Kellogg School of Management at Northwestern University

Stanley Reiter, a towering figure in the development of mathematical economics, died Aug. 9 in Evanston, Ill. He was 89.

Reiter will be remembered as the intellectual force behind the creation of the Managerial Economics and Decision Sciences Department at the Kellogg School and as a mentor and friend to many. He was dedicated to precision and logic, bringing rigorous mathematical methods to economic questions. He was a pioneer in applying mathematical methods to the study of operations and a leader in the field of mechanism design. His wide-ranging intellect and interests lead him to realize the potential research gains that could come about in creating an interdisciplinary department that contained researchers in economics, mathematics, decision theory, and operations research.

“He was an effective visionary,” said Hugo Sonnenschein, the Adam Smith Distinguished Service Professor at the University of Chicago and a former student of Reiter’s at Purdue.

He is also remembered as a model of civility, an amazing listener, and a father figure to practitioners and academics in the field he pioneered.

“He was a very classy man,” said Ehud Kalai, the James J. O’Connor Distinguished Professor of Decision and Game Sciences at Kellogg. “He was always welcoming to new ideas and new directions of research. You’d be sure you’d get a good hearing from Stan.”

An ideal PhD program

Reiter was part of the transformation of economics in the 1960s and 1970s, when more mathematical and rigorous techniques were introduced into the discipline. Reiter pushed this approach by building a large theory group in the business school and the economics department, providing an environment at Northwestern where theorists could thrive.

Reiter joined Northwestern in 1967 after helping build the economics department at Purdue University.  He brought his former graduate students Mort Kamien, Nancy Schwartz, and John Ledyard with him to Northwestern.

“Initially, the kind of people he hired, the people who are now very famous, a lot of them were not getting good offers from other schools,” said Ledyard, who is now the Alan and Lenabelle Davis Professor of Economics and Social Sciences at the California Institute of Technology.

The first wave of new hires included such leaders in the field as Kalai, Ted Groves, Bengt Holmstrom, Paul Milgrom, John Roberts, Mark Satterthwaite, Nancy Stokey, and future Nobel Prize laureate Roger Myerson.

“He had remarkable taste,” Sonnenschein said., . “The people he picked early to go to MEDS, they’re giants. He made the success of others possible.”

Ledyard sat in on an early planning meeting where Reiter posed the question: “If you could create an ideal PhD program, what would it be?” That meeting, where concepts in operations research, decision theory, economics, and game theory were discussed, became the foundation of MEDS.

“MEDS changed the way economists think,” Ledyard said.

The place to be

In the 1970s and 1980s, MEDS was “one hell of an exciting place to be,” Ledyard said. The introduction of information asymmetry and game theory into economics changed the basic paradigm of the field. This doesn’t happen very often in any science, Ledyard said. Generally, you work and get a new exciting idea every year or two if you’re lucky, he said, but at that time in MEDS, “ideas were just flowing. It was fun to go to work. You were afraid if you didn’t go to work you were going to miss something new and be left behind. It was really exciting.”

Donald Jacobs, Kellogg dean emeritus, Gaylord Freeman Professor of Banking, and professor of finance, said the type of high-level, mathematically rigorous research MEDS was doing infiltrated the rest of the school,  and still influences how Kellogg operates today.

“There really was a dramatic shift at one point and I set the timing of that shift with Stanley coming,” Jacobs said.

Reiter helped spearhead this environment of high-level intellectual interaction through lunch seminars where faculty would present and a working-paper series where faculty distributed research results. This approach is common now, but at the time not many theoretical economists were doing it, Ledyard said.

“Now I know people use Skype and you can talk to your friends and coauthors all over the world,” said Nancy Stokey, the Frederick Henry Prince Distinguished Service Professor of Economics at the University of Chicago, who worked in MEDS from 1978 to 1990. “That wasn’t true at that point. So it was even more important to have people in your home department in your home university.”

But collaboration by professors within their department wasn’t enough for Reiter. He wanted to see that same collaboration by departments within the university. To strengthen ties between MEDS and Northwestern’s economics department, Reiter founded the Center for Mathematical Studies in Economics and Management Science, commonly called the math center, in 1971.

“A lot of those important papers in information economics, they were all math center discussion papers originally,” said former MEDS Professor Rakesh Vohra, now the George A. Weiss and Lydia Bravo Weiss University Professor at the University of Pennsylvania. Vohra was a professor in MEDS from 1997 to 2013 and director of the math center from 2007 to 2013. “That was the place to be.”

The research that came out of Northwestern at this time is now central to economic theory and many of its applications, said former MEDS faculty member John Roberts, who holds the John H. and Irene S. Scully Professorship in Economics, Strategic Management, and International Business in the Graduate School of Business at Stanford University.

Groundbreaking research

Reiter’s interest in the roles of information in economic systems and incentives was deeply influenced by Leonid Hurwicz, with whom he coauthored several pieces, including their 2006 book, Designing Economic Mechanisms.

A 1974 article Reiter coauthored with Kenneth Mount developed the notion of size of message space in a mechanism. They showed mathematically that, in an idealized economy, the smallest message space to convey information exactly coincides with price. This finding is equivalent to the notion in computer science of communication complexity, Vohra said.

“Stan was 20 years ahead of the game,” Vohra said.

Reiter was one of the first scholars to tackle the job-shop problem, a common optimization problem in computer science. Vohra said when he first read Reiter’s paper on the topic as a graduate student in the 1980s, Reiter’s paper seemed obvious, given the level of computing available at the time.  But Reiter had written the paper in 1965, decades ahead of the computing curve.

“It was consistent with Stan’s view that mathematics had an important role to play in modeling and understanding business operations,” Vohra said.

A magnificent experience

Sonnenschein remembered a course where it was just four graduate students and Reiter in the room. The group went through Gérard Debreu’s Theory of Value line by line. Reiter didn’t lecture. Instead, he would sit patiently, questioning the students if an argument seemed less than complete.

“The issues had as much to do with the way the economics were modeled as the way the mathematics were done. It was a magnificent experience for all of us,” Sonnenschein said.

Alvaro Sandroni, the E.D. Howard Professor of Political Economy at Kellogg, remembered Reiter as someone he felt comfortable talking to about intellectual life. “He valued people who would think for themselves,” Sandroni said. “Instead of picking up notions from others of right or wrong, how to do things, or what research or intellectual life should be, he liked to think for himself and reach his own conclusions.”

Reiter also had many interests outside of academia. He was an accomplished stone sculptor and, according to Sonnenschein, had “a serve that could knock you off the tennis court.”

A fellow of the Econometric Society, the American Association for the Advancement of Science, and the American Academy of Arts and Sciences, Reiter received his bachelor’s degree with honors in economics from Queens College, and his master’s and doctorate in economics from the University of Chicago.

He is survived by his wife, Nina, to whom he was married for 70 years, and his children Carla and Frank.

Jennifer Byrd is the managing director of the Center for Game Theory and Economic Behavior in MEDS at the Kellogg School.

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