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December 23, 2007
David Warsh, Proprietor


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What is Better Than Beating the Yankees?

The inspiring teacher is a well-recognized type in education, celebrated in fiction from Goodbye Mr. Chips to the about-to-be-released film “The Great Debaters,” in which a professor motivates students at all-black Wiley College to form a debate team that eventually goes all the way from east Texas to challenge Harvard for the national championship in 1935.

Yet specialization is relentless, even in education. Especially in research universities, the razor-like maxim often holds: Those who can, do; those who can’t, teach.

In recent years, however, the value of stellar educators has become so obvious that, even in big research universities, departments of chemistry, physics, biology and economics have begun offering tenure to the occasional gifted PhD who, over the course of a long career, is expected to concentrate mainly on teaching undergraduates – no commitment to produce cutting-edge research required.

That most certainly wasn’t the situation in the fall of 1971 when Karl “Chip” Case turned up at Harvard. That he turned up at all owed mainly to Harry Landreth, his professor at Miami University, of Ohio, for whom Case had taught classes as a senior. Landreth, himself a Harvard PhD, complained to his friend Henry Rosovsky that Case’s application had been rejected. Rosovsky, the incoming chairman, arranged a second letter.

Certainly, Case was not a typical graduate student in that year of winding down the war in Vietnam. He was married, for one thing. He was a passionate outdoorsman. He was not particularly mathematical. And he was just back from a year as an Army lieutenant in Quang Tri, and had a colorful vocabulary to show for it.

Yet he was in love with economics; ready to take the math-for-dummies course necessary to form at least a speaking acquaintance with linear algebra and transcendental logarithmic production functions; able to form strong bonds with key older members of the faculty, Richard Musgrave and John Kain in particular; and willing to serve as a source of levity and relief to his fellow students in a department preoccupied with turning itself around.

Case served as head teaching fellow from 1972 until ’76, taught dozens of bright undergraduates (one section demanded he attend their class’s twenty-fifth reunion), then took a job teaching at Wellesley College – a first-rate school ten miles from two great universities. He would be a ranking, but still not-quite-first-class citizen in the capital city of the Republic of Economics.

Before long, it was obvious that he was a master teacher. Wellesley students headed for business school thronged to his class. More than a few went to economics departments instead. No fewer than eighty Wellesley women have obtained PhDs in economics in the thirty years since Case began teaching there. Virtually all credit him with having played some part in the process.

Still, he managed to keep a hand in research. As a graduate student, he did field-work on the landmark 1975 study Housing Markets and Racial Discrimination, by Kain and John Quigley, now of the University of California at Berkeley, which crystallized his life-long interest in residential real-estate markets. Once established at Wellesley, he signed on as a researcher in regional economics at the Federal Reserve Bank of Boston.

Then, in the 1980s, with Ray Fair of Yale University, he co-authored an introductory economics textbook which not only succeeded commercially, but which produced some key changes in the way economics today is taught to college students – microeconomics first, instead of business cycles. (About to appear in its ninth edition, Case/Fair, soon-to-be Case/Fair and Sharon Oster, is the sixth or seventh most frequently-adopted today among all principles texts.)

But it was at the Boston Fed that Case struck it rich, first intellectually, then financially. Quigley had remarked to him, probably during a bull session one evening in the inflationary ’70s, that “the only thing stupider than not owning a house is not owning two houses” (whereupon Case and his wife had bought a house in Wellesley). Not until 1986 was the depth of that wisdom borne in upon him – when the value of their house went up 40 percent in a single year.

Case checked real estate prices in a dozen cities around the country, looking for similar appreciation in other markets. He found none. He wrote his results up in an article for the Boston Fed’s New England Economic Review. Faced with no satisfactory explanation of why prices should be going up so rapidly in Boston but not elsewhere, he ventured that perhaps Boston was caught in the midst of that will-’o-the-wisp, a speculative bubble.

Case hadn’t much solid evidence to go on; he had even less theory. He asked his macro co-author, Fair, to recommend an expert on bubbles: look no further than Robert Shiller, across the hall at Yale, Fair replied. Case’s wife, Susan, a guidance counselor at suburban Stoneham High School, produced a summer research assistant, Maura Doyle, who, she insisted, otherwise would be headed for a career at the local supermarket.

What was needed, Case and Shiller agreed, was a proper index of house prices: not the usual jumble of transaction prices, of houses with wings added and sills deteriorating, but of well-maintained but unmodified single-family homes changing hands regularly over long periods of time. It was a tall order, but not an impossible one. Doyle spent the summer in deeds offices in six cities and towns around the state. When she was done, the professors had something worth having – the clearest picture ever developed of what a theorist would want to know about developments in a single market.

Another summer of collecting similar prices, in other cities around the country, and Case and Shiller had a paper in the March 1989 American Economic Review: “The Efficiency of the Market for Single Family Homes,” and Doyle was on her way, first to Mount Holyoke, then to an MIT PhD. (She is now a lecturer at Dartmouth College.) Eventually the paper would become famous, at least in certain circles, as evidence that even the housing market was prone to the kinds of mood swings that seemed to routinely afflict the markets for stocks and bonds. The reason that macroeconomists are interested in such matters should be amply clear in the winter of 2007-08!

But the Case and Shiller didn’t stop there. If indeed one region of the country could swing up while another swung down then there were risks to home owning that a prudent investor, especially one who thought he might someday move, could hope to hedge against – but only if there were an actual market for such risks. The partners now enlisted a Shiller student, Allan Weiss, and formed a company to create the kinds of dependable indexes of house prices in cities around the country on which trading of index-based futures and options could be based. Each put up a few thousand dollars at the beginning. A decade later, when the company had become the market leader in residential housing data and valuation, they would sell it for many millions.

Yet all the while, Case was teaching, driving for hours to attend team games and matches, housing a long succession of “host daughters” from countries around the world (and teaching for short stints in as many of those countries as he could), becoming a full-fledged Wellesley legend. His wife, who had moved to Milton Academy to serve as college counselor, added a new stream of students. Case began filling in teaching introductory economics at Harvard Law School. His businessman father caught the final lecture one year, and, after the standing ovation at the end of the hour, came to terms with his son’s choice of a teaching career.

Throughout, Case invested wisely, speculated even more wisely in fancy wine, drank more than a little of it with friends along the way, and went to as many Boston Red Sox games as possible. In the throes of discussing recently the fine points of the route to the 2004 World Series, he punched icons on a PC in order to blare out “The Impossible Dream.” Once, in the grandstand, with the Sox up 8-3 over the Yankees, he asked his friend and one-time professor H. James Brown, “What’s better than beating the Yankees?” Pause for effect. “Nothing!”

Earlier this month, the Lincoln Institute of Land Policy hosted a two-day meeting in Cambridge to produce a conference volume in honor of Case, now 61. Big shots presided, among them Quigley of Berkeley, and Edward Glaeser and Dale Jorgenson, of Harvard. Dozens of friends and former students turned up. Buzz about the subprime crisis filled the breaks.

The final dinner was a particularly warm occasion. Sharon Oster, Ray Fair and Robert Shiller spoke. Hermann “Dutch” Leonard sang. Edward Lazear, chairman of the Council of Economic Advisers, spoke. Austan Goolsbee recalled Case’s practical jokes. At the end of the long evening, Case returned it all in kind. He didn’t mention the slowly-advancing Parkinson’s Disease that had dogged him for seventeen years. “I’m not going anywhere,” he told the audience.

For all the pleasure of the evening, the real climax of the conference had come earlier in the day, when Case’s friend Brown (who for many years had been the Lincoln Institute’s president), brought the final session to its feet when he sought to convey the character of his friend with some lines from Walt Whitman:

I am of old and young, of the foolish as much as the wise; Regardless of others, ever regardful of others,
Maternal as well as paternal, a child as well as a man,
Stuff’d with the stuff that is coarse,
and stuff’d with the stuff that is fine;

A learner with the simplest, a teacher of the thoughtfullest;
A novice beginning, yet an experient of myriads of seasons;
Of every hue and caste am I, of every rank and religion
A farmer, mechanic, artist, gentleman, sailor, quaker
A prisoner, fancy-man, rowdy, lawyer, physician, priest.…

I resist anything better than my own diversity
I breathe the air, but leave plenty after me,
And am not stuck up, and am in my place.

What’s better than beating the Yankees? Maybe that.

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