Faculty Spotlight

Ted Groves
Impact on Economics

By Richard Carson, Ph.D.

The occasion of Professor Ted Groves’ retirement marks the end of a second era for the Department of Economics. Groves came to the department after holding positions at the University of Wisconsin, Madison and Northwestern University. At the time, hiring Groves – then seen as a rapidly rising star – helped signal the intent of the fledgling UC San Diego department to become one of the country’s top economics departments.

[Photo: Ted Groves]

Pioneering Work in Microeconomic Theory

Groves is now viewed as one of the preeminent microeconomic theorists of his generation. He did pioneering work on how to effectively organize teams of people in organizations and on approaches to getting people to reveal their private information about public goods. His work fundamentally changed how researchers thought about the structure of economic incentives. Less well known is that Groves’ work is the foundation of how Google and others sell online advertising. So much for the oft heard complaint that economic theorists only look at esoteric problems that have no real world relevancy!

In the mid-1990s, Groves participated in a major research project with UC San Diego’s School of International Relations and Pacific Studies to look at the evolving incentive structure of Chinese state-owned enterprises as they grappled with the transition from direct state control to managerial control. The findings played a key role in understanding how managers were picked, the incentive structure they faced, the degree of control they had over production, and the role that hiring and firing of workers played in boosting output and making profits.

Center for Environmental Economics

Groves later turned his attention to environmental policy issues. His interests were broad. He started with how to design programs to reduce the likelihood of oil spills, and his latest paper looks at how nongovernmental organizations can structure successful ongoing agreements with local communities to preserve key habitats. Along the way he worked on how to place monetary values on environmental amenities, fishing agreements, water conservation and protecting sea turtles. He established the Center for Environmental Economics at UC San Diego and has been tireless in working with both undergraduates and graduate students. His commitment to this project has not ended: Groves has retired from teaching only and remains charge of the center’s regular activities, actively participating in several research endeavors.

Ensuring the Strength of the Department of Economics

Groves has made two other major contributions to the department that could not have been foreseen when he was hired. First, soon after becoming department chair, Groves put the department on firm administrative footing by hiring Paulette Gregg, its first professional manager. This led to the hiring of top-notch staff over the years and a reputation of being consistently one of the best-run departments on campus. Perhaps Groves’ administrative talent was related to the notion of incentives in teams that he had studied abstractly. It was reprised on several other occasions when he served as chair of the Academic Senate, associate dean of Social Sciences and associate vice chancellor for Academic Affairs. Stories abound of Groves saving UC San Diego from one disaster or another, including converting the Faculty Club from having waiters in black tuxedos serving mostly empty tables to the current buffet style that continues to pack in diners.

Groves’ second major accomplishment as department chair was to successfully start a high-quality applied economics group at UC San Diego. It is difficult to hire junior faculty in areas where there are no senior faculty members to serve as mentors. Groves recognized that the department needed to hire people who were self-starters and who already had a network of contacts. He knew it would help if they were somewhat unconventional. I was one of those new junior faculty hires and still remember Groves’ words as I was considering taking a position at a more highly ranked department: “You can come here and get tenure doing anything you want as long as you are really good at it and the profession takes note what you are doing.” It is a stance that the department has maintained to this day, creating an atmosphere that is largely free of the doctrinal infighting that typifies many places and continuing to attract the best new faculty to work here.