SELECTED BIBLIOGRAPHY

The Departmentof Economics, 1980-2015

Before 1980: A century of economics at Michigan

The Economics Department entered the 1980s with a spirit of celebration and reflection. It had been 100 years since Henry Carter Adams had been hired as the University’s first economist on April 14, 1880. It was a good moment to take stock of the Department’s history and traditions, as well as to look ahead to the future.

Since that first appointment, the Department had built a major reputation in the discipline and, at the outset of the 1980s, was ranked among the top dozen programs in the country. Many of the faculty served in important public service posts at the national, state, and University levels. At the start of the 1980s, both the president of the University, Harold T. Shapiro, and the dean of the College of Literature, Science and the Arts, Peter Steiner, were recruited from the ranks of the economics faculty.

To commemorate the first century of economics at the University, Marjorie C. Brazer—wife of public finance economist and former Department chair Harvey Brazer—wrote a detailed history of the Department that was published in Economics and the World Around It, a compilation of papers presented at a centennial symposium by economists with ties to the University and edited by Saul Hymans, thenchair of the Department. Brazer traced how, from the very beginning, the Economics Department had embraced a vision of economics that was applied and empirically oriented. Under Adams’s leadership—which lasted four decades until his retirement in 1921—Michigan’s Economics Department was an early leader in the development of the empirical aspects of the discipline. While strongly rooted in the field’s origins in moral philosophy, Adams was interested in empiricism and the application of economic principles to social and financial questions. Consistent with these interests, he led a parallel career in public service, most notably at the Interstate Commerce Commission, where he established the collection of statistical data and the rationalization of railroad accounting, setting the pattern for public utility accounting for decades to come. Many of the first economics courses offered at Michigan reflected Adams’ inclinations. In addition to the principles of political economy, students could take courses on the principles of finance, the principles of statistics, financial and industrial history, tariff legislation, “The Railroad Problem,” and “Economic Development of Mineral Resources,” among others.[1]

From then to the present, Michigan’s tradition of strength in applied economics would remain fairly consistent and flavor both the character of the Department and its reputation in the profession. While some economics departments at other universities came to be more closely identified with particular ideologies, economics at Michigan was regarded as a more pragmatic approach that looked to data analysis for answers.

But the identification with an applied and empirical view of economics reflected the greater number of faculty members with such interests, not an absolute specialization. Within this broad characterization, the Economics Department has seen periods of great strength in economic theory and econometrics as well as prominent scholars conducting research in these areas. Indeed, economics at Michigan came to reflect a large, full-service Department that trained graduate students in the full range of fields within the discipline, unlike some departments that took a more “boutique” approach, specializing in an area of particular strength. (An example is the University of Minnesota, focused on macroeconomics.)

In many ways, the evolution of the Economics Department over its first century mirrored changes in higher education in general and the discipline of economics in particular. In the early 20th century, economics separated itself from the other social sciences, particularly sociology and political science. This trend would continue and become more accentuated over time, as economics became a much more mathematical and quantitative discipline. Similarly, subjects that had been under the purview of economics, such as accounting, left the roster of subjects with the establishment of schools of business administration. (This occurred at Michigan in 1924.) In their stead, by the start of the 1950s, the economics curriculum included important new features. Macroeconomics had become a full-fledged field, with both theoretical and applied aspects, and was taught at all levels. Stabilization policy and econometrics added to the roster of new fields.[2]

As the 1980s dawned, a change was underway that would profoundly impact economics for decades to come: the advance in computing power which came in tandem with the access to new, rich and massive databases. The ability to process and manipulate heretofore unimagined quantities of data would have a profound impact on the questions that economists asked and the way in which they were investigated. This affected almost every field in the discipline, particularly the applied fields.

Two key developments gave the Department a head start in this revolution. The first was the creation in 1951 of the Research Seminar in Quantitative Economics (RSQE), the brainchild of Lawrence Klein and Kenneth Boulding. The seminar undertook the building of a model that used econometrics to track and forecast the U.S. economy’s direction. It put the Department into a position of national leadership in econometrics. (Klein, who left Michigan in 1956 as a result of the persecutions of the McCarthy era, would eventually earn a Nobel Prize for his work using computer models to predict economic fluctuations). While computing power at the start of RSQE was fairly primitive—a mechanical calculator that required researchers to pull a crank—it was much more mathematical and rigorous than the institutional studies that characterized most of economics in that era.[3]

With the passage of time, RSQE integrated technological advances as it fine-tuned and improved its models of the Michigan and U.S. economies. While the economic modeling and forecasting methods pioneered at RSQE were adopted widely and forecasting spread to the private sector, RSQE continued producing its economic forecasts. In 2014, it held 62nd Annual Economic Outlook Conference—the longest-running event of its kind in the U.S.

RSQE would also become the intellectual home of several key econometricians, including Saul Hymans (Ph.D., University of California-Berkeley) who directed RSQE and the Economic Outlook Conference starting in 1977. In a career that spanned more than four decades at Michigan, Hymans served as chair of Economics and special assistant to the dean (1985-1996).[4] Another econometrician associated with RSQE, E. Philip Howrey (Ph.D., University of North Carolina), was a much beloved teacher of first-year econometrics to graduate students during the several decades of his Michigan career (1973-2004). As a result of Howrey’s teaching, many students came to regard econometrics as their favorite subject.[5]

The second development that foreshadowed the era of big data analysis and helped shape the way in which the trend would take root at Michigan was the creation in 1948 of the Institute for Social Research (ISR). ISR pioneered many of the data sets that have dominated analysis in economics and social science broadly. These include the Surveys of Consumers, which began in the 1950s; the Panel Study of Income Dynamics (PSID), started in 1968, which is the world’s longest-running panel household survey covering the connections between economic status, health and well-being over the life course and across generations; and, since 1992, the Health and Retirement Study (HRS), which has been tracking information on assets, pensions, health and other factors that affect individuals approaching the end of their work lives.[6] James Morgan and F. Thomas Juster played key roles in these developments as founding directors of the PSID and HRS, respectively.

The presence of ISR and its various research centers not only provided tremendous expertise in the analysis of large social data sets at the forefront of the computing revolution. Especially after the mid-1980s, when an external review of ISR led by the Yale economist and future Nobel laureate James Tobin recommended fostering closer ties to Economics, it also helped to attract faculty who served jointly in ISR and Economics. This sometimes gave economists the opportunity to participate in the very design of the data for their research needs.

The micro theorists: A leading field during the 1980s

While the presence of ISR would bolster faculty conducting research in the applied fields, the Department entered the 1980s with a critical mass of microeconomic theorists which placed it—for the first time in its history—at the forefront of this area.

During Harold T. Shapiro’s tenure as chair, the Department hired Theodore C. Bergstrom in 1975, Hal Varian and Lawrence Blume in 1977. Glenn Loury joined as associate professor in 1979. In addition, Carl P. Simon, a 1967 Stanford graduate, moved from mathematics to a half-time position in the Economics Department in 1977.

Varian and Bergstrom would remain at Michigan for the better part of two decades and leave a deep imprint on the Department. Among their many accomplishments was a paper co-authored in 1986 with Lawrence Blume, “Private Provision of Public Goods,” that changed the agenda on research in public goods for years to come.[7]

Varian’s pedagogic impact extended well beyond the Ann Arbor campus through two influential microeconomics textbooks, one for undergraduates and the second for graduate courses. In addition, Varian was a pioneer in the use of technology. In the early 1990s, he was integrating the nascent Internet into his teaching in a way that was unrivaled at other economics departments at the time.[8] Eventually, Varian’s interest in information technology would take him to the post of dean of the School of Information Management and Systems at the University of California, Berkeley, in 1995. He was later appointed chief economist at Google in 2007. Bergstrom left Michigan for the University of California, Santa Barbara in 1996.

The malaise of the early 1980s

The early 1980s brought difficulties to the Department. Its national standing had been declining. By one account, the Department had been ranked seventh in the country in 1969—a ranking held since 1925—but by 1981, it had slipped below the top 10.[9] There was a feeling that despite important improvements in the Department, economics at other universities had improved even faster.[10]

The market for academic economists had become fiercely competitive. The growing popularity of economics as a field of study and the importance of economic research had every major research university chasing after top economists. Universities were also forced to compete for economists with higher-paying business schools, government, and the private sector. The intense competition was driving the salaries of economists upward and pushing down their course loads at academic institutions.[11] In this competitive environment, rapid turnover became the norm in the Department.

This situation placed the Michigan Economics Department at a disadvantage. Not only was it difficult to compete with the salary budgets of private universities, but also the state of Michigan was hit disproportionately hard by the recession that afflicted the United States at the beginning of the 1980s. And the state outlook for the near future raised concerns: doubts about the international competitiveness of the U.S. auto industry were casting a cloud over the economic prospects of the state of Michigan itself. As the double-digit inflation of the second oil shock was eroding the salaries of existing faculty, the Department was facing an uphill struggle in recruitment and retention.

Increasing the pressure on the faculty was the huge influx of students who wanted to major in economics at the University. The number of economic majors rose from 153 in 1973-1974 to 540 in 1984-1985. Despite the growing demand for economics classes, the full-time teaching equivalents (FTE) in the Department had remained fairly constant at around 30 FTE.[12] Consequently, course enrollments in economics had been rising. An external review of the Department in 1980 found that the morale of both undergraduate students and faculty was low as a result of the large and increasing sizes of classes.[13]

In part, the existing faculty was spread thin due to significant commitments to other Departments within the University. The Michigan faculty had an extraordinarily high number of joint appointments with other Departments relative to the norm at other universities. The Department listed 45 faculty members in its roster but only counted 30 full time teaching equivalents due to the high proportion of faculty who had teaching, administrative, or research responsibilities in other parts of the University.[14]

In spite of stretching out the Department’s resources, whether the economic faculty’s broader University engagement was adding to the stresses on faculty recruitment was unclear. Some faculty members were attracted to Michigan precisely because of the ease of establishing inter-unit relationships with other schools such as Law, Business, or Public Health, with interdepartmental programs such as the Institute of Public Policy Studies (IPPS) and with research units such as ISR and the Center for Research in Economic Development.

Trying to make the best of a bad budget situation, the college implemented a differential three-tier pay raise for all departments in LSA aimed at retaining the University’s most productive faculty. The new schedule gave the higher raises to faculty deemed to be the most accomplished and productive and who were at greater risk for leaving the University. A second tier of professors whose work was valued but were considered to be at little risk of leaving received lower increases. Those who were deemed to be less productive were placed in the lowest tier and given raises of about one percent, according to Frank Stafford, economics chair at the time. With inflation at ten percent, the people who received the lowest raises in effect received negative increases while those who received the largest raises saw only moderate increases in real terms.[15]

The Department began to lose some of its members and was at risk of losing more. Then disaster struck.

The fire

On December 24, 1981—Christmas Eve—fire engulfed the Economics Building, the oldest classroom building on Michigan’s campus and home of the Department since 1908. Members of the faculty and staff stood watching into the early hours of Christmas Day as flames consumed their offices, their books, and their belongings. When it was over, the building was a shell and most of its contents were destroyed. Police traced the fire to an arsonist—a former University employee with no ties to the Economics Department.

Because the fire took place at night and during a holiday period, no lives were lost and the injuries were minor (several firefighters slipped on the ice that built up around the building). Student grades had already been turned in and the research materials of many professors and students were safe on a mainframe computer elsewhere on campus.

But the losses were profound and, in many cases, irreplaceable. President Harold T. Shapiro, who had maintained an office in the building since 1964, lost the records to the bulk of his professional life. Philip Howrey lost most of the manuscript of an unfinished book. The very few rare documents on the Japanese economy that survived from Gary Saxonhouse’s personal library suffered smoke damage that would cause his new office to smell of smoke for years afterward. Morris Borenstein had spent two decades building a library of Soviet economics; it was destroyed. Gardner Ackley, former chair of the Council of Economic Advisers under Presidents John F. Kennedy and Lyndon B. Johnson, lost his personal library and his memorabilia from his years in Washington. James Adams had spent 1980-81 doing research in France, where, through confidential sources, he had been able to copy private materials documenting the work of French advertising agencies. He had hand-carried the documents to his office in the Economics Building. They were ruined by water from the firefighters’ hoses. Harvey E. Brazer lost his entire personal library, including the copy of his working paper that informed John F. Kennedy’s 1963 tax message and a historic textbook written by Henry Carter Adams. “Grown men aren’t supposed to cry,” Brazer told the Detroit Free Press, “but this morning was very hard when I saw that it was all gone.”[16]

“In my opinion, the more important loss was the psychological loss,” recalls James Adams. “There were some of my colleagues who never recovered psychologically from the fire. Some were never able to move their research forward and learn new tricks. And that didn’t seem to be correlated to the loss. There were people who lost virtually nothing and were incapable of moving in a new direction. And there were other people who treated it as ‘let bygones be bygones.’ … Material loss and psychological loss are not always correlated.”[17]

Adams was one of those who regrouped and moved on. Forced to abandon his project on French advertising, he expanded his scope and wrote a book entitled Restructuring the French Economy: Government and the Rise of Market Competition Since World War II, in which he analyzes the success of the French economy despite widespread predictions to the contrary. In addition, Adams would go on to become a distinguished teacher, winning the Golden Apple Award in 1998, and would also serve in different University administration positions, including as Associate Dean for Faculty Affairs and Chair of Economics.

But in the immediate aftermath of the fire, faculty and staff members had to resume their routines as best they could, picking up the pieces of their scholarship, resuming teaching and research. The Department moved into temporary quarters in the North Ingalls Building, the former St. Joseph’s Hospital, where space was found on a floor that had been a cardiology ward. Doctoral students took to calling it “the Econ Ward.”

The temporary relocation, which would house the Department for five years, added another loss to the list of casualties of the fire. The tradition of informal faculty lunches at the big round table at the east end of the Michigan League, which had started in the mid-1960s, died out, since the League was no longer a short walk away.[18] The open table had been an important factor in the Department’s atmosphere of camaraderie, and its demise would have repercussions in the next decade when Department management became more contentious.[19]

The fire and its aftermath served as the final straw in the unhappiness that had been building up. The Department lost eight senior and promising junior faculty during a short period, including the economic historian Gavin Wright (to Stanford in 1982), Glenn Loury (to Harvard in 1982) and Daniel L. Rubinfeld (to Berkeley in 1983).[20]

In order to stem the growing crisis, Stafford appealed directly to Provost Billy Frye and President Shapiro. In a first stopgap measure, the college offered an unprecedented mid-year salary increase. But because the additional increase was also made according to a differential scale, it did not fully assuage all members in the Department.[21]

More importantly, in direct response to Stafford’s requests, the college leadership made a strong commitment of support to the Department. Assurances were made that salaries would rise to market rates as quickly as possible. New slots for faculty recruitment would be opened up to replace recent losses and also to increase existing FTEs to relieve bursting enrollments. And Lorch Hall, the arts and architecture building designed by Emil Lorch, the University’s first dean of architecture, would become the Department’s new home after extensive renovations.

Rebuilding from the ashes: The 1980s

The task of rebuilding the faculty fell to the next two chairs: Edward (Ned) M. Gramlich (Ph.D. Yale, chair 1983-1986) and development and natural resource economist Richard C. Porter (Ph.D. Yale, chair 1986-1989).

Gramlich had joined the U-M faculty as professor of economics and public policy studies in 1976 after working as research economist at the Federal Reserve and as senior fellow at the Brookings Institution. Driven by a profound interest in public policy, Gramlich distinguished himself in a career that would successfully span the world of research, public service and academic administration. As an economist, he tackled issues in macroeconomics, budget policy, tax policy, income redistribution, fiscal federalism, social security, and even the economics of professional sports. His public service career would include an 8-year term as governor of the Federal Reserve during the critical period of 1997 to 2005, which saw the buildup to the subprime mortgage crisis that contributed to the Great Recession. Indeed, Gramlich would be among the first policy makers to call attention to the mortgage market’s problems. His book, Subprime Mortgages: America’s Latest Boom and Bust, published in June 2007 by the Urban Institute, provided a prescient roadmap for solutions to the crisis.[22]

Gramlich was a highly able administrator. (He would later play a pivotal role in the establishment of the Gerald R. Ford School of Public Policy and serve as U-M’s interim provost of the University.) As chair of Economics, he initiated an effective and vigorous recruiting campaign that would continue through Porter’s chairmanship to the end of the 1990s. Between 1983 and 1990, the Department made more than 20 hires, effectively increasing its faculty to 54 members in 1988-1989.[23]

The new hires both at the senior and junior levels reinforced the Department’s traditional strengths in public finance, labor, macroeconomics, and international economics. Important senior appointments went to Charles Brown (labor), Stephen Salant (industrial organization and natural resources), Matthew Shapiro (macroeconomics), Michelle White (law and economics, particularly bankruptcy issues), Marc Gersovitz (development) and Kenneth Binmore (microeconomic theory).

In particular, the traditional strength in public finance was renewed with the senior appointments of Roger Gordon (,, MIT), in 1984, and Joel Slemrod (Ph.D., Harvard), in 1987. The field had historically been a standout at Michigan where, from the beginning, Henry Carter Adams had been among the most influential public economists in the early 1900s, promoting the creation of a progressive income tax and authoring The Science of Finance, one of the great books of that time. In the 1950s, Richard Musgrave had carried on the tradition. The Theory of Public Finance, written while he was at Michigan, was the most influential book in the field in the latter half of the 20^th century.[24] But by the early 1980’s, an external review of the Department found that the area needed attention, as Harvey Brazer had become increasingly isolated in shepherding graduate students in the field.[25]

The appointments of Roger Gordon and Joel Slemrod restored Michigan to the ranks of the top departments for public finance, a position the Department would retain into the 2000s. Roger Gordon, whose career at Michigan lasted more than 15 years, made seminal contributions in the areas of taxation of mobile businesses; he tackled questions such as whether taxing corporate income induces businesses to go elsewhere. He also studied fiscal federalism, scrutinizing the restrictions that taxation at one level of government poses on other levels of government, and how these fiscal federalism relationships should be managed. Gordon was instrumental in convincing Slemrod, with whom he had been collaborating, to move from the University of Minnesota to U-M, where he headed the Center for Tax Policy Research at the Business School. At Michigan, Slemrod and Gordon would collaborate on topics such as the federal tax exemption of municipal bonds and income shifting between individual and corporate taxes. In later years, Slemrod’s work would focus more on international aspects of taxation and on aspects of tax policy other than tax rates and tax bases (such as the enforcement system, audit coverage, audit strategy, public disclosure of income tax rates and of income tax returns, evasion questions, avoidance questions, and the tradeoff for tax authorities between the benefits and costs of getting things exactly right.)[26]

The senior hires made during the 1980s were joined by a cadre of young faculty—many just graduated from their doctoral programs—who would suceed in rising through the academic ranks and making their intellectual contributions at Michigan for the next several decades. Newly minted Ph.D.s David Lam (University of California, Berkeley, 1983) and James Levinsohn (Princeton, 1988) strengthened the Department’s international expertise with their focus on economic development and international trade. Miles Kimball (Harvard, 1987) and Robert Barsky (MIT, 1986) joined the macroeconomics team. Jeffrey K. MacKie-Mason (MIT, 1986) worked on issues of taxes and corporate decisions when he was first hired, then switched his focus in the early 1990s to the economic and technical issues surrounding digital information systems and their content. He would pioneer work on the economics of the Internet with a multidisciplinary approach that combined microeconomics, game theory, computer science and psychology. MacKie-Mason would become dean of the School of Information in 2010.

In the field of labor economics, the new junior hires—Gary Solon (Princeton, 1983) and John Bound (Harvard, 1986)—together with Charles Brown, who came in as a senior hire, joined the already strong labor group led by senior faculty George Johnson (Berkeley) and Frank Stafford (University of Chicago). George Johnson attained external recognition for his research on the dimensions and causes of the sharp rise in earnings inequality in the U.S. during the 1980s, among other work.[27] Colleagues and students remember Johnson especially fondly for the important role that his sense of humor played in enlivening departmental life during his tenure at Michigan (1966-2007). His unofficial power charts of the Department, for instance, were prominently posted on his office door and were eagerly awaited and much discussed. The Department chair would sometimes appear at the bottom of Johnson’s power structure, while other universities and external entities that Johnson judged to be influencing the Department would also make appearances.[28]

The lineup of labor economists would remain stable through the mid-2000s and contribute to Michigan’s reputation as one of the top ten in the field.

The Department was bursting with new energy and a sense of renewal. The junior faculty were able to teach graduate courses right off the bat, something that was less common in other institutions. Much latitude was given to junior hires—to bring new people into the seminars, take their research in new directions, change the way graduate courses were taught, and to change the field. “The Department was very good at giving you the sense that ‘you guys are the future: go for it,’” says David Lam.[29]

The physical rebuilding of the Department was also going well. In April 1986, soon after Richard Porter replaced Gramlich as chair, Economics dedicated its new home in the renovated Lorch Hall. The centerpiece of the renovation was a library funded by and named for an alumnus of the Department, Sumner Foster, and his wife, Laura. Formerly the School of Architecture’s drafting room, it was a spacious, bright room with beautiful oak furnishings. Nearly 200 people attended the ceremony, including the Foster family, President Shapiro, Provost Frye, Dean Steiner, Economics Chair Richard Porter and Saul Hymans who, as special assistant to the dean, had played a key role in raising funds from alumni for the new quarters.[30]

Housed in its new, state-of-the-art premises, after years of vigorous recruiting, the Department ended the 1980s much strengthened. External recognition of the high-quality appointments was reflected in a rise in the Department’s national rank to number 11.[31]

New directions: Expanding use of large micro data sets and growing ties to ISR

Turnover in the Department helped to usher in new trends that were influencing the discipline more broadly.

Many of the new hires that came in the 1980s worked with large databases, relying on the increasing computing power that was beginning to change the way in which economic research was conducted. When they arrived at Michigan during the 1980s, researchers found computing resources at the University to be at least as good, if not better, than those at other top institutions.[32] This only increased with time as technology continued to develop. In the early 1980s, for instance, development economist David Lam had to run his analyses with datasets that contained 500,000 people on the mainframe overnight. By the 2000s, he would have three decades’ worth of such data sitting on his laptop.[33]

In tandem with increasing computing power, and just as important, was the fact that economists were increasingly getting access to richer data sets. When Joel Slemrod and Roger Gordon conducted analysis of the U.S. tax system in the 1980s and early 1990s, for instance, they had to rely on a statistically significant sample of IRS returns provided by the agency. By the 2000s, Slemrod and other public finance economists would be able to work with the complete set of tax-return data instead of a sample. Access to the complete database would allow researchers to begin to make much more detailed analyses, such as studying the differential impact of tax policy at the regional level or following individuals’ income across decades.[34]

The increase in computing power together with access to richer data sets would have profound effects on the types of research published by economists. Research based on computer simulations became more prevalent. The number of papers that analyzed more than one big data set also increased. So did the discipline’s standards for what could be claimed as a causal effect. (Some critics contend the trend also led researchers to limit the questions they could ask to those for which a strong causal relationship could be established, sometimes at the expense of questions that had broader applicability or implications.)[35]

At Michigan, the micro-empirical approach was at first particularly strong among the labor economists. Gary Solon would conduct research on the intergenerational transmission of inequality. John Bound and George Johnson looked at changes in the structure of relative wages. Charles Brown made extensive use of large databases in his studies of the relationship between employer size and labor market outcomes. Bound would also make methodological contributions, including influential work on weak instruments and on measurement error in survey data.

The approach spilled over to fields such as development economics. Lam, who came to Michigan as a joint appointment with the Population Studies Center, was among the first development economists to use microeconomic analysis of data sets from developing countries. Studying demographic data from Brazil and South Africa, he explored issues such as population growth, fertility, marriage, and aging, and their links to education, labor markets, and income inequality.

Macroeconomics at Michigan has distinguished itself for its practical, non-ideological approach. It is a Department where “salt water” (neo-Keynesian) and “fresh water” (neo-classical) macroeconomics productively and cordially mix. In the early 1980s, it was fairly mainstream, with almost all faculty having been trained in the Keynesian or New Keynesian perspectives. As such, the macroeconomists worked with small-scale analytical models that focused mainly on monetary and fiscal policy, business cycles, and financial markets. However, in the early 1990s, U-M macroeconomists also were drawn into more microeconomic analysis, and were at the forefront in using microdata to answer macro questions.

The Institute for Social Research, as well as the Population Studies Center (which would become part of ISR in 1998) played a critical role during the 1980s in facilitating this transition at Michigan by helping to attract and hire faculty, as well as giving them the tools, support, and a cluster of expertise to move their research in this data-intensive empirical direction.

The relationship between the Economics Department and ISR was not always close. The work of labor economist Frank Stafford was an exception. Stafford had designed a debt and assets panel for the Survey of Consumer Finances in the late 1960s to study the impact of credit cards, then novel, and easy consumer loans on Americans’ saving discipline. The relationship between Economics and ISR grew stronger when labor economists Charles Brown and John Bound accepted joint appointments with ISR.

Soon, the economist F. Thomas Juster played a key role in engaging the macroeconomists with data research at ISR.[36] Juster (Columbia) joined the faculty in 1973 and served as director of ISR from 1976 to 1986. Juster and Stafford pioneered the use of time diaries to study how people allocated their time. Then, at the beginning of the 1990s, Juster designed and directed the interdisciplinary Health and Retirement Survey (HRS), a longitudinal panel study that surveys a representative sample of approximately 20,000 Americans over the age of 50 every two years. The work is sponsored by the National Institute on Aging and the Social Security Administration.

Juster used the advent of the HRS to implement the mandate of a report chaired by the economist James Tobin, of Yale, to connect ISR more strongly with Economics. Instead of trying to shape the recruiting of the Department, Juster reached out to engage with economists who had recently joined it. He created the opportunity for U-M economists to shape survey questions using specific concepts drawn from economic models such as people’s tolerance for risk and their willingness to substitute present consumption for future consumption. These parameters are crucial to individual choices about wealth accumulation, retirement, portfolio allocation, as well as insurance. This work resulted in “Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Study,” authored by Juster with macroeconomists Robert Barsky, Miles S. Kimball and Matthew D. Shapiro, which has been cited widely since its publication in The Quarterly Journal of Economics in 1997.

The long-term impact of this collaboration was the continued involvement of the Department’s macroeconomists with ISR.[37] In particular, through their involvement with the Health and Retirement Study (HRS), macroeconomists Miles Kimball, Matthew Shapiro, John Laitner, and Dmitriy Stolyarov, have conducted nationally regarded studies on the economics of aging, retirement and saving.

The ties between the economics Department and ISR were further strengthened in 1995 when labor economist and economic demographer Robert Willis (Ph.D. University of Washington) was recruited from the University of Chicago as a joint appointment with the Department to succeed Juster as head of the HRS.

Decline of the institutional approach

A parallel transformation that was taking place was a shift away from the more institutional approach that characterized economics prior to the 1970s, when economists were experts on the real-world entities they studied—governments, labor unions, corporations or specific countries—and departments had a breadth and depth of expertise along both geographical and historical dimensions.

By the 1980s, the discipline was moving towards a more technical and mathematical methodology where a set of core skills in microeconomic theory and econometrics could be applied to a broad number of issues and skilled application of this core was becoming more important than in-depth knowledge of a specific subject. One sign of this change was that graduating with a doctorate in economics no longer required a solo-authored, book-length thesis demonstrating command of a single topic. Instead, students were producing several article-length pieces aimed at publication in academic journals that could demonstrate their mastery in the application of core theory and econometrics to a range of issues.[38]

This transition in the discipline was driving changes in departments across the country, and it would affect the Department at Michigan, though somewhat more slowly, as the Department was traditionally very strong in the institutional approach and had a rich breadth and depth of subject expertise. The trend would place the Department under constant pressure to expand the roster of faculty who specialized in the core areas of theory and econometrics for the ensuing decades.[39] This need has been augmented by the fact that both fields have continued to evolve and are active areas of research. Microeconomic theory, for instance, has been expanding beyond the analytical framework of perfect competition among a multitude of rational economic players endowed with perfect information, incorporating issues of strategic interaction (game theory), limited rationality, imperfect information and uncertainty.[40]

At the start of the 1980s, the Department still had many features of the less core-intensive approach. An external review in 1980, for instance, noted how the Department had three economists (Locke Anderson, Daniel Fusfeld, and Thomas E. Weisskopf) who specialized in unconventional approaches to social and economic issues, focusing on Marxian political economy, the role of ideology in economic thought, and the history of economic thought, among others.[41] (By the second decade of the new millennium there were no U-M economists who specialized in heterodox economics, and that was the case more generally of most top economics departments in the country.)

Perhaps no field better exemplified this transition than development economics. The move towards stronger core theory and away from case-specific knowledge contributed to the demise of the Center for Research in Economic Development (CRED), for example. The Center, which had been established in the 1960s with funding from the Ford Foundation and the U.S. Agency for International Development, had strong participation by economists in the 1960s and 1970s including Wolfgang Stolper, Richard Porter, and Elliot Berg.[42] By the 1980s, the work of CRED focused mostly on consulting and advising countries in Africa. At the time, the economics of development did not draw much from theory and tended to focus more on the specifics of each developing country in order to understand it. However, economists were starting to feel that some theoretical principles and empirical analysis applied to most developing countries. Moreover, it was increasingly felt that the empirical work needed to go beyond case studies, looking across time or across countries to get a more general sense of what works and what does not work.[43]

The result was that by the early to mid-1990s interest in the field of development economics—which looked at the particular aspects of individual developing countries— had flattened out. Those who wanted to help developing economies sought out different fields where they could acquire knowledge of general theory and empirical tools that could then be applied to developing countries. While changes in funding as well as personnel transitions most likely had a negative impact on CRED, the fact that development was not as highly regarded and that students were not very interested in taking it on as a field, contributed to its end. As CRED researchers left, no effort was made to replace them and the center was basically allowed to die out.[44]

A demise of country specialization among economists was a similar manifestation of this transition in international economics. In the early 1980s, the Department had a wealth of country specialists—particularly experts on China (Alexander Eckstein and Robert Dernberger), Japan (Gary Saxonhouse), and the Soviet Union (Morris Bornstein)—that would dissipate in the decades to come.

Expertise in particular countries had deep roots at Michigan. In particular, the interest in China had a long tradition. Indeed, Henry Carter Adams had spent a year in China in 1913 to set up a system of railroad accounting; I. Leo Sharfman had taught at Imperial Pei-Yang University in Tientsin prior to his Michigan career;[45] and C.F. Remer, a member of the Department from 1928 to 1959 and a specialist in international trade and Chinese economics, had spent a decade teaching at Saint John’s University in Shanghai.[46] Robert Dernberger (Ph.D. Harvard), who joined the Michigan faculty in 1968, would carry this tradition into the 1980s and beyond. Dernberger followed a circuitous route into Chinese economic studies, entering the field when it was no longer possible for Western researchers to visit China. He learned Chinese in the army during the Korean War, when he deciphered Chinese communications and with interrogated Chinese prisoners. After the war, Dernberger registered at U-M on the G.I. Bill and became Remer’s research assistant. The question that consumed Remer—how the Chinese would escape famine—was considered controversial in the era of McCarthyism; thus Remer and Dernberger kept their studies quiet.[47] Dernberger would go on to pursue a doctorate in Economics and returned to the University of Michigan where he would be director of the Center for Chinese Studies twice (1983-86, 1991-94) and taught until 1995.

Among the country specializations, the focus on Japan would carry on the longest at the Department, lasting until Gary Saxonhouse’s untimely death in 2006. During his 36-year career at Michigan, Saxonhouse (Ph.D. Yale 1971) made the Department one of the few world centers for the study of the economics of Japan.[48] His studies of technical diffusion in the Japanese cotton-spinning industry gave him a deep understanding of Japan’s adoption and innovation of western technology, as well as the nation’s rapid economic rise. It also allowed him to develop important lessons for other developing countries as well as to deepen understanding of unique labor market practices in Japan, such as permanent employment.[49] Saxonhouse trained many economists and brought in funds that provided key financial support to many of his students. Among them were David Weinstein (Ph.D. 1991) an expert of the Japanese economy as well as a respected trade economist who would become chair of the Department of Economics at Columbia University.[50] Saxonhouse also schooled many elite members of Japan’s civil service who would spend a year studying with him in Ann Arbor.[51]

The country-specific expertise of these economists leant itself to more multidisciplinary interaction across the University, particularly through area centers such as the Center for Chinese Studies as the Center for Japanese Studies. But as economists transitioned into a less country-specific, more core-driven and mathematical application of their discipline, opportunities for multidisciplinary collaboration with other social sciences at the area centers dwindled. By 2000, few American economists at Michigan or elsewhere would identify themselves primarily as single country experts.[52]

The course of world events also contributed to changes in international economics. With the demise of the Soviet Union, the interest in Soviet economics and comparative economic systems lost much of its raison d’etre and its importance. For a relatively short period, the focus changed to transitioning economies, led by Jan Svejnar (Ph.D. Princeton) prior to his move to Columbia University in 2012.

In contrast, interest in trade and international finance was on the ascent. The fields had been relatively ignored in the U.S. during the mid-20^th century. The whole world trading system had come close to shutting down in the 1930s and, although it was rapidly coming back after World War II, the U.S. remained a relatively closed economy and trade accounted for a very small share of national production. Given this state of affairs, it was not atypical that during the 1960s, Robert Stern (Ph.D. Columbia) was the only economist in the Department who specialized in international aspects of both trade and finance. (Even though Wolfgang Stolper had co-authored one of the most famous papers and results in international trade, the Stolper-Samuelson theorem, he had early on decided to switch fields from trade to development economics.) Still, Stern’s presence had already begun to establish the Department’s reputation in international trade and the Department trained students who were strong in the field, including Edward E. Leamer (Ph.D. 1970) who would go on to have a prominent career at Harvard University and the University of California, Los Angeles.[53]

As barriers to the cross-country flow of capital and goods dropped and globalization increasingly became a hot topic, the Department increased the roster of economists specializing in international trade and finance. This shift was reflected in the appointments of Alan Deardorff at the beginning of the 1970s and of James Levinsohn in the late 1980s. But it became even more marked during the 1990s, when the Department would acquire considerable strength in the area and become one of the world’s leaders in international economics.[54]

Responding to the questions raised by the changing trade environment, Stern, Deardorff and their student, Drusilla Brown (Ph.D. Michigan, 1984) would focus part of their research efforts on the Michigan Model of World Production and Trade, an attempt to estimate the effects of reductions in tariffs on trade and production in multiple countries and multiple economic sectors.

Changes in undergraduate teaching

As the economics discipline was placing greater emphasis on the set of core theoretical and empirical skills, the instruction of introductory classes at the undergraduate level would change in the 1980s. The core classes that gave the option of covering the material with lower math requirements disappeared quickly in the early 1980s. (By the second decade of the 2000s, the statistics and econometrics core requirement would be strengthened further and additional courses in these areas were added in response to the growing demand for these skills by employers as suggested by post-graduation student surveys.)[55]

Burgeoning student enrollment in the 1980s, among other factors, led to increasing reliance on Graduate Student Instructors (GSIs) to teach the introductory principles courses. By the model prevalent in the early 1980s, a supervising faculty lecturer delivered a one-hour lecture each week while GSIs provided three hours of instruction in smaller discussion sections. But in the fall of 1989, a major change in the way these required courses were taught took place. Responding to pressure from the College of Literature, Science and the Arts (LSA) to expand faculty involvement in “principles” courses, the Department shifted the primary teaching responsibility from GSIs to faculty. Saul Hymans, Richard Porter, John Laitner, Paul Courant, Robin Barlow, Thomas Juster and others taught the principles courses in large lectures.[56] While GSIs continued to lead smaller discussion sections, they were primarily delivering quizzes, going over homework and reviewing the material covered in lectures in a smaller setting.[57]

A similar model was adopted in the intermediate microeconomics and macroeconomics courses (401-402), in which multiple small classes taught by faculty were replaced by a large lecture delivered by a faculty member, with small discussion sections in support. The new model served to increase the consistency of material presented to growing numbers of students.

Economics had become a coveted degree, and the skills of economists were sought in business, government, and service sectors. Economics had become one of the largest concentrations in LSA, with 450-550 majors annually. Enrollment in undergraduate economics courses increased (with some cyclical ups and downs) from about 7,000 in the 1980s to consistently above 8,000 in the new millennium. For the academic year 2013-2014, for instance, undergraduate economics courses registered a total of 9,380 enrollments. Every year, some 2,000 undergraduates take the introductory microeconomics course (101) and another 1,000 the introductory macroeconomics course (102). In addition to the core courses, undergraduates could choose from a full-range of classes, including highly-selective honors classes and seminars that cover a wide range of subjects and stress developing skills in writing, research, and analytical thinking.

Even before 1980, the Department had hired lecturers to help with teaching principles courses to undergraduates. Now, their numbers increased. In addition to teaching, lecturers sometimes served as concentration advisors. Helen Crafton, who had been a graduate student at Michigan, joined the Department as lecturer in 1967 and continued to work as a lecturer and advisor into the early 1980s. Janet Gerson, a Michigan Ph.D., stepped in to teach for a faculty member who was having health problems in 1983; in 1985 she was appointed to a more permanent position as a lecturer and advisor. For many years, Gerson’s position involved teaching nearly 2,000 undergraduates every year. She was a core member of the intermediate microeconomics team (401) and co-taught the introductory microeconomics class (101) with Paula Malone—who joined the team in the late 1990s—from the late 1990s until shortly before Malone retired in 2014. Janet Wolfe and Frank Thompson took over advising duties when Crafton retired. Wolfe was a research scientist for RSQE and also taught some of the more specialized 400-level courses; Thompson taught writing classes at the Residential College. In the 2010s, national searches for top-level faculty lecturers were conducted to replace retiring lecturers.[58] The new cadre included Chris Proulx, Stan Sedo, Ron Caldwell, Ed Cho, Mitchell Dudley, and Adam Stevenson.

Undergraduate instruction continued to evolve as new classroom technologies—PowerPoint, web-based resources and interactive tools—changed the ways in which materials were introduced, making it easier to present concepts in large classrooms and to engage with students.

In 1974, the Department had established the master’s in applied economics (MAE) as a terminal degree for students headed for nonacademic careers in economics, or who want advanced training in economics along with another professional field, such as law, public health, or natural resources. The MAE continued to be a coveted degree well into the 2000s, with many more applicants than slots available.

Threats and achievements in the 1990s

As the Department entered the 1990s, the impressive rebuilding of the 1980s came under threat.

A new recession prevented the Department from maintaining its aggressive recruitment campaign. In addition, faculty hiring was a source of contention with the College. Given the competitive nature of recruiting in economics, the Department wanted to be able to make multiple offers for any given position; the College saw this as financially risky. Economists wanted to be able to conduct broad searches in order to hire the best available candidates; that strategy ran against U-M’s tradition of conducting targeted searches to meet narrowly defined needs.[59]

And although the economic hardship was more broadly shared across the country than the recession of the 1980s, the Department was once again losing ground to competing institutions in faculty salaries and course loads. In the mid-1990s, the Department had the highest teaching load of any top-15 economics department, to the point that some assistant professors were giving portions of their salaries back to the University in order to lighten their teaching loads, according to an external review of the Department conducted in 1994-1995.[60] As chair, Paul Courant addressed this problem problem by reducing the requirement to an effective three courses,[61] but faculty salaries continued to fall behind. The Department feared another hemorrhage of its best faculty.

The outlook was complicated by internal management difficulties. Long gone were the days of life-term chairmanships of Henry Carter Adams and his successor, I. Leo Sharfman, who, between the two, ran the Department from Adams’s appointment in 1887 to Sharfman’s retirement in 1954. Since the mid-1950s, the Department had been run by rotating chairs serving increasingly shorter terms; the length of the chair’s term was gradually reduced from five years to three. The demands on the chair had become greater and more complicated as the faculty grew in size and diversity of opinions. Seniority no longer dictated who would be in charge of making hiring and promotion decisions. A larger share of the faculty expected to be included in and consulted on such deliberations. And, like most departments, Economics did not have a codified set of rules and procedures. The only document that came close to that—penned by Locke Anderson in an attempt to counteract the erosion of institutional memory that came with constant faculty turnover—had burned in the fire.[62]

While things were running relatively smoothly, Department leaders such as Hal Varian and Ned Gramlich were able to run the unit without a lot of meetings or consultation.[63] But, in 1995, amidst the difficult economic landscape, Varian left for California and Gramlich became dean of the School of Public Policy. Paul Courant, who had been tapped to become chair, had his term interrupted by a sabbatical, then became associate provost. (Courant would go on to serve the University as Provost and Executive Vice President for Academic Affairs until 2005.) In the meantime, the Department was served by five chairs, including a shared-chairmanship, in four years, from 1995 to 1999.

In spite of the rapid management turnover, a number of important appointments were made during that period. Econometrician Lutz Killian (Ph.D., University of Pennsylvania) was hired in 1996; he would ascend the ranks to full professor. Killian’s research interests included time-series econometrics, empirical macroeconomics, and energy economics, with timely research into the sources of fluctuations in the price of oil and the transmission of energy price shocks. Lones Smith (Ph.D. University of Chicago) joined the Department in 1998 from MIT in the coveted area of microeconomic theory.

Industrial organization expanded with the recruitment in 1998 of Kai-Uwe Kühn (Ph.D., Oxford University) who would go on to serve as chief economist of the Directorate General for Competition at the European Commission from 2011-2014.

The field of public finance attained almost unrivalled strength in 1997 with the addition of James Hines, who started out at the Business School and became the leading tax economist dealing with international issues, in particular those of taxation of multinationals and the role of tax havens in the global system. Julie Cullen, an expert on state and local finance of public education, also came in 1997 as a junior appointment.[64]

Similarly, the field of international economics increased its already considerable stature in the later 1990s. International trade, which already included Stern, Alan and Levinsohn saw, for a brief period, two well-respected faculty added to the team. Gordon Hanson, a senior appointment recruited in 1998 from the University of Texas, Austin, brought his expertise on issues of immigration and global outsourcing, the economic integration of the U.S. and Mexico, expansion by multinational firms, and the relationship between trade and the location of economic activity. At the same time, David Weinstein returned to his alma mater and joined the faculty of the Business School from 1996 to 1999.

The finance side of international economics—which had had a long-standing vacuum—made lasting gains in 1997, when it recruited Linda Tesar from the University of California, Santa Barbara, and Kathryn Dominguez from the Kennedy School of Government at Harvard University; her initial appointment at Michigan was in the Institute of Public Policy Studies.

Tesar and Dominguez added an important and timely perspective on the international dimensions of economic financial crises. Dominguez had written extensively on the role of international reserves and central bank interventions, among other topics. Tesar’s work focused on the international transmission of business cycles and fiscal policy, global risk sharing, capital flows to emerging markets, and international tax competition. And Tesar and Dominguez jointly authored research on the impact of exchange rate exposure and explored issues surrounding financial crises in developing countries through their research on the Argentine crisis.

The number of economists working on international trade and finance continued to grow in the 2000s, keeping pace with growing interest in globalization. Andrei Levchenko (Ph.D. MIT) joined the Department in 2008 after working at the Research Department of the International Monetary Fund, bringing renewed expertise in the areas of international trade and the interactions between globalization, economic development, and macroeconomics. Javier Cravino (Ph.D., UCLA) and Sebastian Sotelo (Ph.D.,University of Chicago) would be hired at the assistant level in 2013 and 2014, respectively.

The (very slow) ascent of women in Economics

The senior appointments of Tesar and Dominguez in the late 1990s also marked important progress for women in the Department, which—as has been the case for the field of economics in general—has been slower than in other social sciences.[65]

There had been tenured women in the Department before. Eva Mueller in particular had been a trailblazer. Mueller (Ph.D., 1951) started with a research position at the Institute for Social Research after the chairman of the department at Harvard, where she earned her doctorate, told her he couldn’t help her find a job “since economics wasn’t a woman’s field.”[66] At ISR, Mueller helped pioneer the use of surveys to analyze consumer behavior and, in 1957, she joined the Department of Economics. She became a full professor in 1964 and served until her retirement in 1988. Mueller published papers covering a wide range of topics including the impact of unemployment on consumer confidence in the U.S.; the economics of fertility decline in Taiwan; and the time allocation of women and children in Botswana. In recognition of outstanding work that furthered the status of women in economics, she was honored with the Carolyn Shaw Bell Award from the American Economic Association’s Committee on the Status of Women in the Economics Profession in 2000.[67]

Still, women have been historically underrepresented and the gender gap in the Department has reflected a broader problem for the field of economics in general, which has seen a slow ascent of women to senior ranks. Although the situation has improved since 1972, when the American Economics Association started keeping track, women in economics have been a minority at every level of the academic ladder, from graduating Ph.D.s to full professor. And the share of women at every rung becomes progressively smaller in what has been characterized as a “leaky pipeline.” In 2013, for instance, the share of women in economics was 35 percent of new doctorates, falling to 28 percent of assistant professors, 24.5 percent of tenured associate professors and to 12 percent of full professors.[68]

At the time that Tesar and Dominguez were being recruited, there was only one tenured woman among the economics faculty—Michelle White. The fact that they were being recruited at the same time facilitated their decision to join the Department.[69] Their arrival chipped away at the barriers. This was a deliberate aim for Linda Tesar in particular; she would go on to serve the Department as director of graduate studies and chair (2007-2011). “One of the reasons I wanted to become chair was to make this a more woman-friendly, open, diverse Department and I think we’ve had some successes,” Tesar said.

In 2013, Martha J. Bailey (Ph.D., Vanderbilt) would mark another historic milestone by becoming the first woman to ascend the ranks from assistant professor to tenured associate professor in economics at Michigan. Bailey, whose fields span labor economics, demography and economic history, has examined the implications of the diffusion of modern contraception for women’s childbearing, career decisions, and the convergence in the gender gap. She has also focused on the shorter and longer-term consequences of Great Society programs.

As the 1990s drew to a close however, the Department’s gains would be diminished as a combination of personal factors, economic circumstances and the decade’s management difficulties took their toll. The Department lost several key faculty in a short span of time, including what some came to call “the California exodus,” when Roger Gordon, Michelle White, Julie Cullen, and Gordon Hanson all left for the University of California, San Diego in 2001.

The new millennium

If the 1980s and 1990s were rocky rides for the Department, combining periods of meteoric growth and accomplishments with dramatic setbacks, the 2000s brought a much steadier period of consolidation and progress.

The management of the Department returned to the stability of full four- and three-year chairships with smooth transitions, starting in 1999. The steadier pattern began when Patricia Gurin, a professor of psychology, was appointed interim dean of LSA; she made it a priority to reestablish sound management in the Department of Economics. Gurin took the unprecedented step of asking the Department to elect its own leadership, and in 1999 Gary Solon was elected by his peers to serve as chair.[70]

Important steps were taken to ensure that the management gains would be solid and long-lasting. In April 1999 the Department unanimously adopted a 31-page constitution drafted by Saul Hymans, Gary Saxonhouse and Matthew Shapiro, which explicitly spelled out the Department’s governance structure, hiring procedures, and evaluation process for promotion and tenure. The codification of Department governance was partly a response to a broader push by the University to make all the administration of all departments better organized and regulated. In Economics, “the Constitution’s codification of well-defined processes for participatory decision-making has been an important element in the Department’s return to its customary collegiality.”[71]

In consultation with Department faculty, Solon wrote a long-term plan that has served as an guiding framework through several Department chairmanships. It lays out the Department’s priorities with respect to recruiting faculty and appointing the personnel needed to staff and mentor the graduate and undergraduate programs.[72]

When Matthew Shapiro succeeded Solon as chair in 2003, another important step was taken to lay the foundations for the Department’s advancement. Shapiro sought to improve the Department’s relationship with LSA. His chairmanship coincided with the appointment of Terrence McDonald as Dean. In McDonald, Shapiro found a receptive partner who strongly supported the Department’s aggressive recruiting strategy and enabled it to search broadly and make multiple offers to promising candidates.[73]

Progress was also made on the salary front during Solon’s and Shapiro’s terms as chair. They tried to diminish anomalous differentials within the ranks and managed to bring Department salaries closer to par with competing institutions. With these changes, effective recruiting resumed. In 2005, for instance, the Department recruited nine new faculty members—a highly successful effort.[74]

Notable among the new hires was a strengthening of the core areas of theory and econometrics with the senior appointment of Tilman Börgers in the highly sought-after area of theory and Yusufcan Masatlioglu (Ph.D., New York University), who joined at the assistant level in 2005. Börgers (Ph.D., London School of Economics, 1987) works on game theory and its applications. In game theory, he has explored the implications of various assumptions regarding players’ knowledge of the game they are playing and about other players’ rationality. He has also studied models in which players play a game repeatedly, and use simple learning algorithms to adjust their strategies. Börgers’ research on applications of game theory concerns auctions, voting and, more generally, mechanism design. He has advised several government agencies on auctions of spectrum licenses and on gas and electricity auctions.[75] In econometrics, Serena Ng (Ph.D., Princeton) served the Department as a full professor from 2003-2007; and Matias Cattaneo (Ph.D., University of California Berkeley) joined the Department in 2008 at the assistant level.

The growing importance of alumni support

As chair from 2003 to 2007, Matthew Shapiro became involved to a much greater extent with fundraising and external development.[76] The support of generous alumni had increasingly become vital to the Department, especially in the aftermath of the crippling recession of the 1980s and the economic blows of the early 1990s.

Among many generous alumni, John Sweetland (B.A. Economics 1958, M.A. Economics 1959) took a leadership role. Sweetland had found considerable success in the 1980s importing raw materials for cement from Korea to the U.S. In 1995, he announced a planned bequest that exceeded $8.5 million, the largest received by LSA to date. The bequest added to his previous endowment of the John W. Sweetland Chair in International Economics.[77] In the following years, Sweetland championed the idea of creating a board of loyal alumni to advise the Department.

Eventually, the idea took hold and led to the creation of the Economics Leadership Council (ELC). The Council, which met first under a different name in the fall of 2000, functions as a key advisory group, meeting annually with the Department to help develop and move toward long-term goals.

The members of the ELC provide generous financial support for the Department. Allen Sinai endowed a chair in macroeconomics and Gail Wilensky endowed a chair in applied and health economics, both jointly with the Ford School of Public Policy. The ELC members, who numbered thirty by 2015, also provide support for fellowships and research. As Sweetland has emphasized, this support provides a foundation for reaching out to the Department’s large base of alumni. The group’s engagement with the Department goes well beyond contributions and advice. Several ELC members have participated for instance, in the Economics 108 section “Economics at Work,” developed and taught by senior lecturer Janet Gerson, a very successful class that brings in a diverse group of alumni guests to share their career experiences and how they use economics in their careers, while giving students advice and the opportunity to network with successful alumni.

A new landmark for private support of the Department was reached in 2012, when a generous anonymous donor established the Michigan Institute for Teaching and Research in Economics (MITRE) with a $5 million gift. MITRE funds support Ph.D. fellowships, visiting research scholars, faculty research and professional development, as well as graduate and undergraduate research.[78] While funds from MITRE cannot be used to augment salary offers to new faculty, they do give the Department chair more cards to play, and the existence of these resources makes the Department more attractive to potential faculty.

Alumni giving has been instrumental in helping the Department advance its long-term goals with respect to the graduate program. The Department enrolls close to 30 Ph.D. students annually who participate in the research mission as research assistants and co-authors and in the teaching mission as graduate student instructors. Hence, the quality of the program is integral to the Department’s overall strength. The Economics Ph.D. program has a long track record of placing its best students at departments of equal or higher rank.[79] Graduates of the program move on to jobs as tenure-track faculty at top research universities and liberal arts colleges; positions in non-academic institutions in the U.S. and abroad, including the Federal Reserve system, the International Monetary Fund, the U.S. Treasury Department, the U.S. Bureau of Labor Statistics, and non-governmental think-tanks and research organizations.

Under the leadership of Linda Tesar, in particular, who served as graduate student director for several years (2004-2007, 2013-2014), efforts were made to improve the program, including a new research-writing course for third-year students designed to facilitate the transition from course work to dissertation research and shorten completion time. The endeavor has yielded results. In 2007, the program’s doctoral placements included three students accepting positions at Harvard, Yale and Berkeley. And a 2011 external review of the Department was impressed with the high fraction (relative to other economics departments) of the students graduating with at least one publication to their credit.[80]

Obtaining better funding for graduate students had been an elusive step in plans to improve the program. The MITRE funding, along with fellowships established by Gail Wilensky, Peter Borish, John Sweetland, and others, made it possible to, for the first time, offer full funding to the entire Ph.D. class of 2012. More competitive funding packages allowed the Department to reach its admission targets, recruit more students at the top of the admissions pool and help improve student retention.

Shored up by the succession of stable chairmanships and with stronger financial backing from alumni, the Department was better prepared to face adversity by the time the Great Recession hit in 2007. (This was also true for the University as a whole, which had become less dependent on state funds.) In contrast to the profound negative effects of the recessions of the 1980s and 1990s, the Department was able to go through the biggest disruption in economic activity since the 1930s in relatively good shape, continuing to hire new faculty, award promotions and raise salaries.

The research frontier

The growing stability and consolidation that began at the turn of the millennium have enabled the Department to reinvigorate its traditional strengths and branch out into new and sought-after areas of research.

The field of development economics saw a tremendous resurgence in the 2000s. The application of randomized control trials (RCTs) to the study of developing countries, which was spearheaded by MIT, drove new interest in economic development. It became bncommon for faculty and students to spend time in the field in Africa, Asia or Latin America conducting experiments to study how different policies could increase school enrollment, improve public health campaigns, or reduce poverty, among other topics.

While they did not initiate the revival, it was embraced by a dynamic group of young Economics faculty at Michigan, including Dean Yang (Ph.D. Harvard, 2003), Rebecca Thornton (Ph.D. Political Economy and Government, Harvard 2006), Manuela Angelucci (Ph.D. University College London, 2005), Jing Cai (Ph.D. Berkeley, 2012) and Raj Arunachalam (Ph.D. Berkeley, 2007).

Yang, in particular, adopted the RCT methodology in his research on financial services for the poor and international migration. In 2014, for instance, he was running survey work and field experiments among Filipino migrant workers and their families, and among rural micro-loan clients in Malawi. Other field research took him to El Salvador, Guatemala, Indonesia, Mozambique, and the Philippines, as well as to study migrant populations of Filipinos in Italy, Indians in Qatar, and Salvadorans and Kenyans in the U.S.[81]

The field attracted many students into the graduate program in Economics, and it became one of the most sought-after areas of concentration in 2014.[82]

Industrial organization also saw an upsurge of interest. The field had been among the first to be distinguished at Michigan; Henry Carter Adams wrote an important early book on government and business, while I. Leo Sharfman published a monumental, three-volume treatise on the Interstate Commerce Commission. During the late 1960s and early 1970s, three prominent industrial organization economists were at Michigan: F.M. Scherer, Peter Steiner, and Geoff Shepherd. But for a time the field was less populated. James Adams devoted only a portion of his time to industrial organization, and such important figures in the field as Glenn Loury, Severin Borenstein, and Patrick Bajari were on the faculty only briefly.

The field has seen renewed strength since 2010, when Daniel Ackerberg (Ph.D. Yale, 1997) and Jeremy Fox (Ph.D. Stanford, 2003) were recruited from the University of California, Los Angeles and the University of Chicago, respectively. Ackerberg and Fox became part of a core group of faculty who address questions about how modern markets work in a variety of settings. Fox’s work for instance, has looked at efficiency in Federal Communications Commission spectrum auctions and the cost of breaking up globally integrated automotive manufacturers, while Ackerberg has studied the impact of advertising on consumer demand and online auctions, among other subjects.[83]

Energy and environmental economics have also expanded at Michigan. The field, long led by Stephen W. Salant (Ph.D. University of Pennsylvania) who joined the Department in 1986, has grown with the recruitment of Ryan Kellogg (Ph.D. University of California, Berkeley) in 2008. They work at the intersection of industrial organization and energy and environmental economics. Salant, for instance, has looked at the industrial organization of the world oil market and the economic decisions of organizations that select quantity restrictions by voting processes (such as agricultural marketing boards, cartels, international commodity organizations, pro-rationing boards, etc.) Kellogg has studied ozone pollution and gasoline content regulation.

Some of the areas of traditional strength in the Department have also been reinforced in the new millennium. Macroeconomics has seen a widespread surge of interest following the disruptions of the Great Recession. Questions about the broad effects of asset bubbles and poor quality assets on bank balance sheets, for instance, gained renewed importance. The Department’s macro seminar, meeting each Wednesday, has brought in speakers on highly topical analyses, which combined theoretical and empirical approaches to address what has been going on in the economy.[84] The macroeconomics team, which had had a stable group of experts in Robert Barsky, John Laitner, Matthew Shapiro and Miles Kimball, expanded in the late 1990s with the appointments of Dmitriy Stolyarov (Ph.D. University of Pennsylvania) in 1999, and Christopher House (Ph.D. Boston University) in 2001; and expanded again in 2013 with the addition of Justin Wolfers (Ph.D. Harvard), and Stefan Nagel (Ph.D. London Business School) who joined Michigan in the area of finance, and John Leahy who joined the Department in 2015 as the first Sinai Professor of Macroeconomics with a joint appointment in the Ford School of Public Policy.

As was the case in the early 1950s, when U-M macroeconomists were pioneering the use of econometric models to forecast economic output, macroeconomists in the Department were, by 2015, once again at the forefront of finding data sources and ways to measure the course of the economy in a timely and policy-relevant fashion. Matthew Shapiro and his research team, for instance, were looking at social media and exploring how tweets about job losses or gains relate to unemployment claims.

The ranks of the labor economics group also grew in the 2000s with the addition of Jeffrey Smith (Ph.D. University of Chicago) whose research specializes on evaluation methods—particularly of social and educational interventions—and Mel Stephens (Ph.D. University of Michigan), who returned to his alma mater in 2009 and has researched displaced workers, household consumption decisions, aging and retirement, and how the timing of income receipt affects consumption decisions. But labor economics at Michigan takes in a broader group beyond those with tenure-track appointments in the Department, including, for example, faculty at the School of Education such as Brian McCall, and at the Ford School, including Brian Jacob, Susan Dynarski, Kevin Stange, and John DiNardo.[85] A Thursday lunch provides a formal opportunity for researchers from many U-M units to discuss topics in labor economics topics. Given the low barriers to interaction across units, it is common for doctoral candidates in labor economics to receive substantial support for their dissertations from relevant faculty outside of Economics, and vice versa.

Finally, the field of economic history, which has had moments of greater and lesser prominence in the Department, grew dramatically since 2005. In the early 1980s, the field had been led at Michigan by Warren Whatley (Ph.D. Stanford), known for his work on the economic history of African-Americans in the 20^th-century U.S. By 2015, the group had added Martha Bailey; Paul Rhode (Ph.D. Stanford) whose wide-ranging interests in the 20^th-century U.S. included the impact of agricultural harvest fluctuations and the evolution of public health policies on communicable diseases; and Hoyt Bleakley (Ph.D. MIT), who has studied the consequences of disease eradication in the American South and the impact of river transport routes on the location of American cities.

Full circle

As the University prepared to celebrate its bicentennial, the Economics Department had, in some ways, come full circle. It had grown itself back from the devastation of the fire while managing to retain its characteristic identity and strength in applied economics. It continued to push the boundaries of the discipline, growing in areas of developing research. Buffeted by the impact of economic downturns but blessed by the generosity of alumni, it found ways to hold its ground in the highly competitive world of economics departments. The Department accomplished all this while annually graduating some 500 undergraduate concentrators and filling 10,000 seats in courses that cover all regions of the world and topics ranging from the technical to the institutional to the policy-oriented.[86]

The author thanks Robert Brustman for making extensive research and interview transcripts available and gratefully acknowledges the help of Mary Mangum and interviewees David Lam, Jim Hines, Jim Adams, Saul Hymans, Charlie Brown, Alan Deardorff, Joel Slemrod, Jan Gerson and Matthew Shapiro.