Yongheng Deng
Professor and Director of Doctoral Programs
Yongheng Deng was just 14 years old when the Chinese government, in thrall to Mao Tse-tung's Cultural Revolution, sent him to the countryside to labor in the fields. The experience taught Deng a great deal, but not the lessons that the government had intended.
Yongheng Deng recalls the interruption of his youth in the late 1960s.
"The high schools and universities were shut down," he says. "I was pulled from school and spent the next six years working in a field."
Many of Deng's friends were also forced to work on farms, but because most of them were older—17 or 18—they dated and married during this time.
"Ninety-nine percent of my friends who were sent to the countryside never went to college," he says. "I was just lucky that I was younger. Just lucky."
When the Cultural Revolution subsided, Deng was able to return to Shanghai. But the government still dictated his occupation. He was assigned to work in a department store and eventually became sales manager. After several years, he finally received the opportunity to resume his education. "I never finished high school—I went directly to college," says Deng. "My experiences, although painful, had made me more appreciative of the opportunity. I realized that the time I had for study was so important."
At Shanghai Maritime University, Deng became an academic star. After earning bachelor's and master's degrees in shipping economics and transportation management, respectively, he was touted by the government as a model for other citizens—as someone who had toiled in the fields and then excelled as a scholar. He was promoted to assistant dean and groomed to become the university’s president.
Deng demurred.
"In China, the president of a university is a politician," he says. "I wanted to be remote from politics. I wanted to use my knowledge to contribute to society, to help people in China."
To do so, he first had to leave China.
Arrival in America
Deng enrolled at UC Berkeley in 1988 as a Ph.D. student in economics.
"If you study economics, there are basically two routes you can follow," he says. "The first is political economics, which is where you work in theory and basically recommend what people should do. "That was too close to politics for me," he says. "The other is more quantitative, in which you use the data, the facts. Numbers inherently aren’t political."
The latter approach suited Deng. "I'm more interested in doing things that have practical applications in the real world rather than coming up with a new theory," he says. "It's about which would help people more."
Deng found encouragement among the faculty for his focus on work that had real-world applications. One of Deng's mentors at UC Berkeley, Daniel L. McFadden, won the Nobel Prize in economics in 2000 for his role in developing a logit model of transportation planning that has replaced the linear regression model that was used until that time, says Deng. McFadden's work provided the basis for the design and construction of the Bay Area Rapid Transit (BART) system in the 1980s.
The lesson, says Deng: "Don't make the problem fit a model—learn to develop a model to fit the problem."
Applied Knowledge
After earning his Ph.D., Deng went to work for the U.S. federal government as an economist in the Office of Federal Housing Enterprise Oversight. Working with a team of bank examiners, lawyers, and fellow economists, he helped to lay a new regulatory foundation for Fannie Mae and Freddie Mac, the government-sponsored, publicly traded companies that hold more than $1.5 trillion in home loans. Once the new rules and regulations for these companies were established, Deng left the federal office.
"When I joined, it was a brand new agency, so there weren’t a lot of rules," says Deng. "As time passed, a lot of bureaucracy was created."
With one door shut, another opened—one that led Deng back to academia. A colleague and department chair from the University of Pennsylvania’s Wharton School of Business called to recruit Deng, who was at first reluctant to join the school as a postdoctoral fellow.
"The truth is, if you get a Ph.D. and want a career as an academic, you must get a job at a university right away," says Deng. But his concerns proved unfounded. After his postdoc at the Wharton School, he joined the USC School of Policy, Planning, and Development in 1999 as an assistant professor. Since then, Deng has been promoted to the title of professor.
Au Contraire
Professor Deng's teaching and research activities have sometimes been considered as unconventional as his career path. He teaches students at all degree levels in both SPPD and the USC Marshall School of Business.
"MBA classes can be difficult because you get older students who have worked in business and challenge your reasons for teaching certain things," he says. "You need to spend time motivating these students to learn."
And he says that his empirical methods class for SPPD Ph.D. students is sometimes viewed askance by his peers outside USC.
"It's different from other statistics and econometrics classes," he says. "I'm teaching the students how to apply their statistics and econometrics skills to real-world research. This is a totally different skill set, and the students find it quite useful."
His work has not gone unnoticed: Deng was one of four SPPD professors this year to be nominated for a USC Mellon Award for Excellence in Mentoring, an honor created by USC's Center for Excellence in Teaching as a way for students and faculty members to recognize individuals they regard as exceptional mentors.
Deng's research in such areas as housing finance has also challenged prevailing notions. A recent study that he conducted with SPPD professor Stuart Gabriel for the U.S. Department of Housing and Urban Development (HUD) found that Fannie Mae's and Freddie Mac's objection to supporting more home loans for low-income and minority borrowers—namely, that these borrowers pose a greater risk—is based on incorrect assumptions.
Deng explains that middle- and upper-income borrowers present the greater risk because they refinance at a rate of over 50 percent, while minority and low-income borrowers refinance at a much lower rate (under 25 percent). Although low-income borrowers default at a slightly higher rate, default is still extremely rare.
"On the whole, lending to these underserved borrowers is a smaller risk than is lending to higher-income borrowers," says Deng.
Although Deng's work may be a source of consternation for some institutions in the U.S., his native land warmly welcomes him and his expertise. Several times a year, Deng travels to China to work with such agencies as the Chinese Academy of Social Sciences’ Financial Research Institute to assist China's burgeoning home-finance market.
"Data and data collection in China is not very good," says Deng. "Right now I'm pushing them to acquire better data so I can expand my studies there."
In so doing, Deng works toward the goal for which he originally left his homeland: helping people in China.
For Deng's students, peers, and compatriots, it is the practical approach—not politics—that has proved an inspiration, after all.