Intensely Technical — Ariel Pakes Has Followed His Head and Heart to Prominence in Economics

After three months writing a novel on Tenerife in the Canary Islands, Ariel Pakes learned he had a scholarship to Harvard to do graduate work in economics.

An aspiring journalist who was drawn by economics’ mix of theoretical thinking and real-world problems, Pakes was torn.

So he gave parts of the book to three friends, then took them to dinner and asked what he should do. Go to Harvard, they said. He was on a plane to New York the next day.

The economics world applauds his choice.

Pakes, who became professor of economics in the Faculty of Arts and Sciences (FAS) in July 1999, is one of the world’s foremost experts in industrial organization and econometric modeling. Pakes’ opinions have been solicited by the U.S. Senate and the National Science Foundation. His computer models have been used by industrial and consulting firms and have been sought out by the Bureau of Labor Statistics to run checks on indexes produced to track prices of goods and services.

” He is the leader in industrial organizations, in bringing new empirical techniques to assessing that field,” said Jeffrey Williamson, the Laird Bell Professor of Economics and chairman of the Economics Department in the FAS. “His field of industrial organization has undergone unbelievable and explosive changes over the past 15 years. It’s been inundated by theoreticians invigorated by new thinking. There have been great leaps forward fostered by new ways of doing things.”

Pakes’ research has predicted some surprising trends, such as when the 1973 gas price hike unexpectedly lowered average automobile mileage.

Rather than favoring higher-mileage automobiles, as one might intuitively think, the price increase forced lower-income people who tend to drive smaller, more fuel-efficient cars to drive less.

Wealthier people, who tend to drive less fuel-efficient automobiles, were less affected by the gasoline price increase and maintained their everyday driving habits.

” Understanding the details of demand and knowing how they fit into the system are very important,” Pakes said.

Pakes’ work has created a demand on his time. He has served on a variety of panels for the National Science Foundation (NSF), including an NSF Economics Advisory Panel in 1989 and 1990. He has also served on a Census Advisory Panel and was a research associate at the National Bureau of Economic Research. He has worked as an editor or associate editor for a variety of publications, including Econometrica, the Journal of Econometrics, and Proceedings of the National Academy of Sciences.

A Fantastic Journey

Pakes lived in Edmonton, Alberta, until he was 17. Wanting to see the world, he followed his older brother to Jerusalem, where he studied at the Hebrew University.

He gained a bachelor’s degree in 1971 with a double major in economics and philosophy, and earned a master’s degree in economics in 1973. From there he came to Harvard, gaining a second master’s degree in 1976 and a doctorate in 1979, both in economics.

Before coming to Harvard, however, Pakes took time off to do some traveling.

He traveled through Tunisia, Algeria, and Morocco, hitchhiking mostly, and stopping for a while in a Berber village in northern Algeria. He joined a Bedouin caravan through the Sahara Desert, but became ill during the crossing. He headed for the modern medical facilities on Tenerife, in the Canary Islands off Africa’s Atlantic coast.

It was while on Tenerife that Pakes began writing what he then hoped would be his first book. It was set in Arab East Jerusalem, where he had lived in an effort to better understand Arab culture.

Though Pakes had an early interest in philosophy, he said he couldn’t see himself spending his life “trying to figure out what Archimedes or Plato couldn’t.”

Always interested in social issues, he was drawn toward journalism, but economics also intrigued him, with its mixture of theory and real-world data.

In the end, economics won.

“I was better at the technical stuff,” Pakes admitted.

Williamson described Pakes as friendly and said he pitched in right away, helping with faculty recruiting and other tasks that new professors often take up slowly.

“He’s very warm,” Williamson said. “Though the work he does is very technical, he has a wide reach. He can converse and debate with labor historians and other economists.”

Pakes became a lecturer in economics at Harvard in 1978. He left Harvard to become a lecturer in economics at Hebrew University in 1980. He became a visiting research associate at Yale University’s Economic Growth Center in the fall of 1985 and was named an associate professor of economics at the University of Wisconsin in 1986.

In 1988, Pakes left Wisconsin for Yale University, where he was named a professor of economics. He was named the Dilley Professor of Economics at Yale in 1997, a post he held until he accepted the Harvard economics professorship.

His work has brought him several awards and honors, including the 1986 Frisch Medal, given by the Econometric Society for the best applied economics article in the journal Econometrica over the previous five years. He was elected a fellow of the Econometric Society in 1988.

The mix of theory and the real world is still a draw for Pakes. In his research and in his teaching, Pakes tries to match one and the other. Pakes tells his students that the theories differ for each industry, since each industry has evolved to different pressures, demands, and government regulations. The key, he said, is for students to know the industry they’re studying intimately so they can apply economic theories correctly.

Pakes says he also benefits from his students’ studies.

“I learn about the industries as they learn to analyze the data,” Pakes said. “I find I learn a lot. It’s a give and take.”