The Otherwise Less Desirable Characteristics of a Hoax

Folks, it's a hoax! It's gotta be a hoax. Quantifying the otherwise more desirable characteristics of unhealthy foods (or the less desirable characteristics of healthy foods) takes Jeremy Bentham's expression "nonsense on stilts" to a new level. It's nonsense on stilts riding a unicycle blindfolded.

Please tell me it's a hoax! Desirability is not an attribute of the object of desire.

Don't take my word for it.

What does Lacan say about desire? "Our desires are not our own, they are the Other’s"

What does Žižek say about desire? "We don’t really want what we think we desire."

What does Rene Girard say about desire? "Desire usually is born out of the contemplation.of someone else who is desiring and who designates to you the object he's desiring as desirable." (1:57)

 

And what, pray tell, does Luis Buñuel have to show us about That Obscure Object of Desire? Well...

As Mathieu sees her, Conchita is so changeable that Buñuel has cast two lovely new actresses to play her—Carole Bouquet, who looks a little like a young Rita Hayworth, as the coolly enigmatic Conchita, and Angela Molina as the earthy, flamenco-dancing Conchita whom he follows to Seville. 

Poor old Mathieu. The night he succeeds in getting Conchita to his country house, where she has promised to be his mistress, the Conchita who goes into the bathroom to change, changes not only her clothes. Miss Bouquet goes in but Miss Molina comes out.

Costs and Benefits of Desire

"Accounting for the facts that healthy foods are otherwise less desirable and that consumers already have some information about health, the net benefit to consumers possible from consuming healthier foods is 30-40% of the value of the gross health benefit from switching to the healthiest possible diet."

What "facts"? A Reuters report on Monday told the story of the $5.27 billion in "lost pleasure" estimated in a U.S. Food and Drug Administration analysis of product labeling. According to the report, to arrive at that estimate, "the agency relied almost solely on a 2011 paper by then-graduate student Jason Abaluck."

In all fairness to Abaluck, the paper strikes this reader as an earnest and diligent graduate student exercise in mathematical modeling. Of course quantifying the "otherwise less desirable" characteristics of healthy foods is sheer nonsense. But that's not an issue for mathematical modeling. Do the conclusions follow rigorously from the assumptions? That's all that counts. Assuming that healthy foods are otherwise less desirable... But why would you?

Freedoms, of Information and Academic

There’s a legal dispute at the University of Kansas surrounding the emails of Arthur Hall, a Koch brothers acolyte and head of the university’s Center for Applied Economics.  A student group filed a public records request, demanding to see all correspondence between Hall and the brothers Koch.

This interests me because we've had similar public records requests at my institution, asking all faculty to submit emails pertaining to one topic or another.  I've been vocal in saying that the requests were over-broad and threatened academic freedom.  What do I say now that the shoe is on the right foot rather than the left?

More or less the same.  First, I am not impressed by the argument that emails on publicly-owned email clients or using publicly-issued accounts constitute those that should be turned over.  Many relevant communications that should be disclosed are on private systems, and drawing the line at who owns what will simply drive most of the traffic onto the protected networks.  That means less transparency, not more.  Second, as I’ll explain, many of the communications on public systems have nothing to do with the purposes behind public disclosure.

Why do we have these freedom of information laws in the first place?  It’s so that the public can learn about the decision-making process in the public sector—transparency and accountability.  Why was a regulation written in one way rather than another?  Why were important contracts not let out for bid?  That’s what the public deserves to know and what the laws are for.  University employees, including faculty, should be subject to these laws insofar as they are engaged in decision-making.

General political attitudes are not decision-making.  Arthur Hall can think whatever he wants about climate change, and his emails discussing his views on this or other academic/intellectual/civic topics ought to be confidential.  Just because he doesn't believe in global warming doesn't mean he should be chilled.  But his emails concerning resource allocation, programmatic initiatives and other aspects of his work as a decision-maker are pertinent and ought to be released.  In that respect he should be treated like any other public employee and held to the same standards of transparency.

Upstream, Downstream: Why a Campus-Based Carbon Tax Is a Bad Idea

Severin Borenstein is against fossil fuel divestment but says universities could move ahead by instituting a campus-level carbon tax.  This would create incentives to lower carbon footprints, he says, while also being educational in itself.  He’s particularly enamored of the way a tax would force climate activists to actually pay, rather than relying on the cheap talk of political advocacy.

I won’t explore the psychological underpinnings of the you-have-to-earn-your-activism-by-paying-a-personal-price thing, but on purely economic grounds I’m surprised that Borenstein didn’t pick up on the extreme inefficiency of such a downstream mechanism.

First a word of explanation: a policy like a carbon cap or tax can be instituted at any level, from the world as a whole down to your own home.  You can tax carbon emissions across an entire economy at so many dollars per ton, or you could tax your own household the same way.   The national or international level is what we call upstream, your home is downstream.  A campus is in between, but in terms of scale much closer to a household than a 300+ million citizen country.

Why does it matter?  In one word, substitution.  The more upstream a tax or cap is instituted, the more opportunities there are for substituting one good or production method for another.  If you tax your household, you can change your own personal consumption, but you can’t change the carbon content of the consumption options themselves.  For instance, where I live there is no effective mass transit between my town and the big metropolises to the north and south (Seattle and Portland).  The only way I can reduce the travel portion of my carbon footprint is to not go there.  But if the choice is posed at a higher level, like the country or at least the Pacific northwest, we can set up better transit services, so I can have the option of getting out of my car and onto a train.

As you can imagine, the upstream-downstream question for climate policy is huge.  Upstream is politically harder—you have to get more people on board—but economically much, much better.

So you have to wonder why Borenstein would think that a very downstream tax, like that on a single college campus, is a good idea.  Yes, everyone would be forced to make choices, but the choices open to them are a small and inefficient subset of those our society actually confronts.  A campus carbon tax would be a powerful source of miseducation.

Economics and Ideology, Terribly Muddled

With great resolve and all the best intentions, I began reading “Political Language in Economics” by Zubin Jelveh, Bruce Kogut, and Suresh Naidu.  This is the research version of the journalism version published by 538, both referenced by Tyler Cowen.

But I stopped at p. 8, wondering how it is possible for three obviously intelligent people to jointly pen such an arbitrary, implausible and internally inconsistent theory of the role of ideology in economic research.

Here’s what they assume:

1. Personal ideology is a scalar on a left-right continuum.  This corresponds to the direction and degree of political partisanship in the two-party electoral system of the US.

2. Economists choose the ideological content of their research to maximize their utility.

3. Their personal ideology is pre-given and unaffected by the results of their research (or anyone else’s).

4. Their professional identity, from which they also get utility, depends on how close their research is to the political center.  This would show they are neutral technocrats.

5. Thus the first choice they have to make is how fully to reflect their personal ideology versus their professional identity in their research.  This is summarized in a parameter.

6. But to achieve their career goals their research needs to be published, and they have to be hired and promoted by their academic departments.  This interest depends on the distance between their chosen research ideology and the ideology of editors, senior professors in their department, etc.  The tradeoff between “personal” (ideology and identity) and “market” (conformism) interests is summed up in another parameter.

All of these assertions are pre-empirical, and no argument is made for any of them.  They are simply assumed.  In fairness to the authors, they probably didn't think this part of their paper was very important.  It was just a standard-issue u-max model inserted to “ground” the empirical work in.....something.  It was their measurement and data analysis that they expected to garner attention, and so they have.

But the theory still matters, because you can’t separate conception and measurement.  For instance, the first assumption, that political ideology is a scalar rather than a vector, is at the heart of their empirical methods.  If they’re wrong about the first, the second doesn't hold up.  And so on.

My view is that assumptions 1-5 are indefensible.  Only #6 is plausible to me, but even here I suspect they are grossly oversimplifying.  Take the role of journal editors.  Editors will vary in the extent to which they will favor submissions based on their personal ideology, for at least two reasons.  First, some ideological positions are more supportive of suppressing alternative views than others.  (I make no presumption as to what those positions are, but you might have a hunch.)  Second, editors too face constraints, and imposing some ideological biases will be less costly for them than others.  Imagine a committed egalitarian who is the editor for a finance journal.  An article is submitted which argues for higher CEO salaries.  The editor would like to discriminate against it but worries about repercussions if a pattern of such discrimination is observed.  Now imagine a committed “market-rewardist” finance editor irritated by a submission that argues for narrower pay differentials.  The symmetrical constraint would be that the editor might worry that his or her finance professor peers may detect too much bias in favor of market-driven pay outcomes.  But are these two scenarios likely to be symmetrical?

Finally, the claim that professional identity is best served by centrism is baldly ideological.  There is an amusing contretemps on p. 8.  The main text speaks of a “preference for being neutral or centrist”, which seems to imply that being in the political center means you are neutral in the sense of unbiased.  Attached to this is a footnote, however, which reads in its entirety, “We do not interpret “centrist" as “unbiased" or more accurate, however, as being non-partisan or centrist could in fact be another form of bias.”  Well, yes, but that’s exactly what they do, since they identify centrism with professional self-respect and “being non-partisan experts”.  Strangely, they add that researchers might derive utility from centrism because it makes them “difficult to pigeonhole politically”, as if centrists don’t sit in a little cognitive box like most everyone else.  My guess: a reviewer made them add that footnote, although the authors were too inside their own centrism-seeking framework to pursue its consequences.

Like I said, I stopped here, and the good stuff is apparently later on.  According to Cowen, however, the authors ultimately suggest “re-centering” research to replace published results by what the results would be, according to the empirical model, if the researchers were perfectly centrist.  Personally, I’m going to adjust their findings to approximate what they would have been if Jelveh, Kogut and Naidu were fire-breathing radicals, in favor of maximum political and economic equality, democracy and freedom.  No bias in that.

UPDATE: Kevin Drum goes after the "good stuff" here.

Face it: Boys Can’t Do Words

Courtesy of Devin Pope and Justin Sydnor in the Spring 2010 Journal of  Economic Perspectives, via Timothy Taylor, we have this graphic that shows, along the horizontal axis, the ratio of girls to boys in the top 5% of the NAEP reading test:

This proves what many of us have suspected all along: boys are genetically inferior when it comes to reading, at least careful reading.  Their brains are not wired for words.  So stop trying to make excuses for things like guys failing to understand mortgage contracts or IPCC reports on climate science.  This is not a social failing; it’s because of evolutionary inheritance.  Back in the cave age, males who got absorbed in reading were eaten by sabretooths or something.  Pretending that biological differences don’t exist is just Political Correctness, and we know how horrible that is.

Police Brutality and Fiscal Austerity

Michele Richinick reports on three controversial deaths at the hands of police in Cleveland, Ferguson, and New York City:

The U.S. Department of Justice found “reasonable cause” to believe the Cleveland police department has routinely used excessive force, following the conclusion of a civil rights investigation launched last year to examine hundreds of cases, Attorney General Eric Holder said Thursday … Less than two weeks ago, Cleveland police officer Timothy Loehmann shot and killed 12-year-old Tamir Rice, who was holding a toy “airsoft” gun outside of a recreation center … On Wednesday, a New York grand jury decided not to indict the officer who placed Eric Garner in an apparent chokehold in July that led to the Staten Island man’s death. Last week, a grand jury in St. Louis did not indict officer Darren Wilson in the police shooting death of 18-year-old Michael Brown on Aug. 9 in Ferguson, Missouri. The Justice Department has opened civil rights investigations into both cases.

Like Ferguson, NYC has seen demonstrations but at least the NYC demonstrations have so far been peaceful. I give a lot of credit to Mayor De Blasio and police commissioner Bratton for understanding that the protestors have a point. Josh Marshall has kept us posted to a lot of the controversy including some incredibly destructive comments from a former mayor of NYC:

Former New York City Mayor Rudy Giuliani has been on a tear since Sunday, turning himself into a B storyline as he offers what you might call unvarnished takes on race and crime in America amid the tension in Ferguson, Mo. It started with a "Meet The Press" panel, when he told a black panelist that white police officers wouldn't be in black communities if "you weren't killing each other." And he hasn't let up while a grand jury has decided not to indict police officer Darren Wilson in Michael Brown's shooting and heated protests have followed. Giuliani isn't a stranger to racially charged rhetoric, dating back to his time as mayor, but these recent comments were striking even to one of Giuliani's biographers who was quite familiar with the former mayor's past rhetoric on these issues.

De Blasio was elected in part because New Yorkers were smart enough to realize that RUDY’s stop and frisk nonsense was hurting our city. RUDY wants everyone to believe that it was RUDY who save this city from a crime spree. Sure crime is a lot less than it was 20 years ago. Joe Lhota – RUDY’s Minnie Me – ran an incredibly racist campaign against De Blasio suggesting bringing back the Democrats would bring back crime. Of course, the last Democratic mayor was David Dinkins who just happened to be black. And of course, De Blasio is married to a black woman. What this only Republicans can reduce crime canard forgot to tell the voters was that the fall in the crime rate started under Dinkins who had the audacity to raise taxes so we could put more police on the street. Giuliani greatly benefitted from President Clinton’s efforts to have the Federal government assist local governments through The Office of Community Oriented Policing Services – something President Obama wants to extend. But back to Richinick’s story:

“We have determined that there is reasonable cause to believe that the Cleveland Division of Public Police engages in a pattern and practice of using excessive force,” Holder said. The actions, he said, were the result of systemic deficiencies, such as inadequate training and equipment, ineffective policies and inadequate engagement in the community.

I recognize that the Paul Ryan wing of the Republican Party wants to slash and burn nondefense government spending so they can give more tax cuts for the rich even as the neocon wing of the Republican Party pushes for perpetual war overseas. But if we are serious about addressing issues such as crime as well as having more professional police departments, we need to spend the money. Update: Table 3.15.6. Real Government Consumption Expenditures and Gross Investment by Function shows that real (2009$) government spending on “public order and safety” peaked in 2009 at $350.8 billion per year but was down to $339.8 billion per year in 2012. This austerity was bad macroeconomics and was generally a terrible idea.

Death and Taxes

Today’s New York Times tells us that many conservatives are upset by the strangulation death of Eric Garner.  They quote five media and political figures as examples; two of them clearly indicate that one factor in their judgment is that Garner was being arrested for tax avoidance.

Poverty and Wealth, Simplified

When you come down to it, poverty is about not having control, and wealth is about having it.

Poor people are subject to the vicissitudes of life.  They don’t have a buffer.  Each negative shock, large or small—getting sick, having your hours reduced at work (or losing your job altogether), having your car or refrigerator break down—is a crisis.  It’s hard to plan ahead and life is ruled by events beyond one’s control.

Rich people have as much control as the unalterable facts of life allow.  They can’t eliminate illness, but they can minimize the risk, finance the best possible care, and have plenty of resources to tide them over until they are on their feet again.  Their standard of living is immune to the short run ups and downs of money-making, and everything they own can be replaced.  Their span of control can extend beyond their own consumption to include charities, foundations, civic organizations, and even political parties.

Economists assume that the sole motive for economic life is consumption.  In the standard formulation, wealth is a transitory condition whose purpose is to enable future consumption (income smoothing) or, at most, to confer the consumption-like benefits of the bequest motive.  Control as such plays no role.  Similarly, it doesn't matter for a poor person whether they finance a good, like health care, out of their own savings or if it’s provided by a public program like Medicaid.  Whether they can control their access is irrelevant.

I’m not a psychologist, but my understanding of the research literature is that a sense of control is essential to well-being.  In a market economy, wealth is the basis for control.

Now it’s true that a program like Medicaid, by spelling out as explicitly as possible the rights of beneficiaries, can confer a form of control: if you've been denied a benefit, you can invoke your rights and hold the government to its obligations.  This is a matter of degree: how the rights are defined, how accessible the appeal system is, how fairly it operates.  For most people, a well-designed public program that minimizes capriciousness and error is a more promising vehicle for control than out-of-reach wealth.  But if you've got it, wealth is better.

This is why rich people, in general, oppose the use of taxes that would take their money and purchase such things as health, a cleaner environment, or education.  They aren't against these things—far from it.  They are happy not only to pay their own bills but also make donations to hospitals, universities or the Nature Conservancy.  But the question is, who controls how the money is spent and who gets the benefits?  The whole point of wealth is to have that control.  If you were rich and cared only about your own consumption, you could give most of it away, even as taxes.

Politically, what I’m saying is that egalitarians should be in favor of not only more equality of consumption, but also more equality of control.

Did the Dems Blow it with ACA?

Thomas Edsall has a thoughtful piece in today’s New York Times, essentially defending Chuck Schumer’s claim that the pivot to health care after the 2008 election has been a millstone around the Democratic Party ever since.  Polling evidence indicates most of the public, and supermajorities of Whites, see Obamacare as good for the poor and bad for just about everyone else.  Edsall reproduces a provocative chart from a Brookings study:

I can’t vouch for the methodology, but if this is true, Schumer is right.

Of course, programs that address the urgent needs of the poorest people should be a top priority, but context matters.  Incomes for all but the top quintile have stagnated or declined in recent decades, and the ravages of the financial crisis have still not been repaired.  It makes no sense, either as policy or politics, to focus almost entirely on a health care program (inefficient and kludgy by design) that imposes still more burdens on middle income groups and put off indefinitely actions that can make the country as a whole more egalitarian and prosperous.

So, wise guy, what would you have done?  I would have led with policies that could positively frame the overall agenda and build a majoritarian base for the midterms.  Then, with more political clout, I would put forward the harder proposals: health care and especially climate change.

As I see it, there were three big economic tasks facing Obama in 2009.  The first was the aftermath of the crisis itself.  This called for a much, much larger and better targeted fiscal response.  One piece of this would have been a structural commitment over a long time frame to provide transfers to the states if their revenue base remained below the pre-crisis trend.

The second was trade deficit, which, as Dean Baker likes to point out, is an ongoing drag on employment and incomes and saps the benefit of whatever fiscal stimulus the government provides.  The standard economic recipe is a lower dollar, and this is, in the end, a diplomatic issue, since it’s not possible for the US to devalue unilaterally.  But the US is, in the sense of international political economy (and in my macro textbook), a structural deficit country, along with most of the rest of the English-speaking world.  That calls for structural solutions, but these take time and a lot of trial-and-error.  That’s not something you can do between January 2009 and November 2010.

The third is the onrush of inequality, especially as it grinds away at the working class—by which I mean people who work for a paycheck or salary and do not have scarce skills.  There are dozens of specific reforms that could turn the tide, but the common denominator is power.  Private sectors unions are virtually past tense in America, and employment has become virtually informalized everywhere: no rights and no expectations.  This means labor law reform should have been a top priority.  There are two components to this.  One is making it easier for workers to form unions or to promote other kinds of collective organizations, like works councils.  There has been a lot of academic work on what the labor institutions of the future might look like, but no meaningful political commitment.  The other is to introduce a standard labor contract for all workers which would spell out the protections employees can rely on when they agree to work for someone else.  This would do away with employment-at-will and uphold essential human rights, like freedom of speech and association.  We have standard contracts for renting an apartment, but not for renting a human being.

This may sound absurdly optimistic.  Maybe so, but 2009 was a moment when a progressive Shock Doctrine might have been feasible.  The question on the table is, what would a new New Deal have looked like if we had had, like picture suggested, a new FDR?

Hia!tt Cites Putin While Failing Economics 101

Yes, today is definitely Beat Up on the Washington Post Editorial Page Day.

So, in an unsigned editorial almost certainly written by Fred Hiatt, whose ability in economics may be worse even than Robert J. Samuelson's, "Venezuela's downward spiral," we are told that President Maduro of Venezuela should follow the good advice and policies of, wait for it, Vladimir Putin of Russia, whose "logic" is "also known as Economics 101."

So, I  must agree that some of the policies that Maduro is reportedly engaging in are not all that impressive, such as imposing multiple exchange rates in the face of falling oil prices, which Putin has responded to by letting the ruble fall in value.  Probably the latter is a better policy, but the "logic" that Hiatt invokes by quoting Putin is simply astounding, a clear failure of Economics 101.  The column begins with a report of Putin telling TASS,"We earlier sold a product worth $1 and got 32 rubles for it...and now we are getting 45 rubles for the same product costing $1.  Budget revenues have increased and not decreased."  Yes, he said that, and not only that, Hiatt thinks that not only is he not lying but that this is Economics 101.

Well, for starters, understood by anybody who remotely passed Econ 101, they do not sell goods in dollars, even if oil is priced in dollars.  They are selling them in rubles, which is what they pay those who produce their oil in their country.  So, when the dollar price of oil falls, which is what has happened, the dollars they get for selling their ruble-financed oil, are fewer.  They are less able to buy stuff from abroad, just like the Venezuelans, which is true for both, whatever they do with their exchange rates.

Which brings us to where Hiatt really falls for what is clearly propaganda to put lipstick on the pig of Russian economic decline flowing from the falling price of oil.  Government revenues in Russia have not increased, they have fallen, and the nation is facing a budget crisis, which Putin is lying about.

Weirdly the evidence for this is right there in the same issue of WaPo (today's) on p. A13, in a story entitled, "Moscow's health-care cuts spur protest."  Demonstrations are going on against the planned closing of 28 hospitals and the firing of over 10,000 medical personnel in Moscow.  Why are these cuts being made?  Well, "The pressure on the country's budget has intensified as the economy suffers from low oil prices, a drop in the value of the national currency, and Western sanctions over Moscow's role in the deadly conflict in eastern Ukraine."  It seems Hiatt does not even read his own paper before he approvingly quotes propagandistic nonsense from the lying Putin.

Of course, we should not be surprised that Hiatt pays no attention to cuts in medical care.  He constantly calls for cutting Medicare and Medicaid, along with Social Security, so this sort of thing is right up his alley.  Way to go,  Putin!  That is being responsible!  And the fact that it has just been reported that Putin is personally worth about $40 billion in the just published _Putin's Kleptocracy: Who Owns Russia?_, but Karen Dawisha (published by Simon and Shuster after Cambridge University Press chickened out due to  legal threats from Putin's henchmen), just shows how wise and admirable he is.  Clearly he knows Economics 101, even if  Hiatt does not.

Barkley Rosser

How Is Economics Different?

I’ve just read, with morbid fascination, “The Superiority of Economics” by Marion Fourcade, Etienne Ollion, and Yann Algan, which will appear in a forthcoming issue of the Journal of Economic Perspectives.  No surprise that it is such a fine bit of work: I was very impressed by Fourcade’s Economists and Societies: Discipline and Profession in the United States, Britain, and France, 1890s to 1990s, which came out a few years ago.

My reactions might be interesting because, while my training is in economics, I never managed to get into the profession and have not taught in an economics department in any capacity in over 20 years.  This has its pluses and minuses.  I think I was better placed to write my economics textbooks as someone who could refer to economists in the third person (good for critical thinking), while I realize that, being completely out of the loop, I’m susceptible to serious gaps in understanding and errors in interpretation.  But there’s no perfect vantage point, right?

Anyway, here are some thoughts about “Superiority”.  You should read the original article first to see what I’m reacting to.

1. I’m surprised by the data that suggests that economists are not collaborating more across disciplinary boundaries than they used to.  It might be that the focus on top journals and citations, understandable from a data availability perspective, obscures the actual trend, or maybe not.  One possible source of omitted evidence is that their list of external disciplines does not include psychology or biology, two fields where it seems to me that collaboration has been most fruitful.  (See Figure 3, Extra-disciplinary citation in five top journals.)

2. The authors cite a bit of evidence for the view that economists think they are smarter than other social scientists.  (Tyler Cowen thinks economists really are smarter.)  My experience is that this attitude is in fact widespread and is a source of friction in academia: many faculty in other fields feel disrespected by economists and get a surge of schadenfreude when economics gets taken down a peg, as happened in the immediate wake of the financial crisis.  At the same time, the notion that there is something genuinely superior about economics or economists is absurd, when you think about it.  Write down your own list of the ten books or authors that you think have contributed most to our understanding of the modern world—how many are based in economics?  If you have more than, oh, two on your list you need to read more widely.

3. In my opinion, the inferiority of economics is revealed in topic areas where disciplines overlap—where economists and noneconomists study the same phenomena.  In nearly each case, I think you would learn more and better by paying greater attention to the nonecons.  This includes management, law, economic sociology, international political economy and social psychology.  I’m not saying economics isn’t valuable and even essential, just that there’s more illumination coming from other lamp posts.

4. The treatment of organizational structure focuses entirely on the American Economic Association in relation to the professional organizations for American political scientists and sociologists.  This material was quite interesting, but aren’t they leaving out something important?  I’m thinking of the National Bureau of Economic Research (NBER), which provides support and especially networking for “core” researchers in economics.  From where I stand, many rungs beneath, this looks like a nomenklatura for the profession.  Perhaps this is the sort of misinterpretation I warned against earlier.  But if not, we ought to document how members of NBER are recruited and what the career consequences are for inclusion versus exclusion.

5. Much is made of citation and authorship data drawn from a small number of select journals in economics and other social sciences.  This is the main value added provided by the paper, in fact, compared to earlier work.  I wonder, however, whether we should think of the patterns uncovered in these journals as primarily facts about journal publication or as proxy indicators of some deeper underlying process.  My reason for wondering is that, for the purposes of disseminating new research, working papers have almost entirely eclipsed published articles.  If, for instance, we care about the fact that most authors in the top econ journals come from the top five graduate departments because we think that these journals constitute a critical channel of research communication—well, we can care less now.  On the other hand, the relative concentration of authorship in economics compared to other fields revealed by Fourcade et al. may be important for what it says about the nature of the economics star system (and its tight institutional embeddedness in a few departments), and this may persist even after the journals have lost their earlier role.  If I were a reviewer of this article, I would have posed this question.

6. Towards the end the authors toss off in passing what they regard as the key points of intellectual unity that distinguish economists from, say, sociologists.  They don’t try to back this up with references, and perhaps it’s really the sort of thing different people will see differently.  In that spirit, here’s my short list.  (I make no attempt to justify or explain, but you’ll find most of this amplified somewhere or other in previous blog posts.)

a. Causation as prediction rather than process.  The goal of econometric work is to fulfill certain criteria for predicting the effect of independent variables on dependent variables, rather than to locate and describe causal mechanisms or processes.

b. Homogeneity and average effects.  Economic models incorporate entities (agents, goods) that are homogeneous in most respects or differ according to a few indexable criteria, and empirical methods search for discernible average effects.  In other disciplines the uniqueness of entities plays a greater role—one reason for more reliance on case studies.

c. Positive/normative convergence.  Perhaps the single most far-reaching intellectual commitment of economists is to the assumptions necessary for positive models (which can be tested or calibrated with real world data) to yield normative conclusions.  Utility theory, whose longevity is otherwise difficult to explain, is central to this.  Positive/normative convergence, of course, is what allows economics to evaluate policy in a dispositive manner and is attractive to people who, for varying reasons, distrust political and bureaucratic mechanisms.

d. Decision theory.  Economics has practically defined itself as a branch of decision theory, or perhaps as decision theory itself.  One characteristic of this theory is that it is forward-looking, comparing the results of some possible course of action to the continuation of the status quo (not taking the action).  As such, it discounts the historical roots of the status quo or indeed any source of judgment or evaluation external to the comparison between different decision outcomes.

7. For the most part, this article tries to understand the economics profession according to its internal characteristics: its professional structure and norms, the beliefs of its practitioners, and their interactions with academics from other disciplines.  It reveals a lot.  But little is said about the external factors, how economics is affected by the broader structures of power, interest, and beliefs in society at large.  This is the realm of ideological analysis.  I would be the first to defend the notion that internal factors are very important, and that it would be a mistake to think of economics as simply a functional element within, say, a capitalist framework or some other model of how the world works.  But surely these larger interests have to matter.  It can’t be incidental, for instance, that economics, whose main subject matter is central to accumulation of wealth, has the most tunneled vision of all the social sciences.  Of course, loose impressionistic claims about ideology have little value; this is an area for research and hypothesis-testing just like any other.  We need an internal account, among other reasons, to discipline critiques based on external reward or control, but we also need to bring in external factors in order to avoid attributing too much independent importance to professional selection, the bylaws of the AEA or other such matters.

Is 1921 A Role Model For Modern Macroeconomic Policy?

I am going to join in the piling on of Robert J. Samuelson that Dean Baker and now a few minutes ago my Econospeak colleague, pgl, have been engaging in.  But I want to take this a bit further.

So, the regrettable RJS in today's WaPo has fallen all over himself praising the new book by Jame Grant, _The Forgotten Depression_, which was also recently the subject of much praise at a Cato  Institute Symposium.  A number of economists have pushed Grant's line previously, among them Steve Horwitz, Larry White, and Lee Ohanian, with White participating in the Cato Institute hagiographic orgy, although a bit more on that in a minute.  RJS is completely suckered in, as noted by Baker and pgl.  Even though the non-farm unemployment rate hit 15.3% in 1921, after sharp falls in wages and prices, there was a rapid bounceback, in contrast to the Great Depression and the Great Recession.  Therefore all the claims that the Great Depression was due to trying to adhere to the gold standard are clearly wrong, and modern economists clearly have a "fragile grasp of reality."  If only we had let wages and prices crash in 2009, we would be la la land right now.

Let me look at the bigger picture on all this by comparing more closely the 1920-21 episode with the events immediately following WW II, as well as the Reagan recession of 1982 and our more recent experience.  I would suggest  as a good check on Grant's account, "Three Great American Disinflations," by Michael Bordo, Christopher Erceg, Andrew Levin, and Ryan Michaels, 2007, published by the Board of Governors of the Fed. I shall use numbers and accounts from it.

So, what happened back then?  We were  dealing with a regime shift from a no-gold standard period during WW I to a reimposition of it after the its end, basically a postwar adjustment. The most important actor here is one not mentioned at all in Samuelson's article, and pushed to the remote sidelines by Grant, who is all about wages and prices here, even though usually he is all about interest rates, with his newsletter, Grant's Interest Rate Observer, the basis for RJS calling "a respected financial commentator," (unlike RJS himself, but, hey, Grant does get on TV a lot). 

In any case, the Fed held its discount rate at 4% through 1919, while fiscal policy contracted, but a major  inflation broke out into double digits.  At the end of that year the Fed began to tighten, partly in accord with the reimposition of  the gold standard, and gold had been flowing out of the US quite heavily during 1919.  The discount rate was pushed from 4 to 6 percent, with the commercial paper rate about a point above it moving in tandem roughly.  The response was the deflation (20% decline in overall price level, with wages also falling substantially), along with a 30% decline in industrial production, and the rise of unemployment to 15.3% (funny, but aren't wage declines supposed to obviate laying off workers?).

When all this was hitting the fan hard in 1921, the Fed reversed course and lowered the discount rate back down to 4%.  The economy then went into its rapid rebound.  I note that in his remarks at Cato, at least Larry White did note this point as a caveat on all the proceedings.  Bordo et al also note that both Irving Fisher and also Friedman and Schwartz pinpointed the role of the Fed in all this and declared it to have behaved very irresponsibly in the entire episode.  But for Grant and Samuelson, the Fed barely even existed then.

So, what about these other episodes?  I  shall stay away from the GD, leaving its explanation to be what it long has been, overly strong adherence to the gold standard, with the Fed failing at the most crucial moment in Sept. 1931 as the global financial crash hit the US, pushing the unemployment rate up from 8% at the beginning of the year to a 1921 level of 15% by the end of the year. Of course, reimposing the gold standard was the trigger for the crash of 1921, if not its rebound. In any case, let us look at the other three episodes.

I  think we get a nice test of Grant's argument here.  In none of these, 1945-46, 1982-83, or 2007-10, did we see either deflation or wage declines.  However, in one of them there was only a very brief downturn, one quarter at the end of  WW II; one of them there was a pattern that resembled 1921, a sharp fall in output with sharply rising unemployment, followed by a rapid rebound, the Reagan recession, and then the deep fall followed by the slow recovery in the most recent episode.  What differentiates these?  Well, monetary policy.

At the end of WW II, in contrast to the end of WW I, there was no tightening of monetary policy.  Interest rates remained low through the immediate postwar fiscal contraction.  There was a brief dip, but it went nowhere, and the economy became the postwar boom. We must note that in both of these episodes we are dealing with massive regime shifts with huge changes in expectations.  It was only in 1951 with the Fed-Treasury Accord that we finally observe noticeable interest rate increases.

In the Reagan recession, this clearly was brought on by the extremely tight monetary policy of Volcker that had been put in place to crack entrenched inflation.  Interest rates were well into double digits.  So, when the economy plunged in 1982, pushing the unemployment rate over 10%, there was ample room for the Fed to respond, as it did in late 1982, with substantial cuts in interest rates, which it delivered after Mexico threatened to default on its debts and Reagan held back further rounds of his tax cuts.  The economy indeed rebounded sharply in 1983, giving Reagan his "Morning in America" for taking 49 states in his 1984 reelection. 

But, let us be clear.  This did not happen due to Reagan (or Volcker) allowing any deflation or wage cuts.  This was overwhelmingly a story like 1921 in that the recession was largely brought on by tight monetary policy and ended because of a loosening of that policy.  Neither Grant nor Samuelson provide a whisper of recognition of  this.

Finally, why the slow recent recovery? Well, I think there is more going on, but some of it has indeed been the inability of the Fed to provide much stimulus.  It had lowered interest rates in 2003-04 to help Bush get reelected (oh, and supposedly to avoid falling into a Japanese style deflation), with these being raised a bit a few years later, which contributed to the ending of the housing bubble.  But as that bubble declined they lowered rates prior to the full collapse of the financial sector in September 2008.  When the Minsky Moment arrived, they had had little regular  ammo available and had to resort to extraordinary measures to keep 2009 from becoming 1931, which they succeeded in doing.  But, once those extraordinary measures were removed, there we were, basically stuck at the ZLB, with them unable to provide much further stimulus.

This is a situation not remotely comparable to  1921, and those seriously posing it as an alternative are seriously misguided and misguiding.

Barkley Rosser

Was Robert Samuelson Referring to Keynes or the New Classicals?

Robert (no relationship to Paul) Samuelson draws another well deserved rebuke from Dean Baker. Samuelson seems to be impressed with more musings from James Grant where Grant alleges that all we need to avoid prolonged recessions is faith in the free market system. Samuelson summarizes:

Grant argues, for example, that the downward rigidity of wages in the 1930s prolonged and deepened the Great Depression, contrasting unfavorably with the 1920-1921 depression. He concedes that his laissez-faire approach might result in harsher recessions but also suggests that it would produce stronger recoveries. Grant disputes the conventional wisdom that falling wages and prices would doom the economy to a prolonged collapse by reducing incomes and making debts harder to repay. To the contrary: Lower prices might encourage spending and lower wages might encourage hiring.

I guess Samuelson has never heard of the debt deflation theory – in particular Tobin’s 1975 AER paper. But it is his closing paragraph that has irked Dean:

The recent financial crisis and the (unpredicted) weak recovery have exposed economists’ fragile grasp of reality. There has been a massive destruction of intellectual capital: Old ideas of how the economy functions and can be improved have been found wanting. Since the Great Depression, governments are expected to react to economic slumps with countercyclical policies that reverse the downturn and relieve personal suffering. These understandable impulses may compromise the economy’s recuperative rhythms. That’s a troubling possibility that echoes from the 1920s.

Dean notes:

Robert Samuelson apparently didn't know that all sorts of good Keynesian types, starting with Paul Krugman, predicted that the recovery would be weak due to inadequate stimulus … Apparently Samuelson is unaware of this history. He pushes his idea of leaving everything to the free market telling readers, harkening back to the recovery to the downturn following World War I

But can we return to this line from Samuelson?

There has been a massive destruction of intellectual capital

There was a massive destruction of intellectual capital but Samuelson has this all backwards. The New Classical revolution in macroeconomics that dominated the profession for the 30 years preceding the Great Recession tossed out Keynesian economics replacing it with the kind of faith in free markets that Grant and Samuelson seem to want to hold onto. Robert Samuelson indeed is so unaware of the history of macroeconomics that he missed the New Classical revolution as well. And he still gets to write a column for the Washington Post? Update: James Grant and Robert Samuelson really needed to read Daniel Kuehn:

A series of recent reviews of the depression of 1920–1921 by Austrian School and libertarian economists have argued that the downturn demonstrates the poverty of Keynesian policy recommendations. However, these writers misrepresent important characteristics of the 1920–1921 downturn, understating the actions of the Federal Reserve and overestimating the relevance of the Harding administration’s fiscal policy. They also engage a caricatured version of Keynesian theory and policy, which ignores Keynes’s views on the efficacy of nominal wage reductions and the preconditions for monetary and fiscal intervention. This paper argues that the government’s response to the 1920–1921 depression was consistent with Keynesian recommendations. It offers suggestions for when Austrian School and Keynesian economics share common ground and argues that the two schools come into conflict primarily in downturns where nominal interest rates are low and demand is depressed. Neither of these conditions held true in the 1920–1921 depression.

I learned about this from Paul Krugman who was writing about the 1921 recession back in April 1921.

Why We Might Need an Agency Agency

Chris Blattman has an interesting post in which he ruminates on a recent study in Ethiopia: people shown movies about personal success stories were later more likely to engage in future-oriented behavior than a placebo group shown entertainment movies or a control group shown no movies at all.  He goes on to reference other research coming to similar results.

My epiphany occurred when I was walking through Addis Ababa.  There is a beautiful, functional city there, buried beneath a ubiquitous layer of rubble that makes the roads almost unusable.  My first reaction was to think about organizational structures for clearing the rubble.  I had a chat with a transportation planner who assured me that just about everything has been tried, but the rubble remains.

Then I thought about Europe in the immediate aftermath of WWII, when there was also rubble everywhere, devastated infrastructure, agricultural collapse—just about every catastrophe societies could be subject to.  In Germany the “rubble women”, many of them widows, ventured forth, clearing the debris by brute force to begin the process of recovery.  What was the difference between the women of Dresden, Berlin or Hamburg in 1945 and those of Addis today?  It wasn’t education, since nothing you learn in school helps you deal with clearing away acres of brick and concrete.  It wasn’t political or social organization either, both of which had been pulverized, like the cities, by the twin disasters of the Third Reich and its utter defeat.  I know there are some who will say “social capital”, but for me this is more a label than an explanation.

My hypothesis is that the advantage of the rubble women was that they knew what their cities had looked like, and how it had been to live in them, before the chaos of war and air raids.  They could easily visualize what the coming years of focused effort would bring them, and from this image they could draw a sense of agency.  The residents of Addis can’t close their eyes and see the better Addis of tomorrow; for them, the extra work of hauling rubble is just that, extra work.  And even if you had the vision yourself, it wouldn’t do much good unless it were widely shared, so that you could count on others to keep going until the end.

If I’m right, agency is the core issue in development.  Without it, outside interventions will have only temporary benefits, and interventions themselves need to be examined for the effects they are likely to have on beneficiaries’ sense of agency.  Of course, agency is also an intensely political phenomenon, having everything to do with whether people think that they can claim and keep the fruits of their labor.