Spring 2001
Economist's economist takes prize
Photo courtesy of University of California, Berkeley
As a graduate student at the U in the early 1960s, Daniel McFadden completed a special interdisciplinary doctoral program that required a sophisticated understanding of disciplines across the social sciences.
The program was so demanding that McFadden was one of only two students in the history of the economics department ever to finish it.
So it came as no surprise to his old mentors at the U when McFadden (B.S. physics '57, Ph.D. economics '62) was named the 2000 cowinner of the Nobel Prize for Economics, sharing the prize with University of Chicago economist James J. Heckman.
The two were honored for their individual contributions to microeconometrics, the branch of economics that weds economic theory to statistics. Theories and methods each has developed are used widely to analyze and predict the economic behavior of individuals, households, and firms.
Designing engineer
Currently the E. Morris Cox Professor of Economics at the University of California at Berkeley, McFadden describes himself as "a real Minnesota product" who is "basically an engineer who designs things. I'm intrigued by puzzles and I'm a problem solver. In economics, I design statistical tools that [get] used quite a lot."
One of McFadden's most significant accomplishments lies in an area of microeconomics called discrete choice analysis. Using a technique called "conditional logit analysis," he introduced a method of excluding random data that could otherwise invalidate the results of research into what he calls the "big life choices."
McFadden's statistical tools can be applied to great many different economic problems. In that sense, McFadden is "an economist's economist"; his modeling techniques have been widely adopted by others in the field. And using his own methods, he has studied issues as diverse as residential energy demand, the construction of the [San Francisco] Bay Area Rapid Transit system, and housing choices among the elderly.
A scientist by training, McFadden has nonetheless always taken an interest in social issues. In 1953, as a high school junior in his North Carolina birthplace, he was suspended from school for organizing a petition drive on what he calls "a civil rights issue," the right of students to go off campus during school hours.
Southern school districts of that era were in no mood to tolerate student activism, and the young McFadden quickly found himself heading north--without a diploma--to an uncle's dairy farm in Buffalo, Minn. Soon after, at age 16, he passed an entrance exam that allowed him to enroll at the U.
As an undergraduate at the U, McFadden channeled his broad interests into interdisciplinary work, studying psychology in the College of Liberal Arts (CLA) while completing a physics major in IT. One of his part-time jobs was to program the card-sorters for the Minnesota Multiphasic Personality Inventory (MMPI), a standardized test developed by University psychologists in the 1940s.
Working with the MMPI piqued McFadden's curiosity about the statistical measurement of human choices and aspirations. "I got interested in how you could hope to measure people's personalities," he says. The multidisciplinary doctoral program was a natural next step.
McFadden's graduate adviser, Regents Professor Emeritus of Economics Leonid Hurwicz remembers, "McFadden had tremendous self-discipline, ability, and originality. He also took advantage of the very good training you could get at Minnesota... both in [economics] and in statistics."
John Chipman, Regents Professor of Economics, easily remembers his young research assistant as a student of "immense integrity, as well as brilliance. He was an all-around fine person and very obviously the star that year among all the graduate students."
Chipman and Hurwicz were among the economists and social scientists at the U who, says McFadden, "made me what I am."
McFadden's continuing fascination with people and their choices underlies many of his professional accomplishments. The Royal Swedish Academy of Sciences noted that a recurring theme in McFadden's research is "his ability to combine economic theory, statistical methods, and empirical applications, where his ultimate goal has often been a desire to resolve social problems."
Passionately committed to the work that has made him a star, McFadden remains engagingly unchanged in many ways from the unassuming, hard-working young man that his former professors remember. Asked about winning a Nobel Prize, he says, simply, "The best thing was it allowed me to get in contact with students that I'd lost touch with--not to mention a whole bunch of North Carolina cousins that I hadn't seen in years."