Rhetoric and reality in economics

There are plenty of ill-informed criticisms of economics, alongside the very valid criticisms of the subject. It’s frustrating if one wants to see the discipline move in desirable directions – a higher proportion of women and people who aren’t white & middle class, less ‘boys’ toys’ abstraction, more open (again) to history, sociology and other related subjects, etc – because responding to ill-founded critiques is such a waste of time. Yet the false myths need busting if real reform is to take place.

A recent article by Larry Elliott in the Guardian was outstandingly ill-informed. So much so that it prompted some of the UK’s most esteemed economists to write an excellent reply in Prospect. Their most important single point is, perhaps, that the econ-bashers are feeding the dangerous current in politics of disparaging expertise. We economists need to be duly modest about what we know, but we certainly know more than, say, some current members of the Cabinet.

I tweeted the link to the Prospect article, which led someone to come back on Twitter with this.

NelsonSmythe
@DianeCoyle1859 @prospect_uk Gonna throw a bit of Deidre McCloskey’s ‘Rhetoric of Economics’ in here: https://t.co/vyGzJiHRjx
21/12/2017 08:42

Here is the McCloskey quotation:

rhetSo I turned to my copy of McCloskey’s 1985 Rhetoric of Economics and particularly the postscript to the 1998 edition. There she is at some pains to correct readers of the 1st edition who’d concluded she is ‘against’ mathematics in economics, saying: “A lot of good work gets done in economics, new facts and new ideas. Economists are not stupid or lazy, not at all. I love the field. I belong to the mainstream.” Her target is what she describes as the ‘sandbox for boys’ games’ – ultra-mathematical and abstract – far from a wholesale criticism of maths in econ. Famously, she also condemns the unthinking worship of statistical significance – and indeed any economist worth their salt will also be absorbing the recent papers by Alwyn Young and by Ioannides et al in the Economic Journal.

Still, one can’t plonk The Rhetoric of Economics (remember, pub. 1985) down as a killer retort to the economists’ demolition of the latest dangerously misleading attack. As the Prospect economists note:

The way economics is done has been transformed in the past 30 years with an empirical revolution, meaning we now use fine-grained data on individuals, households and firms. In a recent survey of published work in top journals, over three quarters of papers analysed data collected either by the researchers themselves or from secondary sources. Economists provide evidence, increasingly using randomised control trials, or big data. Often this leads to theories being supported or knocked down: this is the bread and butter of modern economics.

My 2007 book The Soulful Science described a lot of the change since the 1980s this refers to. Perhaps it’s too much to hope for, but I do wish people who condemn economics would actually pay more attention to #whateconomistsreallydo

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No Ordinary Woman

I’ve really enjoyed reading No Ordinary Woman, a biography of Edith Penrose by her daughter-in-law Angela Penrose. It is a life story kind of biography – only one chapter (by Edith’s grandson Jago) covers her economic thinking in The Theory of the Growth of the Firm – but what a life.

There’s no question in my mind that, had she been a man, Penrose would be far more esteemed within the economics profession. I haven’t read The Theory of the Growth of the Firm (shame on me – got it out of the library now), and it seems it has been far more influential in management and business schools than in economics. It seems, from the chapter here, that it explores the firm as an institution, and the dynamics of the way firms shape the economic environment.  One can see how this is more at home in the business literature, valid (in fact, essential) as this kind investigation is.

But whatever its stature, Penrose had an extraordinary career as an empirical economist helping shape the field of study of multinational firms, an academic leader (head of the economics deparment at SOAS as it built its reputation, and later at INSEAD), and a public servant (serving on many public bodies and commissions after she and her husband settled in the UK). At the time the OPEC crisis erupted, she was just about the only academic who had studied the oil industry and the Middle East economies. She travelled widely, learnt Arabic and did some consultancy work in her spare time – and all this while bringing up her family and being a housewife to her husband, much-loved but clearly a traditional man of his era.

Anyway, from this affectionate biography, Penrose sounds like she would have been terrific fun and stimulating to know. And it is inspiring to read about a woman who accomplished so much against great odds. Next week in Manchester we’re hosting an event for 14-15 year old school girls to encourage them to do economics in the 6th form. Edith Penrose has to join the pantheon of female economists we’ve been preparing.

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Economics for good

Jean Tirole’s book Economics for the Common Good is out now and is highly recommended. As I had the privilege of helping prepare the English edition, I’ve read it with careful attention, and most appreciated Tirole’s ability to crystallise complicated issues in a straightforward way, combining surgical analysis with very clear explanation. This is too rare a skill among economists.

The first part of the book concerns the influence of economics and economists on society and the role of the market, followed by a section on what doing (good) economics involves, and also how economics is changing. There are then two chapters on organisation, the first on the relationship between state and market, the second on the role of business. These sections are in the same spirit as Dani Rodrik’s Economics Rules, although their experiences and examples differ. Here in Economics for the Common Good is an economist at the pinnacle of the profession (Tirole won the 2014 Nobel prize) giving a thoughtful, reflective account of what economics can properly contribute to – well, the common good. Although much of his work is highly technical, he has always been concerned with its application to practical challenges in organising society: “Academics must ..collectively aim to make the world a better place; consequently, they cannot refuse, as a matter of principle, to take some interest in public affairs.” If an economist has appropriate professional competence in some area, she has an obligation to take a position on it – while acknowledging that what is known changes and re-evaluation may always be necessary.

The final two sections of the book turn to applications of economics, big macroeconomic questions such as financial market stability or tackling climate change, and then applied microeconomic issues such as competition policy, digital platforms, intellectual property and the regulation of network industries. Given my own interests, this final section was riveting. No other individual economist has done more than Tirole to take forward the economic analysis of these kinds of areas, incorporating issues of asymmetric information, principal-agent problems, incentive compatibility, and so on. The final chapter, on sector regulation, is a must-read for anyone interested in this area. (I drew on it in a recent FT column.)

The book is non-technical, aimed at the general reader, and packed with examples. It does in parts require a careful read, but each sections and chapters stands being read alone, so one can dip into the book. There’s a nice publisher blog post in which Tirole explains his motivation for writing the book and what he hopes it can achieve.

It ends with an epilogue reflecting on the status of technical knowledge in a time of populism (the French edition was published early enoug in 2016 that it feels like a different era), and the even greater responsibility economists have to engage and communicate – “Economists must … with humility and conviction, harness economics for the common good.”

Price: £17.38
Was: £24.00
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Women in economics

There has been a big response to a column I wrote for the FT about the male domination of economics, following up Justin Wolfers’ recent one. My conclusion was:

The reputation of economics is already tarnished, even a decade on from the financial crisis, and this new evidence of entrenched discrimination will not improve matters. This is not a women problem, it is an economics problem. It is deeply embedded in the discipline’s culture and norms, and the profession’s senior men need to take it seriously.

Some senior men emailed to ask for suggestions. Here are some.

These come from a Twitter thread compiled by Jan Zilinsky (@janzilinsky):

1/ Some thoughts on gender biases in academia, following up on @JustinWolfers’ article / Alice Wu’s findings on sexist expressions on EJMR

2/ Causal evidence shows that even when full info about candidates’ past performance is provided bias against female candidates persists

3/ The experiment (How stereotypes impair women’s careers in science) is by @ErnestoReuben Paolo Sapienza @zingales pnas.org/content/111/12…

4/ Plenty of issues to dissect (low representation, disrespect online & offline…)

For the thread I want to focus on *unequal treatment*

5/ One thing that bothers me a lot is the co-authorship penalty. Heather Sarsons @saskatchewin shows men who coauthor more are not penalized

6/ but women are less likely to receive tenure if they coauthor more papers: scholar.harvard.edu/files/sarsons/…

7/ That paper is about outcomes in economics. On evidence that women benefit less from co-authorship in polisci see cambridge.org/core/journals/…

8/ The leaky educational pipelines signal more problems… brookings.edu/blog/brown-cen… and @DianeCoyle1859’s ft.com/content/6b3cc8…

9/ And when the path leads to professorship, imagine you are discouraged with comments such as ↡ washingtonpost.com/amphtml/news/w…

10/ Want to end the thread w/ some “what can be done” links. But many steps are tiny, as @cheng_christine said…:

11/ Let me try anyway. First, we can learn pay attention to other disciplines; see this @BetseyStevenson talk youtube.com/watch?v=vsvPg_…

12/ Second, at a minimum, as @Noahpinion wrote workplaces must be professional (why does it need to be said?!)

13/ Third, evaluation nudges could help. Not anonymizing papers/CVs, but moving toward more joint rather than separate assessments…

14/ Promising research shows people rely less on group stereotypes when making joint (not case-by-case) evaluations decisionlab.harvard.edu/_content/resea…

15/ Tools like the gender bias calculator seem fine, as long as there are users motivated to write fair letters…

16/ And it’d be great to eliminate some behaviors that range from baffling to outrageous. Copious examples were shared in the last 1.5 weeks

17/ Things like first-naming female faculty members; title-forgetting; off-color remarks about parenthood; etc…

18/ We could try valuing things other than prestige, as @cjwich pointed out: “As a field, we fetishize hierarchy. ‘Top 5 journals,’ ‘top 10 programs,’ who is/isn’t in the “club” 19/”

19/ Sometimes I lash out at the fashion police b/c the (gendered) focus on some economists’ wardrobe is ridiculous.

A number of people have suggested ending the anonymity of referees’ reports as this conceals biases – there is deep scepticism about the fairness of the process, which is seen as perpetuating privileged networks, mainly male.

Along with many of the female economists who have emailed me, I have observed a range of patronising behaviours – calling women by their first name, men not, is a common one as Jan notes. Offering ‘advice’ to lower one’s ambitions, in research, or submissions and so on. Asking women dispropotionately to do admin tasks, meetings, ‘service’ in the department.

I’d add:

  • senior men are the only people who can address the aggressive culture of economics seminars, which is unique as far as I know. Stop male colleagues from interrupting presenters frequently, rather than giving them space to present. Call people out on hostile, disparaging comments.
  • the ‘publish or perish’ culture for young academics makes it impossible for the primary carer of young children to achieve the expected publication targets; this is usually the woman even in apparently egalitarian couples. As Justin Wolfers has noted, the way policies operate may help men even more. The extension periods for new mothers are laughable, as everyone who has had children really ought to know.
  • I hope male economists would reflect on the recent discussion, acknowledge that the discipline has a problem, and think really carefully about their judgements about people. When you say ‘X is not very good’ and X is female, are you holding her to a different standard than you would a male colleague? The answer is almost certainly yes.
  • I agree about the comment in Jan’s thread about the hierarchy obsession. It is bananas to have only a Top 5 matter….

I hope these provide food for thought. I’ll be happy to update this post with other suggestions.

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Economics for a moral end

I’ve read Pigou’s Economics of Welfare, and I talk to students about Pigouvian taxes and subsidies, but never known anything about the man. So I enjoyed The First Serious Optimist by Ian Kumekawa. The author is a Harvard PhD history student (so kudos to him for having a book published so early in his career!), and this is definitely a historical biography rather than an economics book.

As an economist, and one getting specifically interested in welfare economics, I’d have preferred more about the economic ideas. But for less nerdy readers, there is plenty here on the intellectual trends. And the wider intellectual and political context of Edwardian England, the terrible decades of war, depression and war in the early 20th century, and the post-war swing to Labour and the welfare state, is portrayed very well.

At the end of the book, I decided Pigou the man was still a bit of an enigma, but perhaps someone from a privileged Edwardian milieu, who spent his entire adult life at Cambridge, is just a bit too alien. But the arc of his thinking from classical liberalism to active sympathy for the Labour government of 1945 is fascinating. And the tale is quite sad in the end, Pigou seen as a surly recluse, his star not only waning but utterly shot out of the sky by Keynesianism (and, as so often, Keynes comes across here as a brilliant but not very nice man).

(One is also left wondering how scholars of the future will ever write biographies now we don’t write letters to each other any more? Email exchanges, with their more telegraphic form, or skype conversations – these are how we discuss ideas with colleagues. I suppose conferences are recorded so the video of those formal occasions will be available. That, and the Twitter record? )

I like very much the way the book ends: ” His justification for his career, maybe for his very existence, was to serve a moral end. Perhaps it is this part of Pigou’s systematic framework – its self-conscious motivation – that present-day economists would do best to revisit.. …. It would mean accepting what Pigou had declared in 1908 that, ‘Ethics and economics are mutually dependent’ and that ‘Economics cannot stand alone’.”

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