Questioning long-held claims is a logical preoccupation for Kellogg Professor Alvaro Sandroni

While other kids were cavorting in the warm Brazilian night, Alvaro Sandroni spent hours gazing at the sky, pondering the universe: Was it finite? How had it begun? Did it even have a beginning?

“ Since the age of 7, I’ve had these kinds of metaphysical anxieties,” reveals the soft-spoken Mechthild Esser Nemmers Professor of Managerial Economics and Decision Sciences at the Kellogg School. “As I got older, I switched to questions about society, questions people wonder about, but in my case can’t stop thinking about.”

Specifically, Sandroni’s thoughts often drift to examining the internal logic of widely held claims and “setting the logic straight.”

“ Because I’m always thinking, I’m always unsatisfied,” says the self-admitted “absentminded professor.” “I’m frustrated because I can’t crack that problem or that problem or that problem.”

One of the problems Sandroni did crack earned him the 2003 Stanley Reiter Best Paper Award. Named for his Kellogg colleague, who is the Charles E. and Emma H. Morrison Professor of Managerial Economics and Decision Sciences, the award is given to a Kellogg faculty member who has written a paper judged “best” within the preceding four calendar years. A panel of Kellogg School professors from various disciplines selects the winner, which adds to the award’s status.

Sandroni’s paper, “Do Markets Favor Agents Able to Make Accurate Predictions?” tests a long-held theory and affirms it through exhaustive scrutiny.

He says that for years no one questioned the logic behind the 40-year-old claim, first set forth by renowned economist Milton Friedman, that markets favor agents who make accurate predictions. Then about 10 years ago a number of academics, Sandroni included, began attacking the claim, saying it lacked theoretical support.

While in the process of disputing Friedman’s claim, Sandroni wound up doing the opposite: defending its logic by devising a methodologically foolproof model of support. Sandroni said he went from offense to defense when he realized that the theories that skeptics constructed to disprove Friedman didn’t hold up. But the claim did hold up when Sandroni improved its method of reasoning.

Always one to challenge the status quo, Sandroni has moved on to examine the logic behind another claim, one that says the market is capable of eliminating unfair discrimination without being regulated. Using his background in economics (a PhD in 1996 from the University of Pennsylvania) and mathematics (a PhD in 1994 from the Instituto de Matematica Pura e Aplicada in his native Rio de Janeiro), Sandroni is going up against a claim that has been accepted for 50 years.

“ There has been some debate on this one, but no serious analyzing,” he says.

As an economist and mathematician, Sandroni is concerned about the correct use of statistics. Not just concerned, but actively involved: He’s currently writing a book on how to use statistical data (with Peter Klibanoff, Kellogg School associate professor of Managerial Economics and Decision Sciences, and Boaz Moselle, formerly assistant Kellogg professor in Managerial Economics, now managing director at the United Kingdom’s Office of Gas and Electricity Markets).

When he isn’t writing, teaching or thinking “productively,” Sandroni takes walks and goes biking — activities “to help the mind wander.” His wife, Yejia Zhang, a physician and researcher at Rush University, often goes biking with him.

“ She understands that I need time to contemplate,” Sandroni says. The couple have a son, Alec, who is almost 2.

“ Seeing the mystery of seemingly straightforward ideas” is the most interesting part of his “strictly academic exercise,” Sandroni explains.

“ It’s a solitary line of work, but I could do it for 1,000 years.”

About Professor Sandroni
Prof. Sandroni is an economist and mathematician whose research interests include learning theory and asset pricing. The winner of the 2003 Stanley Reiter Best Paper Award, Sandroni teaches microeconomics at the Kellogg School.

Representative publications include: “Do Markets Favor Agents Able to Make Accurate Predictions?” Econometrica (2000), vol. 68, no. 6, 1303-1341; “On the Convergence to Rational Expectations Under Complete Markets” (with Aloisio Araujo), Econometrica (1999), vol. 67, no. 3, 663-672; “Learning, Rare Events and Recurrent Market Crashes in Frictionless Economies Without Intrinsic Uncertainty,” Journal of Economic Theory (1998), vol. 82, no. 1, 1-18; “Does Rational Learning Lead to Nash Equilibrium in Finitely Repeated Games,” Journal of Economic Theory (1998) vol. 78, no. 1, 195-218.