Two days ago, it was announced that Susan Athey would be the 2007 recipient of the John Bates Clark Medal (A hasty Wikipedia entry is here). It is one of the most prestigious awards in economics and a predictor of future Nobel prize glory. Of the 18 awardees prior to 1983, 11 have already won a Nobel prize. Those are good odds.
As Tim Harford notes, Susan’s award represents a ‘return to fundamentals’ with many decades of applied economists receiving the award. Susan operates at another level to those like Steve Levitt, Andrei Shleifer and Paul Krugman. Fewer papers but much higher long-term impact. Although Susan is not without her share of applied work too.
If I were to characterise Susan’s work in a single sentence it would be on answering the question how does having “more information” translate into observed actions by agents? This is a very difficult question. For starters, you need to know what the statement “more information” means and secondly, you need to consider what actions agents might have at their disposal. For Susan, the two interacted but what is more the issue was what could be said as opposed to throwing up one’s hands at the complexity of it all.
Her research on monotone comparative statics hits at this in a big way. This research looks at when we can say if x changes, then y changes in a set direction. Paul Milgrom, John Roberts and Chris Shannon while we were at Stanford had made great strides in thinking about this for environments where there was perfect information and no uncertainty. Susan decided to tackle the uncertainty case. She showed that the same things we look for when there is certainty carry over into the uncertainty case too. For researchers, this meant that their results generalised and the confidence of predictions went up accordingly.
All this was in Susan’s Stanford dissertation. It started, in fact, with a more applied project including myself, Scott Stern and Scott Schaefer as co-authors. (That paper “The Allocation of Decisions” was never published but is available here). It has one little lemma to generate a comparative statics result under uncertainty. I remember that Susan took that and made 75 (!) more in just a few months. Then, no sooner had she done that but she had poured it back into a single fundamental theorem. Simply amazing and this was the reason why she had 25 job flyouts and a write-up in the New York Times at 25 years old. (Indeed, this generated a celebrity status. When we were in Japan a few months later, she was recognised on the street. “It’s you, it’s you.” Hard to forget stuff like that).
Not content with just that Susan then did the same thing for games with incomplete information and auctions (I wrote about the latter here). She took the relationships at the heart of monotone comparative statics (namely, complementarity) and with Scott Stern showed how it could be used to analyse the adoption of systems especially within organisations (see a write-up here). That work, although unpublished, is perhaps her most cited.
For me, however, I am a bigger fan of her work in industrial organisation. Again using insights from monotone comparative statics, Susan (with Armin Schmutzler) looked at when investment by market leaders would reinforce their dominance (something that really nailed the dynamics of persistent market power). But in more recent work with Kyle Bagwell, Susan has completely changed approaches to modeling dynamic competition. She makes the reasonable assumption that firms can observe things about other firms from their pricing actions and this will soften or strengthen their competitive actions accordingly. This has all sorts of implications such as that firms who want to collude will have trouble adjusting to change (so if you think petrol prices are collusive then expect them to have lower variance than their fundamentals). And that two isn’t enough for real tough price competition. Apparently, this all has some macroeconomic implications too.
Susan’s work is not as highly cited as others. Her h-index (based on Google Scholar) is 17. This is compared to others on Steve Levitt’s list of contenders of John List (23), Marianne Bertrand (19), Esther Duflo (18), Austan Goolsbee (18), Sendhil Mullainathan (19), Ilya Segal (14), and Rob Shimer (17). The immediate past winner, Daron Acemoglu has 46. She isn’t even the most highly cited in her household: Her husband’s Guido Imbens is 26.
But Susan’s work is more fundamental and more complete than any of her peers. When she tackles something, she does it all. The field is advanced 10 years in a single shot and, not surprisingly, the profession plays catch-up for a while. When they have finally caught up, let’s see what happens.
To end, I am going to recount one story about Susan’s work habits. Last year, she was expecting her second child. I got a call which must have been late at night her time. It was Susan and she was trying to complete a few minor things on a project she and I were involved in on timber auctions in Victoria. After a few minutes I asked. “So you must be due soon, how is it going?” Well, apparently, it was going slowly. She was calling me from the delivery room! Most people are content to take that time off. Susan was clearing her to do list! Susan had time to spare and we chatted for a while and for the next hour emails continued to come in. The baby was born soon after.
[Update: David Warsh provides an extended summary of Susan’s achievements.]