As chair of a group of economists on the Academic Research Council of the Consumer Financial Protection Bureau (CFPB), an independent agency of the U.S. government, Dean Corbae ’82 is motivated to “provide guidance on how to help the financial health of U.S. households.” Learn more:
Benefits vs. Costs
“One of the most important recent financial health survey questions is from the Survey of Household Economics and Decisionmaking, which asked a representative sample of U.S. adults if they can afford an unexpected $400 emergency expense. The fraction surveyed between 2013 and 2023 who could not afford the expense ranged between 32% and 50%. The magnitude of the problem — that up to 50% of Americans surveyed could not afford a $400 expense — motivates me to want to help assess potential risks and provide solutions to improve the financial well-being of low-income households. For instance, if there is an unexpected medical expense that was out of one’s control that goes unpaid and lowers one’s credit score, what are the implications for that person’s future access to credit? Policymakers consider what happens if they strike unpaid small medical expenses from a person’s credit history. While it may help the person whose record from which it is stricken, does it have the unintended consequence of diluting credit access of people with whom they are pooled? Those are the benefits and costs of any policy that must be weighed. One of my current projects is to try to come up with a simple model-based measure of household financial well-being to complement survey-based methods.”
Unintended Consequences
“My research focuses on consumer and corporate bankruptcy and its implications for access to credit and wealth inequality. The above example illustrates the question of whether more information is better? It might help some people and hurt others. One question I have worked on with co- authors is whether credit histories should include more information (so that bad credit risks can be rationed from credit access diluting the pool of good borrowers) or less information (because some bankruptcy may come from risk that is out of one’s control), which ensures better credit access for the poor. Another application is whether lax lending standards before the 2008 foreclosure crisis may have contributed to a pool of risk borrowing that precipitated the financial crisis. Currently, I am studying how eviction policies affect access to housing. Specifically, how might eviction restrictions on a landlord dealing with a tenant who is not paying have an unintended consequence of inducing landlords to post fewer vacancies? The benefit to the renter in distress needs to be evaluated in lieu of the cost to those who may not find vacancies. These are difficult cost/benefit calculations that have important implications for household financial health.”
Colgate Connections
“I am currently Frank Sellery Truckenbrod Chair in finance and professor of economics at the University of Wisconsin – Madison. I got here in a circuitous route. I chose economics as a major because I was supposed to work afterward at my family’s tiny business in New Jersey. But Colgate opened my eyes that there might be more than selling rubber hose. I loved my math classes with Bill Mastrocola and my philosophy classes with Jerry Balmuth. I wanted to get an MBA at the University of Chicago after Colgate but couldn’t afford it, so I came back to Colgate looking for guidance from Don Waldman in the economics department. He suggested I think about a PhD in economics. After Colgate I spent one year as a research assistant at the Federal Reserve Bank of New York and then went for my PhD at Yale. I have been teaching ever since. In fact, one of my PhD students was Nicole Simpson, the current chair of economics at Colgate. I am deeply in debt to the mentoring from Don, and to this day we continue to exchange emails.”
On Teaching
“Having such wonderful professors at Colgate, I think teaching and mentoring the next generation is one of the most rewarding things I do. For most of my career, I have been fortunate to focus on PhD teaching, which entails a close relationship with mid–20-year-olds for almost six years. Your students become like your own kids. I want to see them succeed.”
Corbae is also a research associate of the National Bureau of Economic Research and was elected a fellow of the Econometric Society. He has published numerous academic articles and several books, including An Introduction to Mathematical Analysis for Economic Theory and Econometrics (Princeton University Press).