Michael Rothschild

Last updated
Michael Rothschild
Born (1942-08-02) August 2, 1942 (age 82)
Chicago, Illinois, U.S.
NationalityAmerican
Education Reed College (BA)
Yale University (MA)
Massachusetts Institute of Technology (PhD)
Academic career
Field Microeconomics, public economics
Institution Princeton University
University of California, Los Angeles
Doctoral
advisor
Franklin M. Fisher [1]
Doctoral
students
Oliver Hart
Information at IDEAS / RePEc

Michael Rothschild (born August 2, 1942,) is an American economist. He is a professor at the University of California, Los Angeles (UCLA), and a former dean at Princeton.

Contents

Education

Rothschild holds a Bachelor of Arts in anthropology from Reed College (1963), and a Master of Arts in international relations from Yale University (1965). He earned his Doctor of Philosophy in economics from the Massachusetts Institute of Technology (1969).

Honors

Rothschild has achieved widespread recognition through his time in academia and beyond. He is a fellow of the American Academy of Arts and Sciences, the American Association of the Advancement of Science, and the Econometric Society.

Academic career

He was the William Stuart Tod Professor of Economics and Public Affairs, Emeritus at the Woodrow Wilson School of Public and International Affairs. He was dean of the Woodrow Wilson School of Public and International Affairs at Princeton University from 1995 through 2001. Rothschild has written on asymmetric information, decision-making under uncertainty, demography, investment, taxation, finance, and jury-decision processes.

He co-authored one of the most important papers in economics, Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information, [2] with Joseph Stiglitz. This paper gives the first systematic exposition of the problem of cherry picking when insurance companies compete for customers. In Increasing Risk I: A definition, [3] Rothschild and Stiglitz introduced the important decision theory concept of the mean-preserving spread, which leads to a partial ordering of probability distributions according to degree of risk.

Not only has he written on insurance, but also asymmetric information, demography, investment, taxation, finance among others. In addition, he coedited Studies of Supply and Demand in Higher Education. It highlights the presence of competition, use of resources, decision-making in education regarding higher education. [4]

Notably he wrote about decision-making under uncertainty through, 'Uncertainty in Economics: Readings and Exercises, [5] with Peter Diamond. This book synthesizes the traditional and modern thought associated with economic uncertainty. It provides understanding into three primary groups: theory of choice under uncertainty, general equilibrium models of financial institutions, and models of the effects of uncertainty on market institutions. [6]

Related Research Articles

<span class="mw-page-title-main">Microeconomics</span> Behavior of individuals and firms

Microeconomics is a branch of economics that studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms. Microeconomics focuses on the study of individual markets, sectors, or industries as opposed to the economy as a whole, which is studied in macroeconomics.

<span class="mw-page-title-main">Kenneth Arrow</span> American economist (1921–2017)

Kenneth Joseph Arrow was an American economist, mathematician and political theorist. He received the John Bates Clark Medal in 1957, and the Nobel Memorial Prize in Economic Sciences in 1972, along with John Hicks.

<span class="mw-page-title-main">Joseph Stiglitz</span> American economist (born 1943)

Joseph Eugene Stiglitz is an American New Keynesian economist, a public policy analyst, political activist, and a professor at Columbia University. He is a recipient of the Nobel Memorial Prize in Economic Sciences (2001) and the John Bates Clark Medal (1979). He is a former senior vice president and chief economist of the World Bank. He is also a former member and chairman of the US Council of Economic Advisers. He is known for his support for the Georgist public finance theory and for his critical view of the management of globalization, of laissez-faire economists, and of international institutions such as the International Monetary Fund and the World Bank.

<span class="mw-page-title-main">The Market for Lemons</span> 1970 economics paper by George Akerlof

"The Market for 'Lemons': Quality Uncertainty and the Market Mechanism" is a widely cited seminal paper in the field of economics which explores the concept of asymmetric information in markets. The paper was written in 1970 by George Akerlof and published in the Quarterly Journal of Economics. The paper's findings have since been applied to many other types of markets. However, Akerlof's research focused solely on the market for used cars.

<span class="mw-page-title-main">Adverse selection</span> Selective trading based on possession of hidden information

In economics, insurance, and risk management, adverse selection is a market situation where asymmetric information results in a party taking advantage of undisclosed information to benefit more from a contract or trade.

<span class="mw-page-title-main">Information asymmetry</span> Concept in contract theory and economics

In contract theory, mechanism design, and economics, an information asymmetry is a situation where one party has more or better information than the other.

<span class="mw-page-title-main">James Mirrlees</span> British Nobel Laureate in Economic Sciences

Sir James Alexander Mirrlees was a British economist and winner of the 1996 Nobel Memorial Prize in Economic Sciences. He was knighted in the 1997 Birthday Honours.

<span class="mw-page-title-main">Information economics</span> Branch of microeconomics

Information economics or the economics of information is the branch of microeconomics that studies how information and information systems affect an economy and economic decisions.

Constantine Christos "Costas" Azariadis is a macroeconomist born in Athens, Greece. He has worked on numerous topics, such as labor markets, business cycles, and economic growth and development. Azariadis originated and developed implicit contract theory.

<i>The Quarterly Journal of Economics</i> Academic journal from Harvard University

The Quarterly Journal of Economics is a peer-reviewed academic journal published by the Oxford University Press for the Harvard University Department of Economics. Its current editors-in-chief are Robert J. Barro, Lawrence F. Katz, Nathan Nunn, Andrei Shleifer, and Stefanie Stantcheva.

Sanford "Sandy" Jay Grossman is an American economist and hedge fund manager specializing in quantitative finance. Grossman’s research has spanned the analysis of information in securities markets, corporate structure, property rights, and optimal dynamic risk management. He has published widely in leading economic and business journals, including American Economic Review, Journal of Econometrics, Econometrica, and Journal of Finance. His research in macroeconomics, finance, and risk management has earned numerous awards. Grossman is currently Chairman and CEO of QFS Asset Management, an affiliate of which he founded in 1988. QFS Asset Management shut down its sole remaining hedge fund in January 2014.

Screening in economics refers to a strategy of combating adverse selection – one of the potential decision-making complications in cases of asymmetric information – by the agent(s) with less information.

Credit rationing by definition is limiting the lenders of the supply of additional credit to borrowers who demand funds at a set quoted rate by the financial institution. It is an example of market failure, as the price mechanism fails to bring about equilibrium in the market. It should not be confused with cases where credit is simply "too expensive" for some borrowers, that is, situations where the interest rate is deemed too high. With credit rationing, the borrower would like to acquire the funds at the current rates, and the imperfection is the absence of supply from the financial institutions, despite willing borrowers. In other words, at the prevailing market interest rate, demand exceeds supply, but lenders are willing neither to lend enough additional funds to satisfy demand, nor to raise the interest rate they charge borrowers because they are already maximising profits, or are using a cautious approach to continuing to meet their capital reserve requirements.

In neoclassical economics, a market distortion is any event in which a market reaches a market clearing price for an item that is substantially different from the price that a market would achieve while operating under conditions of perfect competition and state enforcement of legal contracts and the ownership of private property. A distortion is "any departure from the ideal of perfect competition that therefore interferes with economic agents maximizing social welfare when they maximize their own". A proportional wage-income tax, for instance, is distortionary, whereas a lump-sum tax is not. In a competitive equilibrium, a proportional wage income tax discourages work.

<span class="mw-page-title-main">Dynamic stochastic general equilibrium</span> Macroeconomic method

Dynamic stochastic general equilibrium modeling is a macroeconomic method which is often employed by monetary and fiscal authorities for policy analysis, explaining historical time-series data, as well as future forecasting purposes. DSGE econometric modelling applies general equilibrium theory and microeconomic principles in a tractable manner to postulate economic phenomena, such as economic growth and business cycles, as well as policy effects and market shocks.

<span class="mw-page-title-main">Public economics</span> Study of government economic and fiscal policy

Public economics(or economics of the public sector) is the study of government policy through the lens of economic efficiency and equity. Public economics builds on the theory of welfare economics and is ultimately used as a tool to improve social welfare. Welfare can be defined in terms of well-being, prosperity, and overall state of being.

Jacques H. Drèze was a Belgian economist noted for his contributions to economic theory, econometrics, and economic policy as well as for his leadership in the economics profession. Drèze was the first President of the European Economic Association in 1986 and was the President of the Econometric Society in 1970.

In economics, implicit contracts refer to voluntary and self-enforcing long term agreements made between two parties regarding the future exchange of goods or services. Implicit contracts theory was first developed to explain why there are quantity adjustments (layoffs) instead of price adjustments in the labor market during recessions.

Optimal capital income taxation is a subarea of optimal tax theory which studies the design of taxes on capital income such that a given economic criterion like utility is optimized.

<span class="mw-page-title-main">History of microeconomics</span> History of the development of microeconomics as a study

Microeconomics is the study of the behaviour of individuals and small impacting organisations in making decisions on the allocation of limited resources. The modern field of microeconomics arose as an effort of neoclassical economics school of thought to put economic ideas into mathematical mode.

References

  1. Rothschild, Michael (1969). Essays in economic theory (PDF) (Ph.D.). MIT . Retrieved 30 October 2016.
  2. Rothschild, Michael; Stiglitz, Joseph E. (November 1976). "Equilibrium in competitive insurance markets: an essay on the economics of imperfect information". The Quarterly Journal of Economics . 90 (4): 629–49. doi:10.2307/1885326. JSTOR   1885326.
  3. Rothschild, Michael; Stiglitz, Joseph E. (September 1970). "Increasing risk: I. a definition". Journal of Economic Theory. 2 (3): 225–43. doi:10.1016/0022-0531(70)90038-4.
  4. Studies of Supply and Demand in Higher Education. University of Chicago Press. 1993.{{cite book}}: |website= ignored (help)
  5. Rothschild, Michael; Diamond, Peter (1978). Uncertainty in Economics: Readings and Exercises.
  6. "Uncertainty in economics: Readings and exercises (Economic theory and mathematical economics)". Thrift Books.