Invasion of the European Economists
A generation of free-market exiles has made the U.S. campus its home.
Courtesy of the University of Chicago, Booth School of Business
One-third of the faculty of Harvard Universitys economics department hails from Europe. At the University of Chicagos Booth School of Business, half of the finance departments faculty is European. And these schools arent alone: European economists are overrepresented at all first-tier American universities and have had a huge influence on economic thinking, doing cutting-edge research in areas ranging from modeling financial markets to assessing risk.
These academicsmost of them young rising stars escaping the mediocrity and politicization of economics departments in their countries of originsee top American schools as the best places to study and teach. When one wants to become a real economist, to accumulate knowledge and recognition, one has no choice but the United States, says Chicagos Luigi Zingales, an Italian who is a leader in the hot field of financial regulation. Hes rightfor the time being, anyway.
Many of the Europeans first came to the U.S. as graduate students, frustrated by the limited options offered by European universities. I was initially trained at Brussels Free University, says Zingaless colleague Marianne Bertrand, who has been at the Booth School since 2000. But when I decided to go for a Ph.D. in the 1990sshe earned hers from Harvard in 1998the U.S. was the only sensible destination. Getting a doctorate in her native Belgium was unappealing, she explains, because students were left on their own, with little academic support or oversight; many Ph.D. candidates she knew became discouraged after a few years and gave up. In the U.S., by contrast, the university was geared toward the student. Professors were approachable; research facilities, including libraries, were first-rate; and financial and other assistance was readily available.
Thirty years ago, when he was an undergraduate studying economics at Milans prestigious Bocconi University, nobody even knew what an economics Ph.D. was, recalls Alberto Alesina, who earned his M.A. and Ph.D. from Harvard in the mid-eighties and today is a tenured professor there, an expert in macroeconomic theory. In a pre-Internet era, European students werent aware of all the possibilities in the U.S.it was hard even to find application forms. Alesina applied to Harvard, MIT, and Princeton only because he had heard of the schools. As recently as ten years ago, notes Christian Hellwig, a young German economist at UCLA, no German university was delivering an internationally recognized Ph.D. in economics. (Hellwig did his graduate work not in the U.S., however, but at the London School of Economics.)
Nor did Europe offer much appeal once the doctorate was in hand. Zingales tried to return to Italy in 1984, after completing his degree at MIT, but the best job offer he could get was a mediocre research assistantship at a second-rate university. Twenty years later, he might have won tenure at the school, he says, but only if he had the right connections. Even the best Italian universitiesand this was true of European schools in generalwere dominated by autocratic and hierarchical traditions. Without belonging to the right academic network and having the right sponsors, career progress was difficult, if not impossible.
Obsolete and disproved Marxist and socialist thinking also remained strong within European universities, including in economics departments. Many young economists, scientifically oriented and so recognizing the superiority of free markets, found the climate intellectually stultifying. It remains the case that most French and Italian universities teach economics as a philosophical subjectwith opinions mattering as much as factsnot a scientific subject. A Keynesian, statist perspective still dominates most European curricula: free-market professors are an embattled minority.
American economic departments wereand aremuch more rigorous and nonpartisan by comparison. Yet isnt there an ideological opposition between, say, the University of Chicago, known as a cradle of free-market theory, and Harvard, a supposedly liberal campus? This perception hasnt much to do with reality, Bertrand responds. We are scientists, above all; ideologies do not dictate our research or our teaching. Alesina, a strong proponent of markets, agrees: The notion of Harvard being liberal and Chicago free-market doesnt coincide with academic reality.
Another comparative advantage of top-tier U.S. departments is their comprehensive quality. There is not one field, says Alesina, where you could not meet a leading expert right there on campus. This holds only for the leading schools, of coursemaybe 20 have reached the critical mass of students and faculty to cover the whole range of economic researchbut for fertile concentrations of talent, nothing beats them. Small wonder that since 1980, 39 of the 47 Nobel Prize winners in economics were professors at American schools. (Of those 39, by the way, several were originally European, including the University of California at Berkeleys Gérard Debreu and MITs Franco Modigliani.)
The best European Ph.D. students also remained in the U.S. for a more down-to-earth reason: very generous job offers. I initially had no intention to become a university professor, or to stay in America, says Bertrand. While studying at Harvard, though, she discovered that an academic in the U.S. could have a financially rewarding careerindeed, that in America, unlike in Europe, the best economists took jobs not with the government but with universities. She accepted the position at Chicago and has become a star in the field of labor economics. Bertrand expresses one reservation about her employer: she feels somewhat isolated from the real world. This has a lot to with the Booth School, she adds, because its main purpose is research; were she at Harvard, which is more policy-oriented and has a long tradition of scholars moving back and forth between the government and the university, she might feel differently.
Columbia Universitys Pierre-André Chiappori, a citizen of Monaco, confirms the financial benefits of teaching in the United States. A tenured professor at a major American university, he observes, will likely earn four times what he would make in Europe. And elite American universities will aggressively pursue top talent, as Chiapporis personal experience shows. Until his late thirties, he was a respected researcher at Pariss National Scientific Research Center, working in financial risk assessment. At first, the U.S. wasnt on Chiapporis mind as a career option; indeed, he hardly knew America. But in 1992, he delivered the keynote address at a European conference attended by the University of Chicagos leading economist, Gary Becker. Impressed, Becker quickly called Chiappori and said it would be an honor to have him at Chicago. Thats something hard to imagine happening in France, says Chiappori. Chicago made an offer I could not resist, one that included a position for his wife, Kristina Orfali, a medical ethicist. Why, then, would Chiappori leave Chicago in 2006 and land at Columbia? Once again, my wife and I received an offer we could not resist, he says.
Academic life in the U.S. is determined by competition at all levels, he adds. Its often said that American universities recruit only the best among the Europeans. I would say instead that we become better because we are immersed in permanent competition. I would have been better at what I do if only I had come earlier to the U.S.
One more benefit of American universities is competent administration. Economists dont require equipment as sophisticated as biologists or physicists, but they do need working computers. When my computer is down at Columbia, it gets repaired in an hour, Chiappori tells me. In Paris, it would take a month. Efficient management also helps secure the research grants that are seminal to cutting-edge academic work. In France, I could get grants, but it would require weeks of bureaucratic work, he explains. In the U.S., one can focus on the substance of the research request, and the administration then takes over and smooths the bureaucratic process for you.
The leading American universities may have the edge that Chiappori and others describe, but they are losing it, Hellwig claims. A well-regarded scholar of monetary and financial institutions, Hellwig has decided to leave UCLA and return to Europenot to his native Germany, however, but to Toulouse Universitys department of economics in southern France. We Europeans look at a global map, he says, and we see new centers of excellence emerging in Europe, though not necessarily in our countries of origin. Toulouse is one such center, thanks to the imaginative leadership of its president, Jean Tirole (formerly of MIT). Tiroles cultivation of financial support from local companies has enabled the public university to make an offer that competes with Hellwigs wages at UCLA. Bonn and Mannheim Universities in Germany, Bocconi in Milan, and Pompeu Fabra in Barcelona are other rising European centers in economic research, and the Paris School of Economics could soon follow.
Many European academics would prefer to live in Europe if they were offered a satisfying position, says Hellwig. Toulouses bid appealed to him not only because it represents a satisfactory academic position but also because it enables him to live a life he craves, far from the constant U.S. pressure for results. Further, technological advances have made belonging to a talent-rich U.S. economics department less essential to academic cross-fertilization. I can live in France and still communicate on a daily basis with any of my colleagues in the world, Hellwig says. He also can fly to any significant academic symposium he needs to attend.
Even more challenging to U.S. research leadership are the European Research Councils new research grants. It remains a Kafkaesque nightmare to get them, Hellwig says, but for twice the hassle you obtain four times as much as in the U.S. for a similar project.
Is Hellwig an isolated case, or does he portend a more general trend? Ten years ago, Alesina maintains, returning to Europe meant that you had failed in the U.S.; this is no longer the case. Europe is awakening to a challenge, agrees Zingales. Bertrand thinks so, too, though she notes that European schools arent yet ready to make attractive offers to professors spouses as well.
American schools could find themselves financially squeezed, too, leveling the playing field somewhat with Europe. Before the current financial crisis, U.S. universities endowments had swollen to gigantic size, encouraging many to go on a building binge and recruit faculty with abandon. That time is over. With endowments massively diminished by the downturn, most schools have frozen faculty wages and downsized the administrative workforce, and research grants are shrinking. But while he sees some difficult years ahead, Alesina, for one, doesnt think that U.S. universities will lose their edge. It will take years before European universities can really compete, he says. The mistake in Europe is to try to improve mediocre existing universities, Zingales believes. It would be more efficient to create brand-new elite institutions. But this would collide with the European passion for equality, which has kept universities open to every student, regardless of ability, and made selection a dirty worda major stumbling block on the path of higher academic achievement.
Could Asia be the next destination for wandering economists? China and South Korea are pouring money into vast new universities, but size does not guarantee quality. At best, Asian schools may be able to lure back some of their U.S.-trained economists to build internationally recognized programs. Like the improvement of Europes schools, though, such a process will take years. Further, Alesina has noticed at Harvard that even when good Asian economics students return home, they tend to join the government or private firms rather than pursue academic careers.
Still, competition is clearly growing. Traditionally, universities competed to attract the best teachers, researchers, and graduate studentsand American schools usually won the competition, helping make them the worlds leaders in economics and many other fields. They soon will have to fight harder to keep the upper hand. And the battle for talent, its worth adding, will increasingly be waged at the undergraduate level, with the global competition for intelligence starting at a younger and younger age. For years, economists have studied the effects of globalization and worldwide markets; more and more, theyre feeling those effects themselves.
Guy Sorman, a City Journal contributing editor, is the author of numerous books, including Economics Does Not Lie.