Stephen Morris ’91 PhD returns to Yale, revisiting ideas that shaped modern economic theory
A Yale-trained theorist returned to campus this semester with a career that runs from Uganda’s foreign-exchange reforms to foundational work on how information and beliefs shape economic life.
For MIT economist Stephen Morris ’91 PhD, his visiting professorship at Yale this past semester has offered a chance to teach, collaborate, and revisit ideas from a career that has helped shape modern economic theory. New Haven, he said, “feels like home”: he earned his PhD here, later returned for seven years as a tenured professor, and now has a son pursuing a PhD in the Yale Department of Physics. Back on campus, Morris has been teaching doctoral students, working down the hall from longtime collaborator Dirk Bergemann, and pursuing new research questions.
Morris is best known for work that examines how information and beliefs shape economic outcomes. Within game theory, he has done extensive research on higher-order beliefs: not only what one person believes about another, but what each believes the other believes. In influential research with Hyun Song Shin, recently appointed as governor of the Bank of Korea, on global games and currency crises, and with Bergemann on mechanism design and information design, Morris has shown why uncertainty about others’ beliefs matters in markets, institutions, and policy.
A surprise reference to an earlier chapter in Morris’s career came during this year’s Kuznets Memorial Lecture, when Dartmouth economist Douglas Irwin discussed the period in the 1980s and 1990s when many developing countries moved to open their economies and expand trade. In a section on Uganda, Irwin pointed to Morris, who was sitting in the audience, and highlighted reports Morris wrote on the benefits of moving toward a unified exchange rate—work Irwin said became known as the “Morris Reports.”
The Relationship Between Money, Prices and the Parallel Market Exchange Rate, by Stephen Morris (1989)
The Impact of Official Exchange Rate Devaluation on Uganda, by Stephen Morris (1989)
“Stephen Morris, Yale PhD,” Irwin said, before asking the audience to applaud Morris for his “contributions to policy reform in Africa.” Irwin linked the reforms that followed Morris’s work there to rising foreign-exchange reserves, increased exports, and export diversification in Uganda.
Morris tells the story more modestly. The Uganda work, he said, was “something completely unlike” what most economists know him for today. But the episode captures an early version of questions that have followed him through his career: how information and political economy shape economic outcomes.
From policy problems to economic theory
Morris arrived in Uganda in 1987 after studying at Cambridge and spending time at Yale where he started the economics PhD through a Clare-Mellon Fellowship. Through an Overseas Development Institute fellowship, he was assigned as a civil servant in Uganda’s Ministry of Planning and Economic Development, as the country emerged from years of civil war.
One challenge was the exchange-rate system. Uganda had an official exchange rate that, in Morris’s view, was no longer shaping prices in the real economy. Access to dollars at the official rate functioned instead as a transfer: those who received foreign currency at the official price could sell it on the black market.
Morris collected black-market data from multiple sources, including rates he encountered when cashing checks from his British bank account with a local dealer. He analyzed the government budget and made color graphs—which were rare at the time—showing the relationship between money supply, prices, and official and black-market exchange rates. He said he believed the analysis supported the right policy, but he is careful not to overstate his role. Senior officials in the Ministry of Planning, he noted, already understood the problem. His research helped supply evidence and a formal economic argument for a reform they were already inclined to support.
The narrow exchange-rate question, Morris said, was “a one-off.” But Uganda shaped his interest in political economy, especially why governments sometimes pursue inefficient policies, and how outside reform efforts can be misaligned with local political incentives.
A richer view of information
After Uganda, Morris returned to academia and became known for theoretical work on strategic uncertainty: the idea that economic decisions often depend not only on facts, but on what people believe others will do.
That idea became especially influential through his work on global games with Shin. Their 1998 paper, “Unique Equilibrium in a Model of Self-Fulfilling Currency Attacks,” helped economists model settings in which market participants act with imperfect information about fundamentals and uncertainty about one another’s actions.
“We both wrote theses that were relatively theoretical about higher-order beliefs and common knowledge and so on,” Morris said of his work with Shin. “But both of us thought that this wasn’t just a theoretical abstraction, but it was something that should be relevant to applied economists.”
With Yale’s Bergemann, Morris developed another major line of work in robust mechanism design and information design. If the global games work helped economists analyze coordination and crisis dynamics under uncertainty, the mechanism design work asked what kinds of institutions and markets can perform well when economists cannot fully know or model people’s beliefs.
For Morris, the strands are connected by a broader effort to take what he has called “a richer perspective on information structures” and their consequences. At Yale this semester, he returned to those themes in a second-year PhD topics course, teaching material closely related to his research for the first time in many years.
Looking ahead
Morris also sees new applications for the tools of economic theory. As information has become central to the digital economy, he said, tools developed for abstract theory are increasingly being used to study applied problems involving new institutions, internet platforms, and technology.
Another emerging project brings Morris and Bergemann into questions around artificial intelligence. Bergemann, director of the Center for Algorithms, Data, and Market Design at Yale (CADMY), was recently awarded a lead grant through a global funding program coordinated by the UK’s AI Security Institute for work with Morris on AI safety. The project aims to develop a more systematic framework for balancing capability and safety, and for designing institutions and “rules of the game” around deployed AI systems. For Morris, the economic framework feels natural for thinking about how AI systems are trained to act as if they have objectives — and what happens when those objectives may not be the ones designers intended.
This work remains connected to the broad questions that have animated Morris’s career: how information shapes behavior, how beliefs shape institutions, and how abstract models can clarify real-world problems. At Yale this semester, he has had a chance to revisit those questions from a familiar vantage point.