Sahil Punamia

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Sahil-Punamia

Sahil Punamia

Like many of UCLA’s students, Sahil hails from northern California growing up in the quaint suburbs of the Bay Area. Growing up in high school, he was actively involved with his marching band, playing the alto saxophone and piano. Interestingly enough, Sahil’s affinity for jazz music and the opportunity to play for the marching band was a pivotal reason he attended UCLA, a testament for his passion for music and the creative arts. Despite being initially rejected by UCLA, Sahil was offered a spot on the UCLA marching band after he created a last-minute audition tape that attracted the attention of UCLA’s band director.

Having graduated UCLA in 2013 with a Bachelor’s degree in Economics and a minor in Film Television & Digital Media Studies, Sahil’s decision to major in Economics was primarily motivated by his desire to learn about various aspects of business and finance. Moreover, he was impressed by the range of electives and lab courses offered by the Economics Department. He recognizes that drawing students to the major means balancing a fine line between theoretical coursework and courses that are more practical and professionally geared in nature. He believes UCLA recognizes this and that the narrative is slowly starting to change as fields like financial engineering and behavioral economics emerge.

Despite his rocky path getting into UCLA, Sahil has directly contributed to some of the university’s greatest facets. In his time here, he served as the President of Bruin Consulting and was one of the nine founding fathers of Sigma Eta Pi (SEP). With his friends, he realized the lack of entrepreneurship fraternities on the entirety of the west coast while fields like medicine, business, and law had full-fledged professional fraternities. By adopting a collaborative mindset, they were able to establish the first entrepreneurship fraternity on the west coast. The time he spent working with these organizations at UCLA taught him how to cultivate trust, work with a breadth of personalities and become a galvanizing leader without overstepping any boundaries.

All the time spent gearing towards professional development helped prepare Sahil for his role as an L.E.K consultant upon graduating. During his time at L.E.K, he forecasted industry trends, developed OTT media strategies and worked on over 35 different engagements spanning 3 years. Despite the tremendous learning curve, Sahil remarks that it was an invaluable experience. That said, as time went on, he wanted to transition out of consulting. Eventually, he turned to the media company Discovery Communications, whose programs he had watched since his youth. This gave him the chance to work on content strategy, marketing, and distribution across various Discovery Communication platforms.

Now Sahil serves on the Marketing Planning & Analysis team at Netflix. He describes his role as that of an internal consultant, leveraging data-driven insights and conducting market research to better support Netflix’s creative marketing & PR teams. He contends that success in the media industry and any industry, for that matter, requires being able to lead and understand what motivates the people around you. Figuring out how to best align the objectives of various stakeholders is a skill that will go a long way. Moreover, Sahil firmly believes that success in his field implies constant learning and that anyone seriously interested in pursuing a career in the media industry needs to be prepared to learn every day about the changes taking place, shifts in consumer behavior, new mediums of distribution, content providers etc.

Aside from growing his own professional career, Sahil seeks to make a tangible impact on the careers of our Bruins. His started his company The Aspiring Professional to coach students one on one and provide career guidance at a personal level. Moreover, he serves on the board of the UCLA Alumni Association and has conducted numerous career-focused seminars for UCLA students at the career center. Having gone through the arduous recruitment process, he knows the challenges students face when it comes to securing a job. His seminars have no doubt shaped the careers of countless students, who enjoy his practical and actionable approach to navigating the recruitment process. To him, the satisfaction gleaned from making a tangible difference in their lives is an unmatched feeling.

In his quest to strike a good work-life balance, Sahil takes the time to go for long drives and regularly attends improv comedy shows. Moving forward, he hopes to continue growing his speaking and coaching practices whilst fostering more meaningful relationships with UCLA and other universities. Ultimately, that is the legacy he would like to leave behind.

By Adithya Kumar and Marcella Pensamiento

Rethinking Randomized Controlled Trials

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Rodrigo Pinto

Sir Ronald Fisher (1890-1962) is often regarded as the most influential statistician in 20th century. His 1935 book on “The Design of Experiments” sparked a revolution towards the use of the use of random assignments in assessing research inquiries. Fisher’s work is originally motivated by agricultural experiments. He explained how experiments that depart from the random assignments involve the judgment of the experimenter which leads to bias and inaccurate interpretation of data. In his own words: “If the design of the experiment is faulty, any method of interpretation that makes it out to be decisive must be faulty too.”

Economists have long benefited from Fisher’s ideas. Randomized Control Trials are often considered the gold standard for evaluating causal effects in social experiments. In it, individuals are randomly assigned to treatment groups and, if the RCT is perfectly implemented, then the average causal effect of the treatments on an outcome can be evaluated by comparing the outcome data across treatment groups. Unfortunately, perfectly implemented Randomized Control Trials are rare in social experiments, and most experiments struggle with some degree of noncompliance, whereby agents choose not to comply with its original treatment assignment. This is a particular problem with a variety of experiments on early childhood education such as the Abecedarian project, Head Start, the Educare program and the Perry Program.

Noncompliance induces selection bias that prevents the evaluation of the causal effects intended by the RCT. Faced with this caveat, experimental economists seek strategies that prevent noncompliance while econometricians have developed statistical methods to correct for noncompliance. These efforts share the same mindset: the original treatment assignments of the Randomized Control Trial is a desirable benchmark and deviations from it ought to be avoided.

Professor Rodrigo Pinto’s recent work reverses this mindset. His paper on “Randomization Biased-Controlled Experiments” is built upon a simple insight: while a departure from random assignments in an agricultural experiment is a failure of the experiment, a departure from random assignments in a social experiment is a realization of a rational choice and, thereby, a useful source of information.

Randomization Biased-Controlled Experiments is a novel framework that connects experimental design with a classical economic model to enhance causal inference. The method recognizes that a social experiment randomizes incentives instead of treatment choices. These incentives are the input of an economic choice model which employs revealed preference analysis to characterize the set of counterfactual choices that are economically justified. The economic model is then embedded into a casual model suitable to the study of treatment effects. The method innovates on standard RTC analysis by exploiting the information on the incentives induced by the experimental design. Moreover, depending on the design of incentives, noncompliance is not an econometric problem but rather an essential tool for the identification of causal effects.

Martin Hackman featured in Bloomberg

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A recent article in Bloomberg Opinion has cited a new study by UCLA Department of Economics Professor Martin Hackmann and University of Georgia professor Vincent Pohl.

According to Bloomberg:

The study uses comprehensive data on 1.4 million skilled nursing-home stays between 2000 and 2005 in California, New Jersey, Ohio and Pennsylvania. It takes advantage of two facts. First, Medicaid payment rates to nursing homes tend to be lower, by about 20 percent in the sample used, than private payers’. Second, Medicaid patients generally have minimal or no cost-sharing for nursing-home stays, whereas private payers typically have significant cost-sharing, so the incentives for consumers are much different depending on whether Medicaid is paying or not.

The study reaches three core conclusions. First, nursing homes are more likely to discharge Medicaid patients (for whom they receive lower payments) when they are at or near capacity than when they are not. The financial incentives thus seem to influence provider behavior: Nursing homes discharge Medicaid patients to make room for better-paying private patients, unless they have enough room for both.

Second, earlier discharges of Medicaid patients when nursing homes are full don’t seem to harm the patients — in terms of mortality, rehospitalization or other measures. The implication is that many nursing-home stays are unnecessarily long, since earlier discharge doesn’t carry negative consequences and since Medicaid patients are held longer when other beds are available at the nursing home. (One could perhaps argue that the evidence just shows that nursing homes are properly discharging patients only when they’re ready, but the authors try to adjust for this possibility in various ways. Fundamentally, Medicaid patients are unlikely to become magically healthier just as other available beds in the facility disappear.)

Third, the authors extrapolate from their statistical analysis to assess changes in both provider incentives and consumer cost-sharing. In particular, they examine increasing costs for patients. They then compare the impact to a change in how the nursing homes are paid, moving partially away from the current structure of a payment per day (which encourages longer stays) and instead making part of the payment a lump sum per admission. As they conclude: “providers react more elastically to financial incentives than patients, so moving to episode-based provider reimbursement is more effective in shortening Medicaid stays than increasing resident cost-sharing.”

Professor Dora Costa in The Atlantic

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Professor Dora Costa, Chair of UCLA’s Economics Department & Kenneth L. Sokoloff Chair in Economic History, was recently featured in The Atlantic for her paper, “Intergenerational transmission of paternal trauma among US Civil War ex-POWs.”

According to The Atlantic:

The most recent [article] is a new study in the Proceedings of the National Academy of Sciences this week by researchers from [UCLA’s Department of Economics]. They found that the sons of Union Army soldiers who endured grueling conditions as prisoners of war were more likely to die young than the sons of soldiers who were not prisoners. This is despite the fact that the sons were born after the war, so they couldn’t have experienced its horrors personally. In other words, it seemed like the stresses of war were getting passed down between generations.

“By no means is it saying that whenever there’s trauma, that means it’s going to be transmitted,” Dora Costa, the lead author of the Civil War study and an economist at UCLA, told me. “The epigenetic story is optimistic because it allows for the possibility of reversibility through maternal nutrition.”

In addition to having her research publicized in The Atlantic, Professor Costa has also been cited by the Los Angeles Times, El Pais, and the ars TECHNICA.

Professor Emeritus John J. McCall passes away at the age of 85

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By John G. Riley, a Distinguished Professor of Economics at UCLA

The UCLA Department of Economics is saddened to announce the passing of Professor Emeritus John J. McCall (February 28, 1933—September 24, 2018), he was 85 years old.  John received his BA from University of Notre Dame and his MBA and in 1959 his PhD from the University of Chicago. He then worked full-time at the Rand Corporation until the mid-1960s and continued at Rand as a consultant for the remainder of his career. He worked briefly at University of Chicago and UC Irvine before being appointed a professor of economics at UCLA in 1970. He authored or edited several books and wrote numerous academic articles. In 1997, he was elected a Fellow of the Econometric Society. After retiring from UCLA in the late 1990s, he moved from Los Angeles to Ojai, California where he resided for the rest of his life.  He is survived by his wife of 62 years, Kathy, two sons, Sean and Brian, two grandchildren, Megan and Conor, and one great-grandchild, Giovanni.

As a doctoral student, John became interested in the work of George Stigler and Jacob Marschak (who eventually become a colleague at UCLA). George and Jasha were emphasizing the importance of studying costly information transmission in a market economy. As a post-doctoral student, John wrote “The Economics of Information and optimal stopping rules,” The Journal of Business (1965). This was the first paper to provide a formal analysis of optimal stopping problems.

With imperfect information, a decision maker must decide whether to choose immediately from a set of feasible actions, conditional upon the current information, or wait and seek additional information. John fully characterized the solution to this problem, showing that the optimal strategy was a simple cut-off rule. For a broad class of problems, it is optimal to take action when some function of the additional data received exceeds a threshold.

John’s mega hit was his Quarterly Journal of Economics paper “Economics of information and job search.” In this paper he indicates that he was further influenced by Armen Alchian and William (Bill) Allen who would also become his colleagues at UCLA. An unemployed resource was traditionally viewed as an unproductive resource. But, from a search perspective, an unemployed resource is a potentially productive resource, since the owner is using the “down time” to seek alternative and potentially more valuable uses for the resource.

In the paper John analyzes the search decision of a laid-off worker. Given the worker’s beliefs about the distribution of wages in the market-place (which may be updated as the search process continues), the unemployed worker receives a stochastic sequence of wage offers.  In the simplest version of the model the stopping rule has a very simple (and now well-known) form. Continue searching until the expected difference between the next offer and the current offer is equal to the expected cost of the search.  The paper also showed how the simple model could be generalized to take into account the expected duration of the new job and also how to take into account learning about the distribution of wage offers.

These two papers are the foundation stones for what is now a huge search literature.

When I arrived at UCLA in 1973, John (and fellow MIT Beaver, Michael Intriligator) were the only senior colleagues whose research papers analyzed economic phenomena using more than basic calculus. John took an immediate interest in my work and remained very supportive throughout those early years.  It was not always easy as some of the “University of Chicago, LA” crowd had dreams of building a department entirely on ideas emerging from the mother school. But the Chicago influence on John was deep and broad. He was fundamentally an intellectual with a very open and curious mind.

In the quarter century that we were on the faculty together, we became good friends. And even after that, we socialized in Ojai and in Pacific Palisades.  Along the way we got to know and enjoy his two sons, Sean and Brian.  Last but not least, John used his knowledge of optimal stopping rules wisely and married a wonderful and talented wife, Kathy. I talked to her a few days ago and she does not seem to have changed at all. She is still very energetic and fit and full of enthusiasm.

While living in Pacific Palisades (quite near our home), Kathy developed considerable skills as a modern landscape painter and sold many paintings.  We have had one of those paintings on our wall for almost thirty years. I often think of her when I look up and see her painting of a Southern California evening sky. But now when I do so, I will also remember John. He was a gentle, good-hearted colleague and friend.

 

 

Kathleen McGarry elected to the National Senate for Phi Beta Kappa

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The UCLA Department of Economics extends a heartfelt congratulations to Professor Kathleen McGarry on being elected to the National Senate for Phi Beta Kappa.  Founded in 1776, it is the nation’s most prestigious academic honor society.  It has chapters at 286 colleges and universities in the United States, nearly 50 alumni associations, and more than half a million members worldwide.  Noteworthy members include 17 U.S. Presidents, 40 U.S. Supreme Court Justices, and more than 140 Nobel Laureates.  The mission of the Phi Beta Kappa Society is to champion education in the liberal arts and sciences, foster freedom of thought, and recognize academic excellence.

Xin Lin

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Xin Lin

Xin Lin

Xin’s LinkedIn page, consisting of names that commonly adorn the tallest skyscrapers in Manhattan, reflects the illustrious career of the young alumnus.  In the seven years following her departure from the Hills of Westwood, she has achieved what is considerable success for most people. However, Xin is not most people. Her propitious forays into the financial world is only the beginning of her adventures.

After talking to Xin for a few minutes it becomes apparent that she is constantly looking for new challenges and is willing to work exceptionally hard to bring them to fruition. It was one such adventure that led her to the United States from Singapore. After two years at a community college, she was accepted into her dream school, and began her journey at UCLA. Entering college in the shadow of the 2008 financial crisis, Xin wanted to study something that was not only interesting but also pragmatic. This coupled with her passion for problem solving made Business Economics the perfect fit. Any Junior reading this would be relieved to learn that Xin, like many of them, had no idea which path she would take. During her Junior year Xin was accepted into the prestigious Sharpe Fellows program, through which she was able to develop a strong network of peers and mentors. This network helped her secure an internship at Merrill Lynch. Later in her senior year, she got the opportunity to embark on another adventure in NYC, and she did not hesitate.

When asked why she chose finance for her first job, Xin unabashedly remarked that there was no romantic Cinderella story. She was not sure of her career path and wanted a career that would enable her to grow. As a member of a generation constantly bombarded with platitudes like “follow your dreams”, it was extremely refreshing to hear someone talk about the quotidian reality. “There is nothing wrong with saying that I need the money,” believes Xin, due to the need to pay her parents back for the cost of tuition. Contrastingly, she also believes that the financial motive soon begins to erode. After the first few years, if you do not find your job interesting you will be dragging yourself to work. One needs to strike a balance. She further elaborates that the field you choose after graduation may not be the end-all. As you grow as a professional your priorities begin to shift. Conveniently, she herself was the perfect example.  After seven years on Wall Street, during which she rose to position of Vice-President at Goldman Sachs, Xin’s financial needs were met. However, she felt that her growth was approaching a saturation point. She shifted her priorities to using her financial expertise to create impact on a micro-level. With this in mind, Xin recently decided to take go on a sabbatical and contemplate her next adventure.

Xin posits that her success was a result of her ability to expose herself to new experiences and get comfortable with being uncomfortable. While at UCLA, Xin pushed beyond the circle of international students and actively tried to gain exposure to different backgrounds. Additionally, she was extremely self-motivated and entrepreneurial. When we asked her about the feared long working hours in finance, she said no one ever forced her to work, and that what you do in the office matters more than how many hours you spend there. She always wanted to learn as much as she could as soon as possible. This ability to go the extra-mile gave her an enhanced knowledge base which she could use to add value to whatever room she entered. Besides, she emphasized confidence and assertiveness as key qualities to succeed in her field. Throughout her education, she was taught to stand out and ask questions. She was constantly encouraged to not shy away and let her curiosity shine. These experiences shaped her ability to be comfortable in the limelight, which she believes to have contributed significantly to her promotions in the workplace.

Xin’s journey represents the trials and tribulations that await so many of us as we prepare to step into the “real world”. However, it also embodies the life-lessons and triumphs that we will have the privilege to experience if we do it right. More importantly, it teaches us that whether you are an incoming Freshman, a graduating Senior, or an experienced professional on a hiatus, the adventure is just beginning.

by Qiuyu (Simon) Dong and Harsh Gupta

Identifying Beliefs from Choice Data

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Jay Lu

How can we untangle beliefs from tastes in everyday decision-making? A hiring manager may reject a minority job applicant because he believes the candidate is unqualified or because of a personal bias against working with minorities. An admissions officer may reject a minority student because he believes the student is academically weak or because of prejudice toward minorities. Even a physician may recommend a certain drug to a patient because he believes it provides the best course of treatment or because of hidden financial incentives from the drug manufacturer.

In many of these decision-making environments, choices are made repeatedly across a large number of subjects and their frequencies aggregated in what is known as “stochastic choice data”. With the explosion of big data in recent years, such stochastic choice data has become increasingly available. In turn, this has spurred new research questions. What can we learn about people’s beliefs by analyzing such data? Does this particular form of data provide novel avenues of identification that are easier to use and employ? An active area of decision theory research has been trying to construct new tools and methodologies that make use of stochastic choice data for addressing these questions.

In ongoing research entitled “Bayesian Identification: A Theory for State-Dependent Utilities”, Professor Jay Lu studies how using information treatments with stochastic choice data can be used to differentiate between two forms of commonly observed discrimination: taste-based and statistical discrimination. For example, consider a hiring manager screening potential candidates from a minority group. In Becker-style models of taste-based discrimination, the manager hires less minority applicants due to some form of animus towards the minority group and is willing to pay a cost in order to avoid interacting with members of that group. On the other hand, in models of statistical discrimination, the manager hires less minority applicants due to stereotyping based on group membership that results from the manager’s imperfect information. While taste-based discrimination is prohibited, statistical discrimination is occasionally tolerated (e.g. older people being charged more for life insurance). When worker quality is not observed, the nature of discrimination is very hard to determine.

Can looking at changes in the manager’s information provide an answer? For instance, the recent rise in pre-employment job testing by employers provides an interesting comparative. After taking into account test scores in addition to interviews, the manager’s hiring should more closely reflect the true level of applicant quality. All else being equal, the true level of applicant quality would be lower under statistical than taste-based discrimination, so this would be reflected in the manager’s hiring. In short, since information affects beliefs but not tastes, the addition of more information would have different effects on hiring depending on the nature of discrimination.

There are many other situations where this methodology could be applied. For loan approvals, one could distinguish between taste-based or statistical discrimination by comparing approval rates before and after the introduction of automated credit scoring. For college admissions, the informational treatment could be the incorporation of in-person interviews. Moreover, the tools developed in this research could also be used for applications that do not involve discrimination. For medical advice, one may be worried that a physician is recommending a certain treatment due to financial incentives from the pharmaceutical company as opposed to concerns about patient well-being. In this case, the informational treatment could be the adoption of better diagnostic technology.

All these suggest that stochastic choice data could offer new methodologies for identifying beliefs and tastes in order to address important issues in regards to policy and regulation. Having a solid understanding of the connections between economic models and behavioral data not only helps to instruct us on how to conduct proper inferences but also provides insights on novel identification methodologies that may be easier or more efficient to implement.

The Good Times Can Roll On

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This origilee-ohaniannally appeared in the August 24, 2018 print edition of the Wall Street Journal By Edward C. Presscott and Lee E. Ohanian.  Lee E. Ohanian is a Professor of Economics, and Director of the Ettinger Family Program in Macroeconomic Research at UCLA.

The economy isn’t on a “sugar high.” Pro-market policy improved incentives to work and invest.

Some Keynesian economists argue that the U.S. economy’s recent uptick is only a “sugar high.”  They predict that the slow-growth conditions of the Obama years will soon return.  But this pessimistic view is misguided.  better economic policies are the primary reason the economy has improved since 2016.  If pro-growth policies remain in place, the economy’s strong performance will likely continue.

The growth paths in a market economy depend on the quality of government policies and institutions.  These affect the incentives to innovate, start a business, hire workers, and invest in physical and human capital.  If policies are reformed to increase incentives for market economic activity — as many have been under President Trump and the Republican-controlled Congress — then investment and labor input expand as the economy rises to a higher growth path.  Once the economy reaches its new growth path, labor and investment stabilize at higher levels.

It’s clear the recovery ended in 2014 because the two hallmarks of recovery — investment’s share of gross domestic product and labor input relative to the adult population — stopped increasing.  This left a large gap between actual output and the output level that would have occurred had the economy recovered to its prerecession growth path.  According to our calculations, the U.S. cumulatively lost about $18 trillion in income and output between 2007 and 2016.  Everything suggested this shortfall would persist or even grow.

Yet economic performance began to improve beginning in the first quarter of 2017.  Real GDP growth accelerated to about 2.7% between the end of 2016 and the second quarter of 2018, up from about 2% between 2014 and the end of 2016.  The share of GDP devoted to nonresidential business investment rose to a historic high.

The best measure of labor input — the total number of market hours worked divided by the 16-and-older population — is growing faster than in 2014-2016, and is now close to its all-time high.  This is all the more impressive since the growth rate of the working-age population is slowing.  Perhaps the most exciting aspect of the current economy: The emergence of better job opportunities has reduced the number of people on disability.  This has led the Social Security Administration to reverse its previous warning that the disability system would become insolvent as soon as 2023.

U.S. economic performance is the strongest in years.  One policy driving this turnaround is the substantially lower corporate-tax rate, which has made the U.S. more competitive with other countries.  Regulatory changes — such as the partial rollback of Dodd-Frank and new leadership within the Consumer Financial Protection Bureau — also have proved helpful, particularly for small businesses, which are benefiting from lower record-keeping and compliance costs.  Meanwhile, the number of regulatory pages in the Federal Register has been cut by a third since President Obama’s last year in office.  That’s a major reason the National Federation of Independent Business reports that more small-business owners are hiring than ever.  They’re also increasingly optimistic about the future of the U.S. economy.

As the two hallmarks of recovery are still rising, the economy likely has not reached its new, higher growth path.  This means that the U.S. can expect from trade are greater than $10,000 a year, according to the Tax Foundation.  Further cooperative trade agreements — rather than wide-ranging tariffs — would expand these already large benefits.

A second area for reform that could put the U.S. on a still-higher growth path is health care.  The rise of health-care costs is the most important reason wages have not increased more for U.S. workers.  The extra compensation is swallowed up by health insurance premiums.  Expanding medical savings accounts and decoupling health plans from employment would create incentives for both consumers and their health-care providers to economize on health-care spending.  This would lower costs without compromising quality.

U.S. economic performance over the past decade illustrates the substantial influence of government policies on growth.  While some are reluctant to admit it, the current performance is a result of policies that basic economic theory tells us will increase investment and hiring.  Even greater prosperity is possible if policy makers stay the course and continue to implement pro-market economic policies.

Mr. Prescott, a 2004 Nobel economics laureate, is director for the Center for the Advanced Study in Economic Efficiency at Arizona State University.  Mr. Ohanian, a senior fellow at the Hoover Institute, is associate director of the center at ASU.

This piece first appeared in The Wall Street Journal.