Professor Ohanian’s Research featured in The Economist

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Professor Ohanian’s research was recently discussed in an article published in The Economist. The article, “Housing is at the root of many of the rich world’s problems” was published in the January 16th edition and an excerpt can be found below—

Housing is at the root of many of the rich world’s problems

Since the second world war, governments across the rich world have made three big mistakes, says Callum Williams

The financial crisis of 2008-10 illustrated the immense dangers of a mismanaged housing market. In America during the early to mid-2000s irresponsible, sometimes illegal, mortgage lending led many households to accumulate more debt than they could sustain. Between 2000 and 2007 America’s household debt rose from 104% of household income to 144%. House prices rose by 50% in real terms. The ensuing wave of defaults led to a global recession and nearly brought down the financial system.

 

Continue reading….

Predicting and Preventing Homelessness Report

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UCLA Department of Economics Professor Till von Wachter worked alongside the California Policy Lab and the University of Chicago Poverty Lab to publish a report on Predicting and Preventing Homelessness.  They used Los Angeles County data on multi-system service use to predict homelessness among single adults receiving mainstream County services.  By identifying people at high risk of first-time homelessness or returns to homelessness and understanding risk factors associated with future homelessness, the County can more effectively target its homelessness prevention efforts to ensure limited resources are going to those most likely to benefit from them.

Since being released on December 16th, 2019, the report has been referenced in many articles across the country.

Resources:

Full Report: Predicting_and_Preventing_Homelessness_in_Los_Angeles

LA Action Plan: LA County Homeless Initiative Press Release about their new action plan

Featured Articles:

Los Angeles Times: Is there a way to predict who will become homeless? These UCLA researchers say yes

Santa Monica Mirror:  UCLA Study Suggests Algorithm Can Prevent Homelessness

Cartels and Productivity

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Carrera, Felipe

Carrera, Felipe

Cartels are a common feature in most economies. For instance, in the 2015-19 period, the European Commission imposed fines in excess of €8.3 billion in 27 cartel cases. It is well understood that cartels reduce social welfare by increasing prices and restricting output. Cartels may generate additional costs to society by increasing the market share of less efficient producers.

One way in which this may happen is if during cartel episodes low-productivity firms are tempted to enter the market by the artificially high profits generated by the cartel, raising productivity dispersion and reducing total surplus. This intuitive mechanism has so far not been quantified because of data limitations: A researcher dealing with this question needs to know with certainty when cartels started and ended, and to have detailed plant-level data. And, since cartels are illegal throughout the developed world, it is very difficult to access the necessary information in modern settings.

In his job market paper, “Cartels, Entry, and Productivity: Evidence from the Chilean Nitrate Cartels”, UCLA PhD students Felipe Carrera and Vitaly Titov quantify the effect of cartels on the quantity and quality of new firms in an industry with low barriers to entry by studying the Chilean nitrate cartels in the early 20 Century. This industry is attractive because cartels were legally enforceable, entry barriers were low, and, over 35 years, the industry switched between cartel and perfect competition multiple times.

Using a newly collected dataset, created from original handwritten archival records, they show that during cartel periods, average entry increased from 5 to 9 plants per year. Moreover, entrants during cartel periods were one-third less productive than average firms. Building on these findings, they build a model of firm entry and conduct two counterfactual simulations. First, using detailed accounts from historical records about these cartels’ inner workings, together with their structural estimates, they are able to show that low barriers to entry lowered incumbent profits by 40%. Second, they estimate a model of firm dynamics and show that had the cartel not existed, 25% of plants would have postponed or cancelled their entry to the industry.

These findings are important from a historical and present-day perspective. In the early 20 Century, Chile’s nitrate industry dominated the country’s economy, accounting for 65% of exports and 45% of government revenues. The excess entry lowered the mean productivity of the industry by 3% and had a measurable effect on tax revenue and GDP. This poses important lessons for other developing countries that are dominated by extractive industries. Moreover, the paper speaks to the literature on productivity dispersion by showing that market power caused by coordinated action by otherwise independent firms can generate substantial amounts of inefficient entry.

Claudia Toussaint

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claudia2

Claudia Toussaint

Some of the most powerful influences in our lives emanate from things we cannot see – legal frameworks, for example. The impact of the law is pervasive not only in our personal lives, but also in the intricacies of our economy, and Claudia Toussaint has dedicated her career to understanding these intersections.

Growing up in Germany, Claudia originally found out about UCLA through the experiences of her mother, who attended the Westwood institution for a short spell before securing a Fulbright Scholarship. Inspired by her mother’s experience and the school’s reputation, Claudia decided to explore an academic experience in the United States; but her journey was not a walk in the park.

UCLA initially rejected her. So, she made her way to the admissions office, out of genuine curiosity, academic records in hand, to ask how she could improve her future chances. Upon further review, Claudia was offered enrollment at UCLA, and her life as a Bruin began on the heels of perseverance. “When you are curious, when you really want to understand the reasons behind decisions, that is something that can pay off in unexpected ways,” Claudia shared.

Claudia’s immersion at UCLA exposed her to one of the campus’ most appealing traits: its diversity. She did not just experience diversity of race, ethnicity or religion, but diversity of ideas, backgrounds, personalities, and even academic opportunities. In Westwood, she had the ability to take classes across multiple fields of study while establishing a strong quantitative background within her economics major. She found one of her strongest connections with an international student from China, and the two worked together to refine their interdisciplinary skills and exchanged perspectives about their very different countries of origin.

In 1988, Claudia graduated from UCLA with a degree in economics, and quickly sought to expand her skill set. “I thought the law would be a good way to apply what I learned, and build upon what I perceived as my strengths,” Toussaint said.

That fall, Claudia enrolled at University of California, Hastings College of Law, where she could continue exploring the intersections between business and law. Her experiences in law school built upon the analytical skills developed in her economic studies and enabled her to better understand the law’s invisible influence on societies. Once Claudia had earned the credentials necessary to become a practicing attorney, however, a new obstacle confronted her: a professional environment historically dominated by men.

In a field where less than 21% of lawyers were female at the time, Claudia secured a job as a transactional attorney at Morrison & Foerster in Los Angeles, spending five years at a firm that embraced diversity and her ability to practice law at the highest levels. But her greatest strengths still lay in her interdisciplinary thinking, and in 1997, she joined Sprint’s in-house legal team in the Kansas City area. She eventually went on to become the company’s Vice President and Corporate Secretary.  She used her talents to build diverse, dynamic and high-functioning legal teams, and to support milestone corporate transactions, including the elimination of the company’s tracking stock structure, the $35 billion merger with Nextel, and the spin-off of Embarq.  In the fall of 2014, after General Counsel roles in several companies, Claudia joined Xylem Inc., a water technology business.

At Xylem, Claudia serves as the Senior Vice President, General Counsel and executive sponsor for the company’s ESG (Environmental, Social & Governance) strategy.  She helps shape the company’s strategy and execution, all aimed at solving the world’s greatest water challenges with innovative technologies.  She also continues to be a strong advocate for building diverse and inclusive teams, knowing it will give Xylem a competitive talent advantage and accelerate the innovation necessary to realize the company’s ambitions.  Her contributions go well beyond addressing legal or regulatory matters; her days are largely filled with questions that require policy and resource trade-offs, with a heavy reliance on interdisciplinary data analysis and, ultimately, alignment with the company’s values of respect, responsibility, integrity and creativity.

“In economics, you think about resource allocation, and in my work I spend most days thinking about precisely that,” Claudia said.  “In addition, the grounding in economics finally enabled me to feel comfortable understanding, using and challenging numbers, whether they are about finance, operations or social impact,” Claudia said. “To make a difference, whether in business or in broader society, it is incredibly important to be conversant in the language of business, which largely is a language of numbers.”

Claudia now reflects fondly and with gratitude on her days at UCLA, where she says she learned a fundamental lesson: curiosity is invaluable.  “Professionally and personally, curiosity will drive your discovery of whether you’re on the right path,” Claudia said. “I really found my path when I became genuinely curious about how and why things are the way they are and I give huge credit to UCLA for awakening and nurturing that curiosity in me.  It is the reason I am so passionate about the value of learning for us as individuals and as societies.”

Quality of Classroom Interactions and the Demographic Divide: Evidence From the Measures of Effective Teaching Study

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By Olivia Osei-Twumasi and Bernardette J. Pinetta

Using data from six urban school districts, we examine the relationship between the quality of interactions in the classroom (measured by the Classroom Assessment Scoring System [CLASS] framework) and the racial match or mismatch between teachers and the students in their classes. We find that White teachers have lower scores on the CLASS framework when they teach classes with higher densities of Black students. Furthermore, in classrooms with high densities of Black students, Black teachers receive higher scores than White teachers. This finding has important implications given the demographics of our nation’s public schools and the underrepresentation of Black teachers.

Read full paper here

 

Jeffrey Leitzinger

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Board of Visitors

Leitzinger

Jeffrey Leitzinger
Founder and Managing Director at Econ One Research

Dr. Leitzinger is an economist with almost 40 years of experience in research and consulting. He started his career with a large national economic consulting firm and rose over the next seven years to join the firm’s Board of Directors.  He has since founded two research and consulting firms, the latter of which, Econ ONE Research, is a successful international firm with six offices in the US and one in Asia.

Dr. Leitzinger has served as an economic expert in major US antitrust cases including Microsoft, American Express and, most recently, Qualcomm.  He has published and presented frequently on antitrust matters and is a member of the Advisory Board of the American Antitrust Institute.  He also has filled Board positions for banks, insurance companies and charitable organizations here in Los Angeles.  He resides in Pasadena, California.

Dr. Leitzinger received his Bachelor of Science Degree in economics from Santa Clara University. He received Masters of Arts and Doctoral degrees in economics from UCLA

Lee Ohanian Op-Ed in The Hill

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Warren Buffett, taxing capital income is a bad idea

By Lee Ohanian

In 2011, superstar investor Warren Buffett made headlines not for his investment recommendations but for his opinion that tax rates on high earners should substantially increase.

Buffett proposed the Buffett Rule, which would impose a minimum 30 percent effective tax on those with incomes exceeding $1,000,000. This was supported by then-President Barack Obama and 2016 Democratic Presidential nominee Hillary Clinton.

Buffett repeated his opinion earlier this year, arguing “The wealthy are definitely undertaxed relative to the general population.”

Buffett does this by transferring the income growth in his assets into price appreciation of Berkshire Hathaway stock, which is the corporation that he runs. The tax is not due until the stock is sold.

Continue reading the article here

Department Renames the Value Investing Program after Benjamin Graham

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The Economics Department is delighted to announce the renaming of its undergraduate Value Investing Program after the field’s pre-eminent pioneer, Benjamin Graham. With the concurrence and encouragement of Mr. Graham’s son, Dr. Benjamin Graham, Jr., the program will now be known as the Benjamin Graham Value Investing Program.

Benjamin Graham, widely known as the “father of value investing,” graduated from Columbia University at age 20. He began a storied career on Wall Street, eventually founding the Graham-Newman Partnership, where he employed Warren Buffett. Mr. Graham also took up teaching positions at Columbia University and later at UCLA. He wrote two of the founding texts in neoclassical investing: Security Analysis (1934) with David Dodd, and The Intelligent Investor (1949). Benjamin Graham’s investment philosophy stressed investor psychology, minimal debt, buy-and-hold investing, fundamental analysis, concentrated diversification, buying within the margin of safety, activist investing, and contrarian mindsets.

“We are thrilled that our Program will now be linked with the legendary Benjamin Graham,” said Adjunct Professor and Program co-founder William E. Simon, Jr. “As it happens, our classes take place in the same building where Benjamin Graham taught here, and knowing this reinforces our commitment to honor his legacy, especially his dedication as a teacher.”

Undergraduates in the Benjamin Graham Value Investing Program learn to evaluate investment opportunities as well as to direct capital to enhance value. The program’s industry-based curriculum prepares students through applied research projects, financial modeling, and group projects in four core concentration courses: Introduction to Value Investing, History of Financial Crises, Applied Value Investing, and Special Projects in Investing. To complete the concentration, students must also select two additional courses from: History of Capitalism in the American Economy; Corporate Finance; Pricing and Strategy; Investments; Real Estate Finance and Investment; Development of Economic Institutions in Western Europe; and Financial Statement Analysis. Upon completing the program, students understand the full set of fundamental economic and strategic forces that favor or disfavor a particular investment opportunity from both a theoretical and practical perspective.

The Program, co-founded by Andrew Atkeson, Stanley M. Zimmerman Professor of Economics and Finance, together with Professor Simon, offers students significant industry exposure from experts in the field. Distinguished guest lecturers serve as “Investors in Residence” who share their experience as chief investment officers and portfolio managers. In addition, students have the opportunity to work closely with the buy-side industry through an honors-level, applied investment project. Private equity firms, hedge funds, mutual funds, pension funds, and endowments submit “Requests for Project Proposals” which are then assigned to teams of three to five students. Each student group is expected to attend and participate in all class meetings with the hosting professor, while engaging with their firm liaison on a regular basis. The course culminates with the submission of a comprehensive research report and a student presentation on campus delivered to the participating firm and its management team.

Students are admitted to the Benjamin Graham Value Investing Program by application only. The application for the 2020-2021 concentration will launch in spring 2020 for fall enrollment, which will be limited to 40 students. To learn more about the Benjamin Graham Value Investing Program, please contact Professor Atkeson (andy.atkeson@gmail.com), Professor Simon (Simon@law.ucla.edu), Humberto Merino-Hernandez (founding manager of the Program, hmhernandez@econ.ucla.edu) or Tony Winston (Program Manager, twinston@econ.ucla.edu).

UCLA Economics Programs Now Classified as STEM

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Beginning with the Fall 2019 graduating class, our Economics and Business Economics Bachelors, Master of Applied Economics, and Economics PhD programs will be officially classified as STEM (CIP code 45.0603).  The STEM designation signifies the analytical rigor of our classes, which trains students in statistics and programming but also teaches them to see the world through the lens of economics.  It opens up more job placement and grant opportunities for our students and we are looking forward to seeing how this will continue to develop our program offerings.

 

STEM (CIP Code 45.0603): A program that focuses on the systematic study of mathematical and statistical analysis of economic phenomena and problems. Includes instruction in economic statistics, optimization theory, cost/benefit analysis, price theory, economic modeling, and economic forecasting and evaluation.