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Rice Magazine | Rice University

Economics' New Course

Interview by Franz Brotzen ’80 Photos Tommy LaVergne

Economics' New Course
Interview by Franz Brotzen ’80 Photos Tommy LaVergne

Antonio Merlo, the George A. Peterkin Professor of Economics, joined Rice last summer. As the new chairman, he was charged with expanding and improving the department. With 200 undergraduates majoring in economics (the largest undergraduate major at Rice) and about 40 doctoral students, these changes are certainly in the spotlight. One of Merlo’s innovations is the Rice Initiative for the Study of Economics, or RISE. We sat down recently with Merlo to learn about RISE, plans for the department to build a specialty in applied economics, his loyalty to Italian soccer and why he is “a big believer in hitting the ground running.” Highlights from the interview, edited for clarity and space, follow.

Q: What factors drew you to Rice? 

A: I was presented with a vision. Nowadays, you hear a lot of universities talking about interdisciplinary research and the focus on the intersection of many different disciplines. One thing that I found extremely refreshing was to hear President Leebron say that you can’t be strong in interdisciplinary research unless you have strength in the core disciplines that determine this intersection. 

Rice is a fantastic university. And if you want to stay a top university, you have to make an investment in a top economics department. I was given free rein and a mandate to implement this vision.  

And, let’s not discount the most important thing. It’s fine when people tell you, “Here is a blank canvas. Paint it.” Then they tell you, “Sorry, you’ve got to go find the resources to do it yourself.” [Leebron] said, “Here are the resources you’re going to need in order to find the colors you need to build the department and make Rice proud of its economics department.”

I don’t think it’s just about building an economics department; it’s about making the presence of economics felt across many campus departments. It’s certainly an opportunity to make a difference in the field I love.

Q: How does the new economics initiative fit into this vision?

A: RISE is a five-year program for investing in research and teaching in economics at Rice. It’s like a global effort to raise the level of the discourse on economics on campus. Nowadays, no matter what your profession is, no matter how you want to position yourself, it’s so critical for people to be exposed to deep critical thinking in economics and basic understanding of economic principles.

Q: What are the specific components of RISE?

A: We’re hiring new faculty. You can’t energize a place without the bodies for doing it, so this department is growing. My mandate was to add 10 new members to the existing faculty. 

We’re rethinking the curriculum — both at the undergraduate and graduate levels. What do we want students to learn? How do we want to convey this energy coming out of a new department that is ambitious and really wants to establish itself and play in the big league and not be on the fringes of the discipline? How do we structure our program and our teaching? So that’s the second component. The new curriculum will be launched in the fall semester 2015.

And we’re building bridges across campus. The most immediate one is with the Jones School. Kerry Back, [the J. Howard Creekmore Professor of Finance] at the Jones School, an economist by training, is now a joint member of our department and the business school. We are going to do something quite bold — require all doctoral students in economics to take a course in finance, because we want the students we produce to be well-versed not just in a basic understanding of the economic side of things but in finance as well. They are so intricately related, interconnected in financial markets and markets for goods and services. That’s a clear example of the types of bridges that RISE is about.

Also, we’ll take advantage of the unique opportunities we have in Houston. The goal is to launch a new 12-month professional master’s degree in energy economics, which is going to be unique, not just in this country but in the world. It’s a natural thing to do because we’re in Houston. With the recent approval of the Faculty Senate, the new degree program also will launch next fall. 

Q: You’re known as a scholar of political economy. You brought four new scholars to the department initially. What strengths are they bringing?

A: Three of my colleagues from the University of Pennsylvania came with me and then one from Johns Hopkins University. The approach that all these people who came here have in common is this notion of taking both economic theory very seriously and econometrics and data analysis very seriously. 

None of [us] are necessarily married to a question or a subfield. We are married to sort of a way of approaching the way we think about economics. And so these people can ask a question in labor economics one day and health economics the next day and political economy and industrial organization, you name it. They have the tools and the foundation and knowledge to tackle the big questions that really are important. People refer to this as applied microeconomics.  

Every person I hired shares this [approach]. Xun Tang, my colleague from Penn, his area of expertise is auctions. Ken Wolpin is a pioneer in the domain of labor economics and development economics. Flavio Cunha researches the economics of education and investment in human capital. My area of expertise is political economy and bargaining theory. Hulya Eraslan studies political economy and bargaining theory, but also corporate finance. So the set of questions is very broad, but the methodological approach is the same. 

I’m trying to bring not just exceptional scholars, but exceptional human beings. I want [to hire] somebody who is invested in the common cause of building, who buys into the vision, but also has the personality that is really conducive to making a small department feel a lot larger than it is. You go after building a team, you have something that is more long-lasting — the synergies make the team feel like a presence. 

Q: The department offers two undergraduate majors — economics and mathematical economic analysis. Why?

A: This is part of the department’s history. The idea is keep the distinction, but make it very clear what these two majors are about.

The mathematical economics major should be for two types of people: the people who want to go on to graduate school in economics and the people who are interested in getting highly technical, demanding jobs, like for example, if you want to go to Wall Street and work for some high-tech finance industry. So what you’re going to learn when you take that particular major is going to be how to use mathematics and statistics at high levels to solve technical economic problems.

Now suppose, on the other hand, that you’re a preprofessional, interested in just working in the labor market in
general, you’re interested in working for the government, you’re interested in economics issues, then you should be
an econ major.z

Q: What are your plans for bringing in visiting scholars?

A: Having a very active intellectual life in the department — where you bring in speakers, visitors, host conference events — is another way of just showing the enthusiasm and enlarging the set of people that are involved in the enterprise. I want the excitement of what’s going on here to be larger than what’s defined by the set of people we can hire. So, you bring in top scholars and ask them to come here and spend some time, interact with colleagues, interact with the students, present their work. 

Q: How are you getting the word out?

A: I’m a big believer in hitting the ground running. I visited all the different residential colleges and talked to the students. So every Wednesday I had lunch at a different college, and I went there to say, “You guys may be curious what RISE is and what I’m doing coming into the chair of the economics department, so let me tell you what I’m doing. Then let me hear from you, what would you like to see out of this process.” 

I’ve given numerous talks on campus not only about my research, but about RISE, what it’s about. I went in front of the Rice Student Association. I interact pretty much with every administrator on campus, the deans and provosts, president, vice presidents. Information is critical to make them buy into the excitement and understand what’s going on.  

Q: How will people outside the department notice these changes? And how will you measure success?

A: You couldn’t possibly go to a conference in economics last summer and not hear people talk about Rice. “What’s happening at Rice?” People have noticed. And the hope is that they will keep noticing. But you have to be constantly pushing the frontier and trying to improve the program, investing in the students, investing in research. So the momentum is there, but now we’ve got to continue doing it. 

I want to be accountable. That’s the nature of the job. I’m actively engaged in reaching out to all the alumni and trustees and whoever is willing to listen, to try to convince them to buy into this great opportunity. I guess a lot of people feel energized by the initiative, regardless of whether it’s their field or not, which I think is very important. Rice is really a remarkable place in that respect. It’s a university where people genuinely want to see one another succeed. 

As for success, we are going to go up in the rankings. There is no question about it. I can’t just tell you everybody in economics knows how to measure things and then tell you we’re not going to pay attention to the measurements. So my goal is to do something unique that the profession is going to recognize and value.  

And, the hope is [employers] are going to hire a Rice Ph.D. as opposed to a graduate from another place. And again, that’s the loop, the sign of success. They start mimicking you, imitating you, hiring your students, try to hire your faculty — that’s success.

Q: Does your Italian heritage affect your outlook on economics?

A: Absolutely. The main reason why I am a political economist is because I grew up there. I was born and raised in Milan. I graduated from Bocconi University. At that time it was the only private university in Italy. If you look at Italian economists of my generation or older working in the United States, they all come from the same university. 

There was this notion of producing the students who were interested in staying in academia and going abroad. The degree I got was really a social science degree, that is, economics, political science, sociology, mathematics and statistics combined. It’s very different than in the U.S. 

My entire outlook on research has always been how institutions shape the outcomes we have, how can we design better institutions. So certainly growing up in Italy had a huge impact on the way I look at economics and economic questions.

Q: Knowing that you were raised in Milan, we have to ask: AC Milan or Inter Milan?

A: Inter. I was in Madrid when Inter won the Champions League with José Mourinho [against Bayern Munich in 2010]. It was actually funny. I went through all possible scenarios to get a ticket for the game and ended up getting a ticket through a friend who works for the Department of Treasury in Spain. It was front row, very close to the pitch. It was all reserved, so I show up with my Inter shirt, a true fan, and they say, “Sir, these seats are reserved.” And I say, “Yes, they’re reserved for me.” 

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