My Ah Hah Moment About Academia
By David Henderson
I was telling a friend the following true story last week and we both think it’s relevant to people who are hesitant about approaching famous academics.
In the spring of 1979, when I was an assistant professor of economics at the University of Rochester’s Graduate School of Management (now called the Simon School), I applied for, and was offered, a job as senior policy analyst at the Cato Institute in San Francisco. I accepted the job. When I announced it to my colleagues, those who commented were virtually unanimous in the view that I was making a big mistake. I knew from other evidence that they cared about me and so I took this seriously. When I asked them what the mistake was, they told me that I would never be allowed back in academia again, certainly not at the high level I left. And I don’t remember if they said this, but the strong impression I got was that no one at a high level in academia would ever talk to me again. It was this latter claim that scared me, but I was so bored in academia at the time that I still thought moving to Cato was a worthwhile step. (I quit the job after only 8 months, but that doesn’t mean it wasn’t a good step. I’m still glad I did it because it got me writing regularly.)
Fast forward to November 1979, when I had been in my job for about 3 months. Some militant Iranians had just taken over the U.S. Embassy in Tehran, and my friend Roy A. Childs Jr., editor of Libertarian Review, which was across the street from Cato, was writing a major article titled “The Iranian Drama.” A point he was making in the article was that the Shah had engineered massive inflation in Iran. He knew enough economics to know what Milton Friedman had said was a good starting point: When you see ongoing inflation, cherchez la monnaie. Translation: Look for the money. That is, look at what was happening to the growth rate of the money supply. Roy called me and asked me if I knew where to get data on money supply growth in Iran. I thought that the San Francisco Fed might have it, but that wasn’t a sure thing. The surest thing was to check the library at UC Berkeley, but, I told Roy, I didn’t have time because I was working on my own projects. He asked me if there was anyone I could call.
I thought of someone. Arnold Harberger of the University of Chicago had come through the University of Rochester a few times and I had had a nice conversation with him at a cocktail party at the home of one of my colleagues. So I called his number at the University of Chicago. He answered. Here was the conversation.
Henderson: Hi Al, I met you at Ron Hansen’s place last year when you came to Rochester.
Harberger: I remember.
Henderson: I have a big favor to ask.
Henderson: A friend is writing a piece on Iranian inflation. He’s not an economist but he would like to know the data on the annual growth rate of the money supply in Iran from about 1953 to 1978. Do you know where I could get it?
Harberger: One minute.
Just about half a minute later, he came back to the phone. He had pulled a book of data off his shelf. If I recall correctly, it was from the International Monetary Fund.
Harberger: Here are the data.
He then proceeded to read out the data to me and I wrote them down. I thanked him profusely, and then took the sheet across the street to Roy.
Notice what happened. I called an economist to ask for some information. And not just a run of the mill economist, but one of the leading economists who, by the way, has often been on many other economists’ short list for the Nobel Prize. (If you don’t know who Arnold Harberger is, it’s worth your knowing. How many economists have a geometric shape named after them? His is the famous Harberger triangle.)
Not only was he friendly, but also he served for a couple of minutes as my unpaid research assistant.
Why? Part of it is that he was, and still is, a nice guy. But the other part, I think, is that he appreciated someone who knew enough to ask the right question.
That led to my ah-hah moment. I realized that one of the occupational hazards of academia is isolation. Even someone as well-known as Al Harberger might receive, in those days when long-distance calls were expensive, only a call or two a day.
After that I relaxed about calling up economists.
Here’s how Harberger’s research showed up in Roy’s article in the February 1980 issue of Libertarian Review:
To pay for these massive shipments of arms, oil revenue was not enough, and so the Shah began to churn out money. By 1968, the Iranian equivalent of M1 was 105 billion rials. By 1972, it had increased to 210 billion rials. But the money supply’s growth then began to accelerate, to pay for the “modernization” and the arms: 273 billion rials in 1973, 375 billion rials in 1974, 452 billion in 1975, 664 billion in 1976, 821 billion in 1977, and as astonishing leap to 1398 billion rials by the time the Shah was deposed.
(I realize that going from 375 to 452 is a smaller percent increase than going from 210 to 273, but Roy was not Mr. Numerate. He got the basic point right, though. The money supply grew by a high double digit percent and then did grow even more percentage wise from 1977 to early 1979, when the Shah was deposed.)