LIt is 9,100 kilometers as the crow flies from Berkeley in California to the government district in Berlin. This distance separates the top German researcher Ulrike Malmendier, who conducts research at the American elite university on the west coast, from German politics. In the future, the line between the two sides could still be very short. Because Malmendier should take one of the two vacant places in the Council of Experts for the assessment of overall economic development, as reported by the “Handelsblatt”.
Malmendier would take the place of Lars Feld, who left the council more than a year ago after the then federal government could neither agree on his extension nor on a replacement. Martin Werding (Ruhr University of Bonn) is to take the second vacant place in the five-person committee. The employers had suggested the expert for demographics and social systems in May after Volker Wieland had left the Council of “Business Wise Men” at his own request. Also represented in the council are the Munich economist Monika Schnitzer, Veronika Grimm (University of Erlangen-Nuremberg) and Achim Truger (University of Essen Duisburg), who sits on the council at the suggestion of the unions.
Prof. Ulrike Malmendier, University of California at Berkeley
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Image: private
The appointments, which the Federal Ministry of Economics did not want to confirm at the weekend, could already be decided in the Federal Cabinet this week. That would end a stalemate in which there were only three of the Council working and unable to agree on a chair. If that happens, there would be a female majority on the federal government’s advisory body for the first time since it was founded in 1963, and for the first time there would be a female researcher working in America. Monika Schnitzer described Malmendier to the FAZ as a “very renowned researcher” and an “absolutely good choice”. Veronika Grimm said both named people “would be fantastic choices”. Schnitzer and Grimm indicated that if a member lives in America, the Council would need to adjust its procedures. Meetings would have to take place in a clustered or hybrid form. But that is not a problem.
Malmendier’s work caused a stir
Malmendier, who received her doctorate in Bonn (law) and Harvard (business administration), researches corporate finance and contract theory, among other things. But she was particularly interested in behavioral economics, which seeks explanations for human behavior in economic situations. This makes Malmendier, born in 1973, a sought-after woman in the current situation with extraordinarily high inflation rates. Together with other researchers, she was able to show that people’s inflation expectations are strongly influenced by whether they have had experiences with high inflation or stable prices in their lives. She also found out why inflation is often overestimated: Households do not weight price changes according to how much they spend on a product, but rather according to how often they buy a product.
Malmendier’s work on the excessive self-confidence of managers also caused a stir. The research results of the mother of three and her colleague Geoffrey Tate show that managers who systematically overestimate themselves and their investment projects tend to overprice mergers when they have a lot of liquidity at their disposal. In another study, the duo showed that the rise of corporate leaders to superstars with appropriate compensation, media exposure and accolades harms their companies in the long term.
She has already indicated several times that Malmendier is interested in political advice. In a guest article in the FAZ, she criticized the lack of political relevance of the bodies in Germany and the long terms of office in many bodies – in contrast to the USA. Apparently that didn’t deter her.
One of the first tasks of the again full council is the election of the new presidency. Grimm and Schnitzer are now considered favorites, making it the first time a woman has headed the council.
