Archive for the ‘economics’ Category
Blogging is like exercise. It feels great as long as you stay in the habit. But once you stray, for whatever reason, boy is it hard to get back in the saddle.
Not only have I been a bad blogger, I’ve been cheating on you with another blog. But I swear it was just a one-time thing. Dan Hirschman and I wrote a piece on “The Influence of Economists on Public Policy” for the Oxford University Press economics blog.
Although we wrote it last week, it ended up being pretty timely given the chatter over Justin Wolfer’s recent Upshot piece about how economists came to dominate the conversation. If you’re interested in this sort of thing, Philip Cohen’s piece over at Contexts does an excellent job at contextualizing the Wolfers article, particularly with regard to ways sociologists might have somewhat more voice than the NYT chart gives them credit for.
Anyway, I have a growing list of things to blog about, not all of them involving economists, I promise, but an incredibly busy schedule at the moment — thank you, graduate admissions season. But I’m not planning on checking out just yet. This post is just me reminding myself that blogging isn’t really all that hard. More to come soon.
I swear I was already thinking about this before Fabio posted last night about the politics of academia. Noah Smith (of the blog Noahpinion and more recently Bloomberg) wrote an interesting piece yesterday titled “Economics Stars Swing Left.”
In it, Smith notes that, contra Fabio’s statement below, economics is pretty left-leaning these days. Among economists there was widespread, though not universal, approval for government stimulus after the recession; inequality has been the cause célèbre ever since Piketty (and, really, before; see Dan Hirschman’s excellent paper on how economics rediscovered income inequality). Development economics, with its focus on interventions that help the poor, has been a hot field for well over a decade. Tyler Cowen calls Piketty, Krugman, Stiglitz, Sachs, and Sen the five most influential economists today — hardly a bunch of free-marketeers.
This runs counter to the way many sociologists think about economics. Some sociologists (#notallsociologists) think that economics is dominated by members of the Chicago School who believe that actors are always rational, free markets always work, and if we just privatized everything the world would be a better place. That’s simply not the case.
But I would like to offer an amendment to Smith’s assertion about economics being totally left-leaning these days. I agree in a way. But what this misses is that the “left” that economists tend to be is a very particular kind of left.
In fact, this is a core argument of the book I’m writing — that as economics became more influential in U.S. policy, it changed what it means to be “left.” It’s also a prominent theme in Stephanie Mudge’s forthcoming book, which follows the development of market-friendly “third way” parties in Europe.
So what’s different about the kind of left that economists tend to be? As always, there are exceptions here — I’m painting with a broad brush. But to make some generalizations:
- It’s a kind of left that does believe in the power of markets, while acknowledging that markets frequently fail or at least work imperfectly.
- It is a technocratic sort of left, that sees market failure as a problem to be solved, and government as a way to solve that problem.
- It tends to prioritize political goals that make sense through the lens of economics: promoting growth, increasing efficiency, increasing income; these days, reducing inequality.
- It has a harder time engaging with goals that can’t really be understood using economics: individual autonomy, civic engagement, political empowerment.
- It’s a bit skeptical of the value of democratic politics. In fact, it kind of thinks that the world would be better if people would just shut up already and do what the experts are telling them. (This last part goes for many sociologists, too.)
- It tends to undervalue what can’t be measured: a sacred piece of land, the value of dignity in one’s work, the inherent worth of increasing knowledge. Or perhaps a better term than “undervalue” is “view as impractical to consider.”
In other words, it’s a type of “left” that looks very familiar in American politics today.
The central political position in economics, then, may be seriously concerned with inequality. It may care deeply about poverty and about development. And it may be solidly in favor of government intervention to solve these problems.
But even so, it is only one type of left. And while there are big chunks of it I agree with, I think we lose when this is the only left that is legitimate.
Tyler Cowen has his markets in everything. Some days I feel like we need another tagline: the commensuration of everything.
Cost-benefit analysis is ubiquitous in government. But the question of what counts as a cost and a benefit, and how to measure them, has been up for debate pretty much since people started tallying them up.
The FDA has, somewhat controversially, been calculating “lost pleasure” as one impact of its regulations. This came up most recently around requirements that restaurants post calorie counts of their menu items. Headlines crowed that consumers might lose some $5.27 billion in pleasure from giving up their high-calorie junk foods, although the value of the health benefits still, according to the FDA, justified displaying calorie counts.
The FDA analysis was based on economics — a working paper by Yale economist Jason Abaluck plus calculations by internal staff, according to Reuters — but a lot of economists disagree that it makes sense to think about it this way. Calorie counts are just providing information. So if you order differently upon being presented with this information — you give up your Gordita for the bean burrito — you’re basically by definition making a choice you prefer, and thus can’t be losing from the decision.
This was a second round in this battle for the FDA, the first having been over the monetary costs of the lost pleasure of smoking. Earlier this year, the FDA, in an analysis of the costs and benefits of graphic warning labels on cigarettes, similarly gave considerable weight to the lost pleasure of smoking — to the extent that the avoidance of death and disease caused by quitting smoking would have to be discounted by 70% to account for the loss in pleasure.
This did not go over well with many economists. In fact, an all-star team wrote a response paper detailing their disagreement with the analysis. What I found interesting was that here they made a slightly different argument than for calorie counts. It’s harder to argue that graphic warning labels just provide information. And if they’re not just providing information, perhaps smokers—rationally choosing to smoke but deterred by gross-out pictures of rotting lungs—are really losing consumer surplus.
So the critics bring addiction into it. Smoking is addictive and therefore not rational. Moreover, people often become addicted before they are adults. Perhaps some people have rationally chosen to smoke, but surely not those who were daily smokers by the age of 18. Since 70% of American smokers started smoking before they turned 17, at least that fraction of any lost consumer surplus should be ignored.
For those who started smoking as legal adults, the authors turn to behavioral economics. Addiction causes us to discount the future too heavily, rendering decisions irrational. Thus even the smokers who started later in life aren’t really losing consumer surplus, either.
I don’t follow current cost-benefit politics closely, but I’ve spent a fair amount of time reading about cost-benefit politics of the 1950s, 60s, and 70s. And what strikes me about this debate that is so similar to conversations that people were having about building dams or calculating the benefits of education or the polio vaccine is how fundamentally political they are.
There’s no avoiding it. In many cases, there’s simply no absolute way to determine that one method of calculating costs and benefits is better than another, and so people make methodological choices based on other factors. Sometimes those may be overtly political, as in, “I think the FDA should do everything it can to deter smoking and I’m going to come up with reasons that make sense for it to do that.” Sometimes they may be based on disciplinary politics, as in “This is my intellectual team, and I’m going to defend our position here, wherever that takes me.” And of course they can be less purposeful, too, and well-intentioned, but such decisions are still judgment calls.
Eventually, practitioners may reach consensus over which choices are the right ones, and then people don’t have to argue anymore over whether to value life based on people’s expected future earnings or on their willingness to pay to avoid risks (as they did some decades back). But just because the choices are settled doesn’t make them any less normative.
In the end, I tend to think these debates are more than a little insane, because they lend false precision to decisions that involve judgment call upon judgment call, and questionable assumption upon questionable assumption. But they matter. Cost-benefit calculations aren’t determinative, but they make a real difference in what decisions are seen as no-brainers, and which find their way into the dustbin. And powerful interest groups — hello, tobacco and junk food lobbies — have stakes in which methods get chosen, not just economists.
Myself, I’d vote for just listing multiple types of costs and benefits and quantifying them by order of magnitude, rather than pretending to an unachievable precision. That’s not likely to happen. If we’re stuck with trying to commensurate the incommensurable, though, at the very least we need to keep making explicit the choices that go into such calculations. That means laying out the assumptions — both normative and methodological — that lay behind them.
Last week, fivethirtyeight.com put up a piece titled, “Economists Aren’t As Nonpartisan As We Think.” Beyond the slightly odd title (do we think they’re nonpartisan? should we expect them to be?), it’s an interesting write-up of a new working paper by Zubin Jelveh, Bruce Kogut, and Suresh Naidu. It went up a week ago, but since it gives me a chance to write about three of my favorite things, I thought it was still worth a post.
Favorite thing 1: Economists
The research started by identifying the political positions of economists, using campaign contributions and signatures on political petitions. This suggested economists lean left, by about 60-40. Not surprising so far. Then Jelveh et al. used machine learning techniques to identify phrases in journal articles most closely associated with left or right positions. Some of these are not unexpected (“Keynesian economics” versus “laissez faire”), while others are less obvious (“supra note” is left, and “central bank” is right).
A recent alternative press article discusses the dismal economics of independent rock bands. As you can imagine, it’s bad:
In an interesting display of transparency, indie musical duo Pomplamoose wrote a detailed article, describing what it took financially to go on a 28-day tour.
To sum it up, the band made $135,983 in revenue and incurred $147,802 in expenses. So they lost $11,819. Ouch.
The economic issue is that bands have high costs and small audiences. But if you want a real chance at success, you’ll almost certainly need to expand the audience. So tours for starting bands are a form of investment. Additionally, there’s consumption. In the bigger scheme of life, a few thousand bucks is a small price to pay to be a rock god for a while.
In my social theory class, we had a week where we covered theories of sexual identity. A theme in writings from the 1980s or so is that the public adoption of a sexual identity is a political act. To say that one is gay or lesbian is to take a political position. Some people disagreed with that view. The two arguments go something like this:
- One needs to take an open political stance on one’s sexuality because not doing so allows repression. Call this the militant approach to identity.
- One needs to make their identity “regular” – queer people should not confront people so that being gay will be seen as an unremarkable identity. Call this the mainstreaming approach to identity.
This debate has a long history in queer politics, but there is one response that is usually absent, an argument based on game theory. One could argue that given the choice between militancy and mainstreaming, one should employ a strategy that combines militant and mainstream.
How does this argument work? Assume you have two “players” in the model – “society” and “LBGT.” The first mover is society and it can be nice or mean. But you don’t know what will happen. Maybe society is mean today, or nice. LBGT doesn’t find out until they encounter society and they have two responses – militant and mainstream. What does LBGT want? They want a repeated interaction with society that is nice. One strategy that will work is “tit for tat” – mimic what the first player does, hope he gets the message, and then they become nice.
Often people talk about how queers (or other minorities) should deal with allies and enemies. This model suggests an answer that is intuitive and supported by theory and research – tit for tat. Punish bad behavior and reward good behavior.
note: this is my first post in a while and I’m a bit rusty. I accidentally hit “publish” on a decidedly un-publishable version of this in the midst of editing and writing earlier. Sorry for the confusion.
I was asked a few weeks ago to comment on the fact that a French economist has been awarded the Nobel Prize this year. Frankly, the answer I gave was kind of lame:
… Sean Safford, an associate professor of economic sociology at Institut d’Études Politiques de Paris, the elite institute for political studies known as Sciences Po, said the awarding of the prize to Mr. Tirole, a professor of economics at the University of Toulouse in France, was notable for coming at a time of economic malaise and brain drain, when so many of the country’s brightest are emigrating elsewhere in Europe or to the United States. “The average French person, who is struggling to pay the bills, is not going to rejoice,” he said.
I’ve been mulling over what I meant to say since then. It started to come together when I read Paul Krugman’s lengthy reflection yesterday on a recent working paper by my colleagues Marion Fourcade and Yann Algan who, along with their co-author, Ettienne Ollion have written a little incendiary bomb of a paper titled The Supremacy of Economics. The paper documents the striking dominance that economics has achieved since the 1980s over sociology and political science in the United States. I read The Supremacy of Economics immediately on the heals of another of Marion’s papers, this one with Rakesh Khurana which documents the rise of financial economics within American business schools. Taken together the two papers paint a clear picture establishing that the discipline of economics — and financial economics in particular — has taken a confidently dominant position at in the United States which has given it unprecedented sway in the halls of policy-making and of commerce and proposes a compelling account of how it got there.
Krugman calls the tone of The Supremacy of Economics “jaundiced”. I would call it wistful. You get the sense that it could have gone another way if it weren’t for the social skill of certain individuals and the interlocking of particular ecologies at particular points in time. (If that wasn’t the tone Marion and the others meant to convey, then I’ll claim it for myself.)
If that alternative is possible anywhere, it should be in France where I now live and work, since — as is the case with its food, its wine and its health care system — here in France the nexus of academic, political and business elites is different. Very different.
In contrast to the story that Marion and her various colleagues tell about the US, academic disciplines (including economics) have not — yet — assumed the central role in France that they have in the American scene. As Bourdieu observed with far far greater skill than I could, French grandes ecoles are unapologetic factories of elite self-reproduction. Most teachers are graying wizened poobahs of their field. Politicians and policy-makers teach other politicians and policy-makers. Engineers teach other engineers. And researchers basically teach and train other researchers on how to be researchers, and thats all. Period.
As Marion and Rakesh show, American business schools in the 19th and early 20th centuries were organized along lines not all that different from the French model. There may have been economists at the helm, but the predominant logic was vocational in the sense that the teachers were mainly practitioners who saw their roles as socializing a younger generation to the norms of the field as situated within prevailing moral values of the day. (Moreover, the “economists” were of the old-school institutionalist variety, not today’s preening quant-jocks).
This begs the question: How did the academics break this pattern to lay claim to teaching, consulting and advice-giving well beyond their home “territory” in America? And how, ultimately, did the (financial) economists come to dominate it? The story Marion and Rakesh tell is fascinating and it is well told. It involves strategic action, social skill and a healthy dose of help from the Ford Foundation all couched within a nuanced theory that mingles Fligstein, McAdam, Bourdieu, MacKensie, Callon and Abbot almost in equal measure. Briefly put, there are two major steps that led America down that particular path. The first was the appearance of an alternative model pioneered at Carnegie-Mellon. Seeking to establish itself in a field dominated by Harvard and Wharton, Carnegie-Mellon hewed to a boldly discipline-based approach to business education. This alternative was amplified by the Ford Foundation which was seeking to differentiate itself within its own competitively saturated field. In the aftermath of the Great Depression, it was understood that previous models of training the elite had produced disappointing results. The Foundation latched on to Carnegie-Mellon’s idea and worked to diffuse it throughout the field. The second step brings in the University of Chicago which ran with the idea of discipline-based teaching, but focused it much more sharply on economics and in particular, on financial economics. The GSB then became the leading player in the “performative” turn which has brought financial economics into boardrooms, Wall Street, the halls of government and of course, the annals of social science.
Which brings us back to France.
France today faces what the Times (constantly) refers to as “persistent malaise.” The economy is flat. The European project is stalled. Its political elite are perceived as out of touch. There is a sense that the system around which France has been organized since 1946 is… just kind of disappointing. And this has led to a broad reflection on the process by which this country produces its political elite.
Sciences Po, where I work, sits at the center of that debate. In the years after the Second World War, General De Gaulle gave Sciences Po a special status that made it the primary path to entering the bottom rung of France’s administrative and political elite, the Ecole Nationale d’Administration. Sciences Po’s teachers were largely drawn from the ranks of the political elite itself. But the school has moved in recent years to beef up its academic credentials and in large part that shift has been justified by a familiar narrative: it is the disciplines, with a dispassionate and theoretically grounded approach, that should take the lead in defining the curriculum of elite education. (As an example: Dominique Strauss-Kahn taught Sciences Po’s main introduction to economics course up until his appointment at the IMF. Today its taught by… Yann Algan).
Here’s the thing, while Marion and Rakesh expertly situate their account within a smartly argued and largely persuasive theory of “linked ecologies”, I could not help feeling that there was an element of chance involved in the ultimate rise of financial economics in the US: The University of Chicago happened to become home to a troika of free-market true believers which included Milton Friedman. The result, ultimately, leads us to The Supremacy of Economics. Could there have been an alternative? One that was less dogmatic? One in which the other disciplines were not isolated and ultimately relegated to the junior leagues?
This brings me back to a French economist winning this year’s Nobel.
When I arrived at Sciences Po, I was impressed by the idea that sociology, political science and economics stood on a more equal footing here than had been the case, certainly, when I was on the faculty of the Chicago GSB. I felt the conditions existed here in which a real dialogue across these disciplines could produce a richer, more compelling approach. It was a place where what we call “economic sociology” could find a fresh home.
I still hope that. But that outcome is by no means inevitable. Winning the Nobel Prize in economics this year and the phenomenal success of Thomas Pickety’s book raise the profile of economics in this country precisely at a moment when political, business and academic elites are questioning the system and looking for the kinds of concrete answers that disciplinary economics provides. In other words, the conditions exist for the intermingling of intellectual streams which seems possible here to breakdown and head down a path toward a European version of The Supremacy of Economics.
Yet the very existence of the paper that motivated this post is a prime example of the kind of dialogue which seemed (and still seems) possible here suggestiing that that outcome could turn out differently. After all, Marion is a prominent young sociologist of world-class capabilities, Yann Algan is very much her equal in economics and the paper was written during Marion’s two-year sabbatical at Sciences Po. But the lesson that I take from Marion and Rakesh’s work is that economic sociology — or whatever you want to call this more egalitarian approach to social science — needs to “perform” itself. And it does that by building a curriculum capable of producing the next generation of elites.
My bottom line is: If economic sociology is to amount to anything, this kind of cross-disciplinary dialogue must continue and it must mature into something that does more than simply critique the hegemony of economics. What it must turn into is a curriculum.
The opportunity is there. But is economic sociology ready for prime time? (Oh, and does anyone have a good contact at the Ford Foundation?)