Tag Archives: economics

Power and economics

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My esteemed colleague Adam Ozanne has written a very interesting, short book on the strange absence of the concept of power from mainstream modern economics. The book, [amazon_link id=”1137553723″ target=”_blank” ]Power and Neoclassical Economics[/amazon_link], argues that the fact that economics ignores power in social relations has also affected other social sciences, especially political science, as they have adopted techniques and approaches used in economics.

[amazon_image id=”1137553723″ link=”true” target=”_blank” size=”medium” ]Power and Neoclassical Economics: A Return to Political Economy in the Teaching of Economics[/amazon_image]

What explains the lacuna? Adam dates it to, first, the marginalist turn in economics in the 1870s, which started the process of abstracting from the particulars of reality into formalism; and then to the ordinalism of the 1930s and Lionel Robbins’ insistence that ‘positive’ and ‘normative’ economics could be separated. The new welfare economics of the 1950s finished the job. Indeed, Arrow’s famous impossibility theorem seemed to conclude that we can’t say anything practical about social choice. As the book puts it: “It must seem strange to non-economists that economic and social choice theorists have dug themselves into such a deep hole (though a very tidy, immaculately constructed hole) that they cannot even distinguish between rich and poor, but that appears to be the case.”

However, as Adam points out, an alternative interpretation of Arrow is that the actual social ordering that emerges is a function of the exercise of power (and in a way Sen has made the same point in saying other kinds of information apart from individual utilities can enter the story). The book goes on to argue that the fact that mainstream economics has nothing to say about the distribution of income and wealth is an important part of the explanation for cynicism about the subject – both among the general public and students like our university’s active and enthusiastic Post-Crash Economic Society.

The final chapters of the book discuss how power might be incorporated into economics. It notes that there are signs of stirrings in the ‘New Political Economy’ of economists such as Tim Besley and Torsten Persson and the institutional economics of others such as Daron Acemoglu and James Robinson. Adam suggests an interesting definition of power in economics as an analogy with force in physics, a dynamic that moves the social outcome in the direction of specific groups. He reinterprets classic social welfare functions as ‘political economy functions’ in a way that means they can be used in conventional general equilibrium approaches. His approach can be incorporated into co-operative game theory, a bit of the toolkit economists should feel comfortable with.

The book concludes: “Most economists are in denial about the relevance of power to economics and their own ability to fully address, let alone answer, the For Whom question so long as they neglect power. This is reflected in the textbooks they write and the teaching they offer students, and has not changed even though the sub-prime and eurozone crises of recent years provide clear evidence of the failure of many of their models, in particular dynamic stochastic general equilibrium (DSGE) models. ….. [T]here are grounds for believing that students and the wider public are increasingly disenchanted by what is on offer.” He continues that the normative and the positive need to be distinguished but that economists cannot and should not ignore the former.

I very much liked the book – ie. warmly agree with the general argument. Surely one of the longer-term outcomes of the crisis will be – must be – to turn economics back to political economy. I’ll be thinking more about the specific means of incorporating power in economics that the book suggests; it certainly looks promising.

My one (quite major) reservation about this book is its price (currently [amazon_link id=”1137553723″ target=”_blank” ]£34.45 on Amazon[/amazon_link]). The publicist explained to me that it’s a series intended to be read as e-books, but the Kindle price is still £30, and this for a 110 page book. Piketty’s 700-page [amazon_link id=”B00I2WNYJW” target=”_blank” ]Capital in the 21st Century[/amazon_link] is less than £20 in hardback! So come on Palgrave, do your bit for economics by reducing the price and testing the elasticity of demand. Meanwhile, everyone will have to order it from the library.

Time for more Keynes

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In a blog post yesterday Benjamin Mitra-Kahn – now chief economist at IP Australia but perhaps even better known as the author of a superb thesis on the history of defining and measuring the economy – pointed out that Keynes’s works are now out of copyright. The copyright has been held by the Royal Economic Society, which has published the Collected Writings in a handsome series ([amazon_link id=”1107673739″ target=”_blank” ]The General Theory[/amazon_link] is Volume 7) (RES members can get them online).

[amazon_image id=”1107673739″ link=”true” target=”_blank” size=”medium” ]The Collected Writings of John Maynard Keynes: Volume 7[/amazon_image]

However, there is no reliable, reasonably priced paperback version at the moment of Keynes’s major works. (Be warned – expert readers say the paperbacks that pop up on Amazon (pirate editions until this week) are poorly produced and full of inaccuracies.)

So as well as Benjamin Mitra-Kahn’s suggestion of putting all of the works and collected papers online – a terrific idea, practical proposals needed – it would be great if a publisher would pick up the need for a paperback classic version so we can get students reading them for themselves again.

Men’s studies

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I’ve zipped through Myra Strober’s [amazon_link id=”B01CRU4QV4″ target=”_blank” ]Sharing the Work[/amazon_link], 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.

[amazon_image id=”B01CRU4QV4″ link=”true” target=”_blank” size=”medium” ]Sharing the Work: What My Family and Career Taught Me about Breaking Through (and Holding the Door Open for Others)[/amazon_image]

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 [amazon_link id=”B01CRU4QV4″ target=”_blank” ]Sharing the Work[/amazon_link] 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. [amazon_link id=”0262034387″ target=”_blank” ]Pre-order it [/amazon_link] now!

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

Economics and evolutionary science

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I recommend this Evonomics post about economics post-2008, and the kind of re-evaluation that’s been going on among economists, citing somewhat critically Noah Smith and also Dani Rodrik’s excellent [amazon_link id=”0393246418″ target=”_blank” ]Economics Rules[/amazon_link]. Author David Sloan Wilson complains: “All good, but there is something missing from the internet links that I just provided—any discussion of evolutionary theory.”

[amazon_image id=”0393246418″ link=”true” target=”_blank” size=”medium” ]Economics Rules: The Rights and Wrongs of the Dismal Science[/amazon_image]

I couldn’t resist preening a little, for my 2007/2010 book [amazon_link id=”B004XCFI2Q” target=”_blank” ]The Soulful Science: What Economists Really Do and Why It Matters[/amazon_link], has a whole chapter, Murderous Apes and Entrepreneurs, about the importance of the links between economics and evolutionary biology. This also forms one strand of my 2012 Tanner Lectures. In other words, I wholly agree with the argument of the Evonomics post, but thhink there has been a little bit more progress than it acknowledges.

Of course, formal evolutionary theorising is not part of the conventional economics mainstream, although it has some distinguished practitioners; but having said that informally it widely informs much business economics. There are also some leading economists who have been thinking about the overlap between economics and evolution. The ‘murderous apes’ of the chapter title was inspired by Paul Seabright’s brilliant [amazon_link id=”0691146462″ target=”_blank” ]The Company of Strangers: A Natural History of Economic Life[/amazon_link]; Wilson cites Robert Frank’s [amazon_link id=”0691156689″ target=”_blank” ]The Darwin Economy[/amazon_link]. There is also an active strand of research on complexity theory, which [amazon_link id=”0571197264″ target=”_blank” ]Paul Ormerod[/amazon_link] and [amazon_link id=”0415568552″ target=”_blank” ]Alan Kirman[/amazon_link] among others have written about.

[amazon_image id=”B004XCFI2Q” link=”true” target=”_blank” size=”medium” ]The Soulful Science: What Economists Really Do and Why It Matters[/amazon_image] [amazon_image id=”0691146462″ link=”true” target=”_blank” size=”medium” ]The Company of Strangers: A Natural History of Economic Life[/amazon_image] [amazon_image id=”B008W4ASGC” link=”true” target=”_blank” size=”medium” ]The Darwin Economy: Liberty, Competition, and the Common Good[/amazon_image]

Economics will have to be consistent with what we learn about human behaviour and decisions from other human sciences, not just the other social sciences, but also evolutionary biology, cognitive science and psychology.

Non-rational economic man

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This past couple of days I’ve been attending the IDEI/Toulouse School of Economics digital economics conference, where the Suzanne Scotchmer Memorial Lecture was given by Joshua Gans.

Josh has a new book out soon (March), definitely one to look forward to, The Disruption Dilemma. The blurb says: “Almost twenty years ago Clayton Christensen popularized the term in his book [amazon_link id=”142219602X” target=”_blank” ]The Innovator’s Dilemma[/amazon_link], writing of disruption as a set of risks that established firms face. Since then, few have closely examined his account. Gans does so in this book. He looks at companies that have proven resilient and those that have fallen, and explains why some companies have successfully managed disruption — Fujifilm and Canon, for example — and why some like Blockbuster and Encyclopedia Britannica have not. Departing from the conventional wisdom, Gans identifies two kinds of disruption: demand-side, when successful firms focus on their main customers and underestimate market entrants with innovations that target niche demands; and supply-side, when firms focused on developing existing competencies become incapable of developing new ones.”

[amazon_image id=”0262034484″ link=”true” target=”_blank” size=”medium” ]The Disruption Dilemma[/amazon_image]

However, his lecture was on his paper on the market for scholarly attribution, which interprets the assignment of co-authorship between senior and junior scientific researchers in terms of a signalling model. It was very interesting and perhaps sheds some light on the growing trend toward larger numbers of co-authors on science papers. The day afterwards, Justin Wolfers wrote in the New York Times about a new paper by Heather Sarsons showing among other results that women get zero credit for papers on which they are listed by co-authors (unless the others are also women). While this is a finding that will not surprise any female academics, it’s also kind of shocking to see the empirical results so starkly. No doubt Josh will blog about the gap between the rational world of his model and the non-rationality of male economists.