| Some Thoughts on
Retooling Economics Theory and Methods
Michael Willenborg — University of
Connecticut, on behalf of the Research Committee
As
academics, we arguably pass through four distinct career phases:
Ph.D.—Student life, Assistant Professor life, Associate Professor life and
the (good?) life of a Full Professor. Back when I completed the 1st phase, and
was embarking on the 2nd, I took Daniel Hamermesh’s (1992) advice
seriously. He suggests forcing yourself to present your papers, providing a
fast start on submitting them, and aiming high in terms of where you send them.
He also suggests how to read editor letters and referee reports and offers lots
of other good advice. Notably absent from his suggestions is that one should
take time to “retool.” Of course, this omission makes perfect sense;
after all, Hamermesh’s article is written for people just starting the 2nd
phase (i.e., who have just finished their “tooling” in the 1st
phase). In this article, I offer some thoughts on the 3rd phase of academic
life. In particular, I share some of the things I do to retool my economics
theory and methods.
Because
this article is the second in a two-article sequence, I echo Steve
Salterio’s advice provided in his article in the Summer 2003 issue, the
essence of which is to allot some time and take a course. Indeed, some years
ago, while I was working at KPMG’s National Office (and, with the benefit
of hindsight, getting a pre-doctorate education), I vividly recall taking
(along with Tim Bell) a course in discrete choice econometrics at MIT. I found
the material and the instruction (some of which from future Nobel prize winner
Daniel McFadden) extremely valuable for me as a future researcher. So, if
you’re presently at a university that is at or above the level of your Ph.
D.-granting university, you could audit a course in your economics or
statistics departments. I know that this strategy was a successful one for Rick
Tubbs, who audited a course in signal detection theory at the University of
Iowa (Sprinkle and Tubbs 1998). Therefore, I agree with Steve’s
advice—finding and attending a good stand-alone course is an excellent
suggestion that also applies to economics-based researchers.
Indeed, in
terms of taking a stand-alone course (and again with the benefit of hindsight),
among the “smarter” things I did during my 1st (Ph.D.) phase was to
take two “additional” courses for credit that few other students at
my doctoral institution took. The first was a lecture course in empirical
industrial organization and the second was a seminar in limited dependent
variable econometrics. As I toiled away during my 2nd (Assistant Professor)
phase, these two courses helped me greatly (i.e., they map directly to three of
my published papers). However, now that I’m in my 3rd (associate
professor) phase, I’m trying to figure out how to retool in economic
theory and methods.
Of course,
to use a phrase from economics, I face a constrained optimization problem. That
is, given human resource constraints (i.e., there are only 24 hours in a day),
family and friends, teaching and service (which, if you ask me, really
increases from the 2nd to 3rd phases), I am hard-pressed to find the time to
take a stand-alone course. Consequently, the issue becomes how to retool in a
manner that is both effective and efficient. In this regard, here are some
suggestions that are perhaps more “real time” in nature than are
Steve’s.
- Read/scan the
literature, especially economics and finance.
In addition to the usual suspects (e.g., TAR, JAR, JAE,
CAR, AJPT), I try to set aside time (often in the evening, after my
kids are asleep) to read/scan economics and finance journals. For me, this is
AER (American Economic Review), RAND (RAND Journal of
Economics), JF (Journal of Finance), and JFE
(Journal of Financial Economics); with a particular focus on the
empirical papers. Let’s face it, the accounting literature often lags the
economics and finance literature. For example, the econometric
“innovation” (i.e., a treatment effects model) to the auditing
literature that a recent paper of mine might offer (Weber and Willenborg 2003)
is from a 24-year old economics paper (Willis and Rosen 1979). Beyond methods,
this approach has helped me with respect to incorporating economic theory into
my papers. For example, using this approach, I came across a theoretical paper
in RAND that was invaluable to motivating an insurance paper I was trying to
publish (Willenborg 2000). Beyond mapping methods and theory into research
projects, I find reading/scanning this literature interesting and fun (e.g.,
the recent Spring 2003 The Journal of Economic Perspective’s issue
on Enron and conflict-of-interest with papers by Paul Healy and Krishna Palepu,
Joel Demski, and Baruch Lev.)
- Involve yourself in
the Ph.D. program (if your school has one).
If you’re presently on the faculty at a Ph.D.-granting school, one of the
best ways to retool is to involve yourself with the Ph.D. program. This Fall,
I’ll teach a Ph.D. course that I’m hoping will both energize me and
keep me current.
- Use your sabbatical or
other leave of absence wisely (if you get one). If you’re on the faculty
at a school that grants sabbatical leave, or at a school where you don’t
have to teach (or be on-site) for a semester at a time, you may choose to visit
another university. This past Spring, I visited the University of Maastricht.
Frankly, with a professional spouse and three kids, it was quite tricky to
arrange this. But, in hindsight, it was a terrific experience that is helping
me broaden my perspective on accounting research.
- Reach out and email
someone (especially a methodological “expert”).
A few years ago, my co-authors and I were stumped with respect to satisfying a
referee’s methodological point (moreover, the editor was clear that the
paper would not be published unless we satisfied the referee). So, what did we
do? We sent a short, respectful email to worldwide experts in this methodology
(count-data econometrics). And guess what? One responded with a very helpful
idea. We wrote the Gauss code, ran the test, satisfied the referee, and
published our paper (Rock et al. 2000).
- “Master” a
comprehensive econometrics package. Disregard the above mention regarding
writing Gauss code (anyway, I confess that my econometrician colleague, Stan
Sedo, did this). I find that I need to be able to quickly and effectively
execute statistical and econometric analysis. Mostly, I accomplish this using
LimDep, an off-the-shelf econometric package that, while a little quirky,
typically always suits my needs. Frankly, I find that I don’t really have
the time to learn many other packages. For many of my co-authors, it’s SAS
or STAT
- • Finally, if you
haven’t already done so, get a copy of Peter Kennedy’s book, A
Guide to Econometrics, MIT Press, Cambridge, MA (http://mitpress.mit.edu). It’s probably
the best $20 I’ve ever spent (on something that helps me with my
research).
References:
Hamermesh, D. 1992. The
young economist’s guide to professional etiquette. The Journal of
Economic Perspectives (Winter): 169–179.
MacKie-Mason, J. 1992. Econometric software: A user’s view. The Journal
of Economic Perspectives (Fall): 165–187.
Rock, S., S. Sedo, and M. Willenborg. 2000. Analyst following and count-data
econometrics. Journal of Accounting & Economics (December):
351–373.
Sprinkle, G., and R. Tubbs. 1998. The effects of audit risk and information
importance on auditor memory during working paper review. The Accounting
Review (October): 475–502
Weber, J., and M. Willenborg. 2003. Do expert information intermediaries add
value? Evidence from auditors in micro-cap IPOs. Journal of Accounting
Research (September): 681–720.
Willenborg, M. 2000. Regulatory separation as a mechanism to curb capture: A
study of the decision to act against distressed insurers. The Journal of
Risk and Insurance (December): 593–616.
Willis, R., and S. Rosen. 1979. Education and self-selection. Journal of
Political Economy (October): S7–S36.
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