HIDDEN ECONOMICS

by Gary Shapiro


Who says economics is the dismal science? A quick glance at the range of topics at Columbia Business School Professor Ray Fisman has tackled suggests otherwise: the parking behavior of U.N. diplomats, discussed in a 2007 article in the Journal of Political Economy, and racial preferences in dating, explored the following year in the Review of Economic Studies.

Fisman, the Lambert Family Professor of Social Enterprise at Columbia, is an eclectic scholar whose research is just as likely to show up in academic journals as in online publications like Slate, where he has a monthly column.

His latest book, The Org: The Underlying Logic of Office Life, co-authored with Tim Sullivan, editorial director of Harvard Business Review Press, was published earlier this year to glowing reviews. “An amiable guide, enjoyably wry without being jokey,” said The Wall Street Journal. And Fortune praised it for its “casual, engaging” style.

The book explores the organizational economics of office life, from the lowly cubicle to the CEO’s corner office. Their conclusion—that no matter how annoying, organizations are essential to get anything done—is illustrated through case studies of organizations as diverse as McDonald’s, al-Qaeda and the United Methodist Church.

Whoever would have thought that al-Qaeda—a decentralized global terror network of devout, if not fanatical, believers—would require its members to fill out expense reports? Well, it does, according to Fisman and Sullivan, citing documents captured by the U.S. military. “If even they need expense forms to prevent people from misusing funds, what hope is there for the rest of us for a life without paperwork?” Fisman says.

Elsewhere, in a discussion of why exceptional CEOs are worth their high compensation, Fisman asks why you would want to hire an experienced card counter to gamble at blackjack in your place. If doing so shifts the odds in your favor by even a few percentage points, it can produce huge returns when the stakes are large.

The Canadian-born Fisman received his Ph.D. in business economics at Harvard in 1998 and worked as a consultant in the Africa division of the World Bank before joining Columbia in 1999. He earned his bachelor’s degree at McGill University.

For his first book, Economic Gangsters: Corruption, Violence and the Poverty of Nations, co-authored with Edward Miguel and published in 2010, Fisman set out to solve the problem of whether corruption and violence cause poverty or vice versa. While Fisman finds that the issue is far from resolved, he said causation almost certainly runs in both ways. (It’s a chicken and egg question, he found.) “In graduate school, I practically lived out of a suitcase many months of the year,” he said.

In 1998, he flew to Jakarta, Indonesia, to study the decline in the market value of companies associated with President Suharto, who was forced to resign amid an Asian financial crisis after three decades in office. His finding? Stock market values of businesses connected to the Suharto family rose or fell with the dictator’s health.

Closer to home, Fisman tabulated the parking violations of U.N. officials to find out whether diplomats from certain nations were more apt to rack up parking tickets. “The study emphasizes the role of cultures or norms,” Fisman said. “There’s a strong norm of legal compliance in, say, Sweden. Less so in Mozambique.”

He found that cultural norms did play a big role: Diplomats from countries where corruption was more accepted accumulated significantly more unpaid parking violations—at least until 2002, when the city, in an agreement with the State Department, cracked down on violators and began to collect on unpaid tickets. More recently, assisted by new disclosure laws requiring Indian politicians to list their financial assets, Fisman has begun researching how much politicians benefit financially from public service. Preliminary results suggest that the benefits accrue the longer you hold office.

Fisman, who directs the Social Enterprise Program at the Business School, is often cited in popular media. His two-year study of speed dating, which produced two scholarly articles, found that men respond more to physical attractiveness than women, while women care more about intelligence and the race of their partner.

His columns for Slate are often counter-intuitive—a recent one was titled “The Most Efficient Office in the World: It’s run by the U.S. government.” Headlines are written by Slate editors, but last year Fisman vetoed one for an article on teaching ethics to business school students.

The proposed title was, “Training the Liars and Cheaters of Tomorrow.” After he insisted on the more neutral, “Can You Train Business School Students To Be Ethical?” Fisman learned an economics lesson of his own: The blander head-line led to a drop in Internet traffic.

Government is the #1 enemy of the people and the source of all major problems of humanity.  Anarchy is the best political system.  Basil Venitis, venitis@gmail.com, http://themostsearched.blogspot.com