This interview with Filip Matějka is the third in the series about new CERGE-EI faculty. Filip Matejka, together with Michal Bauer, Michal Pakos and Jakub Steiner, has accepted offer to join the CERGE-EI faculty. Each of them brings a different set of attributes to his new position and has pursued a different path toward an academic career.
Filip Matejka: Exploring the power of economic ideas
Filip Matějka has been a postdoc at the Economics Institute since 2010. He received his MS and PhD degrees in applied mathematics from Princeton University in 2007 and 2010, respectively. Before going to Princeton, he graduated from Charles University majoring in Physics in 2004. In his work, he studies price rigidities and the implications of informational limitations. His line of research provides insights into understanding market efficiencies and the implications of certain monetary and fiscal policies.
Why did you decide to choose an academic career as opposed to business, politics etc.?
With politics it is easy. I have no voters. I am just kidding. With business it was a bit more difficult. I had certain perspectives at Princeton University, but my girlfriend, who is my wife now, wanted to live in Prague. So we just moved back.
Initially I thought that in the Czech Republic academia salaries are too low. In addition I was not in touch with any of the people here so I did not know exactly what research is done at CERGE
Therefore, after coming back to Prague, I decided to leave academia and turned to business sphere. I started a consulting firm in Prague, which was specialized in using Math methods to solve economic problems in a business environment.
Later, I got in touch with Stepan Jurajda and other people from CERGE-EI, and got a part time position here. Very soon I found out that CERGE-EI is a fantastic department and that academia is actually great.
So my choice in favor of the academic career was not a sudden decision. From the very beginning I knew that I liked academics more than business, and this is great that I have got the opportunity to develop my academic career at CERGE-EI.
You have completed your B.A. and M.S. in Physics at Charles University in May 2004. Did your background in Physics help you in your economics research? Did it help to develop your research ideas?
In Economics you need to be very analytical, to be good at Math and be able to think in terms of models. For that mathematical background certainly helped me. On the other hand, the background in Physics made me too naïve about Economics initially. Physicists often consider Economics to be much simpler than it is indeed. They often think that once they know Math, it is enough just to come up with some models. This prevents them from discovering the true power of economic ideas.
Now I do not share physicists’ opinion any more. I think that in Economics there are certain rules, which determine how models should look like, what they should satisfy. There are well grounded reasons for these rules which physicists often do not attach much importance to. Yeah, for physicists it is easy to come up with some equations, but often there is no much intuition behind them.
Turning to research, having completed your PhD in Applied Mathematics at Princeton University in 2010, what was your dissertation topic? Tell us about the key results of your work.
Officially the program I was accepted to was called Applied Mathematics but from the end of the first year what I basically did was Economics. The advantage of our department was that students did not have any strict fixed curriculum and could choose a certain field to apply Math to. Some people chose Biology, some – Physics. I chose Economics. Both my advisers were from Economics. So I did as much Economics as any other economist.
My thesis topic was called “Rational Inattention: Prices and Information in Economics”. The whole theory is about how to model agents and people that have difficulties in processing information. These difficulties are associated with paying attention to news, to media, to whatever changes in the economy. I was interested in what it implies for the dynamics of prices.
A big question in Macroeconomics is where the real effects of monetary policy come from. If we consider the change in nominal interest rate, a traditional story is that when the interest rate decreases, people have more money, but prices stay fixed for a while. So people can buy more. And the story of what I worked on is that prices do not change, because some people do not know that the interest rate was changed. So bankers in the Central Bank voted, the interest rate was changed, but the owners of the shops did not pay attention to that. As a consequence the prices did not respond the changes in the interest rate.
This is a motivation. While exploring this area, it seems that when you base the models of nominal rigidities on these imperfect information assumptions, then the models can perform very well. Maybe they can perform better than other models. But still there is a long way to go.
So your research interests lie in the area of price rigidities and the implications of informational limitations. In your opinion, why are these areas important?
I think that the Information Economics can be super important. The reason is that lots of economics, lots of models and explanations in economics deal with information, in particular with imperfect information and asymmetry of information. The framework I am working on now is the first framework that determines how people pay attention to information, what pieces of information they collect, how much information they process. Some piece of information may be more important for people than some other piece. It is not that you just start with some assumptions that people have information. This implies nothing. But using this theory you can study what information people have, in what cases and so on.
Speaking about paper publishing, what aspects from your point of view make a paper a successful paper?
First of all it is important to come up with a good, but rather simple idea. Then you need to formalize this idea by building a model. Via the model everyone can agree on what you are assuming in your explanation. And of course everything has to be written clearly. When I started doing economics, my comparative advantage was that I was good at Math. My feeling is that CERGE-EI students often students here are good in Math as well. They like to construct models as complicated as possible: add different assumptions, different shocks, and the more the better. This allows them to solve for bigger model. But I think such approach is more disadvantageous than it advantageous. In the end the best economic papers are based far not only on Math. These papers rather have simple, clear and powerful idea.
What is the most memorable experience from your PhD life?
I liked the research at Princeton University a lot. But still I think I had a great social life there. I had a lot of friends, and I did a lot of sports. All these motivated me to work. Whenever I felt tired I could call my friends and we went for beer pretty much every day, but for an hour. Then we returned to our work again. So I think the life was rich in many ways. Most people at Princeton University do not waste any time. Before that I was a champion in wasting time, but the university changed this significantly.
Now that you are a professor, how do you balance the “big three”: teaching, research, and service (administrative duties and advising) with your personal interests?
Concerning the optimal proportion of time for academia, I still think that the time and effort should mostly be devoted to research and some teaching. I do like to teach, but it takes a lot of time. And in the end we want to be scientists, but not teachers. I like advising as well and think that it is rather important.
How much choice do you have in what you teach? Which classes (among the already existing or new ones) would you prefer to teach?
I will definitely teach some Macro. Also since my research is connected with Information Economics, Jakub Steiner and I have discussed the possibility of developing this class.
This is what I will teach. What I would like to teach is probably what I know very little about, because it would force me to learn more about it. For example, it would be interesting for me to teach political economics. I already have some ideas for research in this sphere. Teaching this field would help me to sharpen my ideas and probably to come up with new ones.
What role does advising play in an academic career?
My official supervisor was Per Krusell, but I worked mostly with my second supervisor, Christopher A. Sims. I think both of my advisers helped me to understand what is important in economics. You read papers, you like some of them, but it is difficult to distil what is important. And my advisers really helped me with this.
I think that the best advising strategy presupposes that students come to the adviser saying: “I am interested in your research. I would like to do this or that…” Research questions have to be formulated by the one who is doing the research. It never works so well when faculty is giving ideas to students.
My advisers always gave me advice not on what to do, but on what not to do. I think this is even more important. The job of the adviser is to tell the students not to waste time on the bad idea, not to pursue it any more. The adviser can suggest reading which could help to develop a valuable idea.
Concerning academic placement I can say that my advisers also helped me to get the current position at CERGE-EI. I would not have it without them.
How would you suggest students to choose advisers?
They should certainly choose someone whom they can talk to. Do not choose someone who you think is brilliant, but you do not like talking to. With both my advisers it was just fantastic. With Per Krusell we were even like friends. We played soccer, tennis together. We had dinner twice a week. With Christopher A. Sims we would not play soccer, but we went for lunch very often. We both enjoyed talking to each other very much. I think that if you want to learn from people and if you want them to devote time to you, you have to like each other.
Tetyana Holets, 2nd year student