Andrei Shleifer
Encyclopedia
Andrei Shleifer is a Russian American
economist
. From its inauguration in 1992 until it was shut down in 1997, Shleifer served as project director of the Harvard Institute for International Development
s Russian aid project. In 1999, Shleifer was awarded the John Bates Clark Medal
, which was then awarded every two years to the most promising US economist under 40, for his seminal works on corporate finance (corporate governance, law and finance), the economics of financial markets (deviations from efficient markets), and the economics of transition. He is currently ranked the most influential economist in the world according to IDEAS/RePEc
, and is listed #1 in the category "Most-Cited Scientists in Economics & Business".
and emigrated to Rochester, New York
, as a teenager in 1976, where he attended an inner-city school and learned English from episodes of Charlie's Angels
. He then studied economics
, obtaining his B.A. from Harvard University
in 1982 and Ph.D.
from MIT
in 1986. As a freshman at Harvard, Shleifer took Math 55
with Brad DeLong; he has said that the course made him realize he was not destined to be a mathematician, but the experience gave him a future co-author. Shleifer also met his mentor and professor Lawrence Summers
during Shleifer’s undergraduate education at Harvard. The two went on to be “co-authors, joint grant recipients and faculty colleagues.” Summers resigned from his position as President of Harvard University in 2006 in part due to concerns that his relationship with Andrei Shleifer constituted a financial conflict of interest.
He has held a post in the Department of Economics at Harvard University
since 1991 and was, from 2001 through 2006, the Whipple V. N. Jones Professor of Economics.
, where he has contributed to the field of behavioral finance
.
In recent years, his research has focused on the legal origins theory
(also sometimes known as law and finance theory), which claims that the legal tradition a country adheres to (such as common law
or various types of civil law
) is an important determining factor for a country's development, most of all financial development.
Shleifer and his coauthors (Rafael La Porta
, Robert W. Vishny
, Simeon Djankov
and Florencio Lopez de Silanes) have written extensively on corporate governance.
In 1994 Shleifer founded with fellow academics—and behavioral finance specialists—Josef Lakonishok and Robert Vishny a Chicago-based money management firm known as LSV Asset Management. As of February 2006 it managed about $50 billion in quantitative value equity portfolios, though, according to the firm's website, Shleifer no longer had an ownership stake.
, the then vice-premier of Russia
, and was one of the engineers of Russian privatization. During that time, the Harvard Institute for International Development
of Harvard University was under a contract with the United States Agency for International Development
, which paid Harvard and its employees to advise the Russian government. In a period from 1992 to 1997, the Harvard Institute for International Development (HIID) under Shleifer received $40 million directly from the $300 million budgeted for the United States Agency for International Development. Additional sums were given in grants to public relations firm Burson-Marsteller
and Big Six accounting firms.
Shleifer was also tasked with establishing a stock market for Russia that would be a world-class capital market. That effort became mired in charges of corruption and self-dealing.
While in Russia working as the project director of the HIID, Andrei Shleifer was an adviser to the State Property Committee (Russian acronym GKI), a board member of the Russian Privatization Center, and a USAID-paid advisor to the Russian Federal Securities Commission.
Two decades after meeting Shleifer at Harvard, Lawrence Summers’ work as the undersecretary of the Treasury, the deputy secretary of the Treasury, and the secretary of Treasury put him in place to design U.S economic policies in such a way to allow and facilitate Shleifer’s work on the Harvard Project. Summers "helped Shleifer and Harvard gain noncompetitive government awards” . In 1996 complaints about the Harvard Project led Congress to launch a General Accounting Office investigation, which concluded that the Harvard Institute for International Development was given "substantial control of the U.S. assistance program.” Such an arrangement was “highly unusual”, according to Louis H. Zanardi, who led the GAO investigation.
Under the False Claims Act, the US government sued Harvard, Shleifer, Shleifer's wife Nancy Zimmerman, Shleifer's assistant Jonathan Hay, and Hay's girlfriend (now his wife) Elizabeth Hebert, because these individuals bought Russian stocks and GKO
s while they were working on the country's privatization, which potentially contravened Harvard's contract with USAID. In 2001, a federal judge dismissed all charges against Zimmerman and Hebert. In June 2004, a federal judge ruled that Harvard had violated the contract but was not liable for treble damages
, but that Shleifer and Hay might be held liable for treble damages
(up to $105 million) if found guilty by a jury.
In June 2005, Harvard and Shleifer announced that they had reached a tentative settlement with the US government. On August 3 of the same year, Harvard University, Shleifer and the Justice department reached an agreement under which the university paid $26.5 million to settle the five-year-old lawsuit. Shleifer was also responsible for paying $2 million dollars worth of damages, though he did not admit any wrong doing. A firm owned by his wife previously had paid $1.5 million in an out of court settlement.
Shleifer's conduct was reviewed by Harvard's internal ethics committee. In October 2006, at the close of that review, Shleifer released a statement making it clear that he remains on Harvard's faculty. However, according to the Boston Globe, he has been stripped of his honorary title of Whipple V. N. Jones Professor of Economics.
Russian American
Russian Americans are primarily Americans who traces their ancestry to Russia. The definition can be applied to recent Russian immigrants to the United States, as well as to settlers of 19th century Russian settlements in northwestern America which includes today's California, Alaska and...
economist
Economist
An economist is a professional in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy...
. From its inauguration in 1992 until it was shut down in 1997, Shleifer served as project director of the Harvard Institute for International Development
Harvard Institute for International Development
The Harvard Institute for International Development was a think-tank dedicated to helping nations join the global economy, operating between 1974 and 2000...
s Russian aid project. In 1999, Shleifer was awarded the John Bates Clark Medal
John Bates Clark Medal
The John Bates Clark Medal is awarded by the American Economic Association to "that American economist under the age of forty who is adjudged to have made a significant contribution to economic thought and knowledge"...
, which was then awarded every two years to the most promising US economist under 40, for his seminal works on corporate finance (corporate governance, law and finance), the economics of financial markets (deviations from efficient markets), and the economics of transition. He is currently ranked the most influential economist in the world according to IDEAS/RePEc
Řepeč
Řepeč is a village and municipality in Tábor District in the South Bohemian Region of the Czech Republic.The municipality covers an area of , and has a population of 267 ....
, and is listed #1 in the category "Most-Cited Scientists in Economics & Business".
Life
He was born in RussiaRussia
Russia or , officially known as both Russia and the Russian Federation , is a country in northern Eurasia. It is a federal semi-presidential republic, comprising 83 federal subjects...
and emigrated to Rochester, New York
Rochester, New York
Rochester is a city in Monroe County, New York, south of Lake Ontario in the United States. Known as The World's Image Centre, it was also once known as The Flour City, and more recently as The Flower City...
, as a teenager in 1976, where he attended an inner-city school and learned English from episodes of Charlie's Angels
Charlie's Angels
Charlie's Angels is a television series about three women who work for a private investigation agency, and is one of the first shows to showcase women in roles traditionally reserved for men...
. He then studied economics
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
, obtaining his B.A. from Harvard University
Harvard University
Harvard University is a private Ivy League university located in Cambridge, Massachusetts, United States, established in 1636 by the Massachusetts legislature. Harvard is the oldest institution of higher learning in the United States and the first corporation chartered in the country...
in 1982 and Ph.D.
Ph.D.
A Ph.D. is a Doctor of Philosophy, an academic degree.Ph.D. may also refer to:* Ph.D. , a 1980s British group*Piled Higher and Deeper, a web comic strip*PhD: Phantasy Degree, a Korean comic series* PhD Docbook renderer, an XML renderer...
from MIT
Massachusetts Institute of Technology
The Massachusetts Institute of Technology is a private research university located in Cambridge, Massachusetts. MIT has five schools and one college, containing a total of 32 academic departments, with a strong emphasis on scientific and technological education and research.Founded in 1861 in...
in 1986. As a freshman at Harvard, Shleifer took Math 55
Math 55
Math 55 is a two-semester long first-year undergraduate mathematics course at Harvard University. The official titles of the course is Honors Abstract Algebra and Honors Real and Complex Analysis...
with Brad DeLong; he has said that the course made him realize he was not destined to be a mathematician, but the experience gave him a future co-author. Shleifer also met his mentor and professor Lawrence Summers
Lawrence Summers
Lawrence Henry Summers is an American economist. He served as the 71st United States Secretary of the Treasury from 1999 to 2001 under President Bill Clinton. He was Director of the White House United States National Economic Council for President Barack Obama until November 2010.Summers is the...
during Shleifer’s undergraduate education at Harvard. The two went on to be “co-authors, joint grant recipients and faculty colleagues.” Summers resigned from his position as President of Harvard University in 2006 in part due to concerns that his relationship with Andrei Shleifer constituted a financial conflict of interest.
He has held a post in the Department of Economics at Harvard University
Harvard University
Harvard University is a private Ivy League university located in Cambridge, Massachusetts, United States, established in 1636 by the Massachusetts legislature. Harvard is the oldest institution of higher learning in the United States and the first corporation chartered in the country...
since 1991 and was, from 2001 through 2006, the Whipple V. N. Jones Professor of Economics.
Work
Shleifer's work focuses mostly on financial economicsFinancial economics
Financial Economics is the branch of economics concerned with "the allocation and deployment of economic resources, both spatially and across time, in an uncertain environment"....
, where he has contributed to the field of behavioral finance
Behavioral finance
Behavioral economics and its related area of study, behavioral finance, use social, cognitive and emotional factors in understanding the economic decisions of individuals and institutions performing economic functions, including consumers, borrowers and investors, and their effects on market...
.
In recent years, his research has focused on the legal origins theory
Legal origins theory
In economics, the legal origins theory states that many aspects of a country's economic state of development are the result of their legal system, most of all where a particular country received its law from...
(also sometimes known as law and finance theory), which claims that the legal tradition a country adheres to (such as common law
Common law
Common law is law developed by judges through decisions of courts and similar tribunals rather than through legislative statutes or executive branch action...
or various types of civil law
Civil law (legal system)
Civil law is a legal system inspired by Roman law and whose primary feature is that laws are codified into collections, as compared to common law systems that gives great precedential weight to common law on the principle that it is unfair to treat similar facts differently on different...
) is an important determining factor for a country's development, most of all financial development.
Shleifer and his coauthors (Rafael La Porta
Rafael La Porta
Rafael La Porta is the Nobel Foundation Professor of Finance at the Tuck School of Business at Dartmouth College. La Porta received his A.B. in economics at Universidad Catolica de Buenos Aries in Argentina and his A.M. and Ph.D. in economics at Harvard University in Cambridge, MA. La Porta served...
, Robert W. Vishny
Robert W. Vishny
Robert Ward Vishny is an American economist and is the Myron S. Scholes Distinguished Service Professor of Finance at the University of Chicago Booth School of Business. He was the Eric J. Gleacher Distinguished Service Professor of Finance at the University of Chicago Booth School of Business.He...
, Simeon Djankov
Simeon Djankov
Simeon Djankov is a Bulgarian economist and Deputy Prime Minister and Minister of Finance of Bulgaria in the government of Boyko Borisov. Prior to his cabinet appointment, Simeon Djankov was a Chief economist of the finance and private sector vice-presidency of the World Bank...
and Florencio Lopez de Silanes) have written extensively on corporate governance.
In 1994 Shleifer founded with fellow academics—and behavioral finance specialists—Josef Lakonishok and Robert Vishny a Chicago-based money management firm known as LSV Asset Management. As of February 2006 it managed about $50 billion in quantitative value equity portfolios, though, according to the firm's website, Shleifer no longer had an ownership stake.
Activities in Russia
During the early 1990s, Andrei Shleifer was an advisor to Anatoly ChubaisAnatoly Chubais
Anatoly Borisovich Chubais is a Russian politician and business manager who was responsible for privatization in Russia as an influential member of Boris Yeltsin's administration. From 1998 to 2008 he was the head of the state owned electrical power monopoly RAO UES. The 2004 survey by...
, the then vice-premier of Russia
Russia
Russia or , officially known as both Russia and the Russian Federation , is a country in northern Eurasia. It is a federal semi-presidential republic, comprising 83 federal subjects...
, and was one of the engineers of Russian privatization. During that time, the Harvard Institute for International Development
Harvard Institute for International Development
The Harvard Institute for International Development was a think-tank dedicated to helping nations join the global economy, operating between 1974 and 2000...
of Harvard University was under a contract with the United States Agency for International Development
United States Agency for International Development
The United States Agency for International Development is the United States federal government agency primarily responsible for administering civilian foreign aid. President John F. Kennedy created USAID in 1961 by executive order to implement development assistance programs in the areas...
, which paid Harvard and its employees to advise the Russian government. In a period from 1992 to 1997, the Harvard Institute for International Development (HIID) under Shleifer received $40 million directly from the $300 million budgeted for the United States Agency for International Development. Additional sums were given in grants to public relations firm Burson-Marsteller
Burson-Marsteller
Burson-Marsteller is a global public relations and communications firm headquartered in the United States. Burson-Marsteller operates 67 wholly owned offices and 71 affiliate offices in 98 countries across six continents...
and Big Six accounting firms.
Shleifer was also tasked with establishing a stock market for Russia that would be a world-class capital market. That effort became mired in charges of corruption and self-dealing.
While in Russia working as the project director of the HIID, Andrei Shleifer was an adviser to the State Property Committee (Russian acronym GKI), a board member of the Russian Privatization Center, and a USAID-paid advisor to the Russian Federal Securities Commission.
Two decades after meeting Shleifer at Harvard, Lawrence Summers’ work as the undersecretary of the Treasury, the deputy secretary of the Treasury, and the secretary of Treasury put him in place to design U.S economic policies in such a way to allow and facilitate Shleifer’s work on the Harvard Project. Summers "helped Shleifer and Harvard gain noncompetitive government awards” . In 1996 complaints about the Harvard Project led Congress to launch a General Accounting Office investigation, which concluded that the Harvard Institute for International Development was given "substantial control of the U.S. assistance program.” Such an arrangement was “highly unusual”, according to Louis H. Zanardi, who led the GAO investigation.
Lawsuit
The Cooperative Agreement signed in 1992 by the Harvard Institute and USAID for the purpose of creating the Russian reform project included this paragraph under “Regulations Governing Employees”:- Other than work to be performed under this grant for which an employee is assigned by the grantee, no employee of the grantee shall engage directly or indirectly, either in the individual's own name or in the name or through an agency of another person, in any business, profession, or occupation in the foreign countries to which the individual is assigned, nor shall the individual make loans or investments to or in any business, profession or occupation in the foreign countries to which the individual is assigned .
Under the False Claims Act, the US government sued Harvard, Shleifer, Shleifer's wife Nancy Zimmerman, Shleifer's assistant Jonathan Hay, and Hay's girlfriend (now his wife) Elizabeth Hebert, because these individuals bought Russian stocks and GKO
GKO
GKO , OFZ are abbreviations for and , respectively. They are government bonds issued by the state of Russia.GKOs are short-term zero-coupon Russian Government Treasury Bills. OFZs are coupon-bearing Federal Loan Bonds...
s while they were working on the country's privatization, which potentially contravened Harvard's contract with USAID. In 2001, a federal judge dismissed all charges against Zimmerman and Hebert. In June 2004, a federal judge ruled that Harvard had violated the contract but was not liable for treble damages
Treble damages
Treble damages, in law, is a term that indicates that a statute permits a court to triple the amount of the actual/compensatory damages to be awarded to a prevailing plaintiff, generally in order to punish the losing party for willful conduct. Treble damages are a multiple of, and not an addition...
, but that Shleifer and Hay might be held liable for treble damages
Treble damages
Treble damages, in law, is a term that indicates that a statute permits a court to triple the amount of the actual/compensatory damages to be awarded to a prevailing plaintiff, generally in order to punish the losing party for willful conduct. Treble damages are a multiple of, and not an addition...
(up to $105 million) if found guilty by a jury.
In June 2005, Harvard and Shleifer announced that they had reached a tentative settlement with the US government. On August 3 of the same year, Harvard University, Shleifer and the Justice department reached an agreement under which the university paid $26.5 million to settle the five-year-old lawsuit. Shleifer was also responsible for paying $2 million dollars worth of damages, though he did not admit any wrong doing. A firm owned by his wife previously had paid $1.5 million in an out of court settlement.
Shleifer's conduct was reviewed by Harvard's internal ethics committee. In October 2006, at the close of that review, Shleifer released a statement making it clear that he remains on Harvard's faculty. However, according to the Boston Globe, he has been stripped of his honorary title of Whipple V. N. Jones Professor of Economics.