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Under- and over-explored areas in economics
Hamilton, a loyal MR reader, requests:
Of those questions in economics whose answers interest you, which question do you think is most under-explored, given its importance? And why do you think that is?
Or, going the other way, to what question or questions has economics been over-applied? Where have economists put too much effort?
Under-explored; Empirical studies of signaling behavior, peer effects, the kind of "questionnaire macro" pioneered by Alan Blinder on price stickiness. Economic anthropology. Neuroeconomics other than brain scans. The economics of the emotions, an area started by Robert Frank. Status and fame motivations. Economic history. The economics of the non-profit sector. The economics of science. How IQ and other cognitive measures interact with economic decision-making and economic rationality. Behavioral economics of politics and public choice. Anything Alex does.
Over-explored: VAR, most structural macro, "another open economy model," auction theory, auctions in experimental economics. There's more, but today I'm not so interested in complaining.
That's my list, what's yours?
Posted by Tyler Cowen on October 20, 2009 at 07:28 AM in Economics | Permalink
Comments
under-explored imo: economic growth and environmental damage(co2, forestation, over fishing etc.).
Posted by: anon at Oct 20, 2009 8:08:42 AM
deforestation :o
Posted by: anon at Oct 20, 2009 8:20:10 AM
underexplored: countercyclical budeting for states: when you have a recession, state government throws everything overboard (some should be thrown overboard, and pushes to have the federal government fill the budget gap; states which have rainy day funds, when times are good, cut the fund give tax cuts, only to have times go bad again and come out requesting a handout from the government.
Posted by: Bill at Oct 20, 2009 8:28:48 AM
"Status and fame motivations." Please would you know two or three articles/books about this issue (I know your "What Price Fame?" book) Thanks.
Posted by: Moggio at Oct 20, 2009 8:30:25 AM
Can you provide an example of economic anthropology (i.e., a good article)?
Posted by: Mark B at Oct 20, 2009 8:32:29 AM
underexplored: combinatorial auction mechanisms as a way of determining preference measures in public policy. You want A and C, I want B and A; she wants A B C in certain preference orders; he wants B if and only if he can have C and if he doesn't get C he wants A B. Mechanisms can be designed to maximimize group and individual utility.
Posted by: Bill at Oct 20, 2009 8:33:18 AM
Paleoanthropology: theories and simulations of the complex relationships between division of labor, trade, language, and the evolution of the human brain.
Posted by: J. Goard at Oct 20, 2009 8:41:22 AM
As a rule, I'd say the effects of government policy are over-explored and the effects of businesses themselves are under-explored. Economic history suffers because neither economists nor historians seem to have much interest in the topic, which is a major problem in my opinion.
Posted by: Ted Craig at Oct 20, 2009 8:41:39 AM
Am glad that the non-profit sector has been mentioned! I work for a charity/think tank in the UK (New Philanthropy Capital) analysing charities' work. It's very hard to do this because of the lack of information, as well as cultural barriers. We are headed up by an economist, and employ several economists and people interested in the economists' approach.
And our CE has just launched a charity that places volunteer economists in charities: http://www.probonoeconomics.com/
Would be interested in hearing from other economists interested in this field.
Posted by: Eleanor at Oct 20, 2009 8:47:30 AM
Note in relation to recent discussion on MR that the underexplored areas are underexplored because they are not in vogue among the pedigree universities, as opposed to VAR. Economic growth is probably overexplored in some ways but underexplored in terms of helping human welfare.
Posted by: Millian at Oct 20, 2009 8:50:41 AM
The non-profit sector is an artifact (or maybe excrudesence) of the tax code. Get rid of that and it goes away.
Posted by: AADL at Oct 20, 2009 8:58:04 AM
underexplored: how manager's pay should be determined during a bubble. Bubble experimental games show that participants are aware that they are operating in a bubble, but believe they will get out at the time just before other particpants bail out. Bubble continues and collapses more than it would have if some participants had been rewarded for early exit.
Posted by: Bill at Oct 20, 2009 8:58:49 AM
underexplored: alternatives to conspicuous consumption as a signalling device of income and/or status.
Posted by: Bill at Oct 20, 2009 9:12:17 AM
I was involved in the hiring process for a financial economist at a #20-#30 econ school a few years ago, and we interviewed people from top places (Harvard, Yale, Columbia, Stanford, etc.) I was dismayed to see so many dissertations on "VAR with a different, more complicated underlying distribution", so I'm glad to see you have that as an over-studied area.
BTW, we ended up hiring a guy from a southern state school who had studied survivor-bias in the mutual fund industry. He had the most interesting and innovative work of the bunch.
As a guy who works in the energy business, who frequently interacts with traders, I've come to realize that work on both peer effects and emotions in trading environments are much more important than I ever would have guessed while in grad school. "Recency bias" is also important, but probably adequately studied by the psychologists.
Posted by: bartman at Oct 20, 2009 9:53:39 AM
Overstudied:
models in which one mechanism is isolated for study, and everything else in the model is stripped to the bare minimum.
Understudied:
models in which numerous mechanisms are thrown in at once.
[it's not that I don't understand the merits of the former]
Posted by: Luis Enrique at Oct 20, 2009 10:50:36 AM
Understudied: complexity economics - http://en.wikipedia.org/wiki/Complexity_economics
Posted by: Alex Golubev at Oct 20, 2009 11:05:32 AM
Is there any non-fMRI neuroeconomics? I mean, I can think of a few things that might count (ie, area LIP type of things like Shadlen/Newsom do), but nothing that focused.
Posted by: adam at Oct 20, 2009 11:10:50 AM
understudied: how catastrophic events shift public preferences from market to non-market solutions and whether market solutions should incorporate insurance for catastrophic events so as to prevent the shift to non-market solutions.
Posted by: Bill at Oct 20, 2009 11:16:46 AM
understudied: how the knowlege of the existence of knock-off goods supports distribution channels known not to sell the knock off products; how the declining price of knock off products is an early indicator of declining brand value (controlling for the supply of knock off products).
Posted by: Bill at Oct 20, 2009 11:24:42 AM
@Adam. It's a bit of a stretch, but I'd think cortisol testing qualifies. Cortisol can be testing with a cheek swab and is a good measure of stress levels in the period immediately preceding the sample. You could easily run experiments testing the effect of stress levels on economic decision making in this way. This kind of testing is extremely common in Psychological studies because it is so cheap and accessible by undergraduate researchers.
Posted by: C.Thorm at Oct 20, 2009 1:10:30 PM
Severely, negligently underexpolored by economists:
1. The macro-models that actually explain and track what is happening - see Dirk Bezemer's paper at http://www.voxeu.org/index.php?q=node/4035 . This is the head of the charge-sheet because the intellectual climate for macro policy could have been so much more relevant in recent years if we had got our minds round these models.
2. Why, and with what implications is the Taylor Rule for interest rate policy so damn good in practice? The stupiest thing you can do with a rule of thumb that works is ignore it in your practice. The second stupidest is to expect it to be always right whatever the circumstances. We were not guilty of the second.
3. Testing our theories against data capable of contradicting them. John List, friends and rivals are beginning to chew on a sizeable hunk of this; but the field of testable untested hypothesis and theory is vast.
4. Analysis of non-market resource allocation. The field of the latest Nobel prize in economics, half of which has gone to someone outside our 'discipline'. Apart from our relative neglect of the commons, of business (after a promising beginning) and (beyond the latest Nobel) government resource allocation, we still have remakably little to say about households.
Simply underexplored: Limits of time and space (shades of Fermat) do not permit a full exposition here.
Severely over-explored:
z. Rationality of markets. Before attempting to determine that all the universe's angels sit or do not sit upon the point of a pin, it is prudent to question whether the pin in question has a point, and whether angels sit.
y. Theoretical games. The variety and fascination of theoretical games is umlimited. Regretably, those that are relevant to economics form a much smaller class.
Posted by: David Heigham at Oct 20, 2009 1:17:07 PM
Field research on boom-bust empirical details in the real world -- were specific individuals came from and were they went from employment to unemployment tomemployment, including grey and black market jobs, and what happened to specific capital
goods across the boom and bust, e.g. Specific actual production equipment, or houses or cars, etc.
Economists imitating biologists, rather than stats instructors and insurance actuaries.
Posted by: Greg Ransom at Oct 20, 2009 1:30:27 PM
Understudied: intracity transportation, land use, and urban issues. Honestly, how many American economists could really tell you anything about the period of history when urban/suburban Americans stopped taking the streetcar and started driving?
In general though I think economic/business history is the most understudied, and complex mathematical models of vague indicators are the most overstudied.
Posted by: Stephen Smith at Oct 20, 2009 1:39:05 PM
overstudied: anything that takes economic theory too seriously - must leave room for transactions costs
understudied: anything that involves purposeful decisions that does not take economic theory too seriously
Posted by: jk at Oct 20, 2009 2:33:41 PM
Internet related. The economy and social interactions are moving online and how do we quantify, analyze, predict and understand what goes on there?
Posted by: v at Oct 20, 2009 3:11:27 PM
