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How should economists integrate their personal and professional lives?
Arnold Kling queries what I meant on that point in a recent talk. I meant the following:
1. There is an entire class of economists -- a large class at that -- whose choice of problems to work on bears little relation to what they think are important issues in the real world. I would stress, however, that it is difficult to find such economists (though there are some) at the top tier schools. This is a bigger problem at lower tier and wanna-be institutions.
2. I commonly meet economists and other social scientists who will tell you about the implications of their latest research, yet if you ask them other questions they will respond in hushed tones of the most severe agnosticism. For instance they will refuse to answer Robin Hanson's question about identifying large inefficiencies in the contemporary United States.
Now, if such agnosticism truly represents their actual views as human beings, that is a perfectly defensible stance. Yet I find that many (most?) of these same people will hold very definite political views and act on them in their private lives. They will support candidates, donate money, condemn colleagues who don't hold similar views, and so on. In other words, they are not really agnostic on all those other issues, they just don't want their personal views subject to full analytic scrutiny. They bifurcate the personal and the political.
This is one of my pet peeves. It is defensible to be truly agnostic. It is also defensible to believe that general principles of economic theory and empirics and ethics allow us to have "all things considered" policy views on matters we have not studied closely. It is not defensible to hold such views but, under the cloak of a not-really-meant agnosticism, refuse to put them on the social science table, so to speak.
(I find that bloggers hardly ever suffer from this problem. In many ways the core of blogging is a willingness to apply what you know to every problem you encounter, and see how good a job you can do of it in a more or less integrated fashion.)
3. Most intelligent people, in their ordinary lives, believe that other people, especially less intelligent ones, make stupid mistakes all the time, including in their decisive choices (not just in their voting). Yet some of these intelligent people call themselves rational expectations theorists. I don't get it.
Posted by Tyler Cowen on September 20, 2009 at 05:15 PM in Economics | Permalink
Comments
Right on.
You get to be more agnostic the more you work with data.
Here's an interesting story: an Industrial Organization economist who had at one time served in the Antitrust Division and had written a fair amount about the Structure/Conduct/Performance model, had done the standard regressions linking structure to profitability, etc.
Anyway, I met him at the State Historical library while visiting my alma mater and asked him what he was doing. Well, he said, I was just running some of the IRS corporate data using a price/cost margin whatever, and I realized that my life long work might be wrong, or at least not as defensible as I thought (actually, I think he said it was wrong). What I admired was his acknowldegment and willingness to challenge his own beliefs with facts. He later went on to publish his findings, and then, soon after, died.
He has some really great students in the IO field who are empircists like he is, which, afterall, was his greatest contribution.
Posted by: Bill at Sep 20, 2009 5:27:58 PM
I see the "agnostic phenomenon" at NYU all of the time. Part of this may be due to the fact that choice of the research topics is based on analytical tractability (given current methodological strictures). These topics are far too "insignificant" to constitute a basis for the individuals' general political-economic views. So they make political-choice decisions just as any other fairly intelligent person working in a non-social-science field would -- by reading newspapers and checking their prejudices.
Posted by: Mario Rizzo at Sep 20, 2009 5:37:01 PM
How about college professors who furiously denounce as racist anybody who mentions in public that blacks have higher average crime rates and lower average IQs, but who, when looking for homes for their children, carefully search out neighborhoods and school districts with few blacks?
What do you think of them?
Posted by: Steve Sailer at Sep 20, 2009 5:38:19 PM
Tyler, what did you mean by "markets always fail?"
Do you mean:
1) They fail to produce the outcomes you want?
2) They occasionally have huge corrections and the changes result in a lot of people getting hurt?
3) Institutions are always using force/fraud to manipulate markets and to steal money from people? (Corrupt governments and Ponzii schemes come to mind)
4) Some Combination of the above or something else entirely.
I don't really know what it is you mean.
On a second note, it would be great if we could develop working theories of force use from an economic perspective. It would help us understand how things like law enforcement work and such.
Posted by: Doc Merlin at Sep 20, 2009 5:49:23 PM
"Tyler, what did you mean by "markets always fail?" -Doc Merlin
I would like more elaboration as well. When I hear "market failure", I think "compared to what"?
Posted by: Jayson Virissimo at Sep 20, 2009 5:57:53 PM
Markets always fail means that all the assumptions that go with markets not failing are never fully and completely satisfied.
Informational failures, frictional failures, small or large barriers to entry, the list is seemingly endless.
Posted by: C at Sep 20, 2009 6:16:32 PM
On 3, I'm often reminded of Friedman(?) who said, "There is no unemployment only unpaid vacations." Or earlier classicals who said unemployment and overpopulation are the same word.
What they're doing is setting the reference frame in order to make the mathematics of the equation easier. We /could/ explain this using a model where we take into account people are stupid, people make dumb mistakes, people don't know what they want, etc, but the math on that is really hard. By changing the reference frame slightly, by changing /our/ perspective, it turns an unsolvable equation into one that can be solved. We say these out-loud to people because they're kind of funny, ironic, silly, or clever. Rational expectations models are one such reference frame. It is possible to construct a world like ours using only rational expectations, and make predictive analysis from it. This sometimes assigns people terrible rationals (unpaid vacation) that are inconsistent with what they both openly express (I want a job), but that doesn't make the models bad or unusable.
This is done all the time in Physics. All science to some extent. Economics, being a more important and much harder science then Physics, means that it's more dependent on these clever tricks to get it done.
I think your post is important, but I think the reason a researcher might feel obligated towards a neutral or agnostic position in their research or topics, is possibly because they're attempting to remove personal bias and expectations in their results.
Posted by: Patrick at Sep 20, 2009 6:40:05 PM
"Markets always fail means that all the assumptions that go with markets not failing are never fully and completely satisfied.
Informational failures, frictional failures, small or large barriers to entry, the list is seemingly endless." -C
You just assumed what you are trying to prove. The question is "what does fail mean?". Saying that markets fail because it isn't true that they don't fail doesn't tell us what it means to "fail".
Posted by: Jayson Virissimo at Sep 20, 2009 7:09:05 PM
Would be interested to see what you think are examples of point #1. Many people would think that there are plenty such people at top tier schools.
Posted by: David Stern at Sep 20, 2009 8:06:46 PM
Re point number three: if you rationally expect people to be predictably irrational you'll never be disappointed, but RET is premised on a different form of rationality. That is why we never have panics in the real world.
Posted by: Bill at Sep 20, 2009 8:38:44 PM
Tyler,
I can see a very good reason for disconnecting, to a certain degree, one's economic knowledge from one's policy views: if one happens not to be a utilitarian/consequentialist. Therefore, one could know that X policy would be the most efficient one and still think that it should not be followed for deontological reasons. So, if Kant were an economist, he could come up with all of the reasons why X would lead to an efficient outcome and still reject X as wrong.
One of the problems with economists is that they frequently allow the "Is" to blur completely into the "Ought" when discussing politics without acknowledging that they speak not as economists when they do so but as lay utilitarians making an ethical argument. What they should stick to is saying, "As an economist, I can tell you that X policy will have Y consequences." -- and if they choose to say anymore than that, they have left the realm of economics. And yes, I've talked to a number of economists who claim that they do so - but this is not what I've seen in action.
Posted by: R at Sep 20, 2009 9:02:51 PM
And btw, there is no way that the Mason folks are cultural relativists by any common definition of that term. They could not be such serious believers and advocates for liberty and be such a thing.
Posted by: R at Sep 20, 2009 9:10:47 PM
The reverse problem applies too: just because you study some specific aspect of the world, don't assume you know much more than everyone else on other topics.
Agnosticism is far preferable to strongly-held incorrect beliefs.
The same advice applies to all professions. Apply your learning everywhere it's relevant, and seek DIFFERENT learning where your core knowledge is not sufficient.
Posted by: Dagon at Sep 20, 2009 9:29:10 PM
"3. Most intelligent people, in their ordinary lives, believe that other people, especially less intelligent ones, make stupid mistakes all the time, including in their decisive choices (not just in their voting). Yet some of these intelligent people call themselves rational expectations theorists. I don't get it."
Best sentence(s) I've read all week.
Posted by: Rob at Sep 20, 2009 9:35:52 PM
On the point that "markets always fail," I think TC addressed this in a few recent interviews. Can't recall his exact words, but it was the standard critique that neoclassical models don't deal well with information asymmetries, bounded rationality, etc.
People don't actually go looking for the Best Deal every time they're shopping for toothpaste. And other stories.
Posted by: Rob at Sep 20, 2009 9:48:25 PM
I don't get point 2)
When I say something as a social scientist, I strive to get all the facts and be as sure as I can be that I'm right about what I'm saying.
When I say something as a private person, e.g. in a political discussion, I'm perfectly happy to claim things that may need some additional assumptions here, may make a bit of a causal leap there, and rely on educated guesses rather than well researched facts at some points. I'm also not embarrassed to change my mind on these issues, because I never claimed that I had put a lot of effort into getting it right.
But if I'm wrong in my social science theory because I wasn't aware of an important fact or because I just assumed a relationship that wasn't there, I'm professionally humiliated. So I really don't see why I shouldn't be more careful with what I want to talk about authoritatively as a social scientist.
3) That rational expections and "There are idiots" are in a bit of a tension is hardly news...
Posted by: Sebastian at Sep 20, 2009 10:13:01 PM
Economists have proven themselves remarkably talented at predicting what will happen last year.
Oops.
Posted by: save_the_rustbelt at Sep 20, 2009 10:24:37 PM
Your point, as I understand it, is that economists ought not avoid but should face the most important issues.
How about redistribution?
Is that important enough for you?
And would you be interested in a new idea on the subject?
Don't all answer at once.
Posted by: D.G. Lesvic at Sep 20, 2009 10:37:59 PM
3. Most intelligent people, in their ordinary lives, believe that other people, especially less intelligent ones, make stupid mistakes all the time, including in their decisive choices (not just in their voting). Yet some of these intelligent people call themselves rational expectations theorists. I don't get it.
I don't get Tyler's point. Markets are rational but individuals make mistakes all the time. Assuming rational markets is not the same as claiming that Barnum's principal has been violated.
The price of a stock is full of consumer surplus and producer surplus (one way to think of it) but given information available the market clears at a price. The market doesn't need a million geniuses to make the market work.
If you disagree please explain how MC = MR.
People are sometimes rationally ignorant, especially in political markets. So what. Politicians, the press, and special interests have have incentives to distort policies.
I suggest you read Gary's Becker's Nobel speech where he quickly explains the idea of a rational market.
Posted by: DanC at Sep 20, 2009 10:52:31 PM
Your position seems to ignore that it may be rational to make the inference from "agnosticism in many/most substantial economic issues is the only defensible position" to "policy X is the best".
In other words, there may be substantial policy implications from economic epistemological semi-nihilism.
But possibly such arguments are too subtle for the targets of your criticisms and there is indeed an inconsistency between their private and public views.
Posted by: Alex at Sep 20, 2009 10:59:19 PM
If the Dunkin Donuts post set Tyler up for the most severe social criticism, this post has to set him up for the most severe professional criticism
Posted by: Careless at Sep 20, 2009 11:40:31 PM
Wow:
1. I wonder if any tendency to work on what one "care" about by people at so called top tier school more than at we peons in the rest of economics, has anything to do with advantage people at such schools might have in getting their work accepted at prestige journals?
2. If wonder if the economic researcher being agnostic is not due to economics being a stochastic or social science. In stochastic sciences shouldn't one take each piece of evidence as just that evidence. Then ones beliefs about the way the world works should be based on the weight of the evidence, not the one piece of evidence one happened to produce.
3. Also might a scientist chose to work on something he is not personally emotionally involved with to avoid having potential personal bias bleed over into scientific work?
Posted by: JLS at Sep 21, 2009 12:09:13 AM
this seems perfectly rational. economists recognize that their opinions will not be counted in any meaningful way for popular political disagreements, so they stick to subjects where they think they can have an impact (pull the rope sideways).
Posted by: nazgulnarsil at Sep 21, 2009 12:27:13 AM
Re: #3
It is entirely possible that people make stupid mistakes all the time, but they average out in such a way as to make the average outcome close to the rational outcome. Not guaranteed, but certainly possible. The rational outcome may even be maximum likelihood!
Posted by: Robert Book at Sep 21, 2009 2:36:57 AM
I'm a chemical engineer. People always ask me chemistry questions. It really irritates me. Am I not sufficiently integrated?
"It is entirely possible that people make stupid mistakes all the time,"
Maybe I'm missing some subtlety but this is a problem I see with finance and economics. If a bunch of bridge designers made mistakes all the time would we call the bridges produced the rational optimum? I'm not sure about that.
Posted by: Andrew at Sep 21, 2009 3:47:58 AM
R
""As an economist, I can tell you that X policy will have Y consequences."
Economists should stick to saying that? Not quite, friend R.
First, economists are never sure of whta a given policy will lead to. Second, economists have a perspective which enables us to see options not obvious to non-economists. Third, our discipline is innately two-handed.So we economists, as economists, should stick to saying:
"I can tell you that policy X is liely to have Y consequences. Policy P, on the other hand, is likely to have Q consequences; which you may prefer."
Posted by: Diversity at Sep 21, 2009 6:27:43 AM
3. Most intelligent people, in their ordinary lives, believe that other people, especially less intelligent ones, make stupid mistakes all the time, including in their decisive choices (not just in their voting).
Hmmm, I'm not so sure about that.* I guess you could have that belief if you were omnipotent. But I assume that people make different choices becasue they have different information, values, insights, needs, wants, etc. Not necessarily because they are not as bright.
And isn't this supposed to be what makes "innovation"?
* Except when I'm driving. Then I'm well above average in a sea of morons....
Posted by: anon at Sep 21, 2009 9:25:08 AM
"Most intelligent people, in their ordinary lives, believe that other people, especially less intelligent ones, make stupid mistakes all the time, including in their decisive choices (not just in their voting). Yet some of these intelligent people call themselves rational expectations theorists. I don't get it."
Most intelligent people are not really thinking about what they believe. They forget that when an individual acts he simply chooses what he prefers over the alternatives. That is always a rational act because the individual realizes that he cannot satisfy all his impulses and desires so chooses something over something else that is not as important at the time the choice is made. When an intelligent person argues that any particular act is irrational it reveals that the assessor making the claim of irrationality is simply using a different value scale.
As Mises pointed wrote in, Epistemological Problems of Economics, "Action is, by definition, always rational. One is unwarranted in calling goals of action irrational simply because they are not worth striving for from the point of view of one’s own valuations." 'Intelligent people' might want to do some reading.
Posted by: Vangel at Sep 25, 2009 10:25:43 AM
