Doing macroeconometrics

I just discovered – courtesy of the great man himself – David Hendry’s free textbook Introductory Econometrics: A New Approach on doing time series econometrics on macro data. I’ve not yet read the book, still less tried the exercises (which require OxMetrics of PcGive), but thoroughly approve for two reasons. First, it’s free – based on his lectures to 2nd year PPE undergraduates at Oxford, and assuming just a little statistical knowledge.

Secondly, as the introduction puts it: “[M]uch of the huge variation over long time periods in many aggregate variables does not fall under the purview of economic analysis, but is due to extraneous forces such as wars, changes in legislation, shifts in social mores, and technological, medical and financial innovations, which in turn are only partly affected by
economics. The current vogue for seeking micro-foundations for such variables in terms of a ‘representative’ agent who is simultaneously, employed, unemployed, growing up and retired, rich and poor, etc. sits uneasily with the historical evidence.”

Yep. Even the Bank of England is tiptoeing away from ‘micro-foundations’, it seems. But there are plenty of diehards still adhering to these models, and, worse, teaching them.

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The Great Escape

I’m very late to reading Angus Deaton’s excellent The Great Escape: health, wealth and the origins of inequality. There is lots to like about this book. It’s a clear and comprehensive summary of the state of knowledge about the history and present of two key dimensions of human well-being on earth. Even for economists who’re pretty familiar with the data and research, there are insights from the way Deaton sets out the evidence here. There were plenty of trends in the statistics I hadn’t known about before reading the book – one example is the recent increase in dangerous and deadly behaviour by young people (especially men) aged 15-34 in recent years compared with 70 years ago. (I suppose life presented enough external dangers then.)

I particularly liked the care he lavishes on the statistics – the sources of data, the conceptual problems, the uncertainties – all done in a way the general reader can understand (although it does make for some quite dense sections). As Deaton notes, the way statistics are defined and collected determine how policy problems are defined and addressed: they “are part of the apparatus that allows what political scientist James Scott memorably called ‘seeing like a state‘.

The book is also strong on the social and political context for the spread of ideas that improve health and wealth. As Deaton writes, “Diffusion of ideas and their practical implementation take time because they often require people to change the way they live.” In particular collective actions – affecting public health or education – are inherently political.

And then the new facts: did you know Louis Pasteur invented Marmite (and then licensed it to a British brewer?) Fabulous addition to the shiny nuggets of knowledge.

UPDATE: On the Marmite issue – Deaton’s Pasteur claim was challenged on Twitter:

MikeBenchCapon
@diane1859 Louis Pasteur invented Marmite? Wikipedia says it was some other guy: https://t.co/uD9JZyCT9d https://t.co/hs7x6S8oXx
06/04/2016 10:15

MikeBenchCapon
@diane1859 I’ve looked into this a bit more and I think I’m on Team Von Liebig. https://t.co/kw5BwP1DJa https://t.co/6Orq0mAOQf
06/04/2016 10:48

Better than (Karl) Polanyi

There was some debate on Twitter yesterday about Karl Polanyi’s The Great Transformation. Noah Smith linked to this post reporting some research (can’t say it sounds very rigorous) taken to indicate that economists don’t read this book. Summary finding:

“All in all, 66 persons responded (25 percent). This isn’t at all bad, considering that these were cold calls. Approximately 3 percent of economists at elite departments have read Polanyi (assuming that those that did not reply have not read him).”

Hmm. Not sure about that assumption. Anyway, Noah’s response was that economists tend to read new books. Dani Rodrik said: “Polanyi is a hard read and hard sell for economists. But he’s been incredibly influential for my own work.” I got some (very) mild Twitter stick for saying I had read it but wouldn’t set it for my students.

There are several reasons for this. Above all, the book is historically inaccurate – Deirdre McCloskey is the latest of many people to point this out in her new book, Bourgeois Equality. So if one reads it, it needs to be from a history of thought perspective. Secondly, it’s about social relations and culture, so not central for economics students even though I wholeheartedly agree that economists in general need more hinterland in other areas of social science and history.

It’s also a dense read, and there are better books to recommend to students to introduce them to the social context of markets. I’d say the original Albert Hirschman books have aged better – Exit, Voice and Loyalty for one – and aren’t marred by inaccuracies like The Great Transformation. Of more recent vintage, I think John McMillan’s Reinventing the Bazaar, James Scott’s Seeing Like A State and Michael Sandel’s What Money Can’t Buy cover the territory better.

 

Men’s studies

I’ve zipped through Myra Strober’s Sharing the Work, propelled both by enjoying this memoir of a life as an academic economist and by righteous anger. (In fact, I’m posting this review 3 weeks too early on the tide of this sentiment.*)

Professor Strober embarked on her career in the late 1960s, and was therefore one of the pioneering feminists to whom my generation owes so much. The book starts with her initial experience at Berkeley, being told by the department chairman that she will never get tenure – ostensibly because she lives in Palo Alto, in reality because she has children. The shock of realising the truth on her drive home across the Bay Bridge launches her into a commitment to feminism in general and to tackling the sexism of economics and the academic world in particular.

This is not an angry, polemical book at all. It’s a warm and readable memoir about family and friends as well as career and the politics of gender. Professor Strober grew up in Brooklyn in a loving family, and was the first to go to college and graduate school. She tells of the tensions of moving away from that background, and also the tensions in her marriage to an ambitious medical student and researcher – a marriage which eventually ended in divorce. Athough not at all bitter in the telling, the book is a reminder of how hard it was for a woman to combine career and children. (It still is – just think about the relatively small proportion of prominent women who have children.)

Thanks in part to the battles fought by earlier cohorts of women, the sexism we face in the workplace today is as nothing compared to those early days of the struggle for recognition. But the anger reading this book kicked in when I reflected on the continuing male dominance of economics in particular – our proportion of women being closer to computer science and mathematics than to any other social or natural science. Just as I finished reading Sharing the Work I happened upon this reflection on getting tenure written by Ellen Meara. Nor is this a US issue – it’s as true in the UK and EU. Economics has a women problem – as Justin Wolfers and Noah Smith among others have noted – and that means economics has a problem. A subject done by men about men can’t claim to be either social or a science.

There is, I think, some recognition of the problem in the economics establishment, and some well-meaning efforts to address it. However, these efforts do not yet extend to a wide acknowledgement of some fundamental points – above all that there is something wrong with the (mainly male) insiders’ definition of what makes for ‘good’ economics.

At the end of last year I sent a survey to about 30 teachers of economics in high schools, asking what they thought were the main barriers to girls choosing to study economics at university; for although the total number of people doing economics degrees has been rising in the UK, the proportion who are female has been declining. The single most popular reply was that it was the ‘character of the subject’. I recounted this to a highly sympathetic and non-sexist male colleague. “Well,” he replied, “It’s not clear to me that there’s anything to be done about this.” That’s the problem. If the trend continues, we’re going to have to rename economics ‘men’s studies’.

I admire Professor Strober for spending her career actively doing something about it. This is a book to inspire all female economists and give all male economists pause for thought. Pre-order it now!

* It’s 22 April for the Kindle edition – the hardback will be out in mid-May.