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Monthly Archives: September 2015

The demise of the Vienna Institute of Advanced Studies (IHS)

29 Tuesday Sep 2015

Posted by tjungbau in Academic Organizations, Austria

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Austria, IHS, Vienna, Vienna Institute of Advanced Studies

I have written a commentary in the Austrian newspaper “Der Standard” about recent events around the Austrian Institute of Advanced Studies (IHS),

ihsArtikelbild

a leading European educator of graduate students in Economics, where I completed my Master’s degree before attending Northwestern. Since the article is written in German, please find my translation below (The original in German can be accessed here) :

The Economic research division at the institute faces hard times. Termination of the Master’s degree program has already been confirmed

The Vienna Institute of Advances Studies has most definitely already seen better days. After a successful period under former head Bernhard Felderer, the institute, or at least its Economic research division fears closure during the spell of current interim director Sigurd Hoellinger.

The institute was founded in 1963 by world-leading Austrian researchers Oskar Morgenstern and Paul Lazarsfeld with financial assistance of the Marshal plan. Initially, it set out to revive Austrian Social and Economic Sciences which lacked competitiveness internationally after WW2. Ever since its foundation the institute has been organizing a two year graduate program in Economics (nowadays graduates are awarded a Master’s degree upon completion).

Reorganization at the expense of science

Astonishingly, the current interim board – with apparent support by local politicians – plans to disestablish the current department structure (Economics, Political Science, Sociology) in order to regroup researchers into interdisciplinary areas. This appears to initiate the end of an era of successful research in Economics at the institute as there is hardly any successful example of such an act of restructuring in fundamental research in Economics. It seems natural to assume that a downgrade of Economic research and the cessation of graduate education will significantly diminish if not destroy any appeal of the institute to leading researchers. The current events reinforce the suspicion that restructuring is the politically smoother idiom for downgrade.

Argument 1: Questionable financial hardship

The motivation for those measures appears to remain a mystery. An argument recurrent in the Austrian media landscape is insufficient funding, which seems ridiculous. Whereas it is per se questionable to require fundamental research to fund itself the Austrian Institute of Advanced Studies is in general externally funded to a larger degree than comparable institutions in the German speaking world.

What is more, funding an Economic research group is preposterously inexpensive when compared to other research disciplines. This fact is mainly caused by comparatively low-cost equipment necessary for Economic research: A notepad, a pencil, nowadays a laptop and eventually data; with cost for the latter being rather negligible due to a rather theoretic and small research group at the IHS. Finally, wages at the institute are at most average when compared to international competitors.

In recent weeks at least scarce mentioning of the institute was observable in the Austrian media. First and foremost I would like to refer to Hanna Kordik’s article in the Austrian newspaper “Die Presse” and to former IHS researcher Alex Stomper’s commentary in the Austrian newspaper “Der Standard”. Alex Stomper, as of today professor of Finance at the Humboldt University in Berlin, Germany, mentions the IHS’ master’s class of 2011 as an example of recent success when graduates went on to pursue doctoral education at Yale, Northwestern or the London School of Economics. Mentionable instances of former successful graduates are Ernst Fehr – a recurring favorite for the Noble prize in Economics – or Wolfgang Pesendorfer, at the time of his inauguration among the youngest professors of Economics at Princeton.

Argument 2: (Insufficient) education at public universities

Another napless argument against the maintenance of an Economics research group at the institute is its substitutability in terms of education by Austrian universities. Personal experience and those of many friends and colleagues shows that demand for Economics graduates of Austrian public universities at potential top class employers is scarce. Public Austrian universities are – primarily due to chronic underfunding – incapable of regularly meeting high international standards in terms of supervision and mentoring both in terms of quality and quantity.

On occasions, contributions in the national media have questioned why an Austrian institution is indirectly funding American top universities with human capital. This perspective is unfortunately out of context. Austria does not subsidize such research institutions. It is rather the case that IHS graduates are rewarded with world-class education for their efforts as research or teaching assistants at those organizations. It goes without saying that a degree from an international top 10 university opens doors of both academia and private enterprises alike worldwide.

Three goals of economic importance

Due to the fact that a significant ratio of graduates does either not leave the country in the first place or returns after successful completion of an international doctoral degree the graduate education program at the Vienna Institute of Advanced studies ensures achievement of three long term economic objectives: (1) supply of highly educated economists for strategically significant jobs in Austria, (2) excellent networking with international decision makers in the private sector and academia and (3) attraction of Austria as research location for international scientists to consult and exchange scientific ideas (visitors to the IHS in recent years were Larry Blume, Mark Machina, Dale Mortensen, Joergen Weibull, etc.);

Relative to its size and population Austria looks back at an impressive and proud history of scientific achievements. However, the large part of those took place more than half a century ago since back then the dark era of WW2 destroyed our excellent conditions for fundamental research, which depends to such a large extent on inter-generational supervision and transmission of ideas. While rehabilitation in academia traditionally could not keep up with developments of the Austrian economy, the IHS has served Austria well for a long time producing internationally competitive research output and human capital. Conversing with non-German speaking internationally renowned economists the Vienna Institute appears to be among the most frequent topics after the Habsburg dynasty and the Vienna opera house.

No demand for excellence?

It might be suspected that the de facto closure of the Economic research division is linked to some dubious political quid pro quo pact.  This raises the question whether Austrian politics understand it to be inappropriate nowadays to harbor a claim for excellence in our country. I am a fiery advocate for free access to education in Austria – as a measure to set economic impulses, increase the average quality of life and prevent a multi-level society – not necessarily in this succession. However, it appears to me that equality of opportunity ex ante is generally confused with the same ex post. Even in a country rightfully proud of its solidary statutes, merit may be rewarded and – quite more importantly – should be met with promotion.

Thomas Jungbauer is PhD candidate at the Kellogg School of Management at Northwestern University in Evanston, a northern suburb of Chicago, Illinois. Before his education at the Austrian Institute of Advanced Studies (IHS) (Class of 2011) he studied at the Vienna University of Economics and Business (WU) and the Vienna University of Technology (TU).

Webpage: kellogg.northwestern.edu/faculty/jungbauer
Blog:        astablematch.wordpress.com

A box paradox

28 Monday Sep 2015

Posted by tjungbau in Statistics

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Bayesian Updating, Puzzles, Statistics

Again credit goes to my former teacher Ulrich Berger:

Suppose you face a choice among two boxes, both of which contain a certain amount of money. You are told that one box contains double the amount of the other box. The position of the higher prize has been determined by a coin flip.

Based on your gut instinct you think about grabbing box A. Then, however, you think back to your high school introduction into probability. Evaluating whether you should take the other box you realize that box B contains either X/2 or 2*X if X is the amount in box A. Since both cases are to occur with equal probability you conclude that box B contains 1/2*(X/2)+1/2*(2*X)=5/4*X. Based on the fact that that 5/4*X exceeds X should you take the other box?

The double Monty

26 Saturday Sep 2015

Posted by tjungbau in Statistics

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Bayesian Updating, Monty Hall, Puzzles, Statistics

Most of us know the standard version of the Monty Hall “paradox”. If not: Monty Hall, a game show host invites a candidate to choose among three doors (A,B & C), one of of which hides a prize whereas the other two would reveal goats (which might also be perceived as a prize by some. I, however, doubt one would be allowed to actually take the goat.). The candidate chooses door A. Monty reveals a goat behind door B and offers the candidate to either stick to her choice or opt to switch to C. Bayesian updating tells us that it is optimal to switch in 2 out of 3 cases.

Credit to my friend Pantelis Loupos for the idea behind what is to follow: Suppose Monty has two candidates, for simplicity a man and a woman. Upon first request the man chooses A whereas the woman goes for C. Monty reveals that door B was covering a goat and asks both candidates whether they would like to stick to their initial choice or switch to the other candidate’s. Suppose that both would receive the prize if choosing the correct door. Does the Monty Hall “paradox” suggest that by switching doors candidates both increase their chance of winning?

Efficiency vs. distribution in the the medical residents market

24 Thursday Sep 2015

Posted by tjungbau in Auction, National Resident Matching Program, Strategy

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Clinical Specialties, Matching, NRMP, Welfare

In my recent post about medical graduates applying for multiple specialties in the National Resident Matching Program (NRMP) I briefly mentioned sloppily “sub-algorithms” of the main resident match. To be more specific, whereas it is true that all residents are matched by means of a single algorithm, possible placement of students is fairly restricted by their choice of specialty. In fact, among all students who (also) applied for -to stress it once more- Neurology in 2013, the average number of specialties student applied to fell short of two. As discussed, there is contradictory advice to students about the optimal strategy in terms of multiplicity of specialties.

On a slightly different note, there might be some evidence for a trade-off between distributional goals and market efficiency related to the strategic problem of students. Consider the following situation: A neurology and a neurosurgery department each have an open position. They compete for two students, each of which has a certain value as a neurologist and as a neurosurgeon. Assume both students chose a single field according to their comparative advantage, i.e. the field in which they are relatively better than the other student. If the abilities of students in their respective fields do not exorbitantly differ firms will be absolutely pleased with this situation since they should be able to hire their only candidate by offering slightly more than an outside option and reap the majority of the output. Society should also be happy since the allocation would be perfectly efficient. Unhappy campers would only be found among the residents who would start their career on moderate wages. In this particular situation both would be better off to register for both specialties to induce firm bidding which leads to increased wages but decreases market efficiency due to uncertain outcomes. The interesting question is: Does this logic generalize?

The endorsement game

21 Monday Sep 2015

Posted by tjungbau in Strategy, Voting

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Election game, Endorsement, Endorsement Game, Political Strategy, Voting, Voting game

Consider the following two-dimensional voting problem: In a two-party system, call the parties A and B, the electorate -divided into a majority and a minority- chooses their preferred candidate along two dimensions. First, voters are more likely to vote for a candidate representing their population subgroup and secondly, they care about the candidates’ political views.

Assume voters to be uniformly distributed over the unit interval in terms of their ideology. The current incumbent from the majority subgroup of the population belongs to party A and supports a median policy. Party B does not have a suitable candidate from the majority subgroup of the population but two promising minority candidates. It is immediate to see that in the simple voting model the minority candidate has no chance of winning the election. What about party B positions its candidates in the primaries to the left and right of the incumbent and has the looser endorse the winner? Assume an endorsement not to guarantee votes but to increase the likelihood of voters initially opting for the endorsing candidate to vote for the endorsed one. Now the primary winner could move for moderation in the main election and reap the benefits of endorsement.

Do we have models which shed light on this scenario?

Is there a Monty Hall problem in Who wants to be a Millionaire?

20 Sunday Sep 2015

Posted by tjungbau in Statistics

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Monty Hall, Puzzles, Statistics, Who wants to be a Millionaire

The basic Monty Hall problem has been discussed far too often to keep track. In his blog, my former teacher Ulrich Berger briefly discusses a conversation appeared on “Who wants to be a Millionaire”:

A candidate faces a multiple choice question with four possible answers, only one of which is correct. She doesn’t know the answer and attaches a probability of 1/4 to each alternative. She chooses A however, not based on any knowledge. Then, before confirming her answer, she recalls that she hasn’t made use of her 50:50 joker, a random mechanism deleting two out of the 3 wrong alternatives. If the candidate chose A for herself before applying the joker and A remains one of the two alternatives on her screen, should she stick to her choice or switch to the other alternative?

Applying to multiple specialties in the medical resident match

20 Sunday Sep 2015

Posted by tjungbau in National Resident Matching Program, Strategy

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Clinical Specialties, Matching, Medical Residency, NRMP

The main resident match by the clearinghouse NRMP (National Resident Matching Program) is for several reasons far more complicated than portrayed in the media or stylized in academic models. Simplification in many cases is perfectly acceptable and an art by itself. However, one of those complications is the fact that within the program actually various “sub-algorithms” are run due to the vast number of different clinical specialties, exceeding 40 in 2015. What is more, about half of the students tend to apply for more than one specialty, in general two with a very small number ranking residency programs of more than three specialties. Some sources on the internet designed to help students through the match argue that data seems to suggest that students increase their chances of a match the lower the number of specialties they apply for. In fact, in of all applicants to Neurology -a specialty with rather few openings- for instance the 2013 NRMP matched 63% of students applying for a single specialty, 59% of students with 2, 48% with 3 and 29% with four or more. Outcomes appear to be similar for other specialties independent of the number of vacancies. Based on this evidence it is suggested that students optimize by choosing a single specialty. This is outrageous inference since this claim’s validity depends on various circumstances. Without detailed knowledge of the data I am fairly certain that this statistic is merely caused by an endogenous selection problem. Students with a strong background in possession of excellent reference letters by professors relevant in their field will expect to be matched in their preferred specialty and forbear from applying to different specialties to spare themselves and their advisors the need to explain their dedication to one field over the other. Weaker students though, more uncertain whether they make it or not, will diversify their applications as an insurance policy. It would be interesting if someone were to look closely at the data and attempts to analyze whether fewer specialties are beneficial among weaker candidates. In fact, the opposite might hold true. On the other hand, given limited information about students’ qualities, the number of specialties might actually serve as a signal of quality and confidence and the claim might be correct. This, however, would be obsolete if all students were to apply for a single specialty. Concluding, there is certainly no clear answer to this question without a profound analysis.

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