Returning to Israel: Academic Appointment
Minnesota was my first academic job. As I mentioned before, University of Chicago did not
offer any rigorous course sequence in general equilibrium theory. In Minnesota I took advantage
the courses in general equilibrium theory that Hugo Sonnenschein (who at the time worked on
the Walrasian Theorem that market demand functions are essentially shapeless) and Leo Hurwicz (who at the time developed single- handedly the new field of mechanism design), Interestingly, University of Chicago did not however had a meaningful course sequence in general equilibrium theory; taught in such a masterful way. Minnesota in those days had a remarkable faculty. The mature department leaders were Leo Hurwicz and John Chipman. With Anne Krueger (the Deputy Managing Director of the IMF in the years 2001- 2006) I have maintained a life long friendship.
There, in Minnesota, I was also greatly influenced by Tom Sargent and Neil Wallace, who, along with Bob
Lucas, developed the most exciting field in macroeconomics at the time, rational- expectations macroeconomics. Greg Mankiw describes the transformation of the field of macroeconomics like this: “At
the time the three new classical waves were first hitting shore in the 1970s and 1980s, one of their goals
was to undermine the old Keynesian macroeconometric models both as a matter of science and as a matter
of engineering. The field has evolved through the efforts of two types of macroeconomist— those who
understand the field as a type of engineering and those who would like it to be more of a science. Engineers
are, first and foremost, problem- solvers. By contrast, the goal of scientists is to understand how the world
works.” In Minnesota, Chris Sims then introduced elements of the new dynamic macro- econometrics into the
graduate curriculum. Students were extraordinary: Andreu Mas Collel, Rob Townsend, Lars Hansen, John
Roberts, Rich Kihlstrom, Salih Neftci, Matt Canzoneri, and more. With Andreu (now the academic director of Europe Research Council), who was a second year graduate student at the time he took my course on growth economics, I wrote a paper on the dynamics of growth in the presence of investment costs of adjustment. I continued to have a position in Minnesota for a few years, jointly with becoming a lecturer at the then young Department of Economics at Tel Aviv University in 1970. To these days, I still feel nostalgic about the intellectual environment in Minnesota in those days. Why did I decide to move to Tel Aviv at this early stage of my academic career? Israel was the place that my parents immigrated to at a young age, to start something new, the Kibbutz. I grew up in the Kibbutz, a border settlement in which I sharpened my commitment to contribute directly to the country. It was therefore a relatively simple decision to return to Israel as a young economist. I have never regreted this decision.
In Tel Aviv in 1973 our daughter, Einat, was born. She now has a stable job in one of the banks in Israel.
We are happy about the way she matures to be an independent person who aspires to make Progress in her career.
In Tel Aviv University when I started, there was an aura of something very new. We were assembled as young economists all of whom educated in the US graduate schools. I had terrific interactions with Elisha Pazner (died at the age of 35 after a very illustrious career) and Eitan Berglas, who founded the Department of Economics at Tel Aviv University and was one of the best academic economists that contributed to public service in Israel (He died at the age of 63). Later with a new crop of brilliant economists joining the Department I maintained an almost life long collaboration with my best friends Elhanan Halpman and Efraim Sadka. My vitae reflect well on the extent of these remarkable scientific collaborations. About 9 years after I started my academic career I was invited by the finance minister, Simcha Ehrlich to serve as the Chief Economic Adviser to the Government of Israel and the Director of the Economic Planning Authority (Israel’s equivalent to the US Council of Economic Advisers), located in the Ministry of Finance. At that time, about year and half after the “maapach” whereby a Likud right-wing party unseated the Labor party that ran the government for 29 years, since the establishment of the state; and also for decades in the pre- state period. I was an activist in the “peace now”
movement at the time, but the top echelon of the ministry of finance was still professional civil servants that were inherited for the old regime. Simcha Ehrlich was liberal in his political views and market oriented. He asked me to join the ministry staff, even though he was fully aware of my political views. However, he was completely inexperienced in his job and the government of Menachem Begin was extremely populistic in its economic policy orientation. High inflation erupted within a few months after I took up the position of an economic adviser. I was in opposition to the policy mixture that the government adopted. Fortunately, for my integrity as an economist I left the position within 6 month. The inflation picked up to triple digit rates and
stayed at the high plateau for a few years, until the radical stabilization policy the Shimon Peres, as a prime minister, implemented in 1985. This as close as I got to politics to realize that my comparative advantage is in the academia.
A (Short) Stint in the Israeli Government
In 1977 the likud party beat the labor party and Menachem Begin formed a Likud led government. The Labor party was ousted from power as a result of the 1973 military debacle, rampant party corruption, and a sense of alienation of Jewish immigrants from North Africa. If I were more knowledgeable, I should have expected this turn of events. But I did not. I heard about Begin rise to power after decades in the opposition, on the car while I was driving in lake-shore drive along Michigan Lake, from Northwestern University, where I was a visiting professor, for a presentation in a seminar at the University of Chicago. I was literally shocked, and almost caused a traffic accident. The shock effect is understandable given my left wing background. But then things brightened, Menachem Begin the prime minister embarked on a peace initiative with Egypt. In January 1979 I was invited by Simcha Ehrlich, the finance minister to serve as the chief economic adviser (something like the chairman of the Council of Economic Advisers in the US). I thought hard whether to accept the offer. I was in political opposition to the newly minted, first Likud led government in the history of Israel, after 29 years of Labor party political domination. The 18th government of Israel, from June 20, 1977 to August 5, 1981 consist of: Menahem Begin, Prime Minister; Meir Amit, Minister of Transport and communications; Aharon Abuhazeira, Minister of Religious Affairs; Zevulun Hammer, Minister of Education and Culture; Yigael Hurwitz, Minister of Trade and Industry; Ezer Weizman, Minister of Defense; Simcha Ehrlich, Minister of Finance; Gideon Patt, Minister of Construction and Housing; Eliezer Shustak, Minister of Health; Israel Katz, Minister of Labor and Welfare; Ariel Sharon, Minister of Agriculture; Shmuel Tamir, Minister of Justice; Moshe Dayan, Foreign Minister; Arieh Naor, Cabinet Secretary.
Ariel (arik) Sharon joined the Begin government as agricultural minister and set about constructing Israeli settlements in the West Bank to prevent Israel from relinquishing the territory.had then his first cabinet office. I saw him in cabinet meeting and I formed an impression about him that turned out decades later completely wrong. He did not yet feel comfortable apparently, to speak on non-military matters. I saw him participating in cabinet discussions by reading comments that his aids wrote to him. He impressed me as one with little intellectual abilities, driven by a single mission: settling Jews in the West Bank. His comments on economic policy were at best mediocre. The fact that he read them made him looks ad lib challenged.
Then ofcourse his public image was that he is bully and do whatever it takes to gain power. Decades later, when he became the prime minister I had several occasions to be asked to come to his office to discuss economic policies. Personally I found him charming, full of humor, and most importantly very attentive. He took notes while the discussion was on and at the end asked penetrating questions. Also politically he became accepted. He was responsible to shift the right wing coalition into compromising positions, including, importantly, the unilateral withdrawal from Gaza.
I learned a lesson. Never form opinion on politicians based on superficial encounters and press images. It could be true that if Sharon were a Prime Minister, with its tremendous responsibilities, he would have never escaped the bad guy image. But in his late life he had the responsibility. He brought into the job also his intellectual brilliance and political courage. He has been vindicated.
Menachem Begin surprised everybody by initiating peace talks with Egypt. This made him “kosher” in my view. The top civil service at the government, inherited from previous governments, was at that time extremely competent. The top two persons in the Finance Ministry, Amiram Sivan, the Director General, and Eitan Berglas, The Director of the Budget, who was a colleague and friend, were regarded as the most qualified persons. It looked to me a good opportunity to shape up economic policies. I accepted the offer with great enthusiasm. Indeed, as soon as I started I found easy access to policy makers, and I was frequently invited to cabinet meetings. I regard as my chief achievement in this short position the fact that I was able to get a cabinet decision which ended decades of a practice whereby government loans where given to the private sector development projects un- indexed , notwithstanding the permanent inflation that was taking place. There were two huge problems with this practice: (1) new investments in development projects were subsidized on a random basis; according to how the inflation turns out to be; and (2) the current huge stock of private sector accumulated private sector debt to the government was shrinking. This meant a big government fiscal deficit and a huge gift to business. (I remember that I designed the new policy with the aid of a then young economist at the treasury, Aharon Fogel, who nowadays is the chairman of the boards of Migdal Insurance Company and Ness Technologies; very successful enterprises). I regard the policy as the pinnacle of my short stint in Begin government. Especially significant development-loans is the achievement, in my mind; because Begin as the prime minister had been a Latin- American style populistic leader on almost every economics matters!. And here I am, almost single- handedly, able to lead Begin and his Cabinet, to change course; against a very strong business lobby. (You cannot take from Begin, of course, what Annuar Sadat and Him were able to achieve on a more important front: the historic peace treaty between Israel and Egypt). But as a month or two elapsed I realized that a big problem started to emerge: a quick entry to hyperinflation stage, unless some budget and monetary policies are enacted quickly. Menachem Begin was not interested in economics at all. He was not the one to lead a radical anti inflation policy package. Indeed, Simcha Ehrlich, the finance minister, even did not try to push for any such package. I left the government position after I went public with my warnings. The rest, the big hyper inflation that lasted until 1985, is, as they say, a history. The experience did solidify my determination to stay out of politics, for ever. Upton SincIair pointed out that it's hard to get a man to understand something when his salary depends on his not understanding it. It's likewise hard to get a politician to understand something if his image among his constituency depends on not understanding it. Indeed, I found out during this intensive but short experience in public life that my own integrity is at danger if I stay in public office. I knew that such integrity is to be kept if I return to academia. And I enjoyed life in the academia so much more. I have never regretted the way I conducted myself in this short episode.
Based on my experience in policy-making I continued to provide public commentaries (in newspapers, radio and television) on Israel economic affairs for at least three decades after my return to academia. I did fill a void, because at the time, there were very few independent voices who can criticize the government policies from a non political vantage point. Especially vocal I was during the high inflation episode (see the book I edited, Calcelanim al Calcala).
Following this experience, I occupied temporarily some academic administration positions. I was the Dean of the faculty of social sciences in the early 1990s and the deputy provost of Tel Aviv university in the early 1990s. You could speculate that in these positions I suffered from my lack of interest in marketing myself to the
academic “constituency” and doing the necessary quid pro quo deals with deans, provost and president;
although I had some management skills and a clear reform agenda. Over all, though, I was never in my
element in these positions. I am happy that I did not get absorbed into the world of some power, but very
little intellectual challenge.
I thought a lot what amounts to a success in my own life. As John Kay remarked, “The survivor in any
Bureaucracy, private or public, is not the person who gets things right – rarely a popular figure – but the one who attaches himself to success and distances himself from failure. In the clumsy hands of Gordon Brown, UK prime minister, this behaviour is so transparent as to be almost comical. But Alan Greenspan, former chairman of the US Federal Reserve, deserved the label “maestro” for the skill with which he deployed this strategy for two decades. Like Napoleon, “he did nothing harmful to the progress of the battle, he inclined to the most reasonable opinions, he made no confusion, did not contradict himself, did not get frightened or run away from the field of battle, but with his great tact and military experience carried out his role of appearing to command, calmly and with dignity”. But, just as Napoleon’s run of victories ended at Borodino, Mr Greenspan’s ran out in the credit crunch.”
In academia, however you can better trace out the individual achievements. I am glad that I was inspired to persist in my academic career, in many of the twists and turns that happened to me.
Tragedy, Memories, and Memorials
Throughout life we inevitably suffer losses. That is true for most of us. Many can gently let go of what they have lost and develop new passions to replace their losses. But it is never easy. Personal tragedy struck again, and it turned over the years to be devastating. My oldest son, Ofer, was diagnosed with (progressive) multiple sclerosis (MS) at the young age of 21. Even now, the medical establishment does not know how people contract MS. Ofer Razin, was born on January 27, 1966 in kibbutz Shamir in Israel, the place where I was born too. At the age of six months we took him with us to Chicago, where I started my doctorate studies. When we returned to Israel he attended pre and primary schools, and later the Alliance high School at Ramat Aviv, a suburb of Tel Aviv. After graduation from high school he started his army service where he became an intelligence officer and served almost 4 years. We, his parents, could very well have had an early warning signal about his problem in the Summer of 1984, but the doctors missed it completely. In the summer of 1986 I participated in the NBER Summer Workshops in Cambridge. We spent a happy summer there. But in the middle of it Ofair (he insisted on this spelling of his name in order to have a better pronunciation of the Hebrew name in English) felt sick and he lost his eye sight; it turned out to be a temporary loss. The source of his problem was not diagnosed at this time as Multiple Sclerosis (MS), an autoimmune disorder that that affects the central nervous system.. No one suggested using MRI tests, which are now daily routine procedures used in such cases. The actual diagnosis had to wait until Ofer’s last year as a junior officer in the Israeli army. Piece by piece he lost control of his body; but Ofer still took the deterioration of his motoric functions in his stride. He was always smiling and interested in the person he talked to; hiding the inside concerns he had about his future life. In the next year when he graduated from high school and was drafted to the army, as every young person in Israel at this age is supposed to do, Ofair’s enlistment to the army had been postponed because of the Cambridge episode. But he decided to volunteer and made a smooth transition to a career as an intelligence officer. Although already handicapped, he had to undergo an intensive officer- training course. He did it because he wanted to make the army service a
meaningful service. But in the fourth year of service (as required for officers) the eye infection episode came back. At that point, the MRI diagnosis of multiple sclerosis had been made with certainty. It turned out later to be one of the most debilitating forms of the MS disease.
With the MS diagnosis already confirmed, Ofer courageously started a real-life marathon race against time to
complete his college education and built a career. His physical condition was progressively deteriorating: first he had to use a stick, then a walker. I still remember our experience in the first Persian Gulf War.
The First Persian Gulf War, Jan.– Feb., 1991, was an armed conflict between Iraq and a coalition of 32 nations including the United States, Britain, Egypt, France, and Saudi Arabia. It was a result of Iraq's invasion of Kuwait on Aug. 2, 1990; Iraq then annexed Kuwait, which it had long claimed. Iraqi president Saddam Hussein declared that the invasion was a response to overproduction of oil in Kuwait, which had cost Iraq an estimated $14 billion a year when oil prices fell.
Saddam Hussein fired Scuds missiles at Israel every night continuously for 6 weeks, and Tel Aviv
was targeted for obvious strategic reasons. Everybody in the A- zone of the country (Tel Aviv being one of them) braced every afternoon for the Scuds to hit the targets in the evening, when dark sets in on Iraq and the launching sites can be discovered by the anti- Saddam coalition forces. During the period of terror Ofair stayed first on the second floor of our house (address: 16 Pilichovsky Street, Ramat Aviv, Tel Aviv; near Tel Aviv University, my workplace). He had to rush two floors down the first few nights to the bio- chemically secured shelter in the basement. After a few nights he moved himself to the basement to save the nightly trips down and up to and from the sheltered basement.
I tend to cite the words of Bob Dylan's Blowin’ in the Wind, paraphrased a bit:
How many roads must a man walk down before you call him a man?
Ofer walks down one treacherous road to become a man.
Alas, the answer my friend is blowing in the winds.
Ofer attended college at Tel Aviv University, double- majoring in Economics and Psychology. After graduating, he entered the Ph. D. Program in Economics at Georgetown University. He and I moved together to Washington DC, where he was supposed to begin graduate studies in economics at Georgetown University, in the Summer of 1991. Ronny, my second son, who is very technically skilled helped to equip the Toyota car that we bought second hand with devices so that Ofair would be able to get the wheel chair into the trunk, and then walk to the driver seat. In a matter of months he lost the ability to walk. With all the things you have to pay for
in University, paying for health insurance is typically small potatoes. But what's last on the list for healthy students. Pre- existing conditions are not covered. We knowingly spent a lot of money outside the realm of the insurance coverage, on all sort of treatments and experimentation. A shocking episode came once after Ofer participated in an HIH medical trial on a new drug. Ofer had to stop taking all other drugs during the trial,
where he could have been only in a placebo group of the patients; and therefore risked a further deterioration in his condition which was very grave. After the end of the trial period the NIH doctor in charge of the trial told the two of us that because commercial companies are going to continue the trial for a few more years, and they would like to demonstrate success of the treatment the hard stricken patients could no longer continue with the treatment. Ofair was among those who were thrown out. The Doctor brought the news as a matter of fact. We left the NIH campus in Bethesda, Maryland, in great despair!
My former student from Minnesota, Matt Canzonneri, then the department chairperson, was extremely helpful in easing the transition period for Ofair once the school year started. Ofer then faced two challenges; the increased level of incapacitation and a rigorous course of study. During the final stage of the doctoral program, Ofair worked mostly at home under the guidance of his dissertation advisor, Professor Susan Collins. In the summers while at Georgetown, Ofer had the opportunity to work in the research department of the World Bank. He gained good experience of dealing with data, which was useful for writing his dissertation. The dissertation was completed a few weeks before his death on December 16, 1996.
Ofer, all alone by himself, made the fatal decision to end his life. He had fulfilled all commitments he took while still in control of his body. Rather than falling into the imminent stage of complete paralysis, while still in control of himself he decided that he should go. On the very last day he sent an e- mail to Ronny who was at Princeton as a graduate student of economics, and Ronny immediately called us in Tel Aviv. I still remember the telephone very well. An hour later I was already on a TWA flight to New York, and then through a connecting flight to Washington DC. In Ofer's apartment I met Ronny and Dafna, who already arrived a few
hours before me. Letters to the family members (including one to my mother, the only surviving grandparent), bills to be paid, and checks, were lying on his desk ready to be delivered. A complete Ph. D. dissertation manuscript was ready to be sent to Georgetown University. The funeral (at which I asked that the second movement from Beethoven’s from Eroica— the “funeral March”-- will be played out loud during the funeral) took place in Kibbutz Einat (for a secular burial), and the Jewish tradition of the seven days sitting after the dead (the shivah) took place at our home at Tel Aviv. The shivah was an opportunity for us to see a few hundred of our friends, from different stages of our life, who all came to our home during the week.
On his grave I cited the Hebrew song (lyrics, Avi(noam) Koren, Music- Shmuel Imbermann, Singer- Shlomo Artzi) :
Et hageshem ten rak be'ito,
ube'aviv pazer lanu prachim,
Veten lannu lihyot shenit ito,
yoter mize anachnu lo tzrichim.
(translation: Give us the rain when the time is due,
scatter flowers for us in the spring,
And, let us see him once again,
we really do not wish for more than that.)
The official Ph. D. degree was awarded to Ofer by Georgetown University posthumously. The main chapter of his dissertation was prepared by Professor Collins for publication after his death.
It now appears as Chapter 3: "Real Exchange Rate Misalignments and Growth," by Ofair Razin (Ofer thought that Ofair can be pronounced better by non Hebrew speaking people) and Susan Collins, in The Economics of Globalization: Policy Perspectives From Public Economics (Assaf Razin and Efraim Sadka, eds., Cambridge University Press, April 1999). The book, the Razin Prize in Georgetown University, and The Ofair Auditorium in the Eitan Berglas School of Economics’ building at Tel Aviv University, are all dedicated to my son’s memory. Past Speakers over the last 9 years in the Razin Prize event at Georgetown University are
leaders in our fields: Jacob Frenkel, Kaushik Basu, Ken Rogoff, Paul Krugman, Jeff Sachs, Michael Mussa, Elhanan Helpman, Stan Fischer, and Dani Rodrik (I gave the first annual lecture.) Our friend Bob Flood has been at every one of the events. He knew Ofair well; he is one of my heroes for the way he has conducted himself in pursuing a brilliant research career, notwithstanding the daily struggle with MS. I feel that this is a tiny bit of what I owe Ofer for his courage and for what I learned from him throughout his short life, as to how one can conduct oneself himself with dignity under a non stop stream of adversities, and still be such a harming person to talk to. How many years can a mountain exist before it's washed to the sea? The answer, my friend, is that 30 year of lifetime is blowing in the wind; just like that (paraphrasing Bob Dylan again).
Ten years after Ofair’s death I remembered him in memorials by singing quietly a paraphrased version of Bernie Taupin’s lyrics of the famous Elton John’s song, Daniel.
Ofer is traveling tonight on a plane, all alone
I can see the red tail lights heading for Zion
Oh and I can see Ofer waving goodbye
God it looks like Ofer, must be the clouds in my eyes
They say that Zion is nice, though I've never been
Well, Ofer says that it's the best place that he's ever seen
He should know, he's been there enough
Oh, I truly miss Ofer, I miss him so much
Ofer is traveling tonight on the plane, all alone
I can see the red tail lights heading to Zion
I can see Ofer waving goodbye
God it looks like Ofer, must be the clouds in my eyes
Oh God, it looks like Ofer, must be the clouds in my eyes.
At the time when Ofer’s illness became more and more acute I shifted my place of work more
and more from Tel Aviv University to America : first, one stint at Yale University and several
stints at the University Chicago; second, a year long visit at the IMF in Washington DC( to be
even closer to Ofair). I had to quit my position as deputy provost at Tel Aviv University, which
originally was supposed to put me on a track to top university administration positions), in order
to stay with Ofer in the US. Ironically, the shift of emphasis in my career, back to full- fledged
academic activities, has been an extraordinarily good move. I must admit that I much more enjoy
academic research life over academic administration! My academic activities led to a level of professional
recognition and great intellectual fun, that the son of two Kibbutz pioneers never dreamed would have
“FIRST SEMESTER” OF LIFE