Archive for the ‘economics’ Category
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?)
Orlando Patterson probably didn’t write the title of his Chronicle piece, “How Sociologists Made Themselves Irrelevant.” But it’s great clickbait, even if, as Jeremy noted over at scatterplot, the sociology self-hate “gets frankly tiresome.”
Patterson makes some fair points. But framing the question as “why sociologists failed” points attention away from a question that’s actually more interesting: “why did economists succeed?”
Patterson does gesture toward the centrality of economics to social policy. He talks about economists’ dominance of the Moving to Opportunity study and notes that, unlike sociologists, they’ve “had their say in debates over incarceration, gangs and violence, high-school dropout rates, chronic unemployment, and socioeconomic disconnection.”
But Patterson puts most of his focus on sociologists, who (he says) have turned away from policy. He reserves some secondary annoyance for the policymakers who have neglected sociology’s insights. But this misses an enormous piece of the story.
Near the end of James Heckman’s lecture on the scholarly legacy of Gary Becker, Heckman argued that Becker was a fine addition to the legacy of “Chicago economics.” He didn’t mean that Becker was a monetarist – the “Chicago school” of Friedman and his followers. Instead, he meant that Becker fit in well with the long tradition of great Chicago economic thinkers including not only free marketers (like Friedman) but also liberals (Paul Douglas), socialists (Oscar Lange), and weirdos (Thorstein Veblen). But what does that mean? Here is what it means:
- People know the whole field of economics, they aren’t just narrow specialists.
- Economics is not a parlor game. It is important.
- Empirical work is important and it is not devalued.
Thumbs up. But let me extend it. This Chicago attitude should extend to the whole of social sciences. People ask me, for example, why I was so damn harsh on the critical realists and the post-modernists. Why? Because what I do is important. It is empirical and it reflects what I’ve learned from absorbing the hard earned lessons of my predecessors. So when I see scholarship sink into a miasma of words, or the toy tinkering with cuteonomics, I can only conclude that the person is here to play games, not figure out how the world works. Excuse me while I get back to work.
Higher education has become dependent on human capital arguments to justify its existence. The new gainful employment rule for for-profit colleges, announced yesterday by the Obama administration, reminded me of this. It clarifies what standards for-profits have to meet in order to remain eligible for federal aid, which makes up 90% of many for-profits’ revenues.
Under the new standard, programs will fail if graduates’ debt-to-earnings ratio is over 30%, or if their debt-to-discretionary-earnings (income above 150% of the poverty line — about $17,000 for a single person) is over 12%.
Now, we could have a whole other conversation about this criterion, which is really, really, weak, since it no longer takes into account the percent of students who default on their loans within three years. By limiting the measure to graduates, it ignores, for example, the outcomes of the 86% of students who enroll in BA programs at the University of Phoenix but don’t finish in six years — most of whom are taking out as many federal loans as they can along the way.
But I want to make a different point here. More and more, we are focused on return on investment — income of graduates — as central to thinking about the value of college.
Psych experiments show that we tend to overvalue objects that we possess – according to a coffee mug experiment, we would be willing to sell one that we have at a certain price, but others would not be willing to pay that same price. What happens when the object is a non-human family member?
When negotiating the sale of their home, one Australian family was willing to give up their cat Tiffany to the new homeowners for $140,000 (about $120K in US dollars). Some readers of the article announcing this exchange felt their pets were priceless, while others pointed out that cats are territorial and may not tolerate moves.
Don’t expect some cats to reciprocate your affectionate feelings – according to one medical examiner, cats will consume your lips and other edibles should you expire in your home. Sweet dreams, kitty owners.
So the stock market has been freaking out a bit the last couple of weeks. Secular stagnation, Ebola, a five-year bull market—who knows why. Anyway, over the weekend I was listening to someone on NPR explain what the average person should do under such circumstances (answer: hang tight, don’t try to time the market). This reminded me of one of my pet quibbles with financial advice, which I think applies to a lot of social science more generally.
For years, the conventional wisdom around what ordinary folks should do with their money has gone something like this. Save a lot. Put it in tax-favored retirement accounts. Invest it mostly in index funds—the S&P 500 is good. Don’t mess with it. In the long run this is likely to net you a reliable 7% return after inflation, about the best you’re likely to do.
Now, it’s not that I think this is bad advice. In fact, this is pretty much exactly what I do, with some small tweaks.
But it has always struck me how, in news stories and advice columns and talk shows, people talk about how this is a good strategy because it’s worked for SO LONG. For 30 years! Or since 1929! Or since 1900! (Adjust returns accordingly.)
And yes, 30 years, or 85, or 114, are all a long time relative to human life. And we have to make decisions based on the knowledge we’ve got.
But it’s always seemed to me that if what you’re interested in is what will happen over the 30+ years of someone’s earning life (more if you’re not in academia!), you’ve basically got an N of 1 to 4 here. I mean, sure, this may be a reasonable guess, but I don’t think there’s any strong reason to believe that the next 100 years are likely to look very similar to the last 100. Odds are better if you’re just interested in the next 30, but even then, I’m always surprised by just how confident the conventional wisdom is around the idea that the market always coming out ahead over a 25- or 30-year period—going ALL THE WAY BACK TO 1929—is rock solid evidence that it will do so in the future.
Of course, there are lots of people who don’t believe this, too, as evidenced by what happened to gold prices after the financial crisis. Or by, you know, survivalists.
Anyway, I think this overconfidence in the lessons of the recent past is something we as social scientists tend to be susceptible to. The study that comes most immediately to mind here is the Raj Chetty study on value-added estimates of teachers (paper 1, paper 2, NYT article).
The gist of the argument is that teachers’ effects on student test scores, net of student characteristics (their value added), predicts students’ eventual income at age 28. Now, there’s a lot that could be discussed about this study (latest round of critique, media coverage thereof).
But I just want to point to it—or rather, broader interpretations of it—as illustrating a similar overconfidence in the ability of the past to predict the future.
Here we have a study based on a massive (2.5 million students) dataset over a twenty-year period (1989-2009). Just thinking about the scale of the study and taking its results at face value, it’s hard to imagine how much more certain one could be in social science than at the end of such an endeavor.
And much of the media coverage takes that certainty and projects it into the future (see the NYT article again). If you replace a low value-added teacher with an average one, the classroom’s lifetime earnings will increase by more than $250,000.
And yet to make such a leap, you have to be willing to assume so many things about the future will be like the past: not only that incentivizing teachers differently and making tests more important won’t change their predictive effects (which the papers acknowledge), but, just as importantly, that the effects of education on earnings—or, more specifically, of teacher value-added on earnings—will be similar in future 20-year periods as it was from 1989-2009. And that nothing else meaningful about teachers, students, schools, or earnings will evolve over the next 20 years in ways that mess with that relationship in a significant way.
I think we do this a lot—project into the future based on our understanding of a past that is, really, quite recent. Of course knowledge about the (relatively) recent past still should inform the decisions we make about the future. But rather a lot of modesty is called for when making blanket claims that assume the future is going to look just like the past. Maybe it’s human nature. But I think that modesty is often missing.