Tuesday, December 16, 2014

Cultural liberalism is about personal responsibility



"We have the best patients in the world because of jail."
     - Raul, Venezuelan diplomat, "Parks and Recreation"


More culture-blogging. Sorry, econo-nerds.

A couple posts back, I talked about the Liberal Marriage Hypothesis, which says that liberal values - gender equality, cooperative parenting, etc. - are actually strengthening traditional marriage instead of weakening it.

Now we have some evidence for the Liberal Drug Hypothesis:
[S]urvey results released today [find[ that the use of cigarettes, alcohol, and prescription painkillers among teens have all declined in the past year, consistent with an overall downward trend for the past few years... 
The majority of high school seniors currently do not think occasional marijuana smoking is harmful, with only 16.4 percent saying occasional use puts the user at "great risk," compared to 27.4 percent five years ago. Eighty-one percent of high school seniors told researchers this year that marijuana is easy for them to get. 
In other words, pot is readily available, in some cases legal to have, and kids don't think it's harmful. Yet they aren't using more of it. 
Which leads us to a law of teenagers that has held constant across all generations: Things are only cool as long as they're dangerous and forbidden.
This is the old idea that alcohol abuse is less common if kids are allowed to drink as soon as they're "old enough to see over the bar," as in Europe and Japan.

Derek Thompson, who wrote the above article, thinks that this is about the peculiar psychology of teenagers - that that which is forbidden is cool. But it might be something more general. It might be about two ways of getting people to do the right thing - personal responsibility vs. social censure.

Under a social censure model, punishment is communally imposed to get people to avoid unhealthy behaviors, such as drugs and broken families.

Under a personal responsibility model, people are educated about the risks and dangers, and told that it is incumbent upon them to avoid doing the bad stuff.

It seems to me that social conservatives endorse the former approach - using shame, monetary penalties, jail, and other punishments to enforce healthy behavior. In contrast, liberals (and some libertarians) endorse the latter approach - using education to teach people about the consequences of unhealthy behavior, but avoiding the use of external punishment, and then leaving people to decide how best to live their own lives.

Of course, this is a huge generalization, but I think you see this dynamic at work in the case of marriage and the case of drugs. The "secret traditionalism" of upper-class liberals is no secret. It is simply the outcome of the repeated quiet exercise of personal responsibility. It is what happens when you frame family choices as individual choices instead of communal imperatives - people do the healthy thing, but they don't preach it.

Social conservatives, in my experience, often tend to argue that the lower classes of society are not smart enough to handle personal responsibility. They seem to argue, in effect, that lower-class people are stuck at Piaget's "concrete operational stage" - thinking in terms of rigid rules - while upper-class people are able to move on to the more abstract "formal operational" stage. In other words, they don't trust the masses to do the right thing if given freedom from punishment.

Now, if that sounds like a straw man, well, good, because I am not a big fan of that idea, and I hope it's more rare than it seems. But I suspect you'll find at least hints and threads of this idea throughout the arguments of many social conservatives.

So that leaves the question: If personal responsibility works better than social censure, why? Does the universality of censure free people from feelings of guilt and shame over their secret violations? Do people think "it isn't cheating if you don't get caught"? Does punishment trick people into forgetting about natural consequences by making them focus only on externally imposed consequences?

This seems like a question for psychologists. So if any psychologists want to show up and point me to the relevant research, please do.

In the meantime, at the aggregate level we now have a bit of circumstantial evidence favoring the liberal, health-and-responsibility-based approach over the conservative, punishment-and-censure-based approach on both marriage and drug use.


Update: Commenter TWY points me to this interesting experiment.

Monday, December 15, 2014

The Agrarian Revolt



Roger Farmer used to have a blogging style that was a bit...abstruse.

Well, no more.

Here is Farmer on the "All models are wrong" dodge:
I have lost count of the number of times I have heard students and faculty repeat the idea in seminars, that “all models are wrong”. This aphorism, attributed to George Box,  is the battle cry  of the Minnesota calibrator... 
Of course all models are wrong. That is trivially true: it is the definition of a model. But the cry  has been used for three decades to poke fun at attempts to use serious econometric methods to analyze time series data.
For good measure, he includes the following picture, which I am just going to steal because it's so awesome:




And here is Farmer on the Real Business Cyclists:
Time series methods were inconvenient to the nascent Real Business Cycle Program that Ed pioneered because the models that he favored were, and still are, overwhelmingly rejected by the facts. That is inconvenient. 
Ed’s response was pure genius. If the model and the data are in conflict, the data must be wrong...His response was not only to reformulate the theory, but also to reformulate the way in which that theory was to be judged. In a puff of calibrator’s smoke, the history of time series econometrics was relegated to the dustbin of history...
And here is Farmer on the H-P Filter:
How did Ed achieve this remarkable feat of prestidigitation? First, he argued that we should focus on a small subset of the properties of the data... 
Ed argued that the trends  in time series are a nuisance if we are interested in understanding business cycles... 
After removing trends, Ed was left with the wiggles. He proposed that we should evaluate our economic theories of business cycles by how well they explain co-movements among the wiggles. When his theory failed to clear the 8ft hurdle of the Olympic high jump, he lowered the bar to 5ft and persuaded us all that leaping over this high school bar was a success.
And here is Farmer on the whole dang post-RBC trend-and-cycle macro paradigm:
By accepting the neo-classical synthesis, Keynesian economists had agreed to play by real business cycle rules. They both accepted that the economy is a self-stabilizing system that, left to itself, would gravitate back to the unique natural rate of unemployment. And for this reason, the Keynesians agreed to play by Ed’s rules. They filtered the data and set the bar at the high school level. 
We don't have to play by Ed's rules. We can use the methods developed by Rob Engle and Clive Granger as I have done here. Once we allow aggregate demand to influence permanently the unemployment rate, the data do not look kindly on either real business cycle models or on the new-Keynesian approach. It's time to get serious about macroeconomic science and put back the Olympic bar.
Dang, Farmer is breathing fire!! This brings me back to the good ol' days of 2011, when the Macro Wars raged in blog-land...



Anyway, Farmer seems totally right about the arbitrariness of the H-P filter and the very very very low height of the empirical hurdle represented by calibration + moment-matching.

It's also very interesting to see someone finally standing up for the idea of non-self-correcting recessions. The whole idea that "trend" and "cycle" are totally independent phenomena always seemed kind of bogus to me, especially in light of evidence like the Mankiw & Campbell "unit root in GDP" paper.

But here's the really cool thing about Farmer's attack on standard macro: it's coming from a real live macroeconomist. Most macro-bloggers I know of are either outsiders (Krugman, DeLong, etc.) or insiders who defend the dominant paradigm (Williamson, House, Wren-Lewis sort of), or nice folks who don't generally get in blogfights (Kimball). It's highly unusual to see a high-level, respected business cycle theorist come out swinging against the conventional macro wisdom.

Anyway, I'll be excited to see who responds!

Saturday, December 13, 2014

Ross Douthat ponders the Liberal Marriage Hypothesis



Over the last few years, an unsettling thought has been worming its way into the consciousness of cultural conservatives: What if liberal values are the key to saving marriage?

In the 1980s, this would have been a preposterous question. Everyone knew that liberalism stood for sexual license, single motherhood, and disregard for traditional institutions. To ask if liberalism was the salvation of marriage was like asking if smoking cured cancer. But slowly, people started to realize that working-class people, who are most likely to profess traditional values, are increasingly the least likely to actually live them. Meanwhile, the educated upper middle class, after experimenting with divorce and single parenthood in the 70s and 80s, went back to traditional marriage, while continuing to espouse a belief in gender equality and other liberal ideals.

A scary idea began to dawn on conservatives: What if they had marriage entirely backward?

In a column entitled "The Imitation of Marriage," Ross Douthat nicely sums up this uncomfortable hypothesis:
Many optimistic liberals believe...that what needs to be imitated most are the most socially progressive elements of the new upper class’s way of life: delayed marriage preceded by romantic experimentation, more-interchangeable roles for men and women in breadwinning and child rearing, a more emotionally open and egalitarian approach to marriage and parenting. 
The core idea here is that working-class men, in particular, need to let go of a particular image of masculinity — the silent, disciplined provider, the churchgoing paterfamilias — that no longer suits the times. Instead, they need to become more comfortable as part-time homemakers, as emotionally available soul mates, and they need to raise their children to be more adaptive and expressive, to prepare them for a knowledge-based, constantly-in-flux economy. 
Like most powerful ideas, this argument is founded on real truths. For Americans of every social class, the future of marriage will be more egalitarian, with more shared burdens and blurrier divisions of labor, or it will not be at all. And the broad patterns of upper-class family life do prepare children for knowledge-based work in ways that working-class family life does not. (emphasis mine)
Douthat clearly understands the Liberal Marriage Hypothesis, and he appears to be warming to the idea. As a proponent of the hypothesis, I see this as a very good sign!

But the ship of ideology does not turn on a dime. Like a socialist reluctant to realize that revolution is bad for the workers, Douthat continues to struggle against full acceptance of the LMH:
But the idea that progressive attitudes can save working-class marriages also has some real problems...it underestimates the effective social conservatism of the upper-class model of family life...Notwithstanding their more egalitarian attitudes, for instance, college-educated households still tend to have male primary breadwinners: As the University of Virginia’s Brad Wilcox points out, college-educated husbands and fathers earn about 70 percent of their family’s income on average, about the same percentage as working-class married couples.
The difference, of course, is that under conservative gender roles, the 30% that women earn is an unpleasant necessity. Traditional masculinity tells husbands to be ashamed of that 30% - "What, you can only put 70% of the bread on the table?" I suspect that shame can break apart a marriage, driving a man to leave his wife in order to find his missing masculinity in other activities.

Douthat continues:
Meanwhile, as cohabitation and churchgoing trends suggest, many working-class Americans — men very much included — have gone further in embracing progressive models of identity and behavior than many realize, and reaped relatively little reward for that embrace... 
[T]he Johns Hopkins sociologist Andrew Cherlin cites research suggesting that many working-class men, far from being trapped in an antique paradigm of “restricted emotional language,” have actually thrown themselves into therapeutic, “spiritual but not religious” questing, substituting Oprah-esque self-help for more traditional forms of self-conceiving and belonging.
As evidence goes, this is fairly weak. The quantitative evidence presented by Charles Murray in Coming Apart - that working-class people are more likely to espouse traditional values and less likely to live them - is not in imminent danger of being turned on its head by these anecdotes.

Finally, Douthat suggests his alternative to the Liberal Marriage Hypothesis:
We may have a culture in which the working class is encouraged to imitate what are sold as key upper-class values — sexual permissiveness and self-fashioning, spirituality and emotivism — when really the upper class is also held together by a kind of secret traditionalism, without whose binding power family life ends up coming apart even faster.
This would be very convenient for a traditionalist who didn't want to have to change his view of reality very much! But how is this supposed to work? Who is "selling" these values to the working class? And why are the working class falling for the trick, instead of seeing the "secret traditionalism" of the upper class, or figuring it out for themselves (as the upper class presumably did)?

It sort of sounds like a version of what many traditionalist conservatives say when I bring up the LMH. In one form or another, they tell me that liberalism only works for smart people. Not-so-smart people, they tell me, need simple rules and guidelines, and guiding institutions like churches, in order to live safe, clean, successful, moral, industrious lives. You can't just give them total social freedom and license and let them figure it all out for themselves, the traditionalists tell me.

Well, maybe that's true. Or maybe - and here I am being an incorrigible optimist - it just takes the working class a little more time. Maybe the upper class are the first to encounter new social forces, the first to hop on new social trends, and therefore the first to figure out how to adapt those trends to their needs. Maybe the working class is doing now what the educated class did in the 1970s and 1980s - responding to the advent of the service economy by adopting more equal gender roles. Maybe more-equal gender roles always have the initial effect of disrupting marriage. But maybe working-class people will eventually do the same thing educated people did - realize that, gender roles or no, marriage is a better bet than the alternative.

In other words, maybe what conservatives should be doing is not fighting the transition tooth and nail, but helping speed it through its inevitable Act 2, to its ultimate denouement - the reestablishment of marriage in a new, stronger form.

Fortunately, it looks like we've at least begun the process of convincing Ross Douthat.

Wednesday, December 10, 2014

Krugman-Cochrane feud is getting out of hand



On one hand, a spectacular feud between two really smart academics is pretty entertaining. In biology there was Richard Dawkins vs. Stephen J. Gould. In nanotech there was Richard Smalley vs. Eric Drexler. In econ there have been a few - Keynes vs. Hayek, the Cambridge capital controversy, Summers vs. Prescott - but in terms of (academic cred) * (importance of issue) * (acrimony), I'm not sure any of them tops Paul Krugman vs. John Cochrane.

Both of these guys are top-flight economists, though interestingly neither one did his main work in business-cycle theory - Krugman is a trade guy, Cochrane a finance guy, each undeniably at the top of his field. Each one has written a paper about the macro of "liquidity traps" in the years since the crisis - Krugman's is here, Cochrane's is here. Their debate has been running for five years now. It began with this Krugman op-ed and this Cochrane response, The argument is over two main issues: A) whether academic macro has run off the rails over the last 30-35 years, and B) whether fiscal stimulus a good idea.

Here are some of Krugman's salvos, here are some of Cochrane's salvos. There are a lot of salvos.

One interesting feature of the dispute is that it has been carried out entirely over blogs. Debate between economists seems to be disappearing from the journals, so maybe blogs are stepping in to fill the void.

The latest salvo shows that the dispute has not really died down, either in the level of disagreement or the acrimonious tone. Here is Krugman, and here is Cochrane. These posts get quite aggro (a slang term my generation invented meaning "aggravated and aggressive"), so I won't quote excerpts.

Anyway, like I said, there is a certain fun in watching Godzilla and King Kong go at it...from a distance. But I think this particular feud is getting out of hand. The acrimony doesn't actually help get to the bottom of the issues at hand - it just provides spectacle.

The fact is, blogs are not that great a medium for resolving issues like this. There's a lot of pressure for rapid response, which means not many equations or data analysis gets put into the posts - that biases blog fights toward ambiguous rhetoric and fights over who-said-what. Additionally, everyone sounds meaner and more aggressive over the internet than they really are.

Having met both Krugman and Cochrane, I don't doubt that if they got in the same room with each other - with a whiteboard and internet access and some other profs in the room to provide comments - and talked about and debated this issue for a day or so, they could resolve a lot of their differences. They have different thinking styles - Krugman is more of the classic economist, thinking in terms of toy models and stylized facts, while Cochrane is more data-oriented and probably prefers a more fully-specified model. But both are reasonable people, and very smart people (duh), and although they wouldn't walk out of the room agreeing on everything, I bet a substantial chunk of the distance between the two would be removed, and - more importantly - a lot of the acrimony would be reduced.

Hopefully this can be arranged at some point. Titanic feuds are fun, but eventually the fun wears off and all that is left is the bitterness.

Monday, December 08, 2014

Economists just don't look very ideological



A while ago I blogged about a paper by Roger Gordon and Gordon Dahl that showed that economists aren't ideological - or, at least, that their ideology doesn't line up much with the American left-right political axis. Now a trio of economists, Zubin Jelveh, Bruce Kogut, and Suresh Naidu, have come out with a very rigorous empirical analysis on the subject. They comb through a bazillion papers and do word analysis on the text! This paper is really impressive - it's very rigorous and obviously took a ton of work and careful thought.

The authors discuss their paper at 538.com, and they emphasize that they do find evidence of ideology in the way economists write their papers. But Kevin Drum, blogging about the paper, points out that the results, while statistically significant, don't look that economically significant - i.e., not that big:

 
What I see is a nearly flat regression line with a ton of variance. Those blue dots are all over the place. If the authors say their results are statistically significant, I believe them, but it sure looks to me as if (a) the real-world error bars are pretty big here, and (b) economists as a whole are remarkable unbiased. I mean, look at that chart again. I would have expected a much steeper line. Instead, what we see is just the barest possibility that ideology has a very slight effect on economists' findings. 
If these results are actually true, then congratulations economists! You guys are pretty damn evenhanded.
I agree with Drum. That's just not a lot of ideology. Although it's hard to interpret the meaning of the slope of the regression line - it depends on the economic impact of the policy recommendations that the y-axis represents - the fit of the regression line is obviously very low. This is true for all of the various ideology measures the authors use:


So political ideology, as far as we can tell, just doesn't explain much of the variance in academic economists' policy recommendations. Keep in mind that absence of evidence is not evidence of absence - the authors simply might not have measured ideology accurately. 

But given the fact that economists deal every day with topics that are inherently political, I'm surprised we don't find more bias in paper-writing. 

And there's also the possibility that the sample is heavily influenced by a few outliers. There are a couple of departments out there that may be influenced by big donations from political activists. That might inject a few politicized folks into the academic mix. (Update: Matthew Martin makes this point graphically.)

So overall, I think my thesis that most of econ doesn't line up along left-right political lines seems like it's borne out by the data. Still, that leaves the possibility that a few policy issues, or a few top economists, might be strongly motivated by political ideology. I'm sure we can all think of one or two anecdotes.

Sunday, December 07, 2014

Five reasons Japan could never have won WW2


In honor of the anniversary of Pearl Harbor, I wrote an article trying to explain why Japan had made such a boneheaded decision (my explanation was high-level disorganization). Commenters mostly agreed with that diagnosis, which is consistent with a lot of the things political scientists have said about Japan. But many disagreed with my assertion that Japan's war against the U.S. was unwinnable. For example, one commenter writes:
Moreover, the odds against the Imperial Japanese Navy weren't nearly so long as the ONI had erroneously calculated. The IJN quickly gained the upper hand in the early stages of the war, and would have swept the Americans from the Pacific altogether and secured Japan's hold over the Dutch oil fields but for certain shortcomings of the Pearl Harbor attack itself (with the sunk battleships proving to have been relatively unimportant targets) and but for the success of codebreakers in giving the Americans an upset victory at the Battle of Midway. Advantages in GDP and population by themselves are no guarantee of victory, especially in a naval conflict where it can take years to build fleets but only hours to destroy them.
Another writes:
Japan's strategy was simple: strike first, strike hard, occupy as much territory as possible, dig in, and make it incredibly expensive for the US to remove them. It was not a bad strategy, it very nearly worked. Had Pearl Harbor been a victory, had the carriers been there, had the Japanese hit the oil depots, the war would have had a very different flavor to it.
Sorry, guys, I just don't think this is the case. Here are five reasons why I think Japan could not possibly have won the war against the U.S.:


1. Size matters. 

They say "It's not the size of the dog in the fight, it's the size of the fight in the dog." But that saying deserves an addendum: For roughly comparable amounts of fight, it really is the size of the dog that matters. GDP is not a deterministic predictor of who wins wars, but when you have as lopsided a ratio of war material as in the Japan/U.S. war, you basically have to be so much better than the enemy that you win all the battles.

That can happen. In the Russo-Japanese war, Japan's navy demonstrated that it could decisively defeat the Russian navy again and again. It didn't matter how many ships Russia threw against Japan - Japan could sink them as fast as they showed up. Japan's advantages in technology and training were just too great.

But in WW2, the U.S. had technology and training roughly equivalent to Japan's. The battles of the Coral Sea, Midway, the Eastern Solomons, and the Santa Cruz Islands showed that over time, clashes between the two nations' carrier fleets would result in significant attrition for both sides. That meant Japan was doomed, because while the U.S. could afford to suffer attrition, Japan could not. Game over.


2. U.S. technology never stopped improving.

At the beginning of the war, Japan held several technological advantages over the U.S. Its Mitsubishi A6M Zero fighters were better dogfighters than anything the Allies possessed. Its Type 93 Long Lance torpedoes outranged the torpedoes on American ships by a factor of about three to one. And Japan's night optics allowed Japanese ships to spot American ships first (actually this was a combination of technology and training, because the U.S. focused on radar instead of on trying to train the best night spotters). These latter two advantages were key to Japanese victories at the Java Sea, Savo Island, Tassafaronga, and Kolombangara. Meanwhile, 1942-vintage U.S. technology had some major weaknesses, in particular torpedoes that went too deep and failed to detonate.

But because the U.S. had big research budgets, and focused on technology over training, by late 1943 the U.S. had amassed a huge technological advantage over Japan. Radar advanced to the point where hit-and-run attacks left Japanese surface ships largely at the mercy of their American counterparts, as demonstrated in the battles of the Vella Gulf, Cape St. George, and (to a lesser extent) Empress Augusta Bay. By this time, of course, the U.S. had torpedoes that worked.

In the air, the U.S. built the Grumman F6F Hellcat, which took advantage of a totally new type of aerial combat ("boom & zoom" high-speed attacks, pioneered by the Germans) that replaced dogfighting. The Hellcat had much better speed and armament than the best Japanese planes, and made short work of the legendary Zero.

Radar also allowed U.S. fighters to coordinate much better, giving them an insurmountable advantage in battles like the Philippine Sea. U.S. signals intelligence was also way beyond that of Japan, 

There were many other examples of U.S. technological advantage, e.g. the nuclear bomb. In comparison, Japan made relatively few advancements over the course of the war, and its much smaller manufacturing capacity meant that it could not afford to deploy the advancements it did make on a large enough scale to make a difference.


3. The U.S. was able to take even the best-fortified positions.

Time and time again, the U.S. demonstrated that it was able to take even the best-fortified positions from the Japanese military. The strategy of "island hopping" - starving out islands instead of storming them - dramatically cut down on the number of assaults the U.S. had to make. But when the U.S. did make assaults, it always won. If you can overrun positions while taking less casualties than the defenders, and if you have more resources than the defenders, it's game over.

The only battle in which a U.S. assault cost the U.S. more casualties than it cost Japan was the battle of Iwo Jima (of flag-raising photo fame). But even in that case, most of the U.S. casualties were wounded, and most of the Japanese casualties were KIA, so the Japanese resource loss was probably higher.

In other words, digging in might have slowed down the U.S. - it did slow down the U.S. - but it never would have been decisive.


4. The U.S. had oil, Japan did not.

The whole Pacific War began over oil, which Japan needed if it was going to continue conquering China. The U.S. had tons of oil, and was by far the biggest oil producer at the time. Japan, in contrast, had only the oil it managed to seize in Southeast Asia. This oil shortage chronically limited the mobility of Japan's navy, and also limited the amount that the Japanese Army could rely on tanks.

Many have suggested that Japan's critical mistake was not to destroy the U.S. oil infrastructure at Pearl Harbor - indeed, Chester Nimitz said that if they had done so, it would have prolonged the war by two years. He was probably exaggerating, but even if not, the fact is that it would not have affected the outcome of the war. Since the U.S. produced so much oil - almost a quarter of total world production in 1937 - it would have eventually brought those resources to bear.


5. China was unconquerable.

"We could only control the cities and railroads," lamented a Japanese friend, recalling the Japanese invasion of China (in which his grandfather fought as a high-ranking officer). The immensity of China - a country with six hundred million people and few natural resources - meant that Japan's attempt to conquer that country could never have succeeded. When Japan invaded China, the country was in a period of extreme chaos and civil war, and Chiang Kai-Shek's nationalists were forced to fight a rearguard action against Mao Zedong's communists even as they tried to hold off the Japanese. Nevertheless, by 1939, the Chinese nationalists had begun to win battles

This doesn't mean the Chinese military was ever more effective than its Japanese counterpart - even late in the war, Japan won a pitched battle against the Chinese in Operation Ichi-Go. But what it does mean is that Japan suffered massive attrition against China, and with China's enormous population advantage, that couldn't go on. 


The fact is, this is not some crazy revisionist history or 20-20 hindsight on my part. Japan's military leaders knew in 1941 that, barring a U.S. political collapse or coup or wholesale unwillingness to fight, they were going to lose the war. 

Wednesday, December 03, 2014

Sociology vs.the Empire



My Bloomberg article on how sociologists could close the salary and prestige gap with economists has gotten some pushback, including this post from Henry Farrell of Crooked Timber (a blogger I like a lot). Basically, I said that if sociology focused a lot more on stats and quantitative modeling, then sociologists would have much more lucrative outside options in consulting and finance and industry, and hence would be able to command higher academic salaries.

There were (at least) two big things I left out of my article, but I'll get to those at the end. First, some responses to Henry.

Harry says that I'm being "imperialist" for economics by claiming that it's natural for policymakers to ask economists - not sociologists - about the economy:
[W]hile it’s true that many sociologists have a complex about economics, the tacit imperialism is compounded by this claim: 
As for economists’ “influence over the economy,” I am going to take a wild guess and say that it isn’t because of their arrogance or hierarchical insularity or “sense of authority and entitlement.” It’s probably because…drumroll…economics is the discipline that studies the economy. If politicians want to know how to reduce cancer rates, they should go to a biologist. If they want to know how to shoot missiles at Vladimir Putin, they should go to a physicist. If they want to know how to boost productivity at U.S. companies, or increase employment, or auction off broadcast spectrum rights, whom should they ask for advice? A sociologist? 
Heaven forfend! After all, it’s not as if there’s a large grouping in sociology devoted specifically to the study of the economy or anything. And if there were such a peculiar tribe of sociologists, economists would surely know all about them!
Sure, I knew about economic sociology - I took an undergrad class on exactly that subject from Mark Granovetter at Stanford. But to think that policymakers are abandon econ whole hog, and replace their teams of advisers with economic sociologists, is stretching the bounds of the plausible. I guess it could happen that the profession that was created to study the economy failed so utterly that they stopped being regarded as the primary experts on the economy, and were replaced by one branch of a different field, but it seems like a very extreme scenario. And it certainly doesn't seem "imperialist" to point out that this is a very extreme scenario. And it certainly doesn't seem "imperialist" to say that expecting this very extreme scenario to be the natural and right course of things is a bit silly. But YMMV.

Henry then points out, aided by numbers from Cosma Shalizi, that statisticians - who of course know more stats than economists - are paid less than economists. This is true. Why? Well, one reason might be the same reason why biostatistics profs get paid a lot more than statistics profs. Biostats is an applied field, and the skills are more transferable to industry. Also, the applied nature of the biostats field indicates that a prof would be willing to work in industry, which pure stats profs might not be willing to do. Finally, there is undergraduate demand, but this is one of the things I left out, so I'll get to it later. But the point is, the biostats/stats disparity seems unlikely to be due to "power", "social construction", "performativity", or the other stuff that Fourcade, et al. and Henry talk about.

OK, let's talk about that other stuff. Henry says that much (most?) of economists' high salary is due to politics, power, and other social factors:
I suspect that much of the assumed authority of economists (just like the authority, in certain policy roles, of international relations scholars like myself), is socially constructed. Expertise is not just a matter of raw talent, whether mathematical or otherwise. It’s a matter of legitimation – of being anointed with the proper sacraments associated with publicly acknowledged expertise in a particular topic. And that is, unquestionably the product of a certain kind of politics, a kind of politics that sociologists have a lot of experience in studying... 
The underlying point of the Fourcade et al. article is that politics and power play a far larger role in determining both the success of economics and the success of economics than economists are prepared to admit in public. Or, more succinctly, sociology provides a much better account of economics’ success than economics itself does.
The last lines of each of those paragraphs are a bit funny - is this the idea that "those who cannot do, teach"? But anyway, here are the problems I have with this thesis:

1. Do political/social factors also explain the high salaries of professors in engineering, biostatistics, operations research, and accounting? If not, why should we expect that econ is substantially different from all of the above? Sure, it's possible that politics explains econ's riches, while skills explain the riches of all of those other fields. But it's not parsimonious. If we're choosing a null hypothesis, shouldn't we choose the null that all of these explanations are the same, instead of the null that econ is a unique outlier?

2. And if we choose the null that econ isn't an outlier, then we have to ask: What support - data or theory - do Fourcade, et al. present for the thesis that econ's high salary is socially constructed? Do they have a theory of how the legitimation happens or happened? Of who conferred the prestige and power upon economists, and why? I didn't see such a theory in their paper. And I certainly didn't see how any of the data they present imply any mechanism for the assigning of econ salaries. No theory, no data - why should I believe this story??

3. Also, I'd like to take the opportunity to rant about the concept of "power". This has always struck me as just another form of economic phlogiston - just another labeled residual, like "technology" or "culture" or "confidence", whose behavior we are expected to take for granted. The reasoning always seems to be something like "Economic outcomes happen because of power. How do you know who has power? Just look at who does better in the economic outcomes!" Some people have actual theories of specific kinds of power, just like some people have actual theories of how technology works instead of just using it as a label for a production-function residual. But I often see people waving their hands at a phenomenon and saying "It's power, of course!" Which doesn't seem very explanatory at all.


OK, this all having been said, I did leave some important things out of my article. 

For one thing, I didn't talk about undergraduates' demand for econ teaching. If undergrads didn't want to major in econ, then universities wouldn't pay them so much. Econ is a popular major. As for why that's true, I suspect that there are many reasons, and that one is that an econ major requires just about the level of quantitative skill that most well-paying white-collar managerial jobs require of graduates. Another is probably the idea that econ majors learn more about business than other majors of comparable or greater technical skill. A third might be that econ acculturates econ majors to business culture - see Henry Farrell on the potential value of business culture. But now I am just tossing out hypotheses - the fact is, econ is a popular major.

A second thing I left out was the fact that in order to "tech up" (i.e. move in a more quantitative direction), sociology will have to raise the technical requirements for both undergrad soc majors and PhD students. There are quantitative sociologists out there, and sociologists with great technical skill, bu they would have to become the overwhelming majority if sociology were to be regarded as a technical field, like econ is. That will almost certainly mean raising the IQ bar for entering sociology at the undergrad and grad level. It will also mean closing the field to many people whose culture has taught them to fear math, to think that they are "not math people". This will change the composition of the sociology field. So a lot of the increase in the average salary of sociologists would come from a change in the background of the average sociologist. Sociologists might regard that as a pointless exercise. It would be about raising the prestige and wealth of the profession more than the people currently in the profession. That may not be something sociologists care about.

But look, salary issues aside, here's the bottom line. Sociologists are fighting what they perceive to be an intellectual battle against economists over whose description of social phenomena - discrimination, family life, etc. etc. - is going to be accepted by society. And it is asymmetric warfare. Sociologists, by (sometimes) continuing to use the tools of literary "critical theory", have brought a nerf gun to a tank fight. We live in a quantitative, data-driven age, and if sociologists want to beat the imperialist economists, they aren't going to do it by talking about "performativity", or by ranting about how arrogant economists are, or by using "power" as a catch-all explanation for unexplained phenomena. That critical theory stuff just doesn't cut a lot of mustard with most people these days.

That's not me being an imperialist. That's not me saying "econ roolz!". That's not me saying that it's a good thing that we live in a quantitative, data-driven age. That's just me delivering the facts as I see them. I might be wrong, but that's how I see the facts.

Tuesday, November 25, 2014

Fake Asperger's guys?



The other day I wrote a Bloomberg View post about women in econ. Frances Woolley had some good criticisms of my piece. But others thought I was focusing on attacking Robin Hanson, a quote of whose I used to illustrate the fact that stuff considered "sexist" in other disciplines is considered "normal" in economics. Actually, I just used Hanson's quote for illustrative purposes - the meat of the article, if you will, was about the research by some economists who claim that women suffer more promotion and salary discrimination in econ than in the sciences. Hanson wasn't really the point, though I personally did think his quote was offensive.

But anyway, some right-wing types on Twitter thought it was all about me trying to sic a mob of SJWs ("social justice warriors", i.e. left-wing types) on Hanson. Steve Sailer jumped in to defend Hanson and all "Aspergery nerds":
Professor Hanson is a very nice, very innocent, very eccentric man who tries to come up with counterintuitive thought experiments (most of which aren’t very useful thoughts, but he means well)...It’s striking how it’s turning into Open Season on Aspergery nerds. Various Dilberts are being targeted as the Gender Enemy Oppressing Four Billion Women. Why? Because they are socially maladroit.
And righty pundit Randall Parker pursued the Aspergery Nerd Defense Crusade on Twitter.

This is something I'm hearing more and more often these days: right-wingers, at least the smart ones, are just people with Asperger;s, whose condition prevents them from being socially sensitive enough to feel the vibes of political correctness. In fact, I don't see any lefty types humble-bragging about their position autism spectrum. This makes me suspicious (and not just because Asperger's was removed from the DSM).

It occurs to me that it's not that hard to fake Asperger's. After all, most "neurotypicals" don't really know exactly what true Aspergerians are like. So just talk about nerdy stuff, get a blank stare on your face every once in a while, intentionally ignore social cues, etc. It'll take a little effort at first, but eventually it'll be second nature. And it'll be fun - if you meet a girl who you know is too pretty to sleep with you, instead of bowing and scraping ineffectually before her majesty and beauty, you can say un-PC stuff that sends her into spasms of ineffectual rage! Wheeeee!! 

Fake Asperger's seems like it could also be a signal of high intelligence, but I'm not sure whether it's a real or a false one. On one hand, social ineptness is a costly signal. If you choose to pay the social cost to become a Fake Asperger's Guy, you prove that you are confident in your ability to make it in this world on intellect alone. (An economist once told me this was called "countersignaling," but actually I think this is just normal signaling.)

But on the other hand, it could also be a false signal. We associate the autism spectrum with high quantitative and technical intelligence, so Fake Asperger's might be a way to spoof society's expectations and pretend to be smarter than you are by exploiting the Representativeness Heuristic. If so, expect the Fake Asperger's Party to run out of steam once folks catch on to the trick.

In any case, if we restrain ourselves from giving social censure to people who are perceived as "Aspergery nerds," doesn't that just incentivize the adoption of Fake Asperger's?

Generally, the possibility of a trend of Fake Asperger's Guys is sort of darkly, gently hilarious, but one thing about it annoys me. Real Asperger's guys are going to get a bad name from this. Real Asperger's guys are usually not right-wing types who brashly declare their disdain for social cues by talking about rape around girls. Most of them are kind, good-hearted people who occasionally say offensive or hurtful things simply by accident, and are very very slow to realize it - but when they eventually do realize (or are informed by friends), they are generally remorseful and distressed. They are people with a real, if minor, disorder, who almost all wish they didn't have the limitations they have. They're basically like Lawrence Waterhouse in Cryptonomicon (though Neal Stephenson took a bit of artistic license).

I wouldn't like to see those real Asperger's people given a bad name by swaggering right-wing jerks who decided Fake Asperger's was a fun and profitable way to shuck the pressures of PC.


Update: As usual, SMBC got there first. Hat tip to Adam in the comments.

Update 2: Legendary troll douchebag Chuck Johnson apparently refers to himself as a "neuroatypical". 

Monday, November 10, 2014

Some nonfiction books I really like



My last post was a mainly negative review of David Graeber's Debt: The First 5,000 Years, and a while before that I posted a decidedly mixed review of Kartik Athreya's Big Ideas in Macroeconomics. So commenters are justified in pestering me to list my favorite books (other than sci-fi). Here's a short list. If your favorite book isn't on here, it's either because (in order of decreasing likeliness): A) I haven't read it, B) I read it a while back, C) I didn't happen to think of it off the top of my head, or D) I didn't like it that much.


Big Theory-of-History Books

1. Guns, Germs, and Steel, by Jared Diamond
An obvious choice. The most original and compelling "big arc of history" thesis I've ever read. And contains pages and pages of details about domesticable plants, which I love reading about, because hey - domesticable plants.

2. The Better Angels of Our Nature, by Steven Pinker
This reads like the anti-Graeber. So on point, so forceful, so focused. Such clarity and readability. There is the occasional howler, as in Graeber, but far fewer, and sources are cited. Pinker successfully makes the case that we live in a much more peaceful world than ever before.

3. Why the West Rules - For Now, by Ian Morris
This one didn't really have as clear a thesis about the big arc of history, but the important thing here is the data - the first hard data I've ever seen on which civilizations were the most developed at which point in time.


Economics and Finance

1. The Myth of the Rational Market, by Justin Fox
The single best pop econ book ever written - a complete history of financial economics. It made me want to join the field.

2. The Undercover Economist, by Tim Harford
This is a managerial econ course in a book - no equations, but read it and you will understand all the concepts. Professors, you could assign this to your class instead of a textbook.

3. When Genius Failed, by Roger Lowenstein
The best history book about the financial industry that I've ever read.

4. The Wisdom of Crowds, by James Surowiecki
Lots of cool facts about finance, economic theory, complex systems, and behavioral econ. Impossible to summarize, but that's fine. Probably the best pop book about complex systems.

5. The Big Short, by Michael Lewis
This book is great at conveying what the modern finance industry is really like. Of course, everything by Michael Lewis is worth reading. Liar's Poker is the most fun, of course.

6. The Occupy Handbook by various authors, edited by Janet Byrne
A wonderful collection of essays about the financial crisis, the recession, and problems in our economy today. I even loved David Graeber's chapter!

7. The Second Machine Age, by Erik Brynjolfsson ad Andrew McAfee
The single best book on the "rise of the robots" question. Doesn't have a strong conclusion about what to do about automation and the economy, but that's because humanity just doesn't quite know what to do yet! Jam-packed with information.

8. Time to Start Thinking, by Edward Luce
The case for economic nationalism and institutional renewal.

9. A Random Walk Down Wall Street, by Burton Malkiel
The best personal finance book. Just reading this book will save the average person thousands of dollars.

10. Zombie Economics, by John Quiggin
Someone had to write this one. Quiggin did it exceptionally well, IMHO.

11. 13 Bankers, by Simon Johnson and James Kwak
Great expose of regulatory capture in the pre-2008 finance industry.

12. My Life as a Quant, by Emanuel Derman
An excellent memoir by a very smart and cool dude.


Japan-Related

1. Nightwork, by Anne Allison
Why Japanese companies are killing Japanese families. Actually, that should have been the subtitle.

2. Can Japan Compete?, by Michael Porter and Hirotaka Takeuchi
A bit dated, but a great look at some of the micro reasons why Japan's economy petered out in the early 1990s. Not intended as a defense of neoliberalism at all, but this is the book that first made me think that neoliberalism might be good for Japan (and might have been good for us, back in the day).

3. Democracy Without Competition in Japan, by Ethan Scheiner
Read this to understand Japanese politics, at least through the early 2000s.

4. The Making of Modern Japan, by Marius Jansen
The best history of Japan, period.

5. The Rising Sun, by John Toland
A great history of WW2 from the Japanese perspective. It will permanently shatter any stereotype of Japanese people as conformist, obedient, etc.


Assorted Other Nonfiction

1. The Pleasure of Finding Things Out, by Richard Feynman
Everything by Feynman is good; this is the best.

2. The Trouble With Physics, by Lee Smolin
Captures both the beauty and fun of doing fundamental physics theory, and the frustration of seeing a field of science hobbled by bad sociology. I wonder what other fields are hobbled by bad sociology? Hmm...

3. Autumn in the Heavenly Kingdom, by Stephen Platt
An eye-opening account of the Taiping Rebellion, the Chinese version of Armageddon.

4. Genghis Khan and the Making of the Modern World, by Jack Weatherford
The story of a boy who came from nowhere to conquer the world, who tried to singlehandedly yank the middle ages toward liberalism, and who of course failed.

5. A World Undone, by G.J. Meyer
An eye-opening account of World War I, the European version of Armageddon.

6. Destiny Disrupted, by Tamim Ansary
An informal history of the world from a Muslim perspective.

7. Lost Enlightenment, by S. Frederick Starr
The amazing history of Central Asian science and technology before horse nomads and religious fanatics wrecked the region forever.

8. Empires of the Sea, by Roger Crowley
A gripping account of the desperate dirty battles between Spain and Turkey in the 16th Century.

9. Delivering Happiness, by Tony Hsieh
I don't read many autobiographies, but this one is great. It made me a Hsieh groupie, and I've never even met the man.

10. Mindset, by Carol Dweck
The only self-help book you'll ever need.

11. The Clockwork Universe, by Edward Dolnick
The history of how Descartes, Copernicus, Kepler, Galileo, Boyle, Hooke, and Newton destroyed the old world of magic and superstition and made it safe for science and rationality - the most important thing that has ever happened to humankind.

12. How the Scots Invented the Modern World, by Arthur Herman
Just one reason Scotland is awesome. Well, many reasons, actually.

13. Coming Apart, by Charles Murray
The sad but apparently true story of America's growing class divide.


(Reminder: Most books not on this list are simply books I haven't read, or read so long ago that I can't remember them clearly. My list of books to read is very long indeed...)

Tuesday, November 04, 2014

Book review: Debt: The First 5000 Years


A while ago, I wrote a rather acerbic critique of one of David Graeber's magazine articles, in which I mentioned his book, Debt: The First 5000 Years - which, at the time, I hadn't read. This angered a bunch of Graeberites, not to mention Graeber himself. And to be fair, I do have a bad habit of passing judgment on books before I read them. So, in keeping with my new philosophy of fairness and open-mindedness, I read the whole thing.

Now, from interacting with David Graeber on Twitter, I have a sneaking suspicion that he is a certain type of Public Intellectual - the type who bristles with anger at the mildest criticism. This type of Intellectual will view any paraphrase of his ideas by a critic to be a total and utter misreading and misrepresentation of what he intended to say, no matter how close the paraphrase is to the original - deviate one word from exact quotation, and you're a Vile, Intellectually Dishonest Boor (V.I.D.B.) who obviously couldn't be bothered to read what the author actually wrote. As for exact quotations, those are certain to be out of context. Just as there is no physically exact model of the Universe except for the Universe itself, there is no representation of the Touchy Intellectual's thought that is accurate except for the Intellectual's own complete and unabridged oeuvre. (Paraphrasing by supporters and fans, of course, is perfectly legit, as long as their support and fandom is unqualified.)

Now if I'm right, and if Graeber is this sort of fellow, then this review is in trouble before it gets started, because the main problem with Debt: The First 5000 Years is that after slogging through all 560 pages, I can't for the life of me tell what point it's trying to make about the phenomenon of debt. This means that in order to say anything about what I think this book might be saying, I will have to paraphrase heavily, which means that Graeber and the Graeberians will undoubtedly conclude (quite vociferously) that I am either lying about having read the book, or am simply a village idiot, and Tweet-spam me accordingly.

OK, so now that we've dispensed with the pleasantries...

Debt is a sprawling, rambling, confused book, mostly about economic history, mixed with some political and moral philosophy. It begins with a discussion of the "textbook" economic history about the transition from barter to money economies, and debunks this with historical evidence. Barter was actually never common. Graeber thinks this will come as a big shock to economists, and indeed it might to some, though monetary economists are well aware that before the advent of currency, credit arrangements were the standard form of payment, and were usually denominated in units of real commodities. Graeber discusses why this kind of payment, which doesn't have a standardized unit of account, is technologically difficult and clunky. He mentions some intermediate solutions, such as using fictitious units of account with fixed prices in bilateral credit arrangements (e.g. one goat = 5 "doubloons"), or using ingots of metal as a rough-and-ready unit of account. He also discusses how currency came into use primarily as a result of war (much of this point is actually sprinkled throughout the later sections).

This was the most interesting part of the book, and I learned some very interesting things from it. However, it would have been nice if Graeber had sat down and talked with an actual monetary economist before writing this section, instead of just reading Econ 101 textbooks. An hour or two of conversation with Miles Kimball, David Andolfatto or Steve Williamson - to name three people I've chatted with about these ideas - would stimulate many interesting thoughts and crystallize others, greatly enriching these sections of the book. Graeber shows keen economic intuition, actually, and I'm sure he could publish papers in monetary economics if he set his mind to it, but of course he has bigger fish to fry.

Most of the book, however, is not about the mechanics of debt, but about its connection to moral issues. If Debt can be said to have a basic thesis, it's that debt has a moral dimension, and that this moral dimension enables people to do bad things to other people. (Yes, I paraphrased; cue brickbats from Graeberians!)

Graeber advances this thesis indirectly. The bulk of the book describes a long sequence of bad things that have been done to people in the past - mostly some form of slavery or another. The upshot of this long litany, though it is never explicitly stated, seems to be that commerce - exchange, markets, capitalism, pick your preferred term - is fundamentally exploitative, and is fundamentally about turning free people into slaves. This is a pretty standard leftist idea. But by always reminding the reader that these arrangements of commerce/exchange/capitalism are carried out via the mechanism of debt, Graeber pours this old wine into a new glass. Capitalism is bad, and debt is the mechanism of capitalism, therefore it is upon the idea of debt that we must turn our disapprobation.

Many times throughout the book, Graeber rails against the fact that the morality of "paying one's debts" functions as a mechanism for keeping debtors in bondage to creditors. But a few times, Graeber actually reverses the equation, and laments the power that debtors can sometimes exercise over creditors, quoting the old saw that "if you owe the bank a hundred thousand dollars, the bank owns you; if you owe the bank a hundred million dollars, you own the bank." In other words, whether debt gives power to creditors or debtors, power is the bad thing, and debt is merely the mechanism by which power is expressed.

Now, this may sound a little silly - if someone wrote a book called "Metal: The First 5,000 Years," and then filled that book with stories of war and bloodshed, never failing to remind us after each anecdote that metal was involved in some way, we might be left scratching our heads as to why the author was so fixated on metal instead of on war itself. And in fact, that is indeed how I felt for much of the time I was reading Graeber's book. The problem was exacerbated by the fact that Graeber continually talks around the idea of debt in other ways, mentioning debt crises (without reflecting deeply on why these happen), the periodic use and disuse of coinage (which apparently is just as bad as debt in terms of enabling the capitalism monster), and any other phenomenon related to debt, without weaving these observations into a coherent whole. 

In other words, I am now angry at myself for paraphrasing the book, and trying to put theses into Graeber's mouth, because this is such a rambling, confused, scattershot book that I am doing you a disservice by making it seem more coherent than it really is.

The problem of extreme disorganization is dramatically worsened by the way that Graeber skips merrily back and forth from things he appears to know quite a lot about to things he obviously knows nothing about. One sentence he'll be talking about blood debts and "human economies" in African tribes (cool!), and the next he'll be telling us that Apple Computer was started by dropouts from IBM (false!). There are a number of glaring instances of this. The worst is not when Graeber delivers incorrect facts (who cares where Apple's founders had worked?), it's when he uncritically and blithely makes assertions that one could only accept if one has extremely strong leftist mood affiliation. The most egregious example of this occurs in the book's conclusion, when Graeber writes:
I would like to end, then, by putting in a word for the non-industrious poor. At least they aren't hurting anyone.
Both the declaration that the non-industrious poor aren't hurting anyone and the implication that being "industrious" probably is hurting someone are obviously false. But Graeber delivers absurdist sentences like this with the same calm assurance with which he tells us about when coinage first became popular in the Mediterranean.

Not only does this have the effect of diminishing Graeber's credibility as a narrator (what if he's wrong about the blood debts too?), but it makes a careful, critical reading of the book nigh impossible.

Now if you have strong leftist mood affiliation - i.e., if you've already bought into most of the background ideology that suffuses Graeber's book - then you will probably nod your head as you read this rambling mess of a book, and come away with the feeling that debt, in some way or another, is another star in the constellation of nasty concepts that you associate with the capitalist machine. But if you don't, you might walk away thinking "What was I supposed to take away from that? That debt is, like, bad, or something?"

Or at least you would if you had read Debt in 2007. But Debt was published in 2011, when legions of middle-class and poor Americans had just seen their wealth wiped out by a housing crash, and yet who were still on the hook for the money they had borrowed to buy those houses. With Americans drowning in debt, the message of a debt jubilee - a general bailout, not just for the big banks that started the whole mess - seemed very attractive (I, for one, would definitely have supported it!). So I'm sure it resonated with a lot of people when Graeber wrote:
It seems to me that we are long overdue for some kind of Biblical-style Jubilee: one that would affect both international debt and consumer debt. It would be salutary not just because it would relieve so much genuine human suffering, but also because it would be our way of reminding ourselves that...paying one’s debts is not the essence of morality, that all these things are human arrangements and that if democracy is to mean anything, it is the ability to all agree to arrange things in a different way.
That sounds like something we should have done more of in the years following the bursting of the housing bubble. But - and here I just want to editorialize a bit, since I deserve it after reading 560 pages of Graeber - as a general, regular thing it sounds like a bad idea. It smacks of the idea that wealth redistribution should be opportunistic rather than systematic - that the government should use debt cancellation in place of regular systems of welfare, thus replacing redistribution to those most in need with redistribution to those who are boldest in asking for "loans."

Anyway, now I'm rambling. To wrap up the review, Debt: The First 5,000 Years is not a book I recommend. It contains some interesting tidbits, but these are not worth the cost of the slog. Perhaps capitalism is a rotten, inhumane system that kills relationships, rewards violence and trickery, and enslaves us all to the brutal logic of the market before inevitably destroying the planet. Or perhaps not. But either way, there's little insight to be gained by reframing the issue in terms of debt. Or if there is, I'm damned if I can find that insight in this book. Perhaps the next 5,000 years will prove more enlightening.

Sunday, November 02, 2014

Preview: Trillion Dollar Economists, by Robert Litan



In the tradition of passing judgment on books I haven't read, let me say that Trillion Dollar Economists, by Robert Litan, looks like it mostly agrees with my priors. From the inside flap:
A trillion dollars, and most likely more – that’s how much economists contribute to the U.S. economy. But you’d never know it by reading the jokes and criticisms (some of it fair) about economists in the media and in the blogosphere. 
In Trillion Dollar Economists, one of the nation’s leading policy analysts, Robert Litan, explains with lucidity and precision how the insights of many economists, mainly over the past fifty years, have helped to revolutionize business, resulting in huge benefits for companies and consumers. 
Economists and their ideas are embedded throughout the economy, Internet-based companies (even on-line dating sites), and increasingly in sports. Whether they know it or not, Internet retailers owe their existence to economists who in earlier decades helped convince policy makers to remove limits on prices and entry into the transportation business, while providing much of the intellectual impetus for breaking up the telephone monopoly that otherwise most likely would have inhibited the growth of the Internet. 
The widespread use of auctions in on-line commerce and search has its origins in economic research. 
Consumers and businesses that have benefited from the oil and gas boom have economists to thank for convincing policy makers to remove energy price controls. Investors in indexed mutual funds and other financial products are in debt to entrepreneurs who got their ideas or inspiration from financial economists.
This sounds a lot like what I wrote here, except without the macro-bashing.

Anyway, it looks like Litan divides the benefits of econ into two categories: 1) engineering applications, and 2) policy advice. That sounds right to me. I would have added a third: 3) ideas.

Economists helped prepare the public psychologically for the advent of neoliberalism in the 80s and 90s. Neoliberalism has had its costs and its benefits, but overall I'm glad we went down that road, since I've seen the alternative (Japan). Economists eased this transition by basically being priests of the free market. That often meant ignoring things like externalities and public goods, which was bad, but it might have been necessary in order to convey a simple message to the public: Don't be afraid of economic liberalization. Economists assured Americans that although liberalization would destroy many jobs, more would be created in their place. That turned out to be pretty much true. But anyway, now that the gains from neoliberalism have been mostly reaped in the U.S. (though not in Japan, Korea, or some European countries), economists may have to shed the role of "priests of the free market," and start talking about how to fix the market failures that they glossed over in the 80s.

So I'm interested to see if Litan deals with this idea.

I'm also interested to see what he thinks will be economists' most important role going forward. My guess has always been that micro theory would become more and more important, as tech companies find more ways to exploit things like auction theory, search and matching theory, etc., and that policy advice would become a bit less important now that the big liberalization boom is over. So I want to see if Litan agrees. I also want to see if he thinks that economists' policy advice will continue to shift from simple deregulation to designing "smart" regulation (a shift I think has already occurred to some degree with things like pollution permits).

Anyway, looks like a cool and interesting book. I'll of course write a review after I've read it.

Friday, October 31, 2014

Thursday Roundup, 10/30/2014



I'm running out of cowgirl pictures that aren't family-friendly...


Me on BV

1. Perhaps you have forgotten that China is big. If so, I am here to remind you.

2. Why I'm not worried about all the papers about data mining and p-hacking.

3. Niall Ferguson continues not to be a serious or trustworthy public intellectual on matters of monetary economics.


From Around the Econ Blogosphere

1. Scott Sumner lavishes praise on Matt Yglesias. Sumner is a passionate man - he loves as he hates, without reservation.

2. Paul Krugman says important and necessary things about the ideological war against infrastructure investment, but fails to mention America's huge cost problem.

3. Here's why we use log returns, courtesy of Ren & Stimpy.

4. Alex "The Rock" Tabarrok has good news on the U.S. patent[ly f***ed up] system.

5. The left-right political axis is actually just a made-up piece of B.S.! Astonishing. But you're still all a bunch of right-wing nutjobs, FYI.

6. Cool Campbell Harvey paper about backtesting trading strategies. God, I hope there aren't people out there trading on strategies with a backtest t-statistic of 2.01...OK I'm kidding, no amount of silliness in the finance industry would ever surprise me.

7. Tony Yates reminds us that all of the models where we assume some simple passive behavior for (fiscal, monetary) policy and then examine the effects of (monetary, fiscal) policy are basically missing the point.

8. Jim Hamilton says that Saudi Arabia isn't likely to cut oil production to boost prices.

9. John Cochrane has taken up the Neo-Fisherian banner! Low interest rates cause deflation!

Wednesday, October 29, 2014

That which is not dead doth sleeping lie (RBC edition)



The other day I had dinner with two prominent New Keynesian macroeconomists (whose names shall not herein be revealed). Both of them told me that the idea of technology shocks as the main driver of business cycles is effectively dead. At the same time, a number of Twitter people (Josh Hendrickson, Tony Yates, Ryan Decker, and Pedro Serodio) asserted that NK is the dominant school of macro. Other macroeconomists, like Chris House, have made the same claim.

I just don't think this is true at all.

Now, it is true - to my knowledge, anyway - that central banks use NK-style models (like Smets-Wouters), and don't use models where tech shocks are the main driver.

Also, I've recently seen people like Patrick Kehoe, Mark Bils and Peter Klenow - who had been known for their skepticism of the sticky-price mechanism - writing some papers giving more credence to the idea of sticky prices.

But in terms of academic publishing, the hot areas in macro seem to be A) labor search models, and B) financial-friction models. In both of those, you often see tech shocks as being the main driver.

The Diamond-Mortensen-Pissarides model, when it includes business cycles, includes them by adding TFP shocks. In other words, once you leave the steady state, DMP is just RBC with a matching friction. By my count, that makes two Nobel Prizes for RBC models and zero for NK. Actually, the vast majority of labor-search models I've seen, if they try to match business cycle facts, use the RBC mechanism to produce the cycles. The big exception I've seen is Christiano, Eichenbaum and Trabandt.

For financial-friction macro it's more even, as you definitely do have models that augment New Keynesian models with financial frictions - e.g. this one by Christiano et al., or this one by Curdia and Woodford. And of course there is Bernanke-Gertler, one of the original financial-friction models. But Kiyotaki-Moore, the other canonical financial-friction macro model I know of, uses RBC-style tech shocks as the single shock. And Brunnermeier-Sannikov uses what is basically a TFP-news-shock model. So here, the literature is pretty split, but RBC is alive and well.

But there are other macro-ish areas of research besides macro! There's international finance, where the models I've seen are all RBC-type models (caveat: my teacher for the international finance field class in grad school did her PhD at Minnesota). And when macro-finance asset pricing models bother to model production, they usually - though not always - use RBC-style tech shocks to make dividends and consumption move around.

So it seems pretty clear to me that RBC - defined loosely as "models where fluctuating TFP is the main driver of the business cycle" - ain't dead by any means. What's more, it seems unlikely that it will die for a good long while. Why? At least two reasons - A) ease of use, and B) familiarity.

First of all, productivity fluctuations are just plain easy to use. You can have constant returns to scale. You don't have to think about money or the aggregate price level. If you want to focus on other hard stuff, like labor search or banks, the easiest thing to do is just to use the simplest possible mechanism for the aggregate shock.

Second of all, everyone is really familiar with RBC, because everyone learns it before they learn any other type of shock mechanism (like NK). This is because RBC came first historically, because it's relatively easy to learn and understand, and maybe because of the enormous respect still given to the original RBC guys. So everyone knows how to use tech shocks, so they're the first go-to mechanism for many people.

So I think that all the people who pronounce RBC dead should think again. And NK's dominance is far from complete. If you don't believe me, just ask the Nobel committee!

Tuesday, October 21, 2014

Who Said It? (safe asset shortages edition)



OK, econ blogomaniacs, time for a quick little pop quiz. Here are two quotes from prominent economics bloggers. See if you can guess which blogger said which quote. No cheating!


Quote 1

"Though there are things that central banks can do in the face of safe asset shortages...a safe asset shortage is basically a fiscal problem. The safe asset shortage is reflected in binding financial constraints that imply the economy is non-Ricardian. Government debt matters, and an expansion in the stock of government debt can be welfare improving. Presumably this also implies a lower net cost of financing government projects, meaning that a safe asset shortage provides an opportunity for the government to finance education and infrastructure on the cheap."


Quote 2

"When the excess demand is for longer-term assets – bonds to serve as vehicles for savings that move purchasing power from the present into the future – the natural response is… induce businesses to borrow more and build more capacity, and encourage the government to borrow and spend…When excess demand is for high-quality assets – places where you can park your wealth and be assured that it will still be there when you come back – the natural response is to have credit-worthy governments guarantee some private assets and buy up others, swapping them out for their own liabilities and thus diminishing the supply of risky assets and increasing the supply of safe assets."


...If you got both right without Googling, then you're way too addicted to econ blogs.

Sunday, October 19, 2014

The Omega Man


Time to write about a very uncomfortable subject that is also not anywhere close to my own area of expertise. A lot of people will be inclined to give this post an un-charitable reading, which is inevitable, so before you explode with rage, realize that A) I know I'm not any kind of an expert, and B) I might be saying something more nuanced than you think I'm saying. You'll probably explode in rage anyway, and I preemptively apologize for raising your blood pressure. I also apologize for the blatant heteronormativity of this post.

Anyway.

It seems to me that a big problem in the world consists of angry young men doing aggressive things. One example of this is terrorism. Another is online intimidation and harassment of women, like we've seen with #GamerGate. Another is random outbursts of violent crime. I don't know why young men are so much more prone to aggression than other groups - most people just wave their hands and say "testosterone", while I tend to just shrug and say "whatever". But anyway, it's a fact, and pretty much everyone knows it.

One thing I have sort of noticed, however - and here we leave the realm of well-established fact and enter the realm of Noah Talking Out of His Digestive Tract - is that when young men feel like they can't get sex, they tend to feel angry and resentful toward the world. Actually, I've noticed that women, when they feel like they can't get sex, also seem to feel unhappy and grumpy. But since young men tend to be more aggressive than their female counterparts (see previous paragraph), the frustration that comes from feeling like one isn't able to get sex seems often to translate into aggression in men, but far more rarely in women.

Note that I say "feel like they can't get sex" instead of "can't get sex", because from what I've seen, nearly anyone is able to get sex if they want. They may not be able to easily get sex with a partner whose quality - attractiveness, purity, status, hair color, whatever - they deem acceptable. But pretty much anyone can get sex. (As a half-crazed drug-addled hippie once told me in a Stanford co-op, "There's all this sex out there, and we don't even realize it!")

But basically, there are a whole lot of young guys out there who feel like they just can't get laid. They're wrong - totally, ludicrously wrong. But they really do feel that way. In current internet slang, these people are called "incels", which is short for "involuntary celibates." Whether this is an apt descriptor depends heavily on your definition of "voluntary," since incorrect beliefs still have power.

Why do these young men feel like they're incapable of getting laid? I have a conjecture - and here we wander dangerously into the realm of pseudoscience, but still, I have a conjecture. My guess is that these men feel that they have low social status, and that this makes them either 1) not attractive, or 2) not deserving of sex. In fact, this could be unconscious - some men seem to tacitly think of themselves as low-status men, and this gives them a general pessimism about their ability to succeed in any social interaction, be it friendship, sex, or business. These beliefs might have been solidified by being bullied as kids - I don't know.

Anyway, these men seem to fit into a social niche that is well-observed in some primate societies - the omega male. Of course, this term has already been incorporated into internet slang (sometimes confused with "beta male"), but like any scientific concept, it has been mutated, misapplied, overapplied, etc. Still, I think the concept is a useful one. In a college course (HAHAHAHAHA...OK now that we've got that out of our system), I learned that in some primate societies, gangs of omega males engage in violence toward females, while the big tough alpha males and their beta male lieutenants try to protect the females and chase off the attacking omegas. I don't know about you, but that image sort of reminds me of #GamerGate.

One interesting question is whether the angry young omega-males are angry because they are sexually frustrated, or whether their lack of sex is simply a signal that seems to remind them that they are low-status. I'm not sure about this - probably both.

So to sum up: There seem to be a lot of young men out there who are angry because they think they can't get laid, and who think they can't get laid because they think of themselves as low-status. And because of this, these men sometimes do aggressive things, alone or in groups, toward women.

Next question: What do we, as a society, do about this problem?

One idea I've seen some of these angry young men suggest - including in long, unsolicited emails to Yours Truly - is to turn women back into pieces of property, and then distribute them evenly to men via a restored norm of traditional patriarchy, possibly enforced by church-state cooperation and mass shaming. Needless to say, I think this idea is total and utter shit, and would be total and utter shit even if it had a hope in Hell of working, which incidentally it would not. In fact, when I hear this idea, I sort of have the urge to take whoever suggested it and pitch him off a cliff into a tar pit, but I guess that just shows that I, myself, still have traces of angry-young-man-itude.

A better solution, I think, is the elephant seal solution.

When I discussed the issue of omega males with Brad DeLong on Twitter the other day, he pointed out that "ω-bull elephant seals hang out at edge of beach & try 2 look attractive—don’t hate on elephant seal cows & chase them off". I don't know if elephant seals actually do this, but I also don't care that much, because everything I've seen in life tells me that this is a good solution for human omegas.

In other words, the resentful, angry, frustrated young men simply need to realize that they are plenty attractive, and that getting sex is really not that much of a problem once you actually go out and try to do it.

In theory, this is what PUA culture is supposed to do - turn "incels" into ladies' men. At first blush, this seems like the perfect solution - teach men how to be attractive to women! Just imagine a world in which all the lonely, under-confident dorky guys suddenly become confident, socially adept men who knew how to be the object of women's desires!

Unfortunately, the PUA movement doesn't seem to have accomplished this societal transformation. Why? Well, one reason is that although many PUA movement leaders, like Erik von Markovik, try to spread the (good) message that any man can be attractive if he just tries - an example of what Carol Dweck would call a "growth mindset" - other members of the subculture propagate the idea that only natural "alpha" males can ever succeed at the attraction game. In other words, these people (no, I'm not going to name names) have reinforced the omegas' insecurity about their own social status and sexual prospects, instead of alleviating it.

Other reasons include A) the fact that practicing being attractive goes against many people's religious and/or traditional values, and B) the fact that even well-intentioned PUA gurus like von Markovik are speaking mainly from their own experience, which - though impressive in scope - simply doesn't work for everyone. As a result of all these factors, many of the omegas resent the PUA subculture just as much as they resent women.

So basically, what I think we need is some new way of getting omegas to stop worrying about their supposedly low social status and learn how to go out and attract women instead of harassing and attacking them. We should teach the angry young human males to take a page from the book of the (alleged) sexy young elephant seal males. The goal is not just for them to get laid (though that's an important human activity), but for them to feel more confident, more worthwhile as mates, and less obsessed with social status.

Of course, I don't know how to accomplish that. But I think this is where our society needs to go. Angry young have to learn how to be attractive, but more than that, they have to learn that they're worthy of being attractive - that their low social status is a self-inflicted figment of their imagination.

Because the alternative method of dealing with the angry omegas is to keep having the alphas - i.e., the cops - continue throwing them off cliffs into tar pits when they get too violent. That solution works, but I wish there were a better way.

Anyway, once again, let me remind you that I don't claim to have any sort of expertise or special insight on this matter.