Introduction to the interview with Eric Maskin by Jean Tirole
I’m very pleased that The TSEconomist chose to interview Eric Maskin, who in turn kindly accepted to participate. Eric Maskin is a role model for scholarship. There is no point reviewing here his breakthrough contributions to the economics of incentives; they are well-known and have been deservedly recognized by the Economics Nobel Prize Committee. Let me just say a few words about a slightly less well-known side of Eric. As all those who have met him will confirm, he is a very modest person; he is also a very good citizen and generous with his time.
A superb advisor, he has mentored generations of students at MIT, Harvard and Princeton and has changed the path of their careers. I had the great opportunity to be one of his first students- along with my MIT classmate Drew Fudenberg. Extrapolating on our own experience, I can conjecture that his extraordinary track record with students is due to three factors.
First, he never insists on his students embarking on his own research topics. He is intellectually curious and will get interested even in subjects lying clearly outside his area of expertise (at least when the student starts working on them- quickly Eric becomes an expert...). If a research path will in his opinion lead to a dead-end or to an unambitious outcome, he will say so. But otherwise he will be strongly supportive, regardless of the topic. As he rightly argues in his TSEconomist interview: “I think the most important element in producing a successful Ph.D. dissertation is being really interested in the questions you are trying to answer. If you truly care about the subject, you have the incentive to immerse yourself in it – and that’s what leads to a good dissertation. In fact, this is probably the most important element in producing good research more generally.” By being supportive of the student’s own interests, Eric makes it more likely that the student succeeds in his/her dissertation and start of career.
I should mention two other factors, both related to the personal traits mentioned above. First, he is very generous with his time. I still fondly remember the tutorials Drew Fudenberg and I had with Eric Maskin in his MIT office. He would discuss with us the yet unpublished papers of now classic work by for instance Myerson, Myerson-Satterthwaite, Green-Laffont, Milgrom-Roberts, Kreps- Wilson and (as we asked him) his own work by himself or with Jean-Jacques Laffont, John Riley, Peter Diamond or Partha Dasgupta. This was just extraordinary; we just saw the field of economics change in real time and were getting insights as to what the shortages of the new approaches (game theory, information economics) and areas for future research were. This is what my TSE colleagues try to emulate today by covering recent developments in an enthusiastic manner.
Eric’s second trait that makes the PhD process under his supervision both enjoyable and productive is his graciousness. Working on a PhD thesis generates anxiety; regardless of previously demonstrated talent, performing research is for most PhD students a jump into the unknown and there are always many moments of doubt, when one wonders if one is able to fulfill expectations. Self-confidence is with passion a key to delivering good research; but unlike passion, self-confidence is fragile and does not come by easily. Eric has always been a gentle supervisor. While he clearly indicates to the student unpromising research paths or wrong reasoning, he always does so in a soft, constructive manner.
Let me give you an anecdote, which probably Eric does not recall (and that I almost successfully repressed myself). In my second year of the PhD program, I had the great opportunity to work on a joint paper with him on Keynesian equilibria – this was the beginning of a long collaboration (indeed in the following year, while I was still an MIT student, we started working on the various papers on Markov perfect equilibria – the pure game – theory piece as well as the three IO applications). One day, while he was away at a conference, I added a proposition to the paper. Alas, this proof of the proposition contained a fateful mistake. When returning, Eric quickly figured out the mistake, but very graciously and in a soft-spoken way tried to find redeeming features (honestly, there were none, the mistake was rather stupid), and went on to provide an alternative proof. While embarrassing for me, this episode certainly taught me a lesson.
Research is a complex alchemy, in which sheer analytical power is just one of many ingredients. Another ingredient is the ability to alternate between two opposite advocacy roles: wishful thinking- hoping that a proof or idea will work, sometimes against all odds, and not hesitating to take shortcuts before writing things more carefully – and critical examination – submitting the outcome to the toughest refereeing process possible. Yet another absolutely key factor is passion, as described in the interview. And finally there is a large payoff to being in the right place with the right people. Eric Maskin is certainly one of these scholars who always make the investigation intellectually challenging and at the same time much fun, as it should!
Interview with Eric S. Maskin: Questions by TSE students
Eric Maskin is Adams University Professor at Harvard. He received the 2007 Nobel Memorial Prize in Economics (with L. Hurwicz and R. Myerson) for laying the foundations of mechanism design theory. He also has made contributions to game theory, contract theory, social choice theory, political economy, and other areas of economics.
He received his B.A. and Ph.D from Harvard and was a postdoctoral fellow at Jesus College, Cambridge University. He was a faculty member at MIT from 1977-1984, Harvard from 1985-2000, and the Institute for Advanced Study from 2000-2011. He rejoined the Harvard faculty in 2012.
• Life and the Nobel Prize
Why did you decide to become an economist given that you were trained as a mathematician? How much investment in math would you recommend to Ph.D. students interested in economic theory in general but without any math background?
It’s true that my initial training was in mathematics. However, almost by accident, I happened to take a course from Kenneth Arrow on “Information Economics,” which was so inspiring that I decided to change direction. It seemed to me that economics combined the best of both worlds: the rigor of mathematics with the immediate relevance of a social science. As for how much math I would recommend, I’d say that basic analysis, including measure theory, is certainly very useful. Also, linear algebra and stochastic processes always helps. But beyond that, I don’t think a huge mathematical investment is necessary to do economic theory unless you are planning to work in an extremely technical area.
What were your immediate reactions and thoughts when you were informed that you won the Nobel Prize? How did being a Nobel laureate affect your life?
My first reaction was great surprise and a sense of unreality – but also pleasure, especially from the fact that Leo Hurwicz and Roger Myerson were being recognized too. For the most part, the prize hasn’t changed my life a great deal, but it has given me the opportunity to visit some places I wouldn’t have otherwise seen and meet some people I wouldn’t have otherwise come across. It has also given me the chance to speak to a much broader audience.
What was the feeling of living in the Princeton house in which Albert Einstein spent the last 19 years of his life? What do you think is the most remarkable element of his work and his legacy?
It was certainly a thrill to live in Einstein’s old house; he has always been one of my heroes. For me, his most remarkable accomplishment is to show how far we can go in understanding the world through pure thought alone.
You come from a musical family: your mother taught at Juilliard and your brother is a professional oboist. As a matter of fact, you turn out to be a first-rate musician yourself. You play the piano as well as the clarinet, and perform regularly in concerts, mainly classical music, but also jazz. Did your involvement with music affect your research life? Did you ever regret that you did not follow the family tradition in the choice of your profession?
Music has helped provide some balance to my life. I love doing research, but must acknowledge that writing an economics paper does not allow me to express my emotions very much. Playing music, by contrast, gives me a rich emotional outlet, which is very satisfying. I don’t regret not becoming a professional musician. As it is, I have the best of both worlds – I can do economics and play music on the side (perhaps not as often as I’d like, but still quite a bit). It would be very hard for a professional musician to do economics on the side.
• About Crises and Economic Theory
The recent financial crisis revealed that markets do not work so perfectly as some policy makers had thought. What were the main reasons for which policy makers and politicians were so confident about the performance of financial markets and rejected the call for more stringent regulation? Can such behavior be justified by realistic economic theoretical models? What do you think are the main lessons that we should keep in mind for the future?
I don’t really understand why politicians and policy makers had such faith in the self-regulation of financial markets – perhaps ideology had something to do with it. Certainly, such faith was not based on a good understanding of economic theory, which shows very clearly how financial markets can fail because of serious externalities. I hope that we remember going forward that financial stability depends on correcting these externalities, and that a good way of doing so is regulation – especially, regulation of leverage.
How do you comment on the recent policy decisions of the EU, like the outright monetary transactions of the ECB, the austerity packages implemented in many European countries and the intensive discussions around the issue of Eurobonds? Do you believe that the currently applied rescue plans in these countries are incentive compatible or they leave room for misbehavior?
I think the ECB’s accommodating monetary policy has been helpful, but I’m afraid that austerity programs have largely proved to be counterproductive; they were implemented at time when economies were still fragile, and have tended to make things worse. I applaud the idea of Eurobonds and other moves to integrate Europe’s fiscal side. Of course, rescue plans create a moral hazard problem, which is why the fiscal consolidation of Europe (including the power of a central authority to constrain member countries’ domestic spending) is so important.
Do you think that the Euro as currency can survive the exit of one of the small and peripheral countries from the Eurozone (say Greece for example)? Could it survive the exit of Germany? Can the consequences of such events be really predicted?
I’m no expert on European politics, but I’d guess that the Euro might survive the exit of Greece, but not the exit of France or Germany. The honest answer, though, is that these are just wild guesses. I suspect that even experts on the subject can’t do much better than guess.
• Patent Protection and Innovation
Your opinion that patents can inhibit innovation in particular in industries like the software industry seems at first sight to contradict the conventional wisdom that patent protection leads to more innovations. Do you think that we should weaken the patent protection in particular industries in order to improve social welfare?
There are indeed industries in which relaxing patent protection might be good for innovation and society. This is true especially of industries – like software – in which invention is highly sequential; where instead of there being one big discovery, there are lots of little discoveries, each building on what has been done before. In such industries, patents can block critical follow-on innovation. You may want to build on a discovery I’ve made. But if I hold a patent on that discovery, I am apt – as a monopolist – to set a high license fee, which may well deter you from innovating.
• Our final question:
You have contented yourself with your research, but have been a fantastic advisor as well. What do you think are the main ingredients of a successful Ph.D. dissertation?
I think the most important element in producing a successful Ph.D. dissertation is being really interested in the questions you are trying to answer. If you truly care about the subject, you have the incentive to immerse yourself in it – and that’s what leads to a good dissertation. In fact, this is probably the most important element in producing good research more generally.