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Chuck Whiteman ('81) has found himself right in the middle of the intersection of politics and economics in Iowa -- state revenue forecasts. In Iowa, as in many states, state spending is constrained by forecasts of state revenues. Chuck, as Director of the Institute for Economic Research at the University of Iowa, has been an active participant in the determination of the Iowa forecast.
As Chuck explains, the system of revenue forecasts in Iowa gave rise to some perverse incentives. In January the Governor would make spending proposals based on the December forecast. The Governor clearly had an incentive for a high forecast while opposition politicians would want a low estimate to hamstring the Governor.
The new forecast in March called for a reversal of roles. An even higher forecast would allow legislators to initiate their own programs while the Governor would be the one voters would hold responsible if the revenue forecast was too optimistic. Forecasting errors in 1991 lead to a change in the rules to limit spending to 99% of the December forecast.
Chuck's work is notable for its uses of modern econometric techniques. Three Bayesian vector autoregressions focus on economic conditions in Iowa while a fourth is used to generate the revenue forecast. The economic conditions VARs are estimated using an equation-by-equation mixed estimation procedure under "Minnesota"-type random walk priors. Predictive densities for the revenue forecasts are calculated by Monte Carlo methods, and forecasts are produced under an asymmetric loss function that weighs deficits more heavily than surpluses.
Complete details about these procedures and a comparison of Chuck's forecasts to the official forecasts can be found in "Bayesian Prediction Under Asymmetric Linear Loss: Forecasting State Revenues in Iowa," in Modeling and Prediction: Honoring Seymour Geisser, Jack Lee, Wesley Johnson and Arnold Zellner, eds., (Springer 1996) pp. 149-166.
The December revenue forecast is determined by the Revenue Estimating Conference (REC), three individuals including the Director of the Iowa state Department of Management and the Director of the Iowa Legislative Fiscal Bureau. The Conference holds quarterly hearings where Chuck presents his forecast for total tax receipts. The forecasts Chuck presents are published by the Institute for Economic Research in its quarterly publication Iowa's Economic Forecast. Both of the state officials come prepared with spreadsheets detailing their forecasts for each of 19 separate taxes-- e.g., income, cigarette, beer, gasoline, inheritance -- but the methods used to generate these forecasts are not public.
Chuck sees two advantages to his approach:
First, because the official state forecasters see predictive densities instead of point forecasts, all of the unquantifiable expertise they bring to the forecasting effort can be brought to bear on the exercise. Second, the predictive densities and distributions have made probabilistic assessments of revenue forecasts possible, and have contributed to the recognition by all those involved that not only are shortfalls and surpluses not equally costly, but that it is possible to do something about it.
It is news when the REC forecast differs from his. After a forecast by the REC for fiscal '91 of 6.1% revenue growth, an estimate that exceeded the 90% quantile of Chuck's predictive density, the Des Moines Register reported that there was a "90 percent chance that the REC forecast is too high." Chuck thought it was the only time 'predictive distribution' would be used in a statewide newspaper. But following his forecast last June that showed no dramatic changes for the Iowa economy, the front page of the business section of the Register carried a story that said
As an economist, Charles Whiteman has perfected the use of phrases like 'predictive distributions,' 'asymmetric linear loss function' and 'Bayesian vector auto-regression'. But he doesn't need five-dollar words to sum up the latest news about the Iowa economy. "Ho-hum," he said. "More of the same.'"
The 1991 REC forecast was not only wide of the mark but figured prominently in state labor negotiations. Chuck reports that "In the first few months of 1991, the state entered into collective bargaining with its three major unions. The state contended that it did not have the money to pay for raises in the 4 - 6% range. Impasses were reached in each negotiation, and in binding arbitration, the state called me to testify (on the basis of the 4.3% revenue growth forecast) that the revenue situation was dire. Under cross-examination, the Director of the Department of Management (one of the principals in the 6.1% REC forecast) would testify that although the state had no money, the 6.1% official forecast was likely to be realized. Each of the arbitrators decided in favor of the unions--each cited the contradictory stance of the state as decisive."
Ray Riezman ('77), department chair at Iowa, says that Chuck has "not only vastly improved the quality of forecasts of Iowa state revenue, he has at the same time produced a tangible example of how frontier research in economics can lead to tangible and quantifiable benefits. In an era in which research is being besieged from many directions here is an example which shows one of many benefits of first rate academic research. "
What else does the Institute for Economic Research do? Chuck reports that he is involved in outreach activities that surround the forecasting activity-- speeches etc. The work with revenue forecasts has resulted in calls from the state for more general economic advice. The Institute also develops a forecast of the higher education price index that is used by the Iowa Regents for budgeting. "Almost all of the logistics for the Summer Meetings of the Econometric Society last year were handled by ex-Minnesotans, Beth Ingram ('86) [and co-director of the Institute] and myself. Also, this spring, we ran the first of what we hope will be an annual 40-person conference (sponsored by a gift to the economics department from the estate of Clarence Tow.)" If all this isn't enough, Chuck is preparing to take over as department chair from Ray Riezman.
Margaret Hagert, who worked for the department from the late 1950s to 1982 when she retired, served as graduate program secretary and mother to generations of graduate students. She now lives in Grand Forks, N. D., but sat out the recent floods in a hospital in Fargo for cancer surgery. She caught pneumonia when she left the hospital, and still faces chemotherapy. But she is as cheerful as ever. Her apartment building got only a few inches of water in the garage under the building during the flood. Because her husband, Franklyn, passed away last winter, Margaret's daughter, Charlotte, is staying with her as she recuperates; and she has some other family in the area. Margaret would enjoy hearing from alumni:
Apartment 216, 2396 27th Ave. S.
Grand Forks, ND 58201
phone 701 795 5870
To Ed Coen, the proud father and father-in-law of "Fargo" Oscar-winners. His sons Joel and Ethan won the Oscar for best screenplay and daughter- in-law Frances McDormand won the award for best actress. On Oscar night Ed and Rena watched the ceremonies on TV like the rest of us as they baby-sat their grandchildren.
To Ramon Marimon for the birth of a son. Wife Giorgia Giovannetti gave birth August 23, 1996 to Pau on the Isola d'Elba. Ramon and Giorgia also have a daughter, Laura.
To Anne Krueger for her election to the National Academy of Sciences last summer. Anne is currently at Stanford University.
To Scott Maynes for his active retirement. He and his wife Blanche traveled to Argentina last November (where 30 years ago he spent time at the Instituto Di Tella). As we write this, Scott is on a rafting trip down the Colorado River in the Grand Canyon with a son and daughter.
Taesung KimApril 1, 1958 - March 13, 1997
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The Department was greatly saddened this spring to learn that Taesung Kim had
died of a heart attack on March 13. Taesung received his Ph.D. from Minnesota
in 1987, and was on the faculty of Seoul National University at the time of his
death.
As a student, Taesung learned easily and voraciously. He wanted to learn everything any of us knew. In the course of doing so, he co-authored two articles on the demand theory of intransitive preferences with Ket Richter, and two articles on selection theorems with the mathematician Karel Prikry and Nicholas Yannelis of the University of Illinois, who had visited the Department for two years. His dissertation proved the impossibility of locally stable Nash mechanisms for implementing Lindahl equilibria in public goods environments. Taesung worked on this topic with Jim Jordan, whom he accompanied on a visit to Northwestern University for the 1985-86 academic year. Taesung's mastery of such disparate areas of mathematical economics was reminiscent of his subsequent Caltech colleague, Kim Border ('79).
On finishing his Ph.D., Taesung was hired as an assistant professor by the California Institute of Technology. Kim Border describes Taesung's hiring seminar as follows:
His job talk here was a masterpiece. He wrote down the outline in the upper right hand corner of the board, and proceeded to check off topics as he completed them. An hour later he finished in the lower left hand corner of the blackboard, without having erased anything. At the end, I was convinced that I understood the results in his dissertation well enough to prove them myself. This feeling vanished the next day, as I realized how deep and subtle it was.
While at Caltech, Taesung continued his fruitful collaboration with Karel Prikry and Nicholas Yannelis, and also wrote on revealed preference in choice under uncertainty.
In the summer of 1990, Taesung returned home to Korea to accept a position at Seoul National University, where he had received his BA in economics in 1981. Taesung maintained close ties with American colleagues, returning to visit Caltech for the 1993-94 academic year, and initiating a new research project with Nicholas Yannelis on games of incomplete information with many players.
Taesung's death came only a few weeks after returning to Seoul from a two-month visit with Nicholas Yannelis at Illinois. He is survived by his wife and two daughters.
James Jordan
Spring 1997
Friends can contact Taesung's wife, Young-Eun Kim, at:
Young-Eun Kim
Yong-In Kun, Soo-Ji Meon
Samsung 1 Cha Apt., 101-305
Kyung-gi do, 449-840
South Korea
S. Rao AiyagariNovember 9, 1951 - May 20, 1997
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On the evening of May 20th, I learned that Rao had suffered a fatal heart attack late that afternoon while playing tennis. I have known Rao well since he first enrolled for graduate study at Minnesota.
I was DGS when Rao applied for admission to the Minnesota graduate program. I remember being influenced by the fact that he had already published, with M. N. Mahanta, a paper in physics, "On the equivalence of the Einstein-Mayer and Einstein-Cartan theories for describing a spinning medium." Rao was one of the stars of our program. I was Rao's advisor, but it was clear even then that I could learn a lot more from him than he from me. As it turned out, one of Rao's first papers in economics, which grew out of his thesis, was entitled "Observational equivalence of the overlapping generations and the discounted dynamic programming frameworks for one-sector growth." Because Rao obviously knew the meaning of equivalence prior to coming to Minnesota, it was clear that we, at least the macro people, taught him very little.
Rao's first job was at Wisconsin. He seemed not to be very happy there, in part because he was not yet married to his wonderful wife Jyotsna. In any case, after several years there, he joined the Research Department of the Federal Reserve Bank of Minneapolis, where he remained until this past academic year.
Rao had very productive years at the Bank. He finished work, begun at Wisconsin, on the properties of equilibria in overlapping generations models with long-lived agents. His many other contributions include papers on the relationship between overlapping generations models with bequest motives and models of infinitely lived agents, on transactions costs and the equity premium, on capital taxation, and on a variety of other topics in intertemporal economics. His collaborators included Fernando Alvarez, Toni Braun, Larry Christiano, Zvi Eckstein, Martin Eichenbaum, Mark Gertler, Jeremy Greenwood, Ellen McGrattan, Ray Riezman, Steve Williamson, and Randy Wright.
Beginning in 1989 and up to 1994, I had the good fortune to collaborate with Rao on several papers stimulated by the 1989 paper of Nobu Kiyotaki and Randy Wright on a random matching model of money. That collaboration was very important for me and I regret never expressing to Rao how important it was. I continue to build on the work we did together and on suggestions that Rao made in the course of our collaboration.
For quite a while, I and others who knew Rao and his work thought that he was not getting the recognition in the profession that he deserved. That changed with his appointment to the Rochester Economics faculty last year. His wife and his colleagues at Rochester report that he was very happy at Rochester.
Rao is survived by his wife Jyotsna, his eight year old son Dileep and his four year old daughter, Meera. Although Rao and I rarely discussed our personal lives, I always sensed that he shared a wonderful family life with Jyotsna and the children. That more than anything makes his sudden death especially painful.
Neil Wallace
May 29, 1997
Friends can contact Jyotsna at
Jyotsna Gorti
39 Fall Meadow Drive
Pittsford, New York 14534
Martin BronfenbrennerDecember 2, 1914 - June 2, 1997
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Martin Bronfenbrenner passed away in early June at his home in Durham North Carolina. Bronfenbrenner had been a member of the Minnesota department from 1958 to 1962. He is best known for his work in macroeconomics, international trade, income distribution, and comparative economics.
Bronfenbrenner received his Ph.D. from the University of Chicago in 1939. He came to Minnesota after having taught at Wisconsin and Michigan State as well as having worked for the US Treasury, the Federal Reserve, and the United Nations. When he left Minnesota, Bronfenbrenner moved to Carnegie-Mellon (then Carnegie Tech) where he served as department chair for five years. He moved to Duke in 1971 when he was named Kenan Professor of Economics. He retired in 1984 but continued to teach, most recently courses on "The Japanese Economy and Its History" and "International Economic Policies."
Bronfenbrenner was a prolific scholar with five books and about 250 published articles, reviews and comments. Fluent in Japanese, he also published a volume of fiction, Tomioka Stories, based upon his experience as a language officer in occupied Japan.
He served as vice president of the American Economics Association, president of the History of Economics Society and president of the Southern Economic Association. In January 1997, the AEA named him a Distinguished Fellow. He was a Fellow of the American Academy of Arts and Sciences, served on the editorial board of a number of professional journals, and was a frequent contributor to the editorial pages of the Durham Herald-Sun.
Anne Krueger, his friend and colleague at Minnesota and Duke notes, "He had tremendous intellectual curiosity and an incredible range, breadth and depth to his work."
Bronfenbrenner is survived by his wife, Teruko Okuaki Bronfenbrenner; a son, Kenneth; a daughter, June K. Bronfenbrenner-Walker; and a grandson, Brian J. Walker.
Friends can contact Teruko at
Teruko Bronfenbrenner
The Forrest at Duke
2701 Pickett Road, #3048
Durham, NC 27705
Memorial contributions should be sent to the
Martin Bronfenbrenner Endowment Fund
Office of Gift Records
Box 90581, Duke University
Durham, NC 27708.
Matthew B. Canzoneri ('75)
The New Transatlantic Economy, edited with W. J. Ethier and V. Grilli. (Cambridge University Press, 1996)
Worried about the earnings on your retirement investments? Perhaps it will help you sleep a bit easier knowing that Marcus Alexis ('59) is a Trustee of TIAA (Teachers Annuity and Assurance Association).
The daughter of L.S. Fan ('65) and C.M. Fan ('72) has been chosen to join the St. Paul Chamber Orchestra next season. Frieda Fan (BA '93, Harvard, MM '96, Indiana) is a violinist. The Fans report that they now plan to travel to the Twin Cities more often from their home in Fort Collins, Colorado, where they teach at Colorado State.
Michael G(arson) Sher (MA '72) (Ph.D. Finance '94)has moved from the Department of Finance at Minnesota to the Department of Accounting and Finance at the University of Auckland in New Zealand.
Bon Ho Koo ('72) has been named President of the University of Ulsan in Ulsan, Korea. He was formerly the head of the Korea Development Institute (KDI). Bon Ho was in Hawaii last August and played golf with Anne Krueger on the island of Maui.
Francisco Thoumi ('73) is spending this year on a fellowship at the Woodrow Wilson Inter- national Center for Scholars, where he is writing a book on the illegal drug industry in Bolivia, Colombia, and Peru. He recently spent 1 1/2 years in Colombia running the Center for International Studies at the Universidad de Los Andes. Francisco can be reached at fthoumi@sivm.si.edu.
George Tauchen ('78) has been named the William Henry Glasson Professor of Economics at Duke University effective July 1. William Glasson was a long time Duke professor who served as chair of the department and Dean of the Graduate School. Congratulations George.
Kim Border ('79) recently wrote that he is "currently the Executive Officer for the Social Sciences, which is the closest thing we have to a department chairman at Cal Tech. It means that I write a lot of memos for the division chairman, who would be called a dean at other universities."
George McCandless ('81) married Maria Rosa Furmento in March in Buenos Aires. He is still at the University of San Andres in Victoria, Argentina and has been appointed Academic Director (a kind of dean). George's e-mail is mcc@udesa.edu.ar.v
The Stutzer Bearcats softball team went out in a blaze of glory by beating the Minnesota Varsity Football softball team 26-6 in this spring's playoffs. It was the last season with Mike Stutzer (`81) at the helm; Mike is moving to Iowa City this August where he will be Professor of Finance. Jeff Bailey (MA `78) will be taking over the team next year supported by MN grads Bob Dildine (MA `86) and John Yunker (MA `75).
Len Burman ('85) has moved to the Urban Institute in Washington DC from the Congressional Budget Office. Len can be reached at lburman@ui.urban. org.
Miguel Sebastian ('85) has moved to Madrid's Banco Bilbao Vizcaya where he is the chief economist. Miguel was formerly the General Director of Intermoney, and he is also teaching at the Universidad Complutense de Madrid.
David Eagle ('86) received tenure at Eastern Washington University in the spring of 1995 and moved with his college (of business and public administration) from Cheney to Spokane. His current research includes a continuation of work with Dale Domian ('87) on inflation-indexed bonds and price-level-adjusted mortgages. David writes, "Given that the U.S. Treasury is going to soon be offering inflation-indexed bonds, Dale Domian's and my research has gone from a relatively obscure topic to one that is hot. This presents a new challenge for Dale and me: how to take advantage of a topic of ours becoming "hot." Time will tell how well we'll succeed. I now have two daughters, ages 8 and 12, and am still married to Lisa Conger. My family also moved to Spokane when the college moved there." David can be reached at deagle@ewu.edu.
Kathy Combs ('88) will be visiting Minnesota a second year, returning to Cal State-LA in June 1998. She can be reached at kcombs@atlas.socsci.umn.edu.
Selo Imrohoroglu ('88) and his wife Ayse ('88) wrote from Turkey recently, where they are on sabbatical at Koc University. "It's been fun and not so unproductive. The time that the kids and us spend with family and friends is something we'll all miss when we get back to LA in August... The kids were fluent before we came here but now they can read and write Turkish which is much easier to learn than English. Burcu is 11 and she'll reach my height soon; Hakan (their son) is 7 so I like to see him as a baby."
Eric Leeper ('89) has moved from the Atlanta Fed to Indiana University. In a recent story about consumer confidence, Eric was quoted in the Minneapolis Star-Tribune to the effect that consumers don't buy goods simply because they feel good. Explaining his role as media pundit, Eric writes "The funny thing about this is that some years ago I wrote a paper about whether consumer confidence had any marginal predictive value, once other readily available information is taken into account. It's a really mindless little exercise I did. I've been interviewed twice by the WSJ, once by the Atlanta paper, given a special briefing on the topic, and spoken to the Atlanta Board of directors. If only my research were as widely known."
Mark Huggett ('91) is now at ITAM (Instituto Tecnologico Autonoma de Mexico) in Mexico City at the Santa Teresa campus. Mark was formerly at the University of Illinois. He can be reached at huggett@masters.ster.itam.mx.
Also affiliated with ITAM is Gerardo Jacobs ('92) who recently took a position with the Banco de Mexico. If Gerardo would answer his e-mail I'd ask him if he's still using that old monetary and banking text of ours to implement monetary policy! Gerardo can be reached at gjacobs@eniac.rhon.itam.mx.
Todd Kaplan (MA '91) spent last summer in New York City at Coopers and Lybrand in midtown Manhattan in the Emergent Solutions Group [http:// www.colybrand.com/esg]. Todd writes, "The group mainly works with stuff related to the Santa Fe Institute. My main focus there was developing a model of real estate booms and busts. To do this I developed a model that was based on the Kiyotaki-Moore credit cycles model (and some work of Francois Ortalo-Magne ('95)). It is still preliminary stuff but I hope to compare it to what happened in Rhode Island when their credit unions collapsed. Todd is now at Ben Gurion University and can be reached at todd@bgumail.bgu.ac.il.
Montree Socatiyanurak (MA '91, Ph.D. Agricultural and Applied Economics, '91) is now Assistant President of Sukhothai Thammathirat University in Nontaburi Thailand. Montree formerly worked for the government in Bangkok and still resides there.
Doug Gollin ('96) writes that after his first year at Williams he is "doing some research with CIMMYT, the international agricultural institution that developed the Green Revolution varieties of wheat and maize. I'm doing an interesting bit of research for them on the value of genetic resources in wheat. It's a pleasant break from both macro theory and liberal arts teaching, and it serves as a good reminder of why I got interested in development economics."
We continue to add to our web links. Wendy Williamson has redesigned the ERC web page. You can help her build a set of on-line links to working papers.
If you have or will be developing a class web page that you are willing to share with others, please let us know. We will include the URLs in next fall's newsletter.
As most of you know, the ERC overlooks the Mississippi River, and this spring the river was at one of its highest levels. Nothing like Grand Forks, of course, but the Mississippi rose above the concrete barriers on the West Bank for the first time in many years (first time I saw it that high!). It's hard to believe that there was a neighborhood down there until the 1930s that flooded nearly every spring. [See "The Bohemian Flats" by the workers of the Writers' Program of the W.P.A., Minnesota Historical Society, 1941, reprinted 1986].
On a more current note, the library's web-page has been redesigned. I hope those of you who access it frequently find it easier to use. I need your help with a new section: "Wendy's Working Paper Website." Within those pages I hope to have links to pages that cite working papers by institution, whether lists or full-text. If your school has a working paper site, or if you have found some that are particularly useful, I'd appreciate it if you could send me an e-mail message with the URL. It takes a lot of time to search for these pages because of the way most university and research institution pages are organized. [i.e., is the econ department in social sciences, business, liberal arts? Are working papers at the fed sites listed under publications, research, or economics? Finding the specific working paper pages is a real guessing game!] I hope that when this project is up on the web that our list will be a convenient one-stop place to access working papers by issuing organization.
from the Center for Economic Research:
295) Richter, Marcel K. and Kam-Chau Wong, "Bounded rationalities and definable economies." December 1996. 54p.
296) Richter, Marcel K. and Kam-Chau Wong, "Definable utility in o- minimal structures." December 1996. 13p.
297) Richter, Marcel K. and Kam-Chau Wong, "Bounded rationalities and computable economies." December 1996. 80p.
298) Richter, Marcel K. and Kam-Chau Wong, "Computability of preference, utility, and demand." December 1996. 35p.
299) Govindan, Srihari and Andrew McLennan. "On the generic finiteness of equilibrium outcome distributions in game forms." April 1997. 20p.
300) McLennan, Andrew and In-Uck Park, "Generic 4 x 4 two person games have at most 15 Nash equilibria." April 1997. 22p.
Lists of both economics working paper series at Minnesota (the CER series and the Economic Development Center series) can be found at the library web-site at <http://www.econ.umn.edu /~econlib>. Write to me for copies as well as any news you would like to share in the next newsletter. Have a good summer!
Wendy Williamson
Economics Research Library
525 Science Classroom Bldg.
University of Minnesota
222 Pleasant Street, SE
Minneapolis, MN 55455
USA
Phone: 612-625-2307
Fax: 612-624-0209
E-mail: wendy@atlas.socsci.umn.edu
Web: http://www.econ.umn.edu/~econlib
Let us hear from you. We can be reached at any of the following:
Mail: Department of Economics
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E-mail: Econdept@atlas.socsci.umn.edu
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