Do You Have a Theory of AdWords?

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You have a 1982 econometric piece, the non-parametric approach to demand analysis. Did doing that kind of work also help you at Google? Well, believe it or not, that very paper was the inspiration for the model I constructed of Google's ad auction. You manipulate those inequalities very much like the paper you described. And here you get this nice formula for what the price should look like. But then you must think we're not doing enough theory today. Or do you think it's simply exhausted for a while?

Before he became the Adam Smith of Googlenomics, Hal Varian spent decades as an academic economist, writing influential papers, a popular book about the information economy, and several textbooks that are still taught today. So how has his nearly twenty years in the business world affected what he’d write and teach now? Is learning Shephard’s lemma really that important anymore?

Tyler asks Hal these questions and more: why aren’t there more second-priced auctions — or prediction markets? How have the economics of sales changed with the internet? In what ways did his hiring criteria change between academia and business? What could we learn from the sack of Rome? When should economists avoid looking at the literature? How are we always eking out victory in the war on spam? And what are people least likely to understand about Google? Fear not — Hal has an answer for it all.

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Recorded May 10th, 2019 Other ways to connect

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