of the students’ feelings or their need for sleep. That recognition, in this student’s view, does not exist.
Reason No. 3: Nothing’s sacred
Some academics are uncomfortable with the U. of C.’s hard-nosed style, and the university has lost some recruiting battles because of it. But it also means that the people who stick around can’t coast on their accomplishments.
“The inactive scholar may be liked and provide useful and appreciated services, but he or she will not be looked upon as one of the warriors,” the late George Stigler (1982 laureate) noted in his “Memoirs of an Unregulated Economist.”
In Room 401 of the Social Science Research Building, where many of the workshops are held, the walls are filled with portraits of some of the world’s great economists. All of these revered academics share one trait: they’re dead.
“There’s no policy about this,” says professor Sherwin Rosen, 57, former chairman of the econ department. “But I think it is part of this feeling that there’s nothing holy and everything is on the table. We can’t argue with you when you’re gone, so then we can put your picture up.”
The first clich a visitor detects at the U. of C. is a variation on the sports fan’s “What have you done for us lately?” At Chicago, it’s, “You’re only as good as your last paper.”
“If a graduate student says something that really works, that’s it. There’s no reason to argue about it,” Philipson says. “And if a Nobel Prize winner says something that’s not right, they go after him. Yes, it matters a little bit who says it, but it’s more what’s said than who says it.”
“In fact,” says Becker, “there’s a little bit of a tendency for some to think, ‘Well, he’s a Nobel Prize winner; we’ll show him what he doesn’t know.’ And that’s good. It keeps you on your toes.”
This may sound suspiciously like the company line, more wishful thinking than day-to-day reality. Yet the string of Nobels gives credence to the notion that ideas, rather than reputations, and clearly conceived arguments, rather than long-held beliefs, are rewarded at the U. of C.
In his memoirs, Stigler wrote that at Chicago “the popular acceptance of an idea was little support for its validity.”
The most famous example from U. of C. lore illustrating the school’s ethos-fighting hard but fighting fair-centers on a 1960 gathering in the Hyde Park home of one faculty member. The guest of honor (or perhaps the intended main course) was Ronald Coase, an Englishman who at the time taught at the University of Virginia. Coase’s theories-focusing on the creation of efficient markets without government regulation-were considered heresy. That evening, 20 U. of C. economists, among them Stigler and Friedman, showed up to let Coase have his say and convince him of his errors.
Friedman led the U. of C. offensive. “Milton would hit him from one side, then from another,” Stigler later recounted. “Then to our horror, Milton missed him and hit us. At the end of the evening the vote had changed. There were 21 votes for Coase.”
The U. of C. economists, it turned out, not only were skilled debaters, they were pretty good listeners. Coase is now 84 and a professor emeritus in the law school. He also is a legend. That night in Chicago, in the eyes of many, he had helped alter the course of economics history.
“The Chicagoans had gone into the room believing, along with liberals, that there were certain, indispensable services government had to provide because markets couldn’t be made to offer them,” David Warsh, a journalist who covers economics, wrote in a Boston Globe column following Coase’s Nobel. “They had walked out with a new vision of what government might accomplish through the clever establishment of property rights. In the next 30 years they persuaded most liberal economists of the acuity of their intuition.”
The Nobels soon followed: Friedman in 1976, Theodore Schultz in ’79, Stigler in ’82 and then the incredible domination of the ’90s.
Warsh, whose econ columns have been collected in a book, says that the Chicago School economists always have been as Chicago in spirit as the city’s authors, brawlers and footballers, most significantly in their no-nonsense way of attacking the conventional wisdom emanating from East Coast universities.
“All these Chicago prizes are very sophisticated punches in somebody’s nose,” he says. As for the Chicago economists: “They’re stuck out there on the South Side and they’ve got nothing else but those ideas.”
Those ideas often have been stuck out there, too. Way out there. “When they started, some people thought they were freaks,” Philipson notes admiringly.
Becker, for instance, is an economic explorer, boldly taking economic constructs into uncharted territory by using them to explain marriage, child-bearing, addiction and discrimination.
Fogel, meanwhile, has used economic data like sticks of dynamite (Nobel would’ve been proud) by exploding perceptions about our nation’s past. He has challenged the belief that railroads were the lone catalyst in the push westward and also argued that slavery was economically efficient, though morally indefensible.
Friedman was the free-market revolutionary whose student, Lucas, fired the final volley in the great siege on the Phillips Curve, which maintained that there was a direct relationship between inflation and unemployment. Lucas showed the limitations of government’s tinkering with the economy. Not only did he hit the Phillips Curve; he crushed it into the nether regions of economic thought.
When Lucas was just starting, however, his ideas were still on the fringes. A leading journal, for instance, rejected his first paper in 1970, and he did not get it published until 1972.
Now that Lucas has his Nobel, does he sense that his Chicago colleagues are treating him with more deference?
A little. “But that’s going to wear off pretty fast,” he says.
Reason No. 4: They’re regular guys mostly
So you’re still not thrilled with the prospect of talking microeconomics with one of the Chicago Nobels? What about talkin’ microbrews?
Miller, who has been known to quaff a brew during a lecture break, occasionally leads beer sampling excursions to let graduate students and alumni taste the wonders of free-market competition in the hop-flavored beverage category.
“They’re so used to this sort of pale, watered-down stuff. The thing I love is to open students’ minds to the possibilities,” says Miller, 72, professor emeritus in the business school. “Of course, in class that’s the teacher’s greatest thrill-to watch the students when the light goes on and they say, ‘Oh!’ “
The U. of C. is not a place where people settle for pale, watered-down stuff-in their beer mugs or in their economic research.
Miller loves football, college and pro, as much as he enjoys beers, foreign and domestic. In the curriculum guide for the graduate school of business, under “related experience,” right after his term as president of the American Finance Association and before his co-editorship of the Journal of Business, Miller lists “Season Ticket Holder, Chicago Bears, 1973-Present.”
“I got a call one afternoon from somebody from the University of Nebraska,” Miller says. “And he said, ‘We’d like you to come down and give a workshop, and I said, ‘Well, my calendar’s very crowded. When did you have in mind?’
“He said, ‘We thought maybe the weekend of the Oklahoma game. I said, ‘Well, I think I can fit you in.’ “
Sports and beer-now there are two things the rest of us can relate to. The Chicago economists relish their sports analogies. Three-peat and four-peat (referring to their own success, naturally) are words actually uttered in the Gothic towers of the U. of C. campus.
Becker, writing a chapter about Friedman for a book, has compared Friedman and Stigler to collegiate football stars: “Like the famed West Point duo of Blanchard and Davis, who were known as Mr. Inside and Mr. Outside, Stigler and Friedman became Mr. Micro and Mr. Macro.” (Stigler, by the way, was a pretty decent tennis player and tutored Becker on his backhand.)
Admittedly, the Chicago economists are not exceedingly adept at small talk. They prefer to discuss economics, public policy and-chests puffed-the triumphs of the Chicago School. “I’ve been in the hallways and two professors walk by and their topic of conversation is how good Chicago is-‘the different ways we’re the best in the country,’ ” says one economist who has taken classes in the business school.
Should this surprise anybody? Success usually breeds at least a little arrogance. (For further proof, again reference the ’85 Bears.)
“Among those U.S. scholars who have been awarded the Nobel Prize in Economics, with one exception, all have either taught at the University of Chicago or been offered jobs at the University of Chicago,” Friedman once wrote. “I think we were right about the exception, too.”
But arrogance does not necessarily mean a lack of collegiality at Chicago. Nobel winners and senior faculty mix (and mix it up) with the junior faculty. “At Yale, I never basically saw the older guys,” says a younger U. of C. economist.
A common gathering area is the Quad Club, a rather stuffy faculty enclave a short walk from both the business school and the econ department, where the drawing card at lunch is robust discourse rather than the bland entres. Here, the debate from that morning’s seminar often continues, or a new one ignites over the latest headline in the Wall Street Journal, or a paper still in progress gets some high-powered consulting.
“The nice part about being a junior faculty member is they’re willing to talk about your work too,” says Derek Neal, 32, an assistant professor in economics.
He remembers the time he and Lucas had a lunch-time conversation about one of Neal’s ideas. It wasn’t long before Lucas had ripped the paper placemat out from under his bowl of soup and was furiously scribbling equations to help Neal out.
Neal’s anecdote is nice. But it still seems hard to believe these guys regularly hang out together-until you visit the Quad Club one day and see Becker in the midst of an intense conversation with another faculty member he collaborates with, Fogel lunching with a colleague nearby and Miller holding court with a large gathering at a round table in his usual spot in the corner. (The topics at the Miller table: Japanese banking, the Brazilian economy and antitrust laws.) Later that day, you are sitting in an associate professor’s office when Miller knocks to ask whether this economist, nearly 40 years his junior, will critique a speech he’s writing.
So what? you say. Aren’t these guys, at base line, conservative idealogues? Don’t they champion everything Big Business and Fat Cat Republicans hold dear?
And if so, what’s so regular about that?
That’s certainly one way of looking at it. The Chicago School still, inarguably, is anti-intervention and pro-marketplace. Viewing it from another angle, though, Chicago economists are just as wary of government as the average 1990s voter and more willing than you’d expect to give credit to Americans for being able to think for themselves.
Lucas, 58, won his Nobel for his theory of “rational expectations,” which in basic terms means he showed that individuals, households and businesses anticipate certain actions-such as government economic policies or even car companies’ price discounting-and react accordingly.
Friedman, meanwhile, has been aligned with such conservative notions as school vouchers or the negative income tax, which would give direct cash payments to the poor in lieu of various welfare and public housing programs. Underlying both those views, however, is a belief in the free individual as well as the free market.
“The chief opposition to this proposal has come from the many people who believe that the poor would spend most unwisely,” Stigler wrote.
Friedman’s high profile and recurrent politicking, however, may have made it too easy for the notion to take root about a Chicago School agenda. (Friedman, 83, now is a research fellow at the Hoover Institution, Stanford University, and a professor emeritus at Chicago.)
“Because of Milton’s dominance-and I won’t deny that Milton was the most influential teacher I ever had-we’re thought of as a right-wing place,” Lucas says.
“And I would say the place is pretty unpolitical. A lot of my colleagues, I wouldn’t be able to tell you how they voted in the last election. I’m sure they didn’t all vote for Bush.”
Reason No. 5: These guys love their work
The second pervasive clich at Chicago (or perhaps it’s clich 1A) is that the faculty members and top students “eat, breathe and sleep economics.”
The plus side to this is that professors rarely are alone when they put in extra hours late at night or on weekends. Or, as Philipson says, “If I e-mail to a senior guy in the department at 1 a.m., I get it back in five minutes. People are consumed by this stuff.”
The downside is that at 1 a.m. they’re with their computers, not their spouses.
A story that has filtered down to the graduate students involves a younger faculty member attending a meeting that went longer than expected. Finally, he announced he was leaving because his wife was waiting for him in a car downstairs.
“I wouldn’t want her to divorce me,” he said.
“Why not?” retorted a senior faculty member. “You’d fit in better then.”
Certainly such zealous devotion to work can take a personal toll. (For Lucas it also took a financial toll: Half his million-dollar prize money for the Nobel goes to his ex-wife as part of a 6-year-old divorce settlement.)
But inside the walls of the university this intensity creates an excitement, a sense of anticipation that there are new economic worlds that can be conquered. You cannot spend time around the laureates and their less-famous colleagues without feeling that these people genuinely believe they are lucky to work at something they love in a place that is intellectually stimulating.
How else to explain the most obscure sports analogy of all, from Philipson?
“A lot of weekends I work, but it’s not like I feel I’m at work,” he says. “It’s like windsurfing all day long.”
At the U. of C., there is none of this retiring and unretiring stuff, a la Sandberg or Jordan. There has never been a Nobel economist who quit econ, saying he’s accomplished everything and the thrill is gone, so now he’s going to study astronomy. There has never been an economist who, feeling slighted, sat out the last 1.8 transparencies of a seminar.
Even if they are less adored than the celebrities who dunk or tackle or bat, the Chicago economists seem to appreciate what they have.
“The greatest thrill is to be able to do what I’ve been doing since the mid-1950s,” says Fogel, 69, who is in the business school.
“I can’t tell you what a thrill it is to get a printout and say, ‘By God, it’s true! That’s the way it works!’ If you want to torture me, you’d tell me I don’t get to go work today.”
Talk about a work ethic: Fogel puts in a Wannstedtian 80 hours a week, and he’s working on five books at one time-about what the entire ’85 Bears team produced.
How can you not root for a guy like that?
CHICAGO’S ODDS IN 1996
Robert Lucas Jr. was happy about winning the 1995 Nobel in economics. But he couldn’t have been too surprised. Going back 10 years, his name-along with Gary Becker’s, the 1992 winner-was being mentioned regularly around the University of Chicago as a strong candidate for laureatehood.
Lucas moved up this year to become, literally, the odds-on favorite, judging by the picks in the annual buck-a-bet Nobel Prize Pool run by a University of California-Berkeley economist.
“This year it was pathetic, I got only six bucks for betting on Bob,” says Anil Kashyap, 35, associate professor of business economics at the U. of C. “The guy who runs the pool told me he’s been doing this for 13 years and the very first year Lucas was getting votes even though he was only 45.”
This is the third straight year Kashyap has predicted correctly, though he frankly acknowledges leaning heavily on the hunches of Nobel laureate and business school colleague Merton Miller. In 1994, he didn’t place his bet in time. In 1993 he accurately prognosticated the dual selection of Chicago’s Robert Fogel and Douglas North of Washington University and won $75.
The smart money in ’96, however, won’t be on Chicago. “Regrettably, Chicago’s run is kind of over-at least for a while. Maybe 10 years,” Kashyap says.
Still, U. of C. economists and people outside the department point to plenty of Chicago professors with Nobel potential. Though these economists are in their early or mid 50s, they still might be considered too young by the Royal Swedish Academy of Sciences; including Lucas, only 4 of the 38 recipients have been in their 50s.
Even if there is no Nobel in Chicago’s immediate future, there also is no indication that the U. of C. econ tradition is losing steam.
Becker, who learned from laureates Milton Friedman and George Stigler, doesn’t see a dearth of talent. In the 1980s, Stigler predicted Becker and Lucas would eventually be awarded Nobels. A decade later, Becker is making similar claims about younger Chicago economists, though without naming names.
“We’re not finished with winning,” Becker says. “I won’t start listing the names because I’m afraid I’ll miss somebody, but there’s no question we have a number of people who will win the Nobel prize in this department.”
THE NOBEL NUMBERS GAME
8 Nobel Prizes in economics won by University of Chicago professors.
7: U. of C. Nobel winners besides economists.
2: Nobels in economics won by Harvard University professors.
0: Nobels in any field won by Northwestern University faculty.
1: Heisman trophies won by U. of C. players. (In 1935, the first year of the award, it went to Chicago’s Jay Berwanger. The trophy is modeled after him.)
0: Heisman trophies won by Harvard.
10: The number of people, besides a spouse, a Nobel laureate can bring to the ceremonies in Stockholm.
63: Milton Friedman’s height in inches, the shortest of the U. of C. economists to win the Nobel.
76: George Stigler’s height in inches, the tallest of the U. of C. Nobel economists.
75: Calls from reporters fielded by U.of C. news office the day Robert Lucas Jr. won the 1995 Nobel.
25: Calls from foreign publications fielded by U. of C. the day Lucas won.
301: The number for Gary Becker’s “Price Theory” class for grad students. It’s the same class that eventual Nobel winner Becker took from Friedman.
67: Line in Becker’s curriculum vitae where Nobel Prize is mentioned.
25: Line in Robert Fogel’s curriculum vitae where Nobel Prize is mentioned.
15: Line in Merton Miller’s curriculum vitae where Nobel Prize is mentioned.
138,000: Dollars received by Friedman for winning in 1976.
233,333: Dollars received by Miller for a three-way Nobel split in 1990.
412,000: Dollars received by Fogel for two-way Nobel split in 1993.
1,000,000: Dollars received by winner Ronald Coase in 1991. Lucas received the same amount in 1995. (The amount varies with Nobel fund investment results.)
1,200,000: Dollars received by Becker for winning in 1992.
10,000: Minimum fee, in dollars, an economist can command per speech after winning the Nobel.
