Wine, Big Macs, and Natural Experiments: CERGE-EI Interview with Professor Orley Ashenfelter

Orley Ashenfelter is the Joseph Douglas Green 1895 Professor of Economics at Princeton University. Professor Ashenfelter recently received a prestigious honorary degree from Charles University. While in Prague, Professor Ashenfelter sat down with CERGE-EI PhD Student Liyou G. Borga to discuss his research interests and his long experiences as a supporter of CERGE-EI. Watch the full interview here!:

Prof. Orley Ashenfelter’s Honorary Degree Speech

In case you missed it, below is the full text of the speech Professor Ashenfelter gave upon receiving his Charles University Honorary Degree:

It is my very special privilege to be with you in Prague today for this marvelous ceremony and honor. I realize there are many people responsible for this gracious day, including the Rector of the Charles University, the faculty of the University, and those who have directly assisted in these arrangements. My thanks go to all of you.

One reason this honorary degree is special to me is that it comes from an institution with which I have had such a long and fruitful relationship. And, of course, it is being presented in a city that I and my wife have come to realize is one of the most beautiful and civilized in the world. And then there are the Czech people, who since my arrival for a first visit over 20 years ago have been so friendly to me and have progressed so far. As I came to know Czechs a little better over the years I gained some perspective on the country. My view at the outset was that there had been far too much outside interference and that, left alone, the Czech nation would prosper. But it did help me to learn a little about Czech humor, a droll style that for many—especially Germans—takes a little getting used to.

Upon my arrival, for example, I decided I needed to learn a few Czech words so I could get by in restaurants and other places where university professors are known to hang out. So, I asked a graduate student at the Charles University, “What is the most important word for me to know?” The answer, without a shade of a smile was, “Pivo.” Ah, I thought, this must be an important Czech word of greeting, so I asked, “What does Pivo mean?” Ah, the graduate student said, “it means beer.” As you can imagine I then learned the word “vino,” which is wine, and even more important it turned out, “archivni vino,” which means vintage wine.

This style of humor sometimes has to change when it is no longer possible to engage in the self-deprecation that is a key aspect of Czech (and often American) humor. Take, for example, the automobile known as the Skoda. When I first arrived in Prague in 1992 I was picked up in a proper Communist Skoda, which felt a little like a tank when you rode in it. I asked the graduate student escorting me, “What kind of car is this?” Ah, he said, “this is a Skoda.” So, I asked, “what are they like?’ His answer, “a Skoda is like a Jehovah’s Witness.” Falling for this completely, I ask, “How is a Skoda like a Jehovah’s Witness?” He answered with a straight face, “you cannot close the door on either one!” There are, of course, endless Czech jokes of this nature: A man pulls into a gas station and says, “I would like a tank of gas for my Skoda.” “Yes,” the attendant says, “that is about the right price.” Of course, only a few years later, the newly designed Skoda was named “car of the year” in Europe and the jokes had to move on.

I would, finally, like to take your time to make a few remarks that touch on the nature of the work I have done that is directly related to the other two aspects of my contributions to economics that the citation for this honor touches upon. I call these remarks.

Evidence Based Policy Evaluation and The Design of Natural Experiments

The title of these brief remarks is taken directly from one of the most famous and influential scientific books of the 20th century, RA Fisher’s Design of Experiments.1 Fisher struggled with, and analyzed, what is now considered the “gold standard” method for making causal inferences. This method, which had been hinted at in scientific work for centuries, finally reached its full development in the 20th century. Designed to produce highly credible evidence in complex situations, it is based on the idea that we determine the causal effect of a treatment or intervention by assigning randomly some fraction of the units we wish to influence and reserving the remainder as a control group. In medicine it is said that we test a drug or procedure by using randomized clinical trials, but Fisher studied primarily agricultural experiments and these are called randomized field trials.

The key point is that these are experiments that take place in the real world, not a laboratory – and they provide the final, conclusive test of the efficacy of a treatment or intervention. An interesting aspect of Fisher’s work is that it was always motivated by actual problems of experimental inference, and evolved as a fundamentally practical analysis. Fisher’s lasting contribution, now taken for granted by virtually all scientists, is a set of methods for determining when observed differences are unlikely to be due to chance alone.

Much of what I have tried to do in my own research in the last forty years is to find some way to implement highly credible methods for the study of important, and controversial problems of inference in economics. These methods, which tend to be opportunistic because they differ with the problem being studied, have come to be called “natural experiments.” Natural experiments are sometimes randomized trials (jokingly called “unnatural experiments” by a few of my colleagues), but often they must depend on some method that falls short of this gold standard. The key point is that these are analyses of what happens in practice, not just in theory, and the emphasis is on the credibility of the results.

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Honorary Degree Ceremony for Orley Ashenfelter: Pictures

The Honorary Degree Ceremony for Professor Orley Ashenfelter on Wednesday, January 15th 2014 was an enormous success. CERGE-EI faculty members looked wonderfully distinguished in their caps and gowns. Whether you know Czech, English, or Latin, the ceremony was rich with tradition and history. Thank you for all those who attended!

See the full photo album from the ceremony here!

Honorary Degree Ceremony for Professor Orley Ashenfelter

Orley Ashenfelter received an honorary degree from Charles University on January 15th, 2014 in Prague. Professor Ashenfelter (Princeton University), who is a former member of the CERGE-EI Executive and Supervisory Committee and a current member of the CERGE-EI Foundation Board of Directors, has been a long-time supporter of CERGE-EI. He is also one of the leading economists of our time.

JUSTIFICATION OF THE AWARD

Professor Ashenfelter is widely regarded as the originator of the use of so-called natural experiments to infer causality about economic relationships. Many important social science questions seemed impossible to answer due to absence of both necessary data and convincing econometric techniques. Professor Ashenfelter pioneered innovative formulations and empirical testing of economic hypotheses and creative data collection. The methods he introduced are used in all social sciences today. He has also helped to transform our views of the labor market as he has made major advances in the study of wage structure, trade unions, labor supply, discrimination, and education and retraining.
Professor Ashenfelter’s numerous honors and awards include the Karel Englis Honorary Medal of the Academy of Science of the Czech Republic, the Jacob Mincer Award of the Society of Labor Economists, the IZA Prize in Labor Economics, and the Ragnar Frisch Prize of the Econometric Society. In 2005, he was named a Corresponding Fellow of the Royal Society of Edinburgh, and in 1977 he was named a Fellow of the Econometric Society. He received the degree of Doctor Honoris Causa from the University of Brussels in 2002.

Selected publications:

  • Bargaining Theory, Trade Unions, and Industrial Strike Activity. American Economic Review, 1969
  • American Trade Union Growth: 1900-1960. Quarterly Journal of Economics, 1969
  • Unionism, Relative Wages, and Labor Quality in US Manufacturing. International Economic Review, 1972
  • Estimation of Income and Substitution Effects in a Model of Family Labor Supply. Econometrica, 1974
  • Estimating the Effect of Training Programs on Earnings. Review of Economics and Statistics, 1978
  • Using the Longitudinal Structure of Earnings to Estimate the Effect of Training Programs. Review of Economics and Statistics,1985
  • Estimates of the Economic Returns to Schooling from a New Sample of Twins. American Economic Review, 1994
  • Using Mandated Speed Limits to Measure the Value of a Statistical Life. Journal of Political Economy, 2004

Cooperation with Charles University:

Since the early 1990s, Professor Ashenfelter has actively participated in the process of restoration of doctoral education and research in economics in the Czech Republic and more broadly in Central and Eastern Europe. Since 1999 he has served on the Board of Directors of the CERGE-EI Foundation, which aims to foster economics education in the region and which supports the doctoral program in economics at CERGE-EI, the joint workplace of the Center for Economic Research and Graduate Education (CERGE) of Charles University, Prague, and of the Economics Institute (EI) of the Academy of Sciences of the Czech Republic. Between 2001 and 2007 he has also been a member of the Executive and Supervisory Committee of CERGE-EI, an academic supervisory body charged with supporting the quality of research and education at the joint workplace. During his regular visits to Prague, he has provided long-term support and valuable advice to students and faculty alike, and he has also helped the development efforts at the CERGE-EI library, which serves not only the CERGE-EI community, but also an equally large group of researchers from the Faculty of Social Sciences of Charles University. He has also played an active and successful role in the CERGE-EI Foundation’s efforts to raise funds from sponsors to support economics education including student mobility or stipends as well as economics research in the region.

Justification:
Professor Ashenfelter has had a major influence on economics research, particularly in the area of impact measurement of social programs, but also in the general study of labor markets. He has pioneered the method of “natural experiments” widely used today to uncover causal relationships in social sciences. It was his indisputable scientific contribution together with his long-standing support of research on transition economics and of economics education at Charles University, where he has helped to grow a new generation of economists, that has led the Scientific Council of the Faculty of Social Sciences to submit a proposal to award him an Honorary Doctorate of Charles University in Prague.

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