Hello !! I am Andrew Caplin, a Silver Professor in the NYU Department of Economics
I am originally from the U.K. and completed my BA in economics at Cambridge University in 1978. I got my Ph. D in economics in 1983 from Yale University, where I was lucky enough to be a student of Herbert Scarf, Bill Nordhaus, and Jim Tobin. This period was intellectually exciting and the breadth of my training has played a continuing role in my research career,
during which I have developed strong interdisciplinary approaches with wonderful collaborators. As a result, I have made contributions in quite a few areas of research. I am now 65 years young and have finally worked out what I want to do when I grow up. Be an economic data engineer!
Economic Data Engineering
My research for the past twenty years has focused on symbiotic advances in measurement and modeling, which I refer to as economic data engineering. Life-cycle data engineering involves research teams constructing survey instruments to measure expectations and contingent behaviors in all life phases. Information-theoretic data engineering designs enriched choice data to measure what decision-makers like, what they know, and why they don’t know more.
Attention and Information Theoretic Data Engineering
Information-theoretic data engineering measures and models what decision-makers like, what they know, and why they don’t know more. It, therefore, hews a middle path between structural applied microeconomics, which treats information as perfect, and reduced form applied microeconomics, which focuses on behavioral biases. The key results are surprising in their simplicity and breadth of application. For example, Daniel Martin and I are applying them to more effectively value algorithms.
Lifecycle/Economic Behavior & Survey Methodology
The life-cycle model organizes understanding of all major decisions, financial and otherwise, across life phases. It is central to my work as an economic data engineer. Particularly exciting is work developing the Copenhagen Life Panel with Soren-Leth Petersen and our co-investigators, including Victoria Gregory, Eungik Lee, and Johan Saeverud. We have developed new survey instruments to study beliefs about life-cycle income and how they evolve over time in relation to history, memory, and experience.
Sloan-Nomis Program on Cognitive Foundation
This very exciting program is unifying economic and psychological models of choice Ernst Fehr, Mike Woodford, and I initiated this with the support of the forward-looking funders: the NOMIS Foundation under Markus Reinhard and the Sloan Foundation under Danny Goroff.
Residential Real Estate
Real estate finance remains extremely primitive. Many years of frustration trying to improve policy have led only to my losing faith in politicians. I now participate in private-sector efforts to upgrade these markets.
Anticipatory Utility
John Leahy and I wrote “Psychological Expected Utility Theory” to allow for such forces such as fear and suspense, that are psychological in nature. One striking application of anticipatory utility is in the paper “The Social Discount Rate” which introduced the idea of retrospective time inconsistency: regret at past self for running down current wealth. But many still view it as against the rules to model psychological forces per se, since their operational definition is unclear. It struck me with a force that the same argument would in principle rule out modeling utility, beliefs, and out-of-equilibrium strategies. Reflecting on this motivated me to become an economic data engineer.
Aggregation, State Dependence, and Dynamics
Much individual behavior is characterized by long periods of inertia interrupted by occasional large-scale revisions in behavior. My early work on state dependence and aggregation explores the implications for macroeconomic dynamics. The key insight is that inertia can hide important information and its belated release can trigger market crashes. John Leahy and I modeled these forces a full 30 years ago. Economic data engineering is needed to construct a data set rich enough to operationalize and further develop this interplay of forces.
Other Research Papers
Early in my research career I conducted research in a number of other areas of economics. My theoretical work in political economy and imperfect competition with Barry Nalebuff contains leads to future applied work. Some of the results (e.g. on 64% majority rule and on competition among institutions) were surprising to us and may be to you also.