In Memeory of Oved- Prof. Leonardo Felli- Tel Aviv Conference January 2005


Few Words of Introduction for the

Conference in Memory of the late Professor Oved Yosha

This conference gives us a unique opportunity to show that not only Oved is still very much with us, in our memory as a friend or a family member, but he is also with us in the legacy he left as a scholar.

I would like to spend the next few minutes discussing the lasting contribution of Oveds research as well as my personal recollection of what I learned through the years from Oveds attitude and method of research.

Two broad themes pervaded most of Oveds research. His interest in the analysis of the role of financial intermediaries and his interest in the way economic systems share and smooth idiosyncratic risk.

His research on financial intermediation started from the analysis of the role of financial intermediaries (banks and venture capitalists) in financing projects characterized by proprietary (private) information. This research then specialized in identifying the optimal financial tools that provide intermediaries (venture capitalists) with the right incentives to finance highly innovative and risky projects. In tackling the analysis of financial intermediaries, Oved did not loose track of the reality of the Israeli economy. He provided us with a comprehensive analysis of how to privatize government owned banks as well as of the costs and benefits of universal banking. The unifying factor behind this whole research was Oveds desire to understand the existence and the economic role of important economic actors such as banks and in more generally financial intermediaries.

The question underlying the second broad theme of Oveds research is how economic systems share and smooth idiosyncratic risk. This is probably the one theme of his research that has had the biggest impact on the economic profession. Oved started from the theoretical analysis of the role of public firms for the well-functioning of insurance markets with adverse selection and then moved to the empirical analysis of the mechanisms for achieving income insurance and consumption smoothing. The profession learned from the research of Oved and Bent how to identify and measure channels of risk-sharing among economic units, national regions and even countries. This approach turned out to be an extremely fruitful tool to understand the benefits and costs associated with a number of phenomena. To mention just one of these phenomena, in one of his last papers Oved applied the method he developed with Bent to quantify the premium associated with peace in the Middle East. This is clearly an important factor in the economic and political debate in Israel. The long lasting impact of this research is apparent from the fact that in this conference the two papers on this topic are co-authored with Oved.

I would like to conclude mentioning what I think is Oveds legacy in terms of research method. In a profession where a common sin is to write simple models or identify simple empirical regularities and then use the model or the regularity to reinterpret the entire world and every possible economic phenomenon, Oved was clearly never touched by this sin. An example of his attitude toward research can be found in the introductions to his papers. They are among the shortest and to-the-point introductions I have ever come across. They mention the economic problem addressed and the solution or the empirical regularity identified. No extra fluff, no useless over-interpretation, no attempt to draw universal economic laws!

This way to proceed is revealing of Oveds approach to research. Oved always started from the economic problem and unrelentingly attacked it from every angle until he found a satisfactory solution. He was not shy to address a problem from a theoretical or empirical perspective depending on the problem at hand. What characterized his approach was his energy, his enthusiasm and his will to keep looking until he found an intuitive and satisfactory solution to the problem. We all remember afternoons and evenings spent in coffee shops engaged with Oved in lively discussions of interesting and very diverse economic problems. It did not matter whether this happened in Tel-Aviv, Boston, London or Brussels, Oved always had his favourite coffee shop and in these his favourite corner. We all know that coffee is a key input of research and Oved was very partial to this input and to the coffee shop environment as the ideal place where to discuss and develop research. This rendered for us, his friends, very difficult the task to reach him given that he always refused to carry a cellular phone. I believe that his thirst for an answer and in general his attitude toward research is an important part of the legacy Oved left us. It is also one of the many reasons why I miss him so much!