May 2005

Bush Names Economist Lazear to Tax Panel

President George W. Bush has appointed Edward Lazear, an economist at the Business School and the Hoover Institution, to the President’s Advisory Panel on Federal Tax Reform. The bipartisan panel will advise the Secretary of the Treasury on how to simplify the U.S. tax code, make it fairer, encourage economic growth and job creation, and strengthen U.S. global competitiveness.

“The tax system is unbearably complicated and needs a fresh look,” said School Dean Robert Joss. “Ed Lazear will bring a depth of knowledge and insight to the problem.” Lazear is the Jack Steele Parker Professor of Human Resources Management and Economics at the Business School. He is an expert on worker productivity and was the founding editor of the Journal of Labor Economics.

He has written extensively on labor markets, pensions and retirement, microeconomic theory, worker compensation, education, and immigration. His scholarly work includes studies on employee incentives, age-earnings profiles, profit-sharing, and career prospects. He also has written about government policies on distribution of income within the household, discrimination, affirmative action, and comparable worth.

Other members of the new panel include its chairman, Connie Mack III, a former U.S. senator and a senior advisor at Shaw Pittman LLP.

Stefan Nagel, assistant professor of finance, was honored recently as the coauthor of the best paper to appear in the Journal of Finance in 2004. The $10,000 Smith Breeden Prize is given annually to authors of a paper chosen by the associate editors of the journal, a publication of the American Finance Association. Nagel shared the honor with Markus Brunnermeier of Princeton.

Their October 2004 article, “Hedge Funds and the Technology Bubble,” questioned the efficient markets notion that rational speculators always stabilize prices. They documented that hedge funds did not exert a correcting force on stock prices during the technology bubble. The work was also summarized in the February 2005 issue of Stanford Business under the title “Irrationality Can Pay Dividends.”

Two Business School faculty who developed a sophisticated online program for simulating factory operations have been honored with the Wickham Skinner Teaching Innovation Award, presented by the Production, Operations, and Management Society, an international organization to promote teaching in the field. The award cited Littlefield Technologies, the name of the teaching tool now used at more than 40 colleges and universities, for demonstrating “real pedagogical innovation” and improving student learning over time, and for being transferable. “This is the most innovative technological application I expect to encounter in my career,” wrote one professor in supporting the award. Another noted that it “fills a large gap” in available teaching material in the field.

The simulation, first used in the Business School’s core course in operations in 1997, is the brainchild of Sunil Kumar, associate professor of operations, information, and technology, and Sam Wood, a School lecturer and former faculty member who today is president of Responsive Learning Technologies, the firm created to market the program.

Kumar and Wood have found that although students can view more than a dozen different performance measures for their team, over and over they click the button that tells them their overall standing in the game. “It is clearly addicting,” says Kumar, who finds that at least in his classes “the amount of time they put into it is disproportionate to the weight of the game’s outcome on their grade.” The program is a standard component of the Business School’s core course in operations.

The winners, say the creators, are usually not the teams that tap into the game most frequently and stay up all night checking for orders. The best scorers are usually the best planners—students who have carefully completed the strategically designed class assignments that go along with the factory game.

The Business School’s Center for Social Innovation recently hosted a daylong conference of environmentalists hailing from a variety of disciplines in academia, industry, government, and the nonprofit world. Professors and members of the U.S. Business Council for Sustainable Development examined some persistent environmental challenges like the need to increase recycling of plastics and lower greenhouse gas emissions. They debated what is needed most: stricter laws, better technology, cooperation from business—or just a change in attitudes among all the world’s citizens.

“My students and I have lofty, idealistic notions about the environment,” explained Erica Plambeck, an associate professor of operations, information, and technology at the Business School, and one of the conference organizers. “We have learned that pragmatic business management will ultimately lead to innovation and efficiency to move us to sustainable development.”

In recent years a growing number of universities have formed alliances with business and they have set the bar high on their goals. Last spring, the Stanford Institute for the Environment was created to take an interdisciplinary approach to develop creative solutions to some of the most serious environmental problems like dwindling energy supplies and species extinction.

When chief executives become celebrities, they lead companies that return less to shareholders than those of CEOs who are less well known, according to research presented at the American Economic Association’s annual meeting in January by Ulrike Malmendier, assistant professor of finance, and Geoffrey Tate of the Wharton faculty. Many CEOs who grace the covers of magazines are paid more and spend more time on outside activities such as writing books than those who don’t become so well known. An earlier version of the research was reported in the February 2003 issue of Stanford Business. In talking to Forbes magazine, the researchers were reportedly nervous. “Perhaps they were afraid of becoming celebrity economists,” the magazine said.

Alumni to Know

Faculty

Newsmakers

The Economist’s reviewer’s choice for best business book of 2004 went to The Modern Firm, by Business School economist John Roberts. (A chapter on reorganization from the book was featured in the February issue of Stanford Business.) The reviewer said Roberts lays out frameworks about complex and varied corporate structures in lucid, jargon-free language. Meanwhile, Professor Emeritus Harold Leavitt has published a new book, Top Down, in which he explains why he believes hierarchies are here to stay.

Two faculty presented lectures based on their research at the School’s first-ever Executive Forums in India, held in January in New Delhi, Bangalore, and Mumbai. V. “Seenu” Srinivasan, the Adams Distinguished Professor of Management and director of the Strategic Marketing Management Executive Program, focused on “Brand Equity: Measuring, Analyzing, and Predicting.”

Robert Burgelman, the Edmund W. Littlefield Professor of Management and director of the Stanford Executive Program, lectured on “Strategy Is Destiny: A Perspective on Strategic Leadership.”

Srinivasan is an internationally known specialist in marketing who has twice been honored with the John Little Award from the Marketing Science Society for the best marketing article published in its journal. Burgelman is an expert on corporate entrepreneurship, strategic business exit, and the role of strategy in firm evolution.

Sponsored by the Stanford Business School Alumni Association, executive forums have also been held in China, Singapore, Taiwan, Hong Kong, Korea, Spain, Portugal, France, Italy, Denmark, England, Germany, Switzerland, and Mexico.

David Brady received the Stanford Alumni Association’s 2004 Richard W. Lyman Award for exceptional volunteer service to the university. Brady is the Bowen H. and Janice Arthur McCoy Professor of Political Science and Leadership Values at the Business School and the Morris M. Doyle Centennial Professor in Public Policy at the School of Humanities and Sciences. He is also deputy director and a senior fellow at the Hoover Institution.

“Dave combines an extraordinary commitment to teaching with exceptional research and insightful national commentary,” Provost John Etchemendy said. “That’s in addition to the many hours he commits to the Alumni Association and the unenviable administrative tasks he has performed with great aplomb.”

An expert on the U.S. Congress, Brady received the Dinkelspiel Award for excellence in undergraduate teaching in 1992 and the Phi Beta Kappa Award for best teacher on campus the next year. He has served as an associate dean of the Business School, as acting vice provost for learning technologies, and as chair of Faculty Senate’s Committee on Undergraduate Studies. The Lyman prize includes funds for the recipient to acquire books and materials for the university libraries.