The power of logical thinking

The tidy room with its empty desk reflects the organised mind of its occupant. Professor of Econometrics Franz Palm talks about his field with infectious enthusiasm, though in carefully chosen words. “Econometrics combines ‘hard’ maths with the ‘softer’ social sciences. That’s why it appeals to me so much.” Here he looks back on a long and successful university career, for which he was honoured last summer with the title Knight in the Order of the Dutch Lion.

“I had no idea. My wife had been informed, but she managed to keep it quiet”, he says with a smile. “I wasn’t prepared for it at all, but after the first three sentences of the award speech I figured out what was going on. Receiving a royal distinction is a great honour.” It was awarded during the garden party on the 30th anniversary of the Maastricht School of Business and Economics, the faculty that Palm helped to establish and where he served as dean no less than three times. “I’m happy I was able to combine both academic and administrative work. It wasn’t one at the expense of the other, fortunately, although maintaining the balance wasn’t always easy.”

UM_WEBMAG_IMG_FRANZ PALMIn all his years in academia, Palm has never once had to apply for a job. “I was always asked. I ended up in Maastricht because I was invited by Hein Schreuder, my former colleague at the VU University Amsterdam, and I was offered the job of dean as well. The only job I ever went out and applied for was at a bank in Brussels, right after my master’s degree. And I didn’t get it, but then I didn’t really want it anyway. My heart already belonged to the academic world.”

Roaring sixties
As the eldest son of a farmer, he was the first of his family to go to university. The farm was close to Büllingen (Rocherath), in the German-speaking part of Belgium. “I have four brothers and a sister. One brother took over the farm and the rest of my siblings went to university as well. My mother in particular thought that was important. Fortunately, she was still around when I became professor in Maastricht in 1984. My father passed away when I was 22.”

He began his economics degree at Leuven in the ‘roaring sixties’, when the student protests surrounding Belgium’s linguistic conflict were in full swing. The university was eventually split in two, a Dutch-language and a French-language university, the latter of which moved to Louvain-la-Neuve. “I wasn’t part of the movement, but I did follow the developments closely. As a German-speaking Belgian, I found myself caught between the Flemings and Walloons.” He did, however, play an active part in faculty life. He served on the Institute Council and, together with three other students, managed to bring about changes to the curriculum. “We convinced the professors and the dean that the programme was due for an overhaul. We had a strong rationale for our demands; they could hardly turn us down.”

Maths in words 
Reasoning, substantiating your arguments, thinking clearly and coherently along the lines of mathematical logic: these are the skills in which Palm excels, and also the reasons why econometrics appeals to him so much. “It’s behavioural and socioeconomics combined with hard sciences like maths, statistics and computer science. You use quantitative models and formal theories to study all sorts of economic phenomena. Maths and statistics, I’m absolutely convinced, have the power to help us make sense of the world. A mathematical formulation improves the quality and coherence of your reasoning. You’ve got to tread carefully, because your story could be based on incorrect assumptions. Statistical methods allow you to test your hypothesis or your model against reality. These days, the real-world applicability of economic theories is increasingly being put to the test in experimental research. For me, coherence and careful testing of your reasoning are basic requirements. And it’s the laws of logic that help you develop a coherent thought process. Eventually of course, this thought process has to be put into words. You have to be able to explain it.”

One of the most inspiring lecturers during his studies was a professor of social philosophy. “He’d studied mathematics and philosophy. He used maths to identify contradictions and errors of reasoning in social science theories. And he was fantastic at explaining this process of mathematical thinking. He could talk for hours without using a single formula, and yet it was crystal clear. You could just see the most difficult things – it was wonderful.”

Love and logic 
From this love of logical thinking, the conversation turns to his wife. Does he approach problems at home in the same way? “My wife is also quite analytical in her thinking. Like me, she’s very eager to learn. We talk about all sorts of things, including science, and still learn all the time from the other’s way of thinking. Until about eight years ago she worked in primary education. Now, we go on trips together. We both like preparing well for our travels beforehand: we read about the country we’re going to, watch lots of documentaries. We’ve been to India and South America and soon we’ll be heading to Canada.”

In their recommendation letters for the Order of the Dutch Lion, colleagues described Palm as honourable, modest, trustworthy and just. Are these values he learnt from his parents? “Definitely, but also from my studies”, he says. “As a professor you have obvious academic and administrative responsibilities, but you should also be a role model for your colleagues and students.”

Clearly, he is the right man for the post of confidential adviser on academic integrity at UM. But this is a position he had to give up recently while he serves as interim dean at the Faculty of Humanities and Sciences. “Academic integrity has long been an important theme. I was an editor of several journals, including the Journal of Empirical Finance and the Journal of Econometrics, for many years. During that time I repeatedly came across various types of plagiarism, a serious academic offence. It’s a big issue, and awareness is important. Fortunately, universities are starting to wake up and pay more attention to it in their teaching.”

A man’s business 
Palm always supervised his own PhD students in good conscience. “Yes, and this is a task I enjoy very much. I’ve supervised, let’s see, a total of 33 PhD students. Only three of whom were women, which is a pity.” He suspects that women find the current academic situation unappealing, and are therefore less likely than men to pursue an academic career. “It’s certainly very demanding, right from the outset: writing a dissertation, publishing, finding a postdoc position. And after that it’s fighting for a position as an assistant professor. But more diversity in terms of gender and background is very important in the academic world.”

He is still in touch with most of his former PhD students, if only occasionally. “I’m proud of the fact that almost all of them continued on in academia. Several are associate professors and nine have become full professors, in the Netherlands, Germany, France and England.”

His own PhD felt almost effortless. “Yes, it did sometimes feel that way because I enjoy what I do so much. I did part of my PhD research at the University of Chicago. I got on extremely well there with the professor who eventually became one of my supervisors. As a master’s student I’d studied his book, and I told him so. We hit it off immediately and launched into an animated discussion. One thing led to another and next thing I knew we’d written a paper together, well before I’d even finished my PhD.”

Palm’s PhD focused on time series analysis, a field that aims to describe, explain and even predict developments over time. In 2010, he co-authored an article with his colleague Bertrand Candelon in De Economist in which they predicted that Greece would become an unsustainable problem for the EU. “Our hypothesis was that Greece’s behaviour within the Eurozone was bound to lead to irreversible problems. We underpinned this with patterns and insights from our time series analyses, including on interest rates in Greece. The interest rates on state loans were starting to skyrocket, even compared to the average interest rates of other Euro countries. The rise was so significant and Greece’s national debt so colossal that you could’ve calculated on the back of a napkin when it would all go wrong. We certainly intended this as a warning at the time, and I hope it made several people think.”

Sharp mind 
At 67, retirement still feels a long way off. “I work part time, but I hope to continue supervising students for a while. Although I do intend to retire well before people start telling me I’ve lost the plot and nudging me towards the door.”

As for all that solid mathematical reasoning and thinking he’s so fond of –is it possible that, ultimately, it provides nothing more than a false sense of security? At this, he bursts into laughter. “That’s always one of the risks of logical reasoning. Testing can minimise that risk, but you can never eliminate it entirely. Besides, theories and hypotheses usually end up getting rejected and replaced by better ones. A pity for the individual researcher, but good for academia. One thing you should definitely not do is try to make things prettier than they really are.”

LOGO_UMEXPERT2_213Franz Palm (1948) is professor of Econometrics at the UM School of Business and Economics. In 2005, the Royal Netherlands Academy of Arts and Sciences (KNAW) presented him with the Academy Professor Prize, a lifetime achievement award for outstanding researchers at the top of their fields. He has also held numerous external advisory positions, including at De Nederlandsche Bank, and conducted research commissioned by organisations such as DSM and the Ministry for Economic Affairs. Read more about him on the UM Expert Guide

This article is reprinted with permission from UM Magazine

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