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nudging the economists (guest post by juan pablo pardo-guerra)

It is the best of prizes. It is the worst of prizes. Let me focus on the latter.

On Monday, the renowned behavioral economist Richard Thaler was awarded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel Prize in Economics. For the Washington Post, the award made “economics more human—and real”. For The Atlantic, it was a much-deserved recognition for someone whose “career has been a lifelong war on Homo economicus”. There may be much to celebrate, but there is even more to ponder.

Thaler’s award speaks to three problems in economics and its relation to the ‘real world’ it inhabits. Firstly, it is disparaging that the prize recognizes research showing “that people can be influenced by [mostly social] prompts to alter their behavior” given that other sections of the social sciences have been doing this for, well, just about forever (e.g. seems there was this French dude called Gabriel Tarde…). This year’s Nobel Prize was as much a recognition of behavioral economics within the intellectual firmament of the discipline as a legitimation of economic imperialism: a finding is only truly relevant if published by an economist (corollary: being an economist from Chicago helps).

This year’s Nobel Prize is problematic for a second reason. Behavioral economics does not seem to be in the same league as the politically troublesome contributions of some of the more controversial previous laureates (think: Milton Friedman or Robert Lucas), but as a matter of fact, it sort of is. Though it might make economics “more human—and real”, the behavioral turn doesn’t make away with the ontological commitments of discipline, privileging market processes and individual action as the fundamental sources of virtue. Consider the metaphor of the ‘nudge’, central to the type of applied behavioral economics that made Thaler’s research so publicly relevant. Rather than questioning the economics of general equilibrium, ‘nudging’ is a proposal in calculated engineering: we can build policies that create outcomes similar to those of theory by gently walking slightly irrational, bounded economic agents through the correct ‘architectures of choice’. I am not saying that this is not positive: I am sure that creating psychological incentives so that people increase their investments in retirement will eventually help them; but so would a stronger social security net and a stronger, better funded state welfare apparatus. At the end of the day, the metrics of success in behavioral economics are uncritical of how the economy is built and remit to the ‘less human’, more market-centered, and ‘more surreal’ varieties of economic analysis that behavioral economists like Thaler so bemoan at a first degree of approximation.

Thirdly, the economics prize showcases and arguably reproduces the lack of diversity and intellectual variety in the discipline. Historically, the economics prize is overwhelmingly white and male. Only one woman received the prize to date—Elinor Ostrom, “for her analysis of economic governance”; the same is true for non-white economists—represented by Amartya Sen for his “research on the fundamental problems of welfare economics”. So while economics might expand its reach in colleges, universities, and government offices throughout the world, the Nobel committee reminds us year after year that there is pretty much one type of economics that is better than the rest. It has a race; it has a gender. This is quite regrettable, particularly in a year when discussions about gender in economics were so prominent in the news. There is no dearth of women or minorities in economics—example: Maureen O’Hara’s work in market microstructure theory is perhaps more relevant and intellectually important than Eugene Fama’s somewhat passé discussions of asset prices and market efficiency from the 1970s that were recognized with the Nobel Prize in 2013. (Harvard’s Carmen Reinhart also jumps to mind).

So this was the best of prizes (for Thaler—kitchen remodel) and the worst of prizes (for the rest—economics won’t change much), a missed opportunity to nudge the discipline in a slightly different direction. Perhaps this is asking too much from a committee that represents all too well the gendered dynamics of economics in Sweden (I could not find a female committee member, but I might be wrong): in 2005, Statistics Sweden only identified one full professor of economics in the entire country. How’s that for an architecture of choice?

Juan Pablo Pardo-Guerra is an assistant professor of sociology at UCSD. His research explores the connections between markets, cultures and technologies.

 

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Written by jeffguhin

October 11, 2017 at 12:26 am

7 Responses

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  1. Minor correction: two non white men have won the econ award – Amartya Sen and Arthur Lewis (a notable development economist who developed dual sector theory).

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    fabiorojas

    October 11, 2017 at 1:47 am

  2. True! Thanks for the correction.

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    JP

    October 11, 2017 at 2:13 am

  3. Someone gets the Nobel for their contribution, not because of their gender!!! Gender is just irrelevant here!

    Second, Nobel is backward looking: in the past, most economists were white male, so this makes a lot of sense even from statistical sense….

    Stop making this political…

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    Pedro

    October 12, 2017 at 3:10 am

  4. Hi Pedro. You are partly right–the Nobel looks at past contributions and the profession was heavily male (though I have one counter example: Robinson, who advised both Sen and Stiglitz, or even Birgit Grodal). I could also use the 2013 prize as an example: why not award the prize to O’Hara along with Fama and Shiller? This would have been entirely reasonable: O’Hara’s contributions are as central and as important as those of Fama, Shiller and Hansen. Or why not Andrew Lo, for that matter?

    The fact of the matter remains that the prize *is* political and has political consequences: because of how it defines the boundaries of the discipline and of discovery, it is an important public signal about what constitutes a virtuous member of the discipline. Indeed, perhaps if the Committee were a bit more open to the idea of what it means to make contributions to the study the economy, we’d see more theoretical and demographic variety in the awards…

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    Juan Pablo Pardo-Guerra

    October 12, 2017 at 3:23 pm

  5. There are some odd empirical and normative assumptions scattered in this blog post. They’re consequential because they underwrite the post’s main complaints about the Nobel prize and yet they’re not spelled out, and I’m not sure they could be.

    Juan, you surely don’t think that affirmative action should be applied at the level of Nobel prize. So lets put that to rest. But what exactly are you trying to suggest?

    Is it (1) that the Nobel prize committees are racist/sexist? Is it (2) That the unjustifiably narrow conception of economics prevalent in the committees has seen the work of non-white non-men maligned? If your argument is (1), what would a ‘smoking gun’ piece of evidence look like? (If you can’t suggest what this would be, I’d counter that your insinuation of sexism/racism is unjustifiable.) If your argument is (2), what are the “neutral” grounds on which we could all agree about the form the discipline of economics should take? (If you can’t suggest what these are, I’d counter that your remonstration merely reflects your own biased view of what the discipline should be, i.e., a view as biased, if biased differently, than that dominant in the committees.

    In short, my reaction (without thinking too deeply about it) is that this blog post is pseudo-normative.

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    Kevin M

    October 13, 2017 at 12:26 pm

  6. Thanks for the comment, Kevin.

    I’m certainly not saying that the Nobel Prize committee in economics is sexist or racist. But I am suggesting that they might be highly homophilic and that this has consequences on the type of awards made and the type of signals they strengthen within and outwith the discipline. The fact of the matter is that economics has a diversity problem that can’t be explained away by individual tastes and that is not in the radar of the committee. Sarsons’ research on gender and recognition suggests, for example, that co-authorship has a stronger contributing effect on the likelihood of tenure for men (8%) than for women (2%) (http://scholar.harvard.edu/files/sarsons/files/gender_groupwork.pdf?m=1449178759). Papers authored by female economists also take longer to go through peer review (by six months). Within lecture halls, as elsewhere in academia, female professors are more often evaluated by looks and presentation than content. Add to this the gender pay gap in economics, and you get at least an impression that something is not entirely right. This echoes larger societal trends around gender for sure but it is nevertheless a problem, particularly for prestigious awards: prizes signal virtue, and so far this particular prize has identified virtue as existing among a very narrow set of traits (mainly white, mainly male). (Maybe Hayek was right: “the Nobel Prize confers on an individual an authority which in economics no man ought to possess”). Is this signal not polluting the perceptions of a potential pool of talented future economists? Is this not some form of implicit discrimination that may be harming the discipline (a la Becker)?

    There is also the connected issue of intellectual diversity. I, for one, think that it is in the interest of scientific disciplines to foster different ways of approaching and understanding the world. This is a very reasonable evolutionary strategy—paradigms are great, until they aren’t, and it’s always nice to have a backup plan in the event of epistemological catastrophe. The problem is that diversity is not the first thing that comes to mind when looking at the composition of the committee. Except for Gardenfors (a really interesting cognitive scientists—surprise, surprise re: Thaler), the members of the committee are very competent, extremely successful economists. But they are not ‘radical’ in any significant way. This might represent the prominence of certain forms of economic thought within the discipline, but it might lead to selecting laureates that are quite conventional. This does not have to be—it is not a ‘natural’ outcome of either economics of the organization of the prize. The Royal Swedish Academy of Sciences maintains programs on ecological economics (don’t know if an ecological economist was ever even considered for the award), and has some sociologists (e.g. Barbara Czarniawska, Robert Erikson, etc) and political scientists among its members, so the expertise are there to tap. There is nothing ‘natural’ or ‘neutral’ in the decision not to use these experts in the decision making process.

    On the second point, there is, of course, no such thing as a “neutral” ground for evaluating what economics should be. This is necessarily a normative statement. I am not pseudo-normative. I am openly normative. So many cool and interesting things have happened (and are happening) in the field of economics and interfaces with other disciplines (e.g. inequality, environment, computation, complexity, finance, technology, etc), that I just feel disappointed that the Committee has, once again, focused our eyes and attention on a relatively bland form of social psychology useful primarily for marketing. Surely, that is not what Nobel had in mind when he referred to awarding those who confer “the greatest benefit to mankind”.

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    Juan Pablo Pardo-Guerra

    October 13, 2017 at 8:10 pm

  7. As a non-economist, indeed, as a non-top economist, I’m in no position to evaluate that discipline.

    But sure, economics has a sex problem. Chicago has thirty odd professors and three women. Trying to fix the problem via the prize will only undermine its status, as well as the women/non-whites who subsequently receive the prize.

    Folks in favor of better sex/ethnicity outcomes probably need to be a bit more radical than they have been. Little “nudges” like hiring and prizing for diversity seem ineffective. Paradoxically, they may well increase the status of being white, i.e., because affirmative action increases the relative competition among white male candidates.

    Like

    Kevin M

    October 13, 2017 at 10:56 pm


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