Varian UC Berkeley December 1994 Current version July 25 2009 Abstract This is an essay for Passion and Craft Economists at Work edited by Michael Szenberg University of Michigan Press 1997 Keywords Address Hal R Varian Dean School of Informa ID: 2878
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pChapter1HOWTOBUILDANECONOMICMODELINYOURSPARETIMEThisisalittlearticlethatIwrotetodescribehowIwork.ItcontainstheadvicethatIwishIhadreceivedwhenIwasjuststartingout,anditismeanttobeentertainingaswellasinstructive.Mostofmyworkineconomicsinvolvesconstructingtheoreticalmodels.Overtheyears,Ihavedevelopedsomewaysofdoingthisthatmaybeworthdescribingtothosewhoaspiretopracticethisart.Inrealitytheprocessismuchmorehaphazardthanmydescriptionwouldsuggest|themodelofresearchthatIdescribeisanidealizationofreality,muchliketheeconomicmodelsthatIcreate.Butthereisprobablyenoughconnectionwithrealitytomakethedescriptionuseful|whichIhopeisalsotrueformyeconomicmodels.1.1GettingideasTherststepistogetanidea.Thisisnotallthathardtodo.Thetrickypartistogetagoodidea.Thewayyoudothisistocomeupwithlotsandlotsofideasandthrowoutalltheonesthataren'tgood.Butwheretogetideas,that'sthequestion.Mostgraduatestudentsareconvincedthatthewayyougetideasistoreadjournalarticles.Butinmyexperiencejournalsreallyaren'taverygoodsourceoforiginalideas.Youcangetlotsofthingsfromjournalarticles|technique,insight,eventruth.Butmostofthetimeyouwillonlygetsomeoneelse'sideas.True,theymayleaveafewlooseendslyingaroundthatyoucanpickupon,butthereasontheyarelooseisprobablythattheauthorthoughtaboutthemawhileandcouldn'tgureoutwhattodowiththemordecidedtheyweretootedioustobotherwith|whichmeansthatitislikelythatyouwillndyourselfinthesamesituation. 2HOWTOBUILDANECONOMICMODELINYOURSPARETIMEMysuggestionisratherdi erent:Ithinkthatyoushouldlookforyourideasoutsidetheacademicjournals|innewspapers,inmagazines,incon-versations,andinTVandradioprograms.Whenyoureadthenewspaper,lookforthearticlesabouteconomics:::andthenlookattheonesthataren'tabouteconomics,becauselotsofthetimetheyendupbeingabouteconomicstoo.Magazinesareusuallybetterthannewspapersbecausetheygointoissuesinmoredepth.Ontheotherhand,ashalloweranalysismaybemorestimulating:there'snothinglikeafallaciousargumenttostimulateresearch.1Conversations,especiallywithpeopleinbusiness,areoftenveryfruitful.Commerceisconductedinmanyways,andmostofthemhaveneverbeensubjectedtoaseriouseconomicanalysis.Ofcourseyouhavetobecarefulnottobelieveeverythingyouhear|peopleinbusinessusuallyknowasetofrulesthatworkwellforrunningtheirownbusiness,buttheyoftenhavenoideaofwheretheserulescomefromorwhytheywork,andthisisreallywhateconomiststendtondinteresting.Inmanycasesyourideascancomefromyourownlifeandexperiences.OneofmyfavoritepiecesofmyownworkisthepaperIwroteon\AModelofSales".IhaddecidedtogetanewTVsoIfollowedtheadsinthenewspapertogetanideaofhowmuchitwouldcost.Inoticedthattheprices uctuatedquiteabitfromweektoweek.Itoccurredtomethatthechallengetoeconomicswasnotwhythepricesweresometimeslow(i.e.,duringsales)butwhytheywereeverhigh.Whowouldbesofoolishastobuywhenthepricewashighsinceeveryoneknewthattheitemwouldbeonsaleinafewweeks?Buttheremustbesuchpeople,otherwisethestoreswouldnevernditprotabletochargeahighprice.Armedwiththisinsight,Iwasabletogenerateamodelofsales.Inmymodelthereweretwokindsofconsumers:informedconsumerswhoreadtheadsanduninformedconsumerswhodidn'treadtheads.Thestoreshadsalesinordertopricediscriminatebetweentheinformedanduninformedconsumers.OnceIdevelopedthemodelIhadaresearchassistantgothroughacoupleofyears'worthoftheAnnArborNewssearchingforthepricesofcolorTVs.Muchtomydelightthegeneralpatternofpricingwassimilartothatpredictedbythemodel.And,yes,IdidmanagetogetaprettygooddealontheTVIeventuallybought.1.2Isyourideaworthpursuing?Solet'sassume(afavoritewordofeconomists)thatyouhaveanidea.Howdoyouknowifitisanygood?Thersttestistotrytophraseyourideainawaythatanon-economistcanunderstand.Ifyoucan'tdothis1Butwhichsourcestoread?IreadtheNewYorkTimes,theWallStreetJournalandtheEconomist;theseareprobablygoodplacestostart. BUILDINGYOURMODEL3it'sprobablynotaverygoodidea.Ifyoucanphraseitinawaythatanoneconomistcanunderstand,itstillmaybealousyidea,butatleastthere'shope.Beforeyoustarttryingtodecidewhetheryourideaiscorrect,youshouldstoptoaskwhetheritisinteresting.Ifitisn'tinteresting,noonewillcarewhetheritiscorrectornot.Sotryitoutonafewpeople|seeiftheythinkthatitisworthpursuing.Whatwouldfollowfromthisideaifitiscorrect?Wouldithavelotsofimplicationsorwoulditjustbeadeadend?Alwaysrememberthatworkingonthisparticularideahasanopportunitycost|youcouldbespendingyourtimeworkingonadi erentidea.Makesurethattheexpectedbenetscoverthatopportunitycost.Oneoftheprimarypurposesofeconomictheoryistogenerateinsight.Thegreatestcomplementis\Ah!Sothatexplainsit!"That'swhatyoushouldbelookingfor|forgetaboutthe\nicesolidwork"andtrytobecomeaWizardofAhs.1.3Don'tlookattheliteraturetoosoonTherstthingthatmostgraduatestudentsdoistheyrushtotheliteraturetoseeifsomeoneelsehadthisideaalready.However,myadviceistowaitabitbeforeyoulookattheliterature.Eventuallyyoushoulddoathoroughliteraturereview,ofcourse,butIthinkthatyouwilldomuchbetterifyouworkonyourideaforafewweeksbeforedoingasystematicliteraturesearch.Thereareseveralreasonsfordelay.First,youneedthepracticeofdevelopingamodel.Evenifyouendupreproducingexactlysomethingthatisintheliteraturealreadyyouwillhavelearnedalotbydoingit|andyoucanfeelawfullygoodaboutyourselffordevelopingapublishableidea!(Evenifyoudidn'tgettopublishityourself:::)Second,youmightcomeupwithadi erentapproachthanisfoundintheliterature.Ifyoulookatwhatsomeoneelsedidyourthoughtswillbeshapedtoomuchbytheirviews|youaremuchmorelikelytobeoriginalifyouplungerightinandtrytodevelopyourowninsights.Third,yourideasneedtimetoincubate,soyouwanttostartmodelingasearlyaspossible.Whenyoureadwhatothershavedonetheirideascaninteractwithyoursand,hopefully,producesomethingnewandinteresting.1.4BuildingyourmodelSolet'sskiptheliteraturepartfornowandtrytogettothemodeling.Luckyforyou,alleconomicsmodelslookprettymuchthesame.Therearesomeeconomicagents.Theymakechoicesinordertoadvancetheirobjectives.Thechoiceshavetosatisfyvariousconstraintssothere'ssome-thingthatadjuststomakeallthesechoicesconsistent.Thisbasicstructure 4HOWTOBUILDANECONOMICMODELINYOURSPARETIMEsuggestsaplanofattack:Whoarethepeoplemakingthechoices?Whataretheconstraintstheyface?Howdotheyinteract?Whatadjustsifthechoicesaren'tmutuallyconsistent?Askingquestionslikethiscanhelpyoutoidentifythepiecesofamodel.Onceyou'vegotaprettygoodideaofwhatthepieceslooklike,youcanmoveontothenextstage.Moststudentsthinkthatthenextstageistoproveatheoremorrunaregression.No!Thenextstageistoworkanexample.Takethesimplestexample|oneperiod,2goods,2people,linearutility|whateverittakestogettosomethingsimpleenoughtoseewhatisgoingon.Onceyou'vegotanexample,workanotherone,thenanotherone.Seewhatiscommontoyourexamples.Istheresomethinginterestinghappen-inghere?Whenyourexampleshavegivenyouaninklingofwhatisgoingon,thenyoucantrytowritedownamodel.ThecriticaladvicehereisKISS:keepitsimple,stupid.Writedownthesimplestpossiblemodelyoucanthinkof,andseeifitstillexhibitssomeinterestingbehavior.Ifitdoes,thenmakeitevensimpler.SeveralyearsagoIgaveaseminaraboutsomeofmyresearch.Istartedoutwithaverysimpleexample.Oneofthefacultyintheaudienceinter-ruptedmetosaythathehadworkedonsomethinglikethisseveralyearsago,buthismodelwas\muchmorecomplex".Ireplied\MymodelwascomplexwhenIstarted,too,butIjustkeptworkingonittillitgotsimple!"Andthat'swhatyoushoulddo:keepatittillitgetssimple.Thewholepointofamodelistogiveasimpliedrepresentationofreality.Einsteinoncesaid\Everythingshouldbeassimpleaspossible:::butnosimpler."Amodelissupposedtorevealtheessenceofwhatisgoingon:yourmodelshouldbereducedtojustthosepiecesthatarerequiredtomakeitwork.Thistakesasurprisinglylongtime|thereareusuallylotsoffalsestarts,frustratingdiversions,andgeneralfumblingaround.Butkeepatit!Ifitwereeasytodo,itwouldhavealreadybeendone.1.5GeneralizingyourmodelSupposethatyou'venallymadeyourmodelassimpleaspossible.Atthispointyourmodelisprobablytoosimpletobeofmuchinterest:it'slikelyjustanexampleoraspecialcase.Butifyouhavemadeyourmodelassimpleaspossible,itwillnowbemucheasiertoseehowtogeneralizeitsinceyouknowwhatthekeypiecesarethatmakethemodelwork.Hereiswhereyoureducationcanbehelpful.Atlastyoucanuseallthosetechniquesyoulearnedingraduateschool.Mostofthetimeyouwereastudentyouprobablystudiedvariouscanonicalmodels:thingslikeconsumerchoice,andproducerchoice,generalequilibrium,gametheoryandsoon.Theprofessorprobablytoldyouthatthesewereverygeneralmodelsthatcouldencompasslotsofspecialcases. SEARCHINGTHELITERATURE5Well,itwasalltrue.Overthelastftyyearseconomistshavecomeupwithsomeverygeneralprinciplesandmodels.Mostlikelyyourmodelisaspecialcaseofoneofthesegeneralmodels.Ifsoyoucanimmediatelyapplymanyoftheresultsconcerningthegeneralmodeltoyourspecialcase,andallthattechniqueyoulearnedcanhelpyouanalyzeyourmodel.1.6MakingmistakesThisprocess|simplifytogettheresult,complexifytoseehowgeneralitis|isagoodwaytounderstandyourmodel.MostofthetimethatIspendmodelingisinvolvedinthisback-and-forthprocess.Alongtheway,Imakealotofmistakes.AsPietHeinputsit:Theroadtowisdom?Wellit'splainandsimpletoexpress:Erranderranderragainbutlessandlessandless.Thisback-and-forthiterationinbuildingamodelislikesculpting:youarechippingawayalittlebithere,andalittlebitthere,hopingtondwhat'sreallyinsidethatstubbornblockofmarble.Ichoosetheanalogywithsculptingpurposely:likesculpturemostoftheworkinbuildingamodeldoesn'tconsistofaddingthings,itconsistsofsubtractingthem.Thisisthemostfunpartofmodeling,anditcanbeveryexcitingwhentheformoftheideareallybeginstotakeshape.Inormallywalkaroundinabitofadazeatthisstage;andItrynottogettoofarawayfromayellowpad.Eventually,ifyou'relucky,theinnerworkingsofyourmodelwillrevealitself:you'llseethesimplecoreofwhat'sgoingonandyou'llalsounderstandhowgeneralthephenomenonreallyis.1.7SearchingtheliteratureAtthispointyoucanstartdoingyourliteraturesearch.Tellyourprofessorsaboutwhatyou'vediscovered|ninetimesoutoftenthey'lltellyoutolookinthe\1983AER"or\Econometrica77"orsometextbook(maybeeven 6HOWTOBUILDANECONOMICMODELINYOURSPARETIMEoneofmine).Andlotsofthetimethey'llberight.You'lllookthereandnd\your"model|butitwillbemuchbetterdone,muchmorefullydeveloped,andmuchclearer.Hey,noonesaidresearchwouldbeeasy.Butthisisapointwhereyoureallyhaveachancetolearnsomething|readthearticle(s)carefullyandaskyourself\Whydidn'tIdothat?"Ifsomeonestartedwiththesameideaasyouandcarrieditfurther,youwanttoseewhatyoumissed.Ontheotherhand,ifyoureallyfollowedtheadviceIgaveyouabovetokeepitsimple,youmayhavecomeupwithsomethingthatismuchclearerthanthecurrenttreatments.Or,maybeyou'vefoundsomethingthatismoregeneral.Ifso,youmayhaveaworthwhileinsight.Gobacktoyouradvisorandtellhimorherwhatyouhavefound.Maybeyou'vegotanewangleonanoldideathatisworthfurtherexploration.Ifso,congratulations|youwouldneverhavefoundthisifyoudidtheliteraturesearchrightaway.Maybewhatyou'veguredoutisnotalreadyintheliterature.Thenextpossibilityisthatyouarewrong.Maybeyouranalysisisn'tright,maybetheideaisjusto thewall.Thisiswhereyouradvisorcanplayabigrole.Ifyou'vereallymadeyouranalysisassimpleaspossible,itisa)lesslikelytocontainanerror,andb)anyerrorsthatremainwillbeeasiertond.Thisbringsmetoanothercommonproblem.Whenyou'veworkedonatopicforseveralmonths|orevenseveralweeks|youtendtolosealotofperspective:::literally.You'rejusttooclosetotheworktoreallygetapictureofwhatisgoingon.Thislackofperspectivetakesoneoftwoforms:rst,youmaythinksomethingisobviouswhenitreallyisn't.Itmaybeobvioustoyou,butyou'vebeenthinkingaboutthisissueforseveralmonths|itprobablyisn'tsoobvioustosomeonewhodoesn'thavethebenetofthatexperience.Theotherpossibilityisthatyoumaythinksomethingiscomplicatedwhenitisreallyobvious|you'vewanderedintoaforestviaameanderingpath.Maybethere'sanicecleartrailjustafewfeetawaythatyou'vetotallymissed.Soatthispointyou'vegottostartgettingsomeindependentjudgmentofyourwork.Talktoyouradvisor,talktoyourfellowstudents,talktoyourwife,husband,girlfriend,boyfriend,neighbor,orpet:::whoeveryoucangettolisten.Andhere'swhatyou'llnd:they'vegotnoideaofwhatyouaretalkingabout(especiallyyourpet).Soyouhavetogobacktotryingtogureoutwhatyoureallyaretalkingabout:whatisthefundamentalideaofyourmodel?1.8GivingaseminarAfteryou'veboredyourfriends,relativesandpetstodeath,youshouldgiveaseminar.Thisisareallyimportantphase:themoreyoucantalk GIVINGASEMINAR7aboutyourwork,thebetterthenalpaperwillbe.Thisisbecauseatalkforcesyoutogettothepoint.Ifyouwantyouraudiencetolistentoyou,you'vegottomakeyourideaclear,concise,andorganized|andtheexperiencethatyougainbydoingthisisextremelyusefulforwritingyourpaper.Ilistentoalotofstupidideas|butthat'swhatI'mpaidtodo.Lotsofpeoplelistentostupidideasfromme,too:mycolleaguesgetpaidtodoit,andthestudentsgetexaminedonit.Butmostpeopledon'thavetolistentoyou.Theydon'thavetoreadyourpaper.Theywon'tevenhavetoglanceattheabstractunlesstheyhaveareasonto.Thiscomesasabigshocktomostgraduatestudents.Theythinkthatjustbecausethey'veputalotofworkandalotofthoughtintotheirpaperthattherestoftheworldisobligedtopayattentiontothem.Alas,itisn'tso.HerbSimononcesaidthatthefundamentalscarcityinthemodernworldwasscarcityofattention|andbrother,isthatthetruth.Therearedemandsforeverybody'sattention,andifyouwantsomeonetopayattentiontoyou,youhavetogivethemareasontodoso.Aseminarisawaytogetthemtopayattention,sobesuretoexploitthisopportunitytogetpeopletolistentoyou.Theusefulthingaboutaseminaristhatyougetimmediatefeedbackfromtheaudience.Anaudiencewon'tputupwithalotofthethingsthatauthorstrytowriteinpapers:turgidprose,complexnotation,andtediousdetails.And,believeitornot,readerswon'tputupwiththesethingseither!Thetrickistousetheseminartogetallthosethingsoutofyourpaper|thatway,itmayactuallygetread.ControllingtheaudienceI'veseenitclaimedthatoneofthegreatestfearsthatmostpeoplehaveisspeakingbeforeagroup.Iimaginethatmostassistantprofessorshavethisproblem,butaftermanyyearsofgivinglecturesbeforeseveralhundredstudentsitgoesaway.Infact,lecturingcanbecomedownrightaddictive(asmyfamilyoftenremindsme.)AsthemathematicianR.H.Bingoncesaid:\WhenIwasyoung,Iwouldrathergivealectureonmathematicsthanlistentoone.NowthatIamolderandmorematureIwouldrathergivetwolecturesonmathematicsthanlistentoone."Givinglecturesisabitlikeeatingoysters.Yourrstonerequiressomecourage,butafteryoudevelopatasteforthem,itcanbehardtostop.Therearethreepartstoaseminar:theintroduction,thecontent,andtheconclusion.Myadviceaboutintroductionsissimple:don'thaveone.Ihaveseenmanyseminarsruinedbylong,pretentious,contentlessintroduc-tions.Justsayafewsentencesaboutthebigpictureandthengetdowntobusiness:showthemwhatyou'vegotandwhyit'simportant.Theprimary 8HOWTOBUILDANECONOMICMODELINYOURSPARETIMEreasontogetdowntobusinessrightawayisthatyouraudiencewillonlyrememberabouttwentyminutesofyourtalk|andthatisusuallythersttwentyminutes.Somakesurethatyougetsomeusefulinformationintothatrsttwentyminutes.Asforconclusions,themostcommonproblemislettingtheseminartrailo intosilence.Thiscanruinagoodtalk.IalwaysliketospendthelastcoupleofminutessummarizingwhatIaccomplishedandwhytheaudienceshouldcare.Afterall,thisiswhattheywillwalkawaywith,soyoumightaswelltellthemwhattheyshouldrememberratherthanmakethemgurethisoutforthemselves.Nowadayseveryoneseemstouseoverheadsfortheirlectures.Thedown-sideofthisisthattheseminarisn'tveryspontaneous|buttheupsideisthattheseminarisusuallybetterorganized.Myadviceistolimityourselftooneortwoslidesforaintroductionandoneforaconclusion.Thatwayyouwillbeforcedtogettoyourcontributionsoonerratherthanlater.Andmakeyouroverheadsbig;uselargetypeanddon'ttrytosaytoomuchoneachone.Therearetwothingstoavoidinyourpresentation:don'tletyouraudi-encegotosleep,anddon'tletthemgettoolively.Youwanttheaudiencetohearwhatyouhavetosay.Theywon'thearyourmessageiftheyaresleeping,andtheywon'thearyourmessageiftheyaretalkingmorethanyouare.Sodon'tloosecontrolofyourseminar!Thekeytomaintainingcontrolistoestablishcredibilityearlyon.Thewaytodoistogointogreatdetailinthepresentationofyourrstresult|atheorem,aregression,adiagram,whatever.Spellouteachaspectofyourresultinexcruciatingdetailsonoonecanpossiblymisunderstand.Whenyoudothisyouwillcertainlygetquestionslike\Willthisgeneralizetonagents?"or\Haveyoucorrectedforheteroskedasticity?"Ifyouknowtheanswertothequestion,goaheadandanswerit.Ifyoudon'tknowtheanswer|orthequestionsistotallyo thewall|say\That'sagoodquestion;letmecomebacktothatattheendoftheseminar."(Ofcourseyouneverwill.)Don'tgetsidetracked:thepointofgoingthroughtheinitialresultingreatdetailistoestablishcredibility.Onceyou'vepresentedyourresultandyouseethattheaudiencehasunderstoodthepoint|theirheadsarenoddingbutnotnoddingo |youcangoontothegeneralizationsandelaborations.Ifyou'vedoneagoodjobatestablishingyourcredibilityinitiallynowtheaudiencewillbelieveanythingyousay!Ofcourseyoushouldn'tabusethistrust,butitisusefultoexploititintherestofyourpresentation.Thisisthefundamentalreasonforstartingsimple:ifyoustartoutwithadelicateargument,itwillbehardfortheaudiencetounderstandandyouwillneverestablishtrust.Whenyouaredonewithyourtalkyoushouldtakeafewminutestojotdownsomenotes:whatwasdicultforpeopletounderstand?Whatquestionsdidtheyask?Whatsuggestionsdidtheymake?Whatreferencesdidtheygiveyou?Youmaythinkthatyouwillrememberthesepoints,but PLANNINGYOURPAPER9quiteoftenyouwon't.Theaudienceisaveryusefulresourceforclarifyingyourthoughts|makesureyouuseitwell.1.9PlanningyourpaperAlmosteveryonewritesoncomputersthesedays.Iknowthatcomputersaregreattimesavers:IgetalmostasmuchworkdonenowasIgotdonebeforeIstartedusingcomputers.2IthoughtthatIwouldspendabitoftimetalkingabouthowIusecomputers,notbecauseitisallthatimportant,butbecausenooneelseeverdiscussessuchmundanematters.SinceIamwellknownasacomputernerd,peoplealwaysaskmewhatIuse,andIgureIcansavetimebypointingthemtothisarticle.Undoubtedlythiswillalllookincrediblyarchaicinafewyears,butthat'sthecostofbeingonthebleedingedgeoftechnology.IcurrentlyuseaUnixmachine,butmostofwhatIsayappliesequallywelltootherenvironments.IhaveadirectoryonmycomputercalledPapersandwhenIstarttoworkonanewtopicIcreateasubdirectoryunderpapers.(Forexample,thispaperisinadirectoryPapers/how-I-work.)WhenIcreatethedirectoryIcreateanotes.txtle:thiscontainsmyinitialideas,aroughoutline,whatever.Forexample,thenotes.txtleforthispaperinitiallyhadentriesinitlike:*readthenewspaper*simplify*writeandtalk**ifyoudon'tgrabthemintherstpage,theywon'treaditIcreateanoteslelikethiswhenIrststarttoworkonatopic|IjotdowntheinitialideasIhave,whichareusuallyprettysketchy.InthefollowingdaysandweeksIoccasionallytakealookatthisoutline.WhenIlookatitImovethingsaround,addmaterialandsoon.Irarelytakeanythingoutcompletely|Ijustmovematerialtotheendofthele.Afterall,Imightwantthosenotesagain.AfterorganizingtheseideasforseveralweeksormonthsIamreadytowritetherstdraftofthepaper.Iusuallytrytodothisinadayortwo,tokeepitallfresh.Inormallyputthenotesinonewindowandthepaper2Ifatrainstopsatatrainstation,whatdoyouthinkhappensataworkstation? 10HOWTOBUILDANECONOMICMODELINYOURSPARETIMEintheotherandwritethepaperwhileIreferbackandupdatethenotestokeeptheminsyncwiththepaper.OncethepaperiswrittenIputitasideforacoupleofweeks.Papersneedtoagelikenecheese|it'struethatmoldmightdevelop,butthe avorisoftenenhanced.Moreimportantly,itgivesyoursubconsciousmindachancetoworkontheidea|maybeitwillcomeupwithsomethingyourconsciousmindhasmissed.WhenIcomebacktothepaperItrytoreaditwithafreshmind,likesomeonewhohasneverseenitbefore.3OnrareoccasionsIlikewhatIread,butusuallyIhavelotsofcriticisms.WheneverIhavetopauseandthink\whatdoesthatmean?"Irewrite|Iaddmoreexplanation,changethenotation,orwhateverisnecessarytomakethepaperclearer.WhenI'mdonewiththisprocessIhavearstdraft.Inextcheckthisdraftintoarevisioncontrolsystem.Thisisapieceofsoftwarethatkeepstrackoftherevisionsofapaper.Itdocumentsallofthechangesyoumakeandallowsyoutorestoreanypreviousversionofapaper.IusetheUnixutilityrcsbutIknowtherearemanyothersystemsavailable.Revisioncontrolsystemsareespeciallyvaluableifyouareworkingwithacoauthorsincetheykeeptrackofwhichpersonmadewhichchangeswhen.Ithenrepeattheprocess:letthepapersitforafewmoreweeksormonths,thencomebacktoit,readitwithafreshmindandreviseitaccordingly.Itisparticularlyusefultodoarevisionrightafteryougiveaseminar.Re-memberthosenotesItoldyoutowriteafteryourseminarended?Sitdownwiththepaperandgooverthequestionstheaudiencehadandthesugges-tionstheymade.Canyouanswertheirquestionsinyourpaper?Canyouincorporatetheirsuggestions?Besuretomodifythenotes/outline/slidesforyourtalkwhenyouincorporatetheaudience'ssuggestions.BibliographicsoftwareOneveryusefulcomputertoolisabibliographicsystem.Thisisapieceofsoftwaredesignedtomanagedalistofreferences.Thereisamasterdatabaseofreferencesthatisstoredonyourcomputer.YouassignakeytoeacharticlelikeArrow70orArrowRisk.Whenyouwanttorefertoapaperyouusethekey,bysayingsomethinglikencitefArrow70g.Thebib-liographicprogramthenlooksuptheappropriatecitationinyourdatabaseandputsitinthelistofreferencesattheendofyourarticle.IusethesystemcalledBibTEX,sinceitworkswellwithTEX.However,therearemanyothersystemsavailablethatworkforotherwordprocessing3Thisismucheasieronceyoureachmiddleage. WHENTOSTOP11packages.It'sagoodideatogetinthehabitofusingasystemlikethis.Overtheyearsyouwillbuildupacomprehensivebibliographyfortheareasyouworkin.Butwheredoyougetyourreferencesintherstplace?Well,onewayistoaskpeople:youradviser,yourcolleagues,yourfriends,andsoon.Thisisstilloneofthemostreliableways.ButnowadaysthereareanumberofcomputerizeddatabasesavailableonlineoronCDsthatallowforeasysearch.YoucanopentheCDfortheJournalofEconomicLiterature,typeinafewkeywordslike\pricediscrimination"andgetthelast10years'worthofabstractsofpublishedarticlesthatcontainthewords\pricediscrimination."Asyoulookatthesearticlesyouwillseeafew\classic"articlescited.WhenyouidentifytheseclassicarticlesgototheSocialScienceCitationIndexandsearchforalltherecentpapersthathavecitedtheseclassics.Thisprocessshouldgiveyouanup-to-datebibliographyprettyquickly.Oftenyoucandownloadthecitationsyougetdirectlyintoyourbibliographydatabaseprogram.1.10ThestructureofthepaperThere'sanoldjokeaboutacademicpapers.Theyareallsupposedtohavethreeparts.Therstpart,everyonecanunderstand.Thesecond,onlyahandfulofreaderscanunderstand.Thelastpartnoonecanunderstand|that'showthereadersknowit'saseriouspieceofwork!Thebigmistakethatauthorsmakethesedaysistoleaveouttherstpartofthepaper|thatpartthateveryonecanunderstand.Buttheintro-ductionisthemostimportantpartofthepaper.You'vegottograbthereaderontherstpage.Nomatterhowbrillianttherestofthepaperis,itwon'tbenoticedifnoonereadsit.Andnoonewillreaditifyoudon'tgettheirinterestintherstfewparagraphs.Ifyoureallyknowwhatyourpaperisabout,youshouldn'tndithardtoexplainthistoyourreadersinacoupleofparagraphs.Mybasicadviceistomakeyourpaperlooklikeyourtalk.Gettothepoint.Useexamples.Keepitsimple.Tellpeoplewhywhatyoudidisimportantafteryou'vedoneit.Putthetediousstu intheappendix.Endwithasummaryofwhatyouhaveaccomplished.Ifyouhavereallywrittenagoodpaper,peoplewon'thavetolistentoyourseminartondoutwhatyouhavedone:theycanjustreaditinyourpaper.1.11WhentostopYoucantellwhenyourworkisgettingreadyforpublicationbythere-actionsintheseminars:peoplestopaskingquestions.(Oratleast,thepeoplewhohavereadyourpaperstopaskingquestions.)Ifyou'vefollowed 12HOWTOBUILDANECONOMICMODELINYOURSPARETIMEmyadvice,you'vealreadyaskedtheirquestions|andansweredthem|inyourpaper.Onceyou'vemadeyourpoint,stop.Lotsofpapersdragontoolong.Isaidearlierthatpeopleonlyrememberabout20minutesofyourseminar(ifyou'relucky),andtheyonlyrememberabout10pagesofyourpaper.Youshouldbeabletosaymostofwhatyouwanttosayinthatlength.Onceyourpaperiswritten,youcansubmitittoajournal.Idon'thavetoomuchtosayaboutthis;DanHamermeshhaswrittenanicearticlethatdescribestheprocedurebetterthanIcan.4AllIcansayistoechohisadvicethatyougooverthearticlewithanetoothcombbeforesendingitin.Nothingturnso aneditororarefereemorethantondtypos,missingreferencesandsloppyeditinginthearticlestheydealwith.1.12WritingtextbooksMostofwhatI'vehadtosaysofarhastodowithwritingarticles.ButIsupposeIreallyshouldsayabitabouttheotherkindofwritingI'vedone:textbooks.5Myrsttext,MicroeconomicAnalysisreallywasn'tplanned;itjusthap-pened.WhenIrststartedmyprofessionalcareeratMITin1973Iwasaskedtoteachtherstyeargraduatemicrocourse.Thetext,suchasitwas,consistedofabout20pagesofnoteswrittenbyBobHall,maybe40pagesofnotesfromDanMcFaddenandSidWinter,andafewjournalar-ticles.Thenoteswereawfullysketchy,andthejournalarticlesweremuchtooadvancedforrstyearstudents.SoIhadtowritemyownnotesforthestudents.TherstyearIwroteabout50pages;thenextyearanother50,andtheyearafterthatanother50.Thestudentswhousedthemweregreat.Theyreadthemcarefullyandtoldmewhatwaswrong:wheretheobscuritieswere,wheretheerrorswere,whatwastooadvanced,andwhatwastoosimple.Iowemuchofthesuccessofthatbooktothefactitwasclasstestedbeforeahighlycriticalaudience.DuringthisperiodIhappenedtomeetRichardHamming,anelectricalengineerwhohadwrittenseveraltexts.Hegavemeakeypieceofadvice:\Gettogethertheproblemsthatyouwantyourstudentstobeabletosolveafterthey'vereadyourbook|andthenwritethebookthatwillteachthemhowtosolvethem."4DanielS.Hamermesh,\TheYoungEconomist'sGuidetoProfessionalEtiquette",JournalofEconomicPerspectives,6:1,169{180.5ThereadermayrecallDisraeli'swarning:\Anauthorwhospeaksabouthisownbooksisalmostasbadasamotherwhotalksaboutherownchildren." WRITINGTEXTBOOKS13Thiswasgreatadvice.Ifollowedittosomedegreewiththegradu-atetext,butlater,whenIwrotetheundergraduatetext,Ifolloweditreligiously|butmoreaboutthatbelow.6Onedayapublishercameintomyoceandasked(astheyoftendo)\Areyouwritingabook?"Isaidthatwouldbeasillythingforanassistantprofessortodo|butasamatteroffact,IdidhavesomeclassnotesthatIhadbeenworkingonforafewyears.NextthingIknew,Ihadseveralpublishersinterestedinmynotes.IspentasemesteratBerkeleyin1977andusedthatopportunitytohammerthemintoshape.Muchtomysurprisethenoteseventuallybecomeabookandendedupbeingverywidelyused.Ididasecondeditionin1983andIshouldhavedonearevisionin1987orso|butinsteadIdecidedtowriteanundergraduatetext.IwantedtowriteanundergraduatebookbecauseIwasfedupwiththebooksIhadbeenusing.Ihadtriedseveraldi erentones,butcouldn'tndanyIreallyliked.IrememberonesemesterIsatdownandtriedtowriteamidtermexam|butthebookIhadbeenusingwassovapidthatIcouldn'tthinkofanyproblemsthatthestudentscouldsolveusingthetoolsthathadbeenpresentedinthebook!AtthatpointIguredIcouldproducesomethingbetter.Aboutthesametimeoneofmyundergraduateshadpickedupawork-bookbyMarciaStigumcalled,Ibelieve,ProblemsinMicroeconomics.Thestudentfoundthisveryhelpfulinunderstandingtheconceptsofeconom-ics,andIrememberedwhatHamminghadtoldmeabouthowtowriteatextbook.SoIaskedmycolleagueTedBergstromifhewouldliketoworkwithmetocreateaseriousworkbook.7Tedcreatedproblemsasthetextwasbeingwritten,andIhadtomakesurethatthetextcontainedeverythingnecessarytosolvetheproblemshecreated.Icreatedproblemstoo,butthosewereautomaticallycoordinatedwiththetextbook|theex-ternalstimulusimposedbyTed'sproblemswasmuchmoreimportantinshapingthecontentofthebook.Ifthestudentsweren'tabletosolvetheproblems,Ihadtoaddexplanationstothetextuntiltheycould|andifwecouldn'tcreateaproblemtoillustratesomepoint,thepointprobablywasn'timportantenoughtoputinthetext.It'sapitythatmostworkbooksarecreatedasafterthoughts.Creatingtheworkbookreallyshouldbeanintegralpartofthewritingprocess,asHammingsuggested.Youwantthestudentstobeabletousethematerial6ThegeneralprinciplethatIfollowed(andstillfollow)withthegraduatetextisthatitshouldgivethestudenttheinformationtheyneedtoknowtoreadamicroeconomicspaperintheAmericanEconomicReview.EverynowandthenIgothroughafewissuesoftheAERandnotetopicsthatshouldgointhenexteditionofthebook.7Asitturnedout,itwasn'tquiteasseriousasIhadexpected|infact,Ithinkthatitisquitefunny,butthatisduetoTed'suniquesenseofhumorratherthanmyintentions. 14HOWTOBUILDANECONOMICMODELINYOURSPARETIMEyouteachthem,sotherstorderofbusinessistogureoutwhatitisthatyouwantthemtobeabletodo.Thelatestbuzzwordineducationis\learningbydoing"butasfarasI'mconcernedthat'salwaysbeentheonlywaytogo.Theundergraduatetextturnedouttobeprettysuccessfulaswell.Andtheworkbookhasendedupsellingtwoorthreetimesasmuchasanyofitscompetitors|whichgoestoshowthattherestillisamarketforaqualityproductinthetextbookmarket.1.13SummaryIsaidthateverytalkshouldhaveasummary|soIsupposeIhavetofollowmyownadvice.Herearethepointstotakeaway:Lookforideasintheworld,notinthejournals.Firstmakeyourmodelassimpleaspossible,thengeneralizeit.Lookattheliteraturelater,notsooner.Modelyourpaperafteryourseminar.Stopwhenyou'vemadeyourpoint.Andnowmypointshavebeenmade,soI'mdutyboundtostop.Goforthandmodel!