The New York Times
April 8, 1998New College All-Star: Columbia Pays Top Dollar for Economics Heavy Hitter
By SYLVIA NASAR
NEW YORK -- The University of Chicago's Sherwin Rosen has been chronicling the "Economics of Superstars" since the beginning of the 1980s. But even he was astounded to learn that Columbia University has just agreed to pay nearly $300,000 a year to lure Robert Barro, one of the nation's most prominent economists, away from Harvard.The kind of six-figure salary that Barro, 53, will command at Columbia, while perhaps commonplace for economics Ph.D.s on Wall Street and not unheard-of for finance whizzes at major business schools (including Columbia's), is a record-breaker in the market for academic economists who work in more traditional fields like macroeconomics and trade theory. It exceeds by roughly $100,000 the most lucrative offers reported for leading university researchers just a year or two ago. And it is roughly twice the current salary caps for arts and sciences faculty at Harvard, Columbia and other elite universities.
"This is a big deal," said Claudia Goldin, a colleague of Barro at Harvard. "It's broken the sound barrier."
An ex-New Yorker with attitude, Barro has exuded stardom since his graduate school days at Harvard in the late 1960s. He has changed the way economists think about everything from the long-run effects of government deficits to the forces that favor economic growth. A Chicago conservative with a libertarian streak who writes for The Wall Street Journal and Business Week, he has produced scholarly articles that are cited by other researchers as often as those of Paul Samuelson, Milton Friedman and Robert Lucas.
As the bidding for Barro shows, the market for top economists is starting to look like those for movie stars, basketball players and bond traders. It carries all the trappings, too -- complex negotiations, signing bonuses and highly organized raids. And the forces that have turned top economists into what the Columbia provost, Jonathan Cole, ruefully calls "free agents without salary caps" are not all that different: lots of customers (rising enrollments), lots of cash in a few pockets (swelling tuition payments and endowments at elite institutions), and a tight consensus on who the most valuable players are.
Add to that the growing feeling among a number of institutions of higher learning that, as one academic put it, "If you don't have a good economics department, you can't have a great university."
The focus on money has moved into the uppermost tier of schools, which have traditionally counted mostly on their reputations to lure talent. "At the top schools, there's been a reluctance to play the game, to think that we can score a tremendous coup if we pay a lot for X," said Peter Kenen, an economist at Princeton University who was chairman of Columbia's economics department in the 1960s. "But the pressure to push against salary caps and exceed them is getting stronger and stronger."
In making its dramatic bid, Columbia hopes to break back into the top league, where it used to rank alongside Harvard, Princeton, Stanford, MIT and the University of Chicago. It sees Barro as a kind of franchise player who can not just pull up the team by his mere presence but also act as a magnet for talented young faculty.
For Harvard's highly-ranked economics department, which has not lost a senior professor to a rival department since Stanford recaptured Kenneth Arrow in the late 1970s. Columbia's coup has come as a wake-up call. The faculty dean, Jeremy Knowles -- who used to brag that "I have never matched an outside offer!" -- is, by all accounts, building a "war chest" to fend off future raids.
Just as extraordinary as the salary Columbia will pay is the cornucopia of perks and privileges Barro won in months of negotiations. To lure him, Columbia helped place his teen-age son in an exclusive Manhattan private school, offered a $55,000-a-year university post to his wife, Judy, who is just returning to the work force and eased out the prior tenant of a 2,300-square-foot university-owned apartment on Riverside Drive, which the Barros coveted. The rent is subsidized, with a lavish renovation, courtesy of Columbia, thrown in for good measure.
While Barro also has other sources of income, it all adds up to at least a $150,000 gain for his family.
Other parts of the deal entail even heftier investments by Columbia. Barro will occupy three spacious offices on the impossibly cramped and overcrowded campus. He will direct a sizable chunk of resources at the university's new social science research center. Most important, he Barro will have a green-light from the administration to recruit a half-dozen promising younger economists.
The whole thing started more than a year ago when Barro, who was feeling underpaid, began dropping hints that he might be willing to move. The first to respond was Boston University, which failed to put together a $250,000 offer last spring. When Columbia heard that he might be "gettable," the economics department and business school teamed up to go after him. Until the deal, which has not been made public, was finally consummated in February, hardly anyone at either Columbia or Harvard expected it to come off. Around Christmas, a Harvard friend offered Columbia's department chairman 20-to-1 odds against Barro's accepting.
The extras clinched it. the Columbia dean, David H. Cohen, made the salary offer at the beginning of the negotiations and hardly raised it. The promise that Barro would have six slots to fill was made in October. Soon afterward, however, the negotiations almost foundered because Columbia was unable to find a suitable apartment. But by the time Knowles of Harvard invited Barro to a long, wine-drenched dinner in February to present Harvard's counteroffer -- involving a new research center -- Ms. Barro was already meeting with architects, their son had received his acceptance letter from the Dalton School and a job offer was about to go out to one of Barro's former students, Casey Mulligan at Chicago.
Harvard was too late, if not exactly too little. "If he had offered me in November what he did in February, I probably would have stayed." Barro said.
To be sure, academic recruiting beyond the junior level -- particularly in New York where housing and schools are major stumbling blocks -- has always been a complex, expensive undertaking. But Columbia's willingness to put together a deal of these proportions shows how much it expects to benefit from Barro's presence. "We're capturing a lot of the surplus that Robert will generate," said R. Glenn Hubbard, an economist in the business school one of the main flag carriers in the Barro negotiations.
Economics is now the No.1 major at Columbia. As enrollments have doubled, the faculty has shrunk. The business school, now one of the most competitive in the country, also considers a highly rated economics department vital to its own continuing success.
The business school dean, Mayer Feldberg, consulted Milton Friedman on the hire. "Milton was very positive," Feldberg recalled. "He said, 'Barro's young. He's got visibility. People are drawn to him.' "
Not all of Barro's peers are equally enthusiastic. Some consider his recent empirical work superficial, others feel his theoretical work is less elegant than, say, that of Lucas, who first coined the phrase "rational expectations" and is revered for his rigorous, spare style. Still others point to Barro's prickly persona (he was known, as a young professor at the University of Chicago, for his outbursts during debates and his scathing attitude toward less-stellar colleagues). But even his critics acknowledge that Dr. Barro is productive, influential and a "builder," who in the early 1980's strengthened the economics department at the University of Rochester, which continues to turn out an impressive number of first-rate students -- Barroids as they are called.
The notion that a big push can restore Columbia's faded glory is a tantalizing one. Columbia once had students like Kenneth Arrow, Milton Friedman and the Fed chairman, Alan Greenspan. Its faculty included some of the great pioneers of empirical economics -- Wesley Mitchell, Arthur Burns, George Stigler. But by the time Gary Becker, who taught at Columbia throughout the 60's, decamped for the University of Chicago in 1970, student revolts, a dysfunctional administration and New York City's decline were pulling the university down and the economics department with it.
That said, Columbia boasts some remarkable thinkers, one or more of whom could easily win a Nobel Memorial Prize in Economic Science. These include Jagdish Bhagwati, Kelvin Lancaster and Robert Mundell in trade, Edmund Phelps in macroeconomics. (William Vickrey, a member of the department, died within days of receiving a prize last year). But this group is about to retire. Columbia also has some promising researchers recently out of graduate school. What it lacks is a vital middle -- those in their prime years of 35 to 55 -- that normally forms the intellectual and administrative leadership. It is this "great void" that Barro has been elected to fill. As Bhagwati put it: "The students don't care if we get four Nobels. They want to learn the latest stuff."
In the past, great departments were built slowly. But armed with a growing endowment and emboldened by the comeback of New York City, Columbia's administrators think they might just be able to engineer a big leap up by buying their way into the top bracket. "We saw a chance to jump start the process," said George Rupp, the president of Columbia.