NEW: Chapter 8 and 9 posted. Chapters of a new open access book about traditional and behavioral economics. ]]>
My father - a giant of a man and always my inspiration. For the moment you can find some information about him here. Slideshow from the memorial.
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Earl Thompson, economist: born October 15, 1938; Assistant Professor, Stanford University 1962-1965, Assistant Professor UCLA 1965-1969, Associate Professor, UCLA 1969-1973; Professor, Department of Economics, UCLA 1973; married 1961 Velma Montoya (one son); died Los Angeles 29 July 2010.
Thompson was an idiosyncratic but brilliant thinker, and his death marks the end of an era for UCLA: Thompson is the last of the economists brought to UCLA by Armen Alchian in the 1960s to create the famed UCLA school of economics.
Thompson's interests in economics were broad ranging. In recent years his goal was to provide an integrated theory of the vital institutions of society - a theory that tied together historical events with economic theory and politics. The basic elements of the theory were outlined in his 2001 book with Charles Hickson. The entire theory was to appear in the three volumes entitled A Reconstruction of Economics.
Thompson did not set out to be an economist. His ambition until his early twenties was to be a professional baseball player. Fortunately for us he fell to injury, so instead became an academic. He attended UCLA as an undergraduate where he studied under Armen Alchian who turned him towards economics, and while in his younger years he had been an indifferent student, he graduated with Honors in 1958. He attended the London School of Economics, then returned to Harvard for his Ph.D. under the supervision of John R. Meyer, becoming Harvard's youngest Ph.D. in Economics in 1961. His first longterm position was as an assistant professor at Stanford University. In 1965 he moved back to Los Angeles to UCLA, where he spent the bulk of his career.
Over that career Thompson published more than 40 articles, many in the top academic journals. He wrote on topics ranging from monetary theory to welfare economics. Always his focus was on the winners and losers from economic policy. In monetary theory he was profoundly skeptical of the influence of bankers on monetary policy - as we have recently been reminded, bankers look out for bankers' interests, not the interests of the rest of us. As recently as March Thompson was writing in the AmericanThinker.com explaining why the banker driven bailout and stimulus policies might benefit bankers, but would be of little use to the rest of us.
Thompson was also cognizant of the universal desire for monopoly. He was one of the first to point to collusion between unions and firms - unions are not subject to anti-trust laws. He gathered substantial evidence that in the coal industry strikes served to raise prices and increase profits by restricting output.
One of Thompson's most significant theoretical contributions was in the area of public finance. Conventional wisdom among economists is that taxing capital is a poor idea. Thompson pointed out that the national defense is one of the primary functions of government - and the beneficiaries are largely the owners of capital. Far from an inefficient drag on the economy, he argued, capital taxes are effectively a user fee, charging those that benefit the most from defense for its cost. That democratic institutions seemed to have found the right solution where economists had not made a profound impression on him.
Thompson made major theoretical contributions to the study of commitment in games - arguing that it has an empirical significance that is underplayed by economists and game theorists. In doing so, he demonstrated a formal mathematical version of what is sometimes known as the Coase Theorem: that without frictions an economy attains desirable outcomes even in the absence of competition. Where other economists focused on markets Thompson focused on the evolution of democratic political institutions, arguing that the democratic process tended to bring forth efficient policy compromises.
Thompson loved to work with students, although occasionally his classes met at odd times, such as Sunday afternoons. Many of his students became coauthors and lifelong friends.
In the early 1980s, while his wife Velma Montoya served in the Reagan White House, Thompson spent a year at the Federal Trade Commission in Washington. This gave him an opportunity to comment on and influence public policy: although a theorist Thompson had an enormously practical side and cared deeply about people and policy.
Thompson received numerous grants and awards to support his research, including from the UCLA Institute for Government and Public Affairs; the Ford Foundation; the Eli Lilly Foundation; the American Petroleum Institute; the Koch Foundation; the Foundation for Research in Economics and Education; and the National Science Foundation.
Earl Thompson was an eccentric in an age of conformity. He kept odd hours: he was alone in his office in Bunche Hall at 4:31 AM on January 17, 1994 when the Northridge earthquake hit, where he found himself unharmed but covered with fallen books. He loved muscle cars, dressed as if the 1950s were just yesterday, and always had a sneaky grin on his face. He will be missed by his colleagues, his students, his friends and his family.
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I recently presented a lecture "Is Behavioral Economics Doomed" at the European University Institute in Florence. It was part of a series of lectures in honor of Max Weber. Since a key issue in behavioral economics is the role of psychological phenomenon such as emotion in decision making, I was curious as to what Max Weber thought of this - Weber being a pioneer of what is now called rational choice theory. Kenneth Allan provides a nice summary of Max Weber's thinking on the topic.
Value-rational behavior is distinguished from affective action because Weber sees some semblance of self-aware decision-making processes in value-rationality. Values are emotional, but when we consciously decided to act because of the logic of our values, it is rational behavior. Emotion, on the other hand,is irrational and proceeds simply from the feelings that an actor may have in a given situation. [Chapter 5: Explorations in Classical Sociological Theory, Chapter 5, Pine Forges Press, 2005]This is similar to the distinction, for example, that Drew Fudenberg and I draw in our work on the dual self model . Indeed Max Weber's own words about the essential irrationality of that deepest of all emotions - love - is instructive Under these conditions, the erotic relation seems to offer the unsurpassable peak of the fulfillment of the request for love in the direct fusion of the souls of one to the other. The boundless giving of oneself is as radical as possible in its opposition to all functionality, rationality, and generality. . . It is so overpowering that it is treated "symbolically": as a sacrament. The lover realizes himself to be rooted in the kernel of the truly living, which is eternally inaccessible to any rational endeavor. He knows himself to be freed from the cold skeleton hands of rational orders, just as completely as from the banality of everyday routine. [Max Weber, Zwischenbetrachtung, 1958] |
From Eric Maskin
Leo made seminal contributions to economics. In particular, he created the modern theory of mechanism design, the study of economic and political institutions for achieving society's goals. For this work he received the U.S. National Medal of Science in 1990 and shared the Nobel Memorial Prize in Economics in 2007, among many other honors. He was also an institution designer in the practical sense: he bears major responsibility for turning the Economics Department at the University of Minnesota into one of the great departments of the world. Full ObituaryLeo was my colleague when I taught at the University of Minesota, and his reputation as a kind and gentle man is well deserved. He was a leader in the best sense of the word: he led by example. ]]>
"information about individual preferences and available production technologies is usually dispersed among many actors who may use their private information to further their own interests. Mechanism design theory, initiated by Leonid Hurwicz and further developed by Eric Maskin and Roger Myerson, has greatly enhanced our understanding of the properties of optimal allocation mechanisms in such situations, accounting for individuals' incentives and private information. The theory allows us to distinguish situations in which markets work well from those in which they do not. It has helped economists identify efficient trading mechanisms, regulation schemes and voting procedures. Today, mechanism design theory plays a central role in many areas of economics and parts of political science." announcement here
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