In the economic community, José Scheinkman’s wide-ranging research is highly regarded and well known. His work has tackled a diverse range of questions including the spatial distribution of crime within cities, to why cities grow to the dynamics of speculative financial bubbles. With a voracious appetite for current events and social phenomenon, Scheinkman is a Renaissance Man in the economics world roving from one curious question to the next.
Growing up in his native Brazil, Scheinkman knew from an early age that he wanted to pursue economics. Inspired by a book he read in high school about the economic history of Brazil he was drawn to study economics as an undergraduate. Intrigued by the strong connection between math and economics Scheinkman realized he could combine the two disciplines and from there he knew he had found his career path.
“I was interested in social science questions. Why are some countries poor? Why are some countries rich? Why are some cities prosperous and others are not? I start with a question. What is the question I want to answer?” Scheinkman says. A key thread throughout his work is the use of mathematics to apply a rigorous approach to analyzing social problems.
He is acknowledged as a pioneer in bringing sophisticated mathematical tools into the field of economics. “Mathematics is a great tool for abstraction. A lot of what research is about is finding the important forces that are playing in this phenomenon,” Scheinkman says.
“Jose is unique in combining theory and modeling with a great sense of data. His work is at once very applied and yet very mathematically elegant,” says Harrison Hong, professor of economics and finance at Princeton University.
After earning an undergraduate degree in economics and a masters in mathematics in Brazil, Scheinkman moved to the United Statesw and earned a Ph. D in economics at the University of Rochester. He spent 25 years at the University of Chicago starting out as a post-doctoral fellow in political economy and ultimately serving as the chairman of department of economics from 1995-1998. He was a visiting professor at the University of Paris-Dauphine from 1985-1994. In the late 1980’s he had a stint on Wall Street as vice president at Goldman Sachs & Co. While there he developed the Litterman-Scheinkman bond pricing model that is used widely across Wall Street today. Now, he serves as professor of economics at both Columbia University and Princeton University.
Scheinkman points to current events as one of his inspirations, and he reads three newspapers a day—the New York Times, a Brazilian paper and a French paper. “I have many varied interests and like to think of economics questions from scratch,” he says.
“Jose is very much an economists’ economist. He has an eye for compelling economic mechanisms that explain important social and economic phenomena, says Patrick Bolton, professor of finance and economics at Columbia University. “He always comes at a problem from first economic principles with a fresh eye. I have never had a meeting with Jose when he did not say something new and surprising,”
The Spatial Distribution Of Crime
One of the many questions Scheinkman has focused on is the variance of crime rates across cities. In research with Edward Glaeser and Bruce Sacerdote, they found a high correlation between social interactions and petty crime. “Lots of things that people do in life has to do with ‘fitting,’ how they fit in with society,” Scheinkman explains.
In this research he examined people’s attitudes towards crimes and how it was influenced if their friends or neighbors are also committing crimes. “If there is lots of crime and everyone is committing crime, you find it more reasonable to commit a crime,” Scheinkman says.
Why Cities Grow
Other research has focused on how and why cities grow, again with a highlight on the role of interactions. “Everybody’s trying to create the new Silicon Valley,” Scheinkman says. But, in his research he found that unrelated business activities tend to spiral off one another to help propel a city’s growth. “Interactions of unrelated economic activities learn from each other. What really makes a city work well is diversity. There is a lot of learning that stems from unrelated sectors where people find new applications for things,” Scheinkman says.
Nature of Bubbles
Speculative bubbles have emerged throughout financial history from the South Seas bubble to the dot com bubble to the U.S. real estate housing bubble. In his research on this subject, Scheinkman has sought to uncover factors which lend to the creation and subsequent popping of these bubbles. The first characteristic that Scheinkman found is that “in every bubble you see a tremendous increase in trading volume.” The next critical factor is that “bubbles arise at a time when there is an innovation, technical or financial,” he says.
Typically bubbles don’t implode because people realize it is a bubble and that prices are too high. Instead there is the temptation to jump on board and to create whatever is being sold at high prices, he says. Scheinkman points to the dot com bubble as an example: “Companies were changing their names just to look like an internet company. Their price went up just because they added .com to their name,”he says.
In addition to his widely varied research, Scheinkman is a highly decorated economist. He was elected as a member of the National Academy of Sciences in 2008, and then a corresponding member of the Brazilian Academy of Sciences in 2012. The University of Paris-Dauphine conferred an honorary doctorate to him in 2001. For his innovative work building mathematical models that shed light on a variety of economic and social phenolmena, Scheinkman was awarded the 2014 CME Group —MSRI Prize in Innovative Quantitative Applications.
Beyond his intellectual curiosity and achievements, his students and colleagues describe a man committed to helping others grow academically in addition to expanding the field of economics.
“His work is fundamental and will be read for generations to come,” says Bolton.“He is such an outstanding scholar, with so many talents, that he inspires awe in others who have had the good fortune to meet and work with him. Yet he is always ready to listen to others’ ideas and very generous with his students, colleagues and co-authors.”