Daniel Little McFadden is an American economist who, together with American economist James Heckman, shared the Nobel Memorial Prize in Economic Sciences in 2000. He won the award for inventing the ‘discrete choice’ theory and tools for examining individual or family behavior in order to better understand how people make decisions about where to work, live, and marry. Economic theory, environmental economics, mathematical economics, econometrics, and health economics were among the areas in which he focused his study. He popularized the Conditional Logit Analysis method, which examines how people make decisions among finite options in order to maximize utility. He also built and produced an early transistorized computer and an X-ray telescope. He was appointed to the ‘James Killian Chair in Economics at MIT, where he also served as the director of the ‘Statistics Research Centre.’ In the early 1990s, he started and continues to manage the Econometrics Laboratory at the University of California, Berkeley. He is currently a Professor in the Graduate School at the ‘University of California, Berkeley. McFadden is also a Presidential Professor of Health Economics at the ‘University of Southern California.’ He works at the ‘USC Dana and David Dornsife College of Letters, Arts and Sciences Department of Economics and the ‘USC Price School of Public Policy’ to research basic healthcare issues, with a special focus on how consumers make decisions about health insurance and medical treatments. He was awarded the ‘John Bates Clark Medal’ in 1975, the ‘Econometric Society’s Frisch Medal in 1986, and the ‘Northwestern University’s Erwin Plein Nemmers Prize in Economics in 2000.
Childhood and Adolescence
As the eldest son of Robert Sain McFadden and Alice Little McFadden, he was born on July 29, 1937, in Raleigh, North Carolina, United States.
He grew up on a family farm in rural North Carolina, where he ate mostly homegrown food and sold hay, maize, peanuts, cottage cheese, and butter. His mother was a high school mathematics teacher, while his father was a voracious reader and collector of books, with his own collection.
McFadden attended North Carolina public schools and completed correspondence courses in geometry and algebra with the help of his mother.
In 1953, while still in high school, he organized a petition drive to seek judicial review of the school’s policy of automatically suspending pupils who were reported off-campus by police. He was, however, suspended from school as a result of his protest.
He worked for a season on an uncle’s dairy farm in Minnesota, and at the age of 16, he enrolled at the ‘University of Minnesota after passing an exam. He received a BSc in Physics with honors.
Meanwhile, he worked in Prof. John Winckler’s Cosmic Ray Laboratory during his undergraduate years. He created and developed an early transistorized computer for data processing and telemetry, as well as an X-ray telescope when he was there. His research career was largely shaped by the experience he gained in this lab.
He graduated from the ‘University of Minnesota with a Ph.D. in Behavioural Science (Economics) in 1962. Professors Leo Hurwicz and John Chipman of the Economics Department mentored him when he was in school. The importance they placed on the axiomatic development of economic theory and the possibilities of formal models affected him greatly.
Daniel McFadden’s Career
He became a Mellon post-doctoral fellow at the ‘University of Pittsburgh’ after completing his Ph.D.
In 1964, he was admitted to the Berkeley faculty of the ‘University of California,’ where he focused his research on choosing behavior and the difficulty of integrating economic theory and measurement.
During the 1966-67 academic year, he visited the ‘University of Chicago while continuing to lecture at Berkley.
He used a combination of economic theory, statistical methodologies, and experimental applications to solve social problems. In 1974, he created the Conditional Logit Analysis approach. The technique examines how people make decisions among finite possibilities in order to maximize utility. His approach contributed to estimating the rate of use of public transportation systems by making choices from a set of finite options. His statistical approaches were used to investigate health care, the environment, labor force participation, and housing, particularly for the elderly.
During 1976-77, he was the Irving Fisher Research Professor at the ‘University of Yale.’
In 1977, he left Berkley to attend MIT (Massachusetts Institute of Technology). He was inducted into the ‘American Academy of Arts and Sciences that same year. He was awarded the ‘James Killian Chair in Economics at MIT. In 1986, he was named Director of MIT’s ‘Statistics Research Center.’
He was inducted into the ‘National Academy of Sciences’ in 1981.
As a ‘Fairchild Fellow,’ he attended the ‘California Institute of Technology’ in 1990.
In 1991, he returned to the ‘University of California’, Berkeley, after more than a decade at ‘MIT.’ He established the Econometrics Laboratory there, which is committed to the advancement of statistical calculations for economics applications, and he continues to serve as its Director. He is still the E. Morris Cox Professor of Economics there, and the endowment he has received from that position has tremendously benefited him in undertaking research.
McFadden’s research publications have appeared in journals such as the ‘Review of Economics and Statistics,’ the ‘Journal of Mathematical Economics,’ and the ‘Journal of Economic Theory.’
He is currently a Professor at the Graduate School at the ‘University of California in Berkeley. Since January 2011, he has been a Presidential Professor of Health Economics at the ‘University of Southern California.’ He is also a trustee of ‘Economists for Peace and Security (EPS), a United Nations-registered NGO based in New York that brings together economists interested in issues of peace and security.
McFadden works in the Department of Economics at the ‘USC Dana and David Dornsife College of Letters, Arts and Sciences as well as the ‘USC Price School of Public Policy’ to research basic healthcare concerns.
He has been focusing on deviations from the economic theory of choice, as seen in studies in cognitive psychology by Amos Tversky and Danny Kahneman, as well as the ramifications of such deviations in economic analysis and the determination of economic information, over the last few years.
McFadden has been focusing on the economic status of aging Americans, including the cost and delivery of health services, financial planning, and housing, with the support of the ‘National Institute on Aging of the ‘National Institute of Health.’
Personal History and Legacy
He married Beverlee Tito Simboli, a photographer, in 1962, and they had three children: Nina, Raymond, and Robert. Nina, who holds a bachelor’s degree in child psychology, works as an executive chef for a company in Tucson, Arizona.
Raymond, who holds an MBA from the University of California, Berkeley, is in charge of software development at the ‘Excite AtHome Company,’ while Robert, who holds a Ph.D. in material science from Carnegie-Mellon University, leads a research team in Intel’s research labs.
Daniel William, Anne, and Emily McFadden are McFadden’s three grandchildren.
He and his wife run a small farm/vineyard in the Napa Valley where they raise cattle and grow and sell figs, olives, and grapes, among other things. They also make and sell wine and olive oil.
Estimated Net worth
Daniel is one of the wealthiest economists and one of the most well-known economists. Daniel McFadden’s net worth is estimated to be around $20 million, according to Wikipedia, Forbes, and Business Insider.