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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Between Francis and Trump, the religious right is going to keep losing

 

Neither (President?!) Trump nor Pope Francis is a liberal, despite what they or anyone else might say. Trump might have a quasi-liberal past, but he’s mostly a bigot misogynist racist with all sorts of pasts at this point, of which some, I assume, are good people. Francis is also no liberal, at least not on the social (read: sexual) issues that have generally mattered in the U.S. culture wars.

Yet what’s striking about both Francis and Trump is how they’ve shifted attention away from the social issues that have traditionally been a key element of conservative politics. That move has been happening for a while, especially for the cultural right. Well before the Supreme Court supported the right to gay marriage, an increasing amount of theologically conservative Christians distinguished themselves from the preceding generations’ politics.  These are folks of various religions who like Francis not because he’s a cultural liberal (he’s not!) but because he emphasizes economic and environmental justice rather than the sexual issues that have animated the American religious right. The change in focus makes Francis attractive to both religious and non-religious who think poverty and climate change are also “moral issues.”

It’s harder to explain Trump’s attraction. Cruz didn’t do great, but he did a lot better than people thought he would: clearly the culture wars aren’t over. There’s also pretty clear evidence that the more you go to church the less you like Trump, so those conservative Christians who support him tend to be “Christian-ish,” with their religion functioning as a badge of ethnic and cultural identity rather than as a marker of religious devotion. It’s an interesting connection to early modern Europeans’ separation of themselves from other races by their being “Christian,” and yet another indication that Trump’s win is a lot about the deep-seated racism still very much at play in American cultural life. There’s sexism there too, and all sorts of other forms of resentment motivating the kind of welfare hoarding Trump is pitching to disaffected whites. It’s noteworthy these folks are voting out of economic and racial resentment rather than the traditional concerns of social conservatism. (It’s of course the case that social conservatism, like everything else in United States politics, is racialized, though it’s striking how unsubtle, and even unnecessary, that link is for Trump.)

Both Francis and Trump ostensibly agree with social conservatives, but they’ve compelled many of them to change their emphases to issues that have nothing to do with their typical concerns. Of course, Francis fans are probably not the same people as Trump fans, and in some ways that’s the point: the culture wars just keep getting cut in different ways. Some warriors, like Rod Dreher, have suggested just giving up, retreating into like-minded communities until the Dark Ages are done. Others remain in for the long haul, but Trump’s win is even worse news for them than Obergefell. This isn’t a defeat at the hands of a too-powerful, out-of-touch bunch of judges. This is the voters who once composed “the moral majority.”  After the shifts towards economic and environmental justice from Francis  and his ilk, alongside the moves towards unapologetic ethnic nationalism from Trumpites, there’s not even a moral plurality left.

The culture war is still going strong.  The religious right, however, is not.

signaling theory and credentialing theory in sociology

A loyal reader asks me to comment on a recent exchange between Econlog’s Bryan Caplan and economics professor and blogger Noah Smith. Specifically, Noah Smith attacks Bryan for his strong defense of the signaling model of education. The theory asserts that the main reason that education correlates with income is that is a signal of intelligence and work ethic, not learned skills. I.e., employers like college graduates because they are good workers, not because they have useful skills.

Smith calls signaling theory a “fad,” even though the main papers were written by Arrow and Spence decades ago!! He also offers arguments in favor of human capital theory, which deserve their own response and have been debated in the literature. For example, he offers the argument that education provides networks. On this blog, MIT’s Ezra Zuckerman has argued that the overall explanatory power of social networks is weak. UNC’s Ted Muow is also a bit skeptical about the value of networks in labor markets.

But I want to step back – what do sociologists think about human capital and signalling? Well, it’s safe to say that opposition to human capital is not a fad. A core theory in the sociology of education is Randall Collins’ credentialing theory. And it’s been around for decades. On this blog, we had a discussion of signaling and it was split – about half the readership (which is mainly soc and management PhD students and faculty) thought that the education/income correlation is due to signalling. Furthermore, sociologists such as Richard Arum and Josipa Roska have documented the lack of learning in college, which strongly supports signalling.

So it’s not a fad, Critiques of human capital are an important part of economics and sociology. The debate will continue.

50+ chapters of grad skool advice goodness: Grad Skool Rulz ($2!!!!)/From Black Power/Party in the Street!!

ka-ching kitty!

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.

The real estate agent is especially happy about his commission, presumably

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.

money, money, money … at Yale

Yale is hosting a conference on $$$, which is open to the public, next Fri., Sept. 12th at Yale.

The line-up is both impressive and exciting, not least of all because it involves our orgtheory crew plus beloved colleagues and dear orgtheory readers!

Friday, September 12, 2014
Hosted by:
Nina Bandelj ~ Sociology, University of California at Irvine
Daniel Markovits ~ Yale Law School
Frederick F. Wherry ~ Sociology, Yale University

With papers from:
Bruce Carruthers ~ Sociology, Northwestern University
Christine Desan ~ Harvard Law School
Nigel Dodd ~ Sociology, London School of Economics
Akinobu Kuroda ~ Institute for Advanced Studies on Asia, Tokyo
Simone Polillo ~ Sociology, University of Virginia
Akos Rona-Tas ~ Sociology, University of California at San Diego
Alya Guseva ~ Sociology, Boston University
Rene Almeling ~ Sociology, Yale University
David Grewal ~ Yale Law School
Kieran Healy ~ Sociology, Duke University
Marion Fourcade ~ Sociology, University of California at Berkeley
Supriya Singh ~ Sociology, RMIT, Australia
Stephen Vaisey ~ Sociology, Duke University
Shane Frederick ~ Psychology, Yale School of Management
Daniel Markovits ~ Yale Law School

SPECIAL SESSION:
The Social Meaning of Money
Turns 20
Nancy Folbre ~ Economics, University of Massachusetts
Arlie Hochschild ~ Sociology, University of California at Berkeley
Eric Helleiner ~ Political Science, University of Waterloo
Bill Maurer ~ Anthropology, University of California at Irvine
Jonathan Morduch ~ Economics, New York University

Co-Sponsored by The Office of the Provost, Yale University ~ Yale Center for Cultural Sociology
Center for Organizational Research at the University of California, Irvine
Yale Center for Comparative Research ~ Yale Law School ~ Yale School of Management

Here’s the program:

Money Talks: A Symposium at Yale
Friday, September 12, 2014

Venues:
Morning Sessions:Yale School of Management, Evans Hall, 165 Whitney Avenue. Class of 1980 Classroom, 2400
Afternoon sessions: Yale Law School, 127 Wall Street, Room 127 (TBC).

9:00 ~ 9:15 AM	Welcome Richard Breen ~ Yale University, Chair of the Department of Sociology Daniel Markovits ~ Yale Law School, Symposium Co-host Frederick Wherry ~ Yale University, Symposium Co-organizer Nina Bandelj ~ University of California, Irvine, Symposium Co-organizer
9:15 ~ 10:45 AM	Panel 1: Money and Markets Bruce Carruthers ~ Northwestern University Some A-B-C’s of Financial Fables: Rethinking Finance and Money Akinobu Kuroda ~ Institute for Advanced Studies on Asia, University of Tokyo The Characters of Money: A Historical Viewpoint from Complementary Currencies Simone Polillo ~ University of Virginia A Macro-Sociology of Money Alya Guseva ~ Boston University & Akos Rona-Tas ~ University of California, San Diego Money Talks, Plastic Money Tattles Moderator: Alice Goffman ~ University of Wisconsin, Madison
10:45 ~ 11:00 AM	Coffee Break
11:00 AM ~ 12:30 PM	Panel 2: Money and Morals Rene Almeling ~ Yale University Money, Technology, and Bodily Experience: Comparing the Production of Eggs for Pregnancy or for Profit David Grewal ~ Yale Law School The Meaning of the Mirage: Money and Sin in Early Political Economy Marion Fourcade ~ University of California, Berkeley & Kieran Healy ~ Duke University Seeing Like a Market Supriya Singh ~ RMIT University, Australia Money and Morals: The Biography of Transnational Money Moderator: Olav Sorenson ~ Yale School of Management
12:30 ~ 2:00 PM	Lunch Break
2:00 ~ 4:00 PM	Panel 3: The Social Meaning of Money, 20 Years Later Nancy Folbre ~ University of Massachusetts, Amherst Accounting for Care Arlie Hochschild ~ University of California, Berkeley Going on Attachment Alert: Paying Money, Managing Feeling Eric Helleiner ~ University of Waterloo, Canada The Macro Social Meaning of Money: From Territorial Currencies to Global Money Bill Maurer ~ University of California, Irvine Zelizer for the Bitcoin Moment: The Social Meaning of Payment Technology Jonathan Morduch ~ New York University Economics, Psychology, and the Social Meaning of Money Moderator: Nina Bandelj ~ University of California, Irvine
4:00 ~ 4:15 PM	Coffee Break
4:15 ~ 6:00 PM	Panel 4: The Moralities, Solidarities, and Meanings of Money Stephen Vaisey ~ Duke University What Would You Do For a Million Dollars? Shane Frederick ~ Yale School of Management Positional Concerns Christine Desan ~ Harvard Law School Money as a Constitutional Practice Daniel Markovits ~ Yale Law School Economic Inequality and the Meaning of Money Nigel Dodd ~ London School of Economics Is Bitcoin Utopian? Moderator: Frederick Wherry ~ Yale University
6:00 PM	A Conversation With Viviana Zelizer Moderators: Nina Bandelj ~ University of California, Irvine & Frederick Wherry ~ Yale University
6:30 PM	Reception ~ Yale Law School, The Alumni Reading Room

cfp on “The Rise of Finance: Causes and Consequences of Financialization” at Socio-Economic Review journal

Now that the spring semester is ending, some of our readers are kicking the manuscript preparations into high gear, judging from the uptick in the number of review requests that I’m starting to receive.   For those of you looking for a special issue to target as an author or a reader, I wanted to call attention to a call for papers in the Socio-Economic Review that might be of interest (click this PDF for more info: SER 2015 Special Issue CfP on Financialization):

 Call for papers

“The Rise of Finance: Causes and Consequences of Financialization”
Guest Editors
Sabino Kornrich, Emory University
Alex Hicks, Emory University
Timeline
Submission deadline: July 21, 2014
Publication of Special Issue in Socio-Economic Review: 2015

Background
The financialization of the economy, as seen in the growing importance of financial markets and the shift from industrial to financial capitalism, stands out as one of the largest changes in the structure of the economy over the last half of the twentieth century (Krippner 2005, 2012; van der Swaan 2014). Indeed, van der Swaan’s (2014) review points to shifts in the structure of accumulation, the role of financialization in firms’ attention to shareholder value, changing individual and household approaches toward everyday life, and related changes in institutional structures. One important line of research focuses on the increasing concentration of profits in financial firms and its consequences for inequality due to its influence on top incomes, the labor share of income, and the distribution of income and profits across sectors (Tomaskovic-Devey and Lin 2011; Volscho and Kelly 2012; Kristal 2013). Even in firms which focus primarily on non-financial activities, financial divisions have become more important (Krippner 2012). While existing research has convincingly demonstrated the rise of financialization in the USA, fewer studies have examined these processes in other countries (e,g, Akkemik and Özen 2014, Godechot 2012). An important agenda remains to understand the extent to which the patterns and dynamics of financialization can be generalized or differ significantly across different types of capitalism, as well as how these have potentially reshaped global economic interdependencies.
Key Themes
This special issue aims to build on and extend this research by enlarging the explanatory focus. We seek contributions that either add empirical insights and advance theory in relation to the underlying causes of financialization, the consequences of financialization for
individual-level and organizational outcomes, and extending the focus of financialization
research beyond the United States and into a broader frame of comparative political
economy.

you no exchange with us? slither home, body snatcher

Off-list, Howard Aldrich penned Brayden and me a heartfelt lament about the one-sided exchange between sociology and economics. He described a recently published article in which an economist urges fellow economists to conduct research on how organizational identity motivates workers to work hard because (surprise!) monetary incentives aren’t sufficient.

With Aldrich’s permission (but without naming the offending article and author), I am excerpting his thoughts here:

“What is heartbreaking is that there’s no sign in this article that the author has any clue that sociology and management & organization theory have been concerned with such questions for decades, or that there is a rich and robust literature on organizational culture, social identity, and so forth. Although the author mentions the social psychology of identity at one point (Ed. Note: plus 2 mentions of March and Simon’s work as “seminal”), all but a handful of the 60+ references are to the literature in economics.

Several years ago, I had a similar experience when I read a special issue of an entrepreneurship journal that was devoted to entrepreneurial teams. It contained an economist’s algorithmically driven analysis of why and how entrepreneurial teams should form. Plenty of other economists were cited, but he seemed clueless to the fact that, five years previously, a couple of sociologists (namely, Martin Ruef and me, together with a business administration scholar) had written an empirical paper, based on a nationally representative sample, addressing precisely some of the idle speculation he’d written up in his paper. I was so irritated that I called up the special issue editor, who apologized profusely but offered no explanation.

So, for economics, all that matters is what other economists have done. I’m sure this simplifies the literature search process, but one can imagine that some insights might be sparked if economists were occasionally to dip into the literature of other fields. For example, what came to mind immediately upon reading the first article was Bill Ouchi‘s rather famous – – at least to me – – book from 1981, Theory Z, which was one of the first books to ride the wave of the “organizational culture” phenomena in organization and management studies.”

In a follow-up email, Aldrich opined the desire for economists either to share or return home:

“I just want them to either go back to their own village or else begin engaging in a more fair exchange….The problem is that I doubt very much whether we can ever create a truly equitable exchange with economists – – I’ve seen the same pattern for years, and indeed Chick Perrow actually talked about something like “invasion of the body snatchers” in talking about when economists came into our field.”*

Since economists are supposedly prone to practicing what they preach, could it be that the discipline of economics is ill-suited to contributing to a knowledge commons?

Don’t close your eyes, sociologists and organizational researchers

systemic risks: too big, too complicated or too central?

Duncan Watts had an article in the Boston Globe last week (hattip: Karl Bakeman) looking at how the network structure of the banking industry might have amplified the financial crisis.  Watts comments:

Traditionally, banks and other financial institutions have succeeded by managing risk, not avoiding it. But as the world has become increasingly connected, their task has become exponentially more difficult. To see why, it’s helpful to think about power grids again: engineers can reliably assess the risk that any single power line or generator will fail under some given set of conditions; but once a cascade starts, it’s difficult to know what those conditions will be – because they can change suddenly and dramatically depending on what else happens in the system. Correspondingly, in financial systems, risk managers are able to assess their own institutions’ exposure, but only on the assumption that the rest of the world obeys certain conditions. In a crisis, it is precisely these conditions that change in unpredictable ways.

He suggests that regulators assess a company’s network position and take action to ensure systemic viability:

On a routine basis, regulators could review the largest and most connected firms in each industry, and ask themselves essentially the same question that crisis situations already force them to answer: “Would the sudden failure of this company generate intolerable knock-on effects for the wider economy?” If the answer is “yes,” the firm could be required to downsize, or shed business lines in an orderly manner until regulators are satisfied that it no longer poses a serious systemic risk. Correspondingly, proposed mergers and acquisitions could be reviewed for their potential to create an entity that could not then be permitted to fail.

This is a very interesting idea.  But it also raises a number of intriguing questions worth fleshing out in a little more detail:

what can performativity do for you?

Hello Orgtheorists! I am new to blogging but I have been enjoying this blog for a while so I am really excited at the idea of joining your conversations. Thanks to Teppo, Brayden, Kieran, Fabio and Omar for letting me blog here.

I was not planning to start with a long post on the pro and cons of performativity, self-fulfilling prophecies, etc…but after Teppo’s recent post, I couldn’t resist…so here is my 2 cents on this debate.  Going through the comments that followed Teppo’s posting on performativity, and similar debates on orgtheory (here, here, and here), socializing finance, organizations and markets, and old- fashioned journal articles (AJS, AMR, OrgScience), I was struck by the number of different conversations/debates/questions we manage to weave around this one perspective (notice I don’t use the t word). I started listing them and I counted at least eleven major debates:

1. Realism and Constructionism
2. Positivism and Interpretivism
3. Nature and nurture
4. Materialism and Idealism
5. Voluntarism and Structuralism
6. Rationality debate
7. The debate on economics (and economists): How did economics become the dominant social science? Is economics wrong? Is it evil? Are economists self-interested? Are B-Schools spreading dangerous (economic) theories?
8. Is the crisis ultimately the failure of Chicago-style economics?  Are economists describing the economy or designing it? Or both?
9. The Materiality debate: What is the role of technology (and other material artifacts) in the functioning of markets (and organizations)? What is the role of models, formula, in shaping the functioning of markets (and organizations)? Did a formula kill Wall St.?
10. Do financial incentives in organizations work? When? What are their limits?
11. Is performativity a theory? How is performativity different from traditional self-fulfilling prophecies? How is it different from institutional theory? Commensuration? Is performativity the future of economic sociology?

I am sure I am missing some of the key debates, and I hope readers will jump in and add to the list of debates and questions that the performativity debate has touched. It feels like performativity has become a sort of Rorschach test for organization theorists, economic sociologists, (few) economists and other social scientists who project on it their worldviews, their knowledge, their biases and enter heated intellectual duels without clear winners. Taken individually, these questions are all interesting and could be treated scientifically but all together they become a hairy mess of (ideological) assumptions, ontological and epistemological positions, methodological preferences, and ultimately the debates generate a déjà-vu feeling that might actually only reinforce our original positions (a classic example of Lee Ross’ biased assimilation).

I wonder if we are not asking too much from performativity?

Debates one through six  have been discussed for centuries and will never be “resolved,” and I personally hope they will never be resolved, because the creative tension between these positions drives theoretical imagination, and, in my opinion, generates more interesting social science (see Abbott’s Chaos of Discipline for a wonderful discussion of this process). Also, why should we expect performativity to provide “the” answer to these debates? Also, why should we expect “one” answer? For instance, among scholars in the performativity arena, I bet that you will find both hard core constructionists-interpretivists, and scholars who would tend more towards a realists-positivists approach (for instace, I don’t consider myself a pure constructionist, but I know Teppo and Nicolai label me as such…), so which one is the “performativity” position?

Critics will point out that the root of these problems is that performativity has not clarified its theoretical mechanisms, defined its scope conditions well enough, and of course, provided enough empirical evidence, so it is easy to poke holes into it. My AMR paper with Jeff Pfeffer and Bob Sutton was, among other things, an attempt to tease out the mechanisms and define the scope conditions of self-fulfilling prophecies. Much of the debate that followed was focused on the polemical qualities of the paper, on whether we like or economists or not (not a very interesting question: of course we do! of course we admire their work! And btw, last night I had dinner with three academic economists, all Princeton PhDs!), rather than its modest attempt to systematize some of the performativity ideas.  Furthermore, not enough good quality empirical work has been published to better articulate the theoretical ideas and test them. The good news is that there is much development on both fronts, and I am optimistic about the future development of these ideas (many orgtheory readers are working on these problems, and this is already a key sign that something is moving!)

At the same time, I don’t think we are ever going to solve many of the debates listed above, and definitely it is not productive to address all of them together. So my suggestion will be to narrow down the scope of the discussions around performativitiy, and to do that,  in my postings here, I will start from a different set of questions from the one Teppo asks. Rather than asking whether performativity is the future of economic sociology, or whether performativity is a good theory (or a theory at all), I would rather ask:

• Has performativity research been useful in my understanding of organizations and markets?
• How can perfomativity research inform my own work on organizations and markets?

I believe that these questions might help us identify whether and how performativity is helping us do better social science. I will address these questions in future posts  but for now I would like to get your answers:  What has performativity done for you?

national health care and american competitiveness

Greg Mankiw points toward a recent CBO report arguing that a national health care system would not improve American companies’ competitiveness. His case essentially rests on the following sentence in the report:

…cash wages and other forms of compensation would have to rise by roughly the amount of the reduction in health benefits for firms to be able to attract the same number and types of workers.

The upshot: national health care would turn out to be a zero sum game as far as competitiveness is concerned because employers would end up having to pay more to attract employees.

Mankiw focuses in on a very narrow definition of ‘competitiveness’: for him, it all seems to come down to labor costs.  The thing is, competitiveness can be defined in a few ways.  One is increasing the long term endogenous growth potential of the economy relative to other advanced economies. Another is increasing the productivity of American workers vis-à-vis others countries’ workers.  Mankiw is likely right that health care reform would not improve competitiveness if you restrict it only to mean labor costs.  But in either of the alternative senses, health care reform would plausibly contribute to American competitiveness.