Top Economics Prize to Athley, First Woman

Professor Susan Athey, of Harvard University, has become the first woman awarded the highest prize to recognize the most promising economist under 40. The American Economic Association named Professor Athey, the first female honoree in the 60 year course of the John Bates Clark medal, for the breadth and depth of her incisive research in diverse fields.

From the WJS article:

Prof. Athey has been a rising star in economics since her doctoral dissertation -- on a new way to analyze how people respond to rising uncertainty -- created a stir on the academic job market in 1995, leading the nation's top economics departments to court her. She ultimately chose the Massachusetts Institute of Technology in Cambridge, Mass., but later moved to Stanford and then last year returned to Cambridge to join Harvard. She is one of a number of female economists who have risen to prominence in recent years. They include MIT's Esther Duflo, who focuses on field experiments and development economics; Amy Finkelstein, also of MIT, who does health economics; and University of Chicago financial economist Monica Piazzesi.

"You can point to multiple fields of economics where one of the very top stars is a woman," Prof. Athey said. "That's been a really exciting change in the last five to 10 years."

Prof. Athey said she first took an interest in economics in the early 1990s when she was a junior at Duke University, making money on the side selling personal computers to the government at procurement auctions. Robert Marshall, a microeconomics specialist for whom she worked as a research assistant, suggested she help him look into a flaw she saw in the auctions: The low cost of disputing the results appeared to be encouraging losers to protest an inordinate number of outcomes, which often enabled them to get payments from the winners through legal settlements. The economists' research concluded that winners could be using the settlements to pay off losers for cooperating on bids -- a point Professor Marshall, now at Pennsylvania State University, argued in congressional testimony. Ultimately, the government scrapped the mechanism.

Prof. Athey's experience with Prof. Marshall showed her "the power of economic theory to change the world," she said. "By the time I finished working with him I was completely sold."

Prof. Athey went on to do widely respected work in the area of auctions -- a subfield of microeconomics that took center stage in the mid-1990s as former Soviet republics sold off state property and the U.S. government launched auctions for radio spectrum. She has extensively studied the ways in which bidders can collude to manipulate the results, and used that knowledge to help governments figure out how best to auction the rights to public resources. One piece of advice she offered: Use sealed bids, which her research has demonstrated will encourage more-competitive behavior among bidders.

Earlier this decade, she helped the Canadian government design timber auctions that as of 2006 had allowed it to reap some $1.1 billion of annual revenue from timber sales. The auctions also helped the Canadians defuse a big trade dispute with the U.S., which had accused Ottawa of effectively subsidizing timber exports.

Among her fellow economists, though, Prof. Athey is possibly more appreciated for her work to deepen and make more elegant the theories and methods economists use to model and measure the real world. While doing her Ph.D. dissertation at Stanford, for example, she developed a technique that allows economists to better understand how uncertainty -- about, say, oil prices or exchange rates -- affects the behavior of investors, businesses and the entire economy. The breakthrough, coming as it did from a 24-year-old student, took many in the profession by surprise.