Archive for the ‘economics’ Category
The NY Times Opinion Pages has a forum on whether economists have too much influence. Personally, I actually think economists have a great deal to contribute. But when reading Diane Coyle’s contribution, she personified the extreme caricature of economists as disconnected. For example, Coyle wrote:
No government has a chief anthropologist or a corps of philosophers employed in its departments. The president has no Council of Sociological Advisers.
We actually do have a corps of sociologists in government who do an extremely important job – the US Census Bureau! And there actually is a high level committee where sociologists shape this extremely government agency. It’s called the Census Scientific Advisory Committee! And it actually has a bunch of sociologists on it such as NYU’s Guillermina Jasso, Michigan’s Barbara Anderson and Penn’s Irma Elo. Within the ranks of the US Census Bureau, there are actually lots of sociologists who work on policy reports and survey design, including some graduates of my own program. The Congressional Budget Office also employs a lot of social science graduates to do important work.
While Coyle may be right about philosophy, she is still wrong about anthropology. It is true that states do not have cabinet level anthropologists, many do actually employ anthropologists to study, manage, and interact with indigenous populations, which is an enormously important job. In Latin America, anthropologists are crucially important for Indian affairs. I don’t know where Coyle got her ideas when she implied that economics is the only social science discipline with a function in government , but I’m working with real data – not pie in the sky!
So last week, for me, was the first week of classes. But the week before that, I was in Austin to use the LBJ archives.
The LBJ archives are awesome. Of the 15 or so archives I’ve visited over the last 10+ years, they had hands-down the most helpful archivist I’ve ever met. (Allen Fisher, if you’re taking notes.) I was also amused that they’re a little competitive with the other presidential archives. I received a meaningful look when they learned that no one at JFK explained the details of the archives’ shared cross-referencing system to me. (“You’d be surprised how often that happens.”)
Anyway, the best find of the trip was the papers of Donald Turner, who was the first economist to run the Antitrust Division (1965-68). There were letters to all sorts of major players in law & economics, like Robert Bork. A letter of recommendation for Oliver Williamson, who very early in his career was Turner’s special economic assistant. A “P.S” on a letter from the Dean of Yale’s Law School: “Is Steve Breyer [then 27] as able as I think he is?”
But the most fun was the totally human part. The year before Turner became antitrust chief, he went on sabbatical at Stanford, where, as academics do, he rented the house of another faculty member who was also on leave — a young Bill Baxter, who would become Reagan’s antitrust chief some 15 years later. Turner kept a copy of his outgoing letters from that year, and they sound awfully familiar. Academics of the past — they’re just like us!
They complain about grading!
I’m not sure if these were left over from the fall semester at Harvard, or if Turner had to teach while he was on leave, but the 140 blue books staring him down in December caused a fair bit of grief. That one’s easy to relate to.
They complain about how their articles are going!
In 1965, Turner published a major article on conglomerate mergers, which caused him all sorts of anguish. The letters are full of agonizing over how hard he’s working on it, frustration with how long it’s taking, and the inevitable requests for deadline extensions. To top it off, there was a final kerfuffle over the copyediting. He sure must have been glad to see the back side of that one.
They take advantage of the bar!
Turner and Baxter, the two future antitrust chiefs, didn’t know each other well at the time that Turner rented Baxter’s house. In fact, it appears that they had never met in person. One of the funniest bits is the post-sabbatical correspondence tidying up the loose ends. Turner drank some of Baxter’s booze, and offered to reimburse him for it. Baxter had noted what they left on a card, but then misplaced the card. So he roughed it out: “[My] recollection is that you left about the same amount of gin and wine that we had left; but that about two fifths of bourbon, two fifths of scotch, and one fifth of cognac have not been replaced.” He called it $25, and Turner paid up. It’s always important to pay for your liquor.
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.