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Economists take the Green Line
We’re in a seminar room on the ninth floor of the Photonics Center at Boston University, shortly before 9:00 on a Friday morning in April. Soon the room will fill with more than 30 students and professors attending the Green Line Macro Meeting, a twice-annual collaboration of the economics departments of BU and Boston College.
The room’s wide north-facing windows look out over Commonwealth Avenue. If you look straight down, you can see the Green Line trains running back and forth. Beyond is a spectacular view of the Charles River. The “externalities,” to borrow a popular macro term, are impressive: the golden dome of the Massachusetts Statehouse at the east end of the panorama, the greenish dome at MIT closer by, and a steeple or two at Harvard visible to the west.
Inside the room, at a minute past 9:00, the work begins. Guihai Zhao, a Ph.D. candidate at BU, is presenting the first of six research papers that will be discussed today. He’s talking about an economic model that seeks to explain how investor confidence affects the rising and falling value of stocks. Dressed in blue jeans and a white shirt, Zhao stands next to a lectern that holds a laptop. Discussion points project onto the screen at the front of the room.
The idea of the seminar is to give graduate students and young assistant professors a chance to present a paper and have it critiqued by a professor from the other institution.
So after Zhao spoke for about 40 minutes, his work was discussed by David Chapman, associate professor in the finance department at the Carroll School of Management.
“You want students and faculty to interact with as broad a group as possible,” Chapman said later. “If you talk to the same people all the time, your world views converge. You don’t get as much challenge. One purpose of this is to try to bring people with different research interests, related but different, together to challenge each other.”
The collaboration was set in motion five years ago by BU economics professor Robert King and BC economics professor Peter Ireland, holder of the Murray and Monti Chair. They enlisted professors Fabio Schiantarelli of BC and Simon Gilchrist of BU, both of whom helped organize, and attended, the recent April meeting.
According to Schiantarelli, meetings between the two departments can spur students to raise the bar on their own work. “It sets higher standards for all the students because if you merge communities, you see papers that are quite good and you say, ‘I must live up to it,'” he says.
“Boston is fantastic for economics,” Schiantarelli continues, “because there are so many institutions—and this is an example of how you can make those relationships between those various institutions tighter.”
At the April meeting, two of the presenters were from BU and four from BC. The papers were selected by senior faculty representing the two schools, according to Susanto Basu, professor of economics at BC, who helped organize the meeting. The location alternates between campuses; the meeting next fall will be hosted on the Heights.
For most students, the seminar features a dissertation-in-progress or a paper to be presented at a larger conference. Felipe Restrepo, a Ph.D. candidate in finance at Boston College, discussed his paper on how taxes levied on bank transactions affected industrial growth in selected Latin American countries. “I can tell you, as a Ph.D. student, it’s great to take your work outside of the school and see what other professors think about it,” Restrepo said. “So for me, as someone who will hopefully in one year be out in the job market presenting my job market paper, this is a great opportunity to get feedback and work on the paper.”
Restrepo described the evolution of an economics research paper, which typically goes through many drafts before being presented at a conference. “The ultimate goal is to send it, I don’t know, by the 20th draft, to a journal,” he said, which then triggers another round of revisions. “So that whole process can take two or three years, even more for a lot of people,” he said. “Sounds painful, right?”
Jonathan Hoddenbagh, a fourth-year Ph.D. candidate in economics at Boston College, presented a paper in the afternoon session (coauthored with fifth-year candidate Mikhail Dmitriev) entitled “The Optimal Design of a Fiscal Union.” Over a lunch of sandwiches, salad, and cookies provided by Boston University, he said that recent events in Europe, including the efforts by prosperous countries such as Germany to assist struggling nations such as Greece, raised intriguing questions about how to set monetary and fiscal policies in an international context. He and his coauthor decided, “Well, let’s make a model and see what the model tells us.” He added that they chose to forego the speed and calculating power of computers to construct their model, performing all the equations by hand “with pencil and paper.” Such a method, he believes, allows for better “intuitive insights.”
The day was not short on economic modeling, mathematical equations projected on the large screen, and typical macro talk about exogenous and endogenous factors, idiosyncratic shocks, stochastic and orthogonal processes, lumpiness and elasticity.
The weird poetry of economics bounced around the room. At one point, BU’s Gilchrist joined a discussion of aggregate fluctuations in the labor market and commented, “The difference between two and infinity is not very big, so if you go to infinity you can do something nice.”
Asked later what he meant, he laughed and said, “Oh, right. That’s a very macro comment.”
“An insider thing,” added BC’s Schiantarelli.
“You know,” Gilchrist said, “mathematicians are known to make jokes like that.”
Read more by Dave Denison