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February 2, 2003
David Warsh, Proprietor


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Second Place and the Thought Department

Anybody who has followed the pastoral messages of the Vatican and the United States Conference of Catholic Bishops over the years understands that the leadership of the Roman Catholic Church has preferred its own precepts of social justice to the ostensibly “value-free” research program of neoclassical economics.

Not surprisingly, therefore, when some twenty-five years ago the University of Notre Dame established a graduate program in economics, the clerics who ran the university quietly decreed that the department would not stray far from the social teachings of the church. Notre Dame loaded up on a succession of heterodox economists, Marxists, development specialists and the like, of whom the most visible today is historian of thought Philip Mirowski. He is among of the liveliest of the new generation of critical thinkers.

Unfortunately, that path has left Notre Dame far behind other universities — especially other Catholic universities — in a discipline whose relevance to understanding the modern world it acknowledges is very great. For example, Boston College soared in the same period from nowhere to become the 35th-ranked department in the United States in terms of research productivity — and recently set its sights on joining the top 25 — Notre Dame fell off the charts. A recent study concluded the entire campus needed to beef up its support for quantitative methods generally — mathematical modeling, computer science and statistical methods.

So last fall a blue-ribbon faculty committee appointed by the provost to study the situation in economics proposed a solomonic solution. Split the department in two. Rename the existing department Economic Thought and Policy — but strip it of its graduate program. Create a new Department of Economics with several new hires and a mandate to train mainstream PhDs. Start from scratch.

So great were the differences among economics faculty, the committee concluded, that reconciliation within a single cohesive department was “wholly unrealistic” — a finding quickly affirmed when 15 of the 20 members of the existing department voted against endorsing a spin-off that would weaken their power over their mainstream colleagues. The university president, Father Edward Malloy, ultimately will decide what to do.

The committee went out of their way to absolve the heterodox scholars of blame; they were hired by the administration “specifically because they eschewed this [mainstream] approach.” But with no PhD program, the Thought Department would have greatly reduced standing within the profession. The suggestion that its dissenters be assigned to teach introductory macroeconomics to undergraduates is apparently small consolation — and perhaps none at all to the undergrads. A gloomy assessment of the situation was published in the Chronicle of Higher Education last month. (“How do you start a fire under a huge wet blanket?”)

If anyone can afford two departments, it is Notre Dame, with its $2.5 billion endowment, wealthy and willing to spend. Two years ago it hired a prominent microeconomist, Richard Jensen, from the University of Kentucky to serve as chair. Now the committee recommends hiring another outsider, equally distinguished, to continue to build the mainstream program.

Notre Dame is not the only American center of economic heterodoxy, though with no degree program it may have trouble maintaining its status in the league. Other bastions include Tufts University, where Neva R. Goodwin’s Global Environment and Development Institute is preparing a textbook of alternative economics with Houghton Mifflin; the Chicago campus of the University of Illinois, where Deirdre McCloskey is a force; the University of Massachusetts at Amherst; and the New University, the former New School for Social Research in New York, the oldest center of them all, its economic department presided over by Duncan Foley. The world conference of the International Confederation of Associations for Pluralism in Economics is scheduled to be held in Kansas City, Missouri in June.

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That’s Why the Lady Was a Champ. Few philanthropists have been more successful at picking winners than Irene Diamond, who died last month at the age of 92. From the very beginning, she had the knack. Foundation News and Commentary described the broad outlines this way:

As a script reader for Warner Bros., she picked out of the pile and bought a screenplay called “Everybody Comes to Rick’s.” It became “Casablanca.”

As a talent scout, she gave Burt Lancaster, Kirk Douglas and Robert Redford their first big breaks.

And in 1942 she married a New York realtor named Aaron Diamond. When he died in 1984, he left a fortune of more than $220 million in the Aaron Diamond foundation — with instructions to “spend it out” in ten years. Then she really got going.

When New York City health commissioner Stephen Joseph asked her executive director in 1985 to put together a consortium of foundations to build a city research lab devoted to a newly-discovered disease called AIDS, Diamond asked, Why bother with all the meetings? Why not simply build a lab ourselves?

Within a year, she had hired a 31-year-old computational biologist named David Ho to run it. Ho had started at MIT, transferred to Caltech, then returned to the Harvard-MIT Health Science and Technology program and Massachusetts General Hospital for his MD. And before long, Ho had come up with the “cocktail” approach of a combination of drugs, based on the action of protease inhibitors, that has become the successful treatment strategy for the virus ever since.

Diamond gave away the rest of the money — 40 percent to minority education, 20 percent to the arts in New York, 700 organizations in all, the Lincoln Center for the Performing Arts and the New York City Ballet most conspicuously. It was a long and zestful life. But her biggest hit by far remained David Ho and his AIDS cocktail.

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The Way We Were. Speaking of “Casablanca,” a new version of “The Quiet American” has been having a hard time in theaters. It’s there at all only because its star Michael Caine gave it a nudge in the trade press, in hopes there might be a sentimental Oscar in it. Otherwise its distributor Mirimax might have sent it straight to the video stores.

The conventional wisdom is that the twin themes of US hubris and naiveté failed to strike sparks when the film was first screened just after 9/11. But the fact is that it is the book itself that has aged.

For a sense of just how persuasive in the 1960s was Graham Greene’s novel of French Indochina, see Martin F. Nolan’s masterful appreciation of it last week in the New York Times (registration required.) With its characterizations of the world-weary British journalist Fowler, the ingenuous American do-gooder Pyle, the elusive young Vietnamese concubine Phuong, the book became the Vietnam War correspondents’ Bible. Every reporter seemed to have a copy, recalled H.D.S. Greenway, who reported from Vietnam for Time and the Washington Post, and many carried Evelyn Waugh’s Scoop as well.

But the experience of the 1980s and ’90s has dimmed the book’s appeal. What seemed prophetic in the decade after America had forced the French and English to abandon their colonial empires today seems mainly dated. Almost all of Asia is booming. Office towers soar above the old Hotel Majestic in Ho Chi Minh City (formerly Saigon), from whose roof-top bar Greene once watched the war.

At a crucial point, the novel’s politics are expressed by its anti-hero, Fowler: “If I believed in your god and another life, I’d bet my future harp against your golden crown that in 500 years, there may be no New York or London, but they’ll be growing paddy in these fields, they’ll be carrying their produce to market on long poles, wearing their pointed hats.”

Not even Michael Caine can make that sound like an attractive position in 2003, much less a good bet.

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The Brawl is in His Court. If there is a weak link in the government’s case against Harvard University for lax supervision of its USAID-sponsored Russia project in the 1990s, it has to do with what Harvard knew about its employees’ behavior and when they knew it.

After the whistle was blown, it turned out that Professor Andrei Shleifer and his deputy, Jonathan Hay — Harvard’s directors of the $35 million undertaking — had made various personal investments in Russian securities, in apparent violation of contract provisions against conflicts of interest.

But that wasn’t what got them in trouble in the first place. The complaints that led to the project being closed down in 1997 had to do with apparent favoritism by the Russian government shown to at least Hay’s girlfriend and perhaps Shleifer’s wife in their business dealings. The advisers’ investments were disclosed only later.

The government is seeking treble damages from Harvard under the False Claims Act — as much as $120 million dollars — on grounds that Harvard knew or should have known its managers were fooling around financially. But in the course of a four-hour hearing last October, US Judge Douglas Woodlock warned the government that it would have to show that Harvard had something more to go on than office gossip.

“Every organization has this kind of bubbling cauldron of resentments about interrelationships and so on. I want something very specific to tell me that somebody said, “Did you know that Professor Shleifer worked out as deal to invest in oil stocks with Mr. Hay?’ There’s nothing like that” in the record, said the judge.

“What I need to see from someone here is that there was notice… from someone, that there was an inappropriate transaction brought to the attention of someone with authority at Harvard who, with knowledge, failed to take action.”

Not surprisingly, the brief on damages that Harvard filed last week was scathing on the government’s interpretation of the False Claims Act — all the more so since a source close to the case says that Harvard last year had offered to settle the case for $25 million, or two-thirds the value of the contract, while the government held out for the full sum. Both Harvard and the US attorney’s office stoutly refused to discuss their negotiations.

Harvard continued to maintain that Shleifer and Hay’s investments did not violate the contract. But even if they did, Harvard argued, the government wouldn’t be entitled to all its money back. “Far from being ‘worthless,’ or contributing to the ‘loss’ of Russia,” the university’s lawyers argued, “the work of the Harvard Institute for International Development contributed to Russia’s current record of success.”

Harvard should be entitled to keep at least part of the value of the contract, they say. The government’s key claim — that Harvard should have acted earlier to rein in its managers — was “incomprehensible,” since Harvard did not know at the time that they were investing. And the rationale for seeking treble damages was worse: “truly a chilling position for the government to advance — and one that is fundamentally inconsistent with the rule of law.”

With that, the matter is in Judge Woodlock’s hands. The evidence, at least on the question of liability, has been adduced. All parties have asked that he rule. When will he decide? It could be a matter of weeks — or a much as a year.

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