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May 9, 2004
David Warsh, Proprietor

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A Forest Grows in Toulouse

BERLIN — It was all Brahms and cheerful possibility here last week, as the fifteen nations of the European Union became The Twenty Five.

Beleaguered Daimler-Chrysler Corp. flew the Berlin Philharmonic to Athens to perform in front of the Acropolis. Countless mayors trod bridges to their midpoints to shake hands with their counterparts from the nation opposite. Even Eine Linke Geschichte, the cabaret Doonesbury here that has periodically added skits since 1983, ended its May Day performance with a cascade of pan-European jokes — substituting, for example, Bach’s “Jauchzet Frohlocket” from the Christmas Oratorio for the familiar “Ode to Joy” that is the official European Hymn. Everybody laughed.

Then everyone returned to the hard realities facing the new Europe.

Nowhere was the basic problem more apparent last week, at least in miniature, than in France. A premier mathematical economist at the height of his powers defected from France’s most famous university to the University of Kansas, taking the editorship of a leading journal with him.

Meanwhile, Jean-Jacques Laffont, probably the best economist in Europe and the man who, perhaps as much as any single figure could, fruitfully addressed the central European problem, died from cancer and was buried in Toulouse. He was 57.

The loss to France and Europe was incomparably great.

That the French commitment to science of all sorts is being tested there can be no doubt. The story has been followed closely for the past year by Science magazine.

Just weeks after French scientists declared victory in what had been described as their biggest crisis in decades, Panthéon-Sorbonne professor Bernard Cornet announced that he was leaving Paris next month to join the department of economics in Lawrence, Kansas.

In April, the government narrowly averted a strike by more than half of the 3500 public lab chiefs, mostly biomedical researchers, many of them competitive in world science. Their complaint: top-heavy hierarchy and chronic stringent budget cuts.

The scientists folded their protest after government promised to create 550 new scientific positions and another 1,000 university jobs, and to unfreeze various budgets. Research minister Claudie Haigneré held out the possibility of a new national science foundation, to fund research proposals rather than labs.

“This is a big day for French research,” said cell biologist Alain Trautman, a spokesperson for the protestors. “We have stopped the hemorrhage….”

But they didn’t stop Bernard Cornet.

Cornet is editor of the Journal of Mathematical Economics, and a senior figure in a field that represents a small but important part of technical economics. In Paris he has supervised the work of a steady stream of graduate students, many of whom are now faculty members at leading universities.

Presumably there are deep stories in the intrigue surrounding his surprise departure. No doubt they will surface in Paris over time.

It is, however, no secret what happened in Lawrence, Kansas. A wealthy alumnus, Charley Oswald (yes, Charley is his given name), donated $10 million to his alma mater three years ago — with $6 million earmarked for the economics department and $3 million for the business school. A 1951 economics graduate, Oswald made a fortune inventing test-grading software for schools.

After a search, the Kansas department first hired William A. Barnett from Washington University, in St. Louis, another leading mathematical economist. (He is editor of the journal Macroeconomic Dynamics.) Then last week they hired microeconomist Cornet. The offer was understood to be several times his Paris salary. An architect is said to be designing his suite of offices.

In a somewhat similar fashion, Vanderbilt University earlier this year hired Myrna Wooders from the University of Warwick. She is co-editor of the Journal of Public Economics Theory, and she joins fellow editor John Conley, who arrived in Nashville two years ago from the University of Illinois.

Such negotiations in US universities usually are package deals. Perhaps they work best in fields such as math-econ, where driving distance to a good airport counts more than a well-rounded department. (It is 52 miles from Lawrence to Kansas City airport, while Nashville has a good airport of its own).

Who knows what, if anything, a Kansas-Vanderbilt rivalry might portend? Mathematical economics is a somewhat abstruse pursuit, often closer to mathematics than to economics — witness the fact that, despite their influential positions, only Wooders among the four editors is as yet a fellow of the Econometric Society, the semi-official inner circle of the profession.

The point is that such bidding-contests among institutions are almost entirely prohibited in Paris. One account has it that, for reasons going back to the French Revolution, a severe separation between church and universities is still enforced, especially at the prestigious Sorbonne, spilling over to prohibit bequests by private individuals as well.

French universities are entirely funded by the state, and even local governments cannot provide separate funds. Within universities, competition for resources is prohibited for the most part as well, with professors’ salaries based on seniority rather than research or teaching success. Salaries are a fraction of what they are in the United States.

No wonder, then, that many of the best French economics professors are teaching in the U.S., including Nobel laureate Gerard Debreu, at the University of California at Berkeley; Roland Benabou and Patrick Bolton, at Princeton; Olivier Blanchard, at the Massachusetts Institute of Technology; Phillipe Aghion, at Harvard; and Pierre-Andre Chiappori, at the University of Chicago.

It is precisely against this backdrop that the achievement of Jean-Jacques Laffont must be assessed. Here is what Eric Maskin of the Institute for Advanced Studies in Princeton had to say last week.

“The thing to say about Laffont is that he had three separate identities, and performed at the highest level in all three.

“First, he was one of the greatest economists of our time.

“Second, as an intellectual entrepreneur, he assembled the finest group of economic talent in Europe — starting from scratch — in Toulouse.

“Third, as a administrator/rainmaker he showed that a top-quality research institute can thrive in Europe as an essentially private outfit.

“Any one of these accomplishments would have been enough to mark him as a leading figure,” Maskin said.

The work with Harvard’s Jerry Green on incentives in public decision-making inspired an enormous literature, he said. The monograph with Jean Tirole on the regulation of natural monopolies did the same — and changed policy, nationally and internationally as well.

Finally, Maskin concluded, Laffont’s work on the causes and consequences of collusion among members of bureaucratic and corporate hierarchies, a collaboration with David Martimort, has just begun to pay off.

The rise to prominence of Laffont’s Institut D’Economie Industrielle, affiliated with the university in the old industrial city of Toulouse is, as yet, still little understood. Eventually, it holds the promise of a model freeing other European universities — the economics centers in Barcelona, Milan, Munich, Bonn, Louvain, Tilburg and Stockholm, for example — to compete for talent on an equal basis for faculty with their more entrepreneurial cousins in the United States.

It seems fair to say that the combination of software magnate Charley Oswald’s money and various economists’ brains means that another tall tree will grow in Lawrence, Kansas. The University of Kansas will enjoy enhanced stature among American land-grant universities.

The result of Laffont’s efforts, however, has been to plant an entire young forest in Toulouse — practical, balanced and diverse. If it grows to maturity, it will show the way to the kind of public-private rough-and-tumble funding that has worked so well to produce the university system in the United States.

For the central European problem in a nutshell is a lingering, totally unrealistic expectation of what the state can do. There is far too little private funding — of retirement systems, of health care, of research and of teaching. It will take at least a generation if not more to build a truly mixed economy. Meanwhile, expect the interplay of the strategies of voice and exit illustrated by Laffont and Cornet to continue.

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