Archive for the ‘Economics’ Category
Charles Ferguson’s Inside Job forces us to fundamentally rethink the connections between economics and policy making. This entangled relation runs along a number of dimension. First there is the performativity of economics: in which ways do economic theories shape the ideas of policy makers and hence the policies they enact (i.e. the Donald MacKenzie story)? Are economists and their rational market hypothesis, CAPM models and what have you responsible for the deregulation that led to the recent financial turmoil? If so, how should economics and its relation to policy making be reorganized institutionally? Second, is it at all possible to be politically and ideologically value-free as an economist? If so, how do we distinguish a value-free economist or economic theory from value-laden ones? If not, should economists always state their ideological points of view in the first disclaimer-footnote of their papers? Are there other ways to sufficiently disentangle ideology from science? Third, should economists be allowed to be paid by the private sector for their academic work? Do we need an economic code of ethics or some other kind of formal arrangement to distinguish more clearly between academic credibility and financial gain?
Luckily, we economists need not figure this out all by ourselves. In fact, the last few years have seen a surge of books discussing the role of science in the contemporary for-profit world. Gaye Tuchman’s Wannabe U (2009) tells the story of the middle ranked university that aspires to become an elite university in an age of auditing and ranking in which universities are run by business men in business suits. Yet, although the undertone is clearly critical, Wannabe U first of all is a careful and engaging ethnographic reconstruction of the archetypical Western university that had to transform itself in the 1990s from a public institution to a private enterprise. Moreover, it reads like a novel.
The different contributions to Harold Kincaid, John Dupré and Alison Wylie’s Value-Free Science? (2007) discuss the topic from a philosophical and theoretical point of view. The basic message is that the old fact-value distinction cannot be maintained. To some extent, that is an almost trivial point. The more important argument, therefore, is that although at some level we all know that the fact-value distinction cannot be maintained, we constantly act as if it does. That, the authors argue, is a fault of contemporary society that needs to be cured. Scientists should make clear how facts and values mingle in their work, politicians should not be allowed to rely on “objective facts,” and moral convictions should never be argued to be based on values alone. Yet, convincing as the book is, it is somewhat unfortunate that the authors do not translate their calls for action into concrete measures.
Theodore Brown’s Imperfect Oracle (2009) is the book of a distinguished chemist, successful university administrator, and well-informed reader of sociology and philosophy who towards the end of a long career reflects on the waning authority of science. The key premise is that with all the problems the world currently faces, there is so much science could offer. Yet public opinion accepts less and less of science and scientists. Thus, the central question Brown addresses is how to restore the authority of science. This book should perhaps be read not so much as a deep or new account of the place of science in contemporary society, but rather as a well-written intellectual autobiography of one of those scientists who ruled the universities in the post war decades.
In contrast to these three general accounts, the different contributions to Hans Radder’s The Commodification of Academic Research (2010) seek to investigate the topic from the bottom up. The book provides detailed accounts of the politics and economics of patents on academic research, the management of data , and the different sources and consequences of financial interests in academic research. Sometimes, the authors force themselves somewhat unnecessarily to infer more general claims about science, private enterprise, or autonomy. But the chapters offer enough in simply describing the different elements of corporate science.
To save the economic discipline it would certainly help when all economists would read Kincaid’s Value-Free Science?. But before answering the bigger questions of whether economics should have a code of ethics, and how universities and research should be funded and organized, we would perhaps do good to first understand the system itself. What would most help the discussion now are detailed sociological, economic and historical accounts of how the economic discipline, economic departments, and economists function and have functioned. Both in the bygone days of the public university and authoritative science, and in the contemporary era of auditing, ranking, financial interests and business suits. Much like Tuchman’s Wannabe U or Radder’s Commodification perhaps. By chance, that happens to be what I’m doing and I’m willing to offer my expertise. Who gives me grant? I’m (still) quite cheap.
Who goes with Fergus?
Who will go drive with Fergus now,
And pierce the deep wood’s woven shade,
And dance upon the level shore?
Young man, lift up your russet brow,
And lift your tender eyelids, maid,
And brood on hopes and fear no more.
And no more turn aside and brood,
Upon love’s bitter mystery;
for Fergus rules the brazen cars,
And rules the shadows of the wood,
And the white breast of the dim sea
And all the dishevelled wandering stars.
The place invites poetry. By the way, all sessions can be viewed from the webiste – check out in particular the last session featuring Gillian Tett of the Financial Times moderating a disucssion between Paul Volcker and George Soros.
Here’s what it all looked like through an amateur lens.
There are a lot of universities represented here, but who are the most likely candidates for participation and who might one expect INET to be interested in? I don’t have anything to do with INET monetas, but know that so far they have partnered with the LSE in London and Oxford University and I presume they are looking for other friends and partners in crime. Using the participant list and some nimble excel sheets, it turns out that the American North East is well represented (to be expected), and there are definetly a top ten (well, nine) coming out for new thinking:
|Balsilie int’l affairs||5||4||1||0||0|
|U. Mass (Amherst)||4||1||2||1||0|
|Central European U.||3||0||3||0||0|
So it’s the local schools first, with Harvard and Boston topping, but Columbia, New School and Balsilie have a very strong presence here, with students and faculty showing up. So perhaps some potential partners are to be found in this list, it seems full of good candidates both for new economic thinking and new ideas. As for INET’s current partners, they find themselves in the ‘also rans’ with 2 representatives each. Although, you can’t say they aren’t in good company: Bard, Cambridge, Carleton, Duke, Freie (Berlin), LSE, MIT, New South Wales (Sydney), NYU, Oxford, Roosevelt, Santa Fe Inst, Stanford, UCL & UCLA.
For one and a half days we had Anglo-Saxons talking finance and financial crisis: Keynesian stimuli, surplus countries bashing, drawing China in, and bullying of the Euro area and in particular Germany’s role in it. If there was one message, it was that it is all about (the politics) of money. So I was curious to hear what the first German speaker, Dalia Marin from the University of Munich would argue: would she defend Germany against the Anglo-Saxon condescencion? Would she defend the cause of the surplus countries? No, she talked about firms, trade and increasing firm production (example: cars). Will the twain ever meet?
Security is tight here, I mean passport checks in the bus coming in, a K-9 unit, police presence, big private security guys with ear-buds and lapels roaming the corridors, and big signs on everyone’s chest to show that they belong. And for the first time in my life I’ve been picketed. Well, ten guys with placards, but when I went to take a picture and talk to them, they hadn’t yet showed up today. Disappointing as it was already 11am – and we were on-site at 7.15. So who are these people. Rumours suggest that they are not your usual anti-capitalists (despite their lone sign that was left behind), but they are tea-partyers.
I will try and run out during lunch (it’s a bit of a walk from here to the entrance) and see if I can’t catch them for a chat about their wants and needs. Hey, we are supposed to be rowing bloggers and this is too good to miss. Also, I am a bit baffled about this.
In the meantime, Tiago and Floris interviewed Akerlof (v. cool I am told), Richard Koo (Nomura Research Institute) just gave a talk about what we can learn from Japan. Yes learn from Japan. His slides are really worth looking at as they tell a story of how government can step in, and how money supply changes can occur without affecting the underlying economy. Duncan Foley (paper) preceded him to point out that if you net out the sectors where the national accounts impute Value Added, then the picture of the 2000 and 2008 recessions look a lot worse (and similar) than we may have thought. Oh, and on Q4 2010 figures, the US is looking very double dippish…
Ken Rogoff and Larry Summers were on the program today at Bretton Woods, and they stole the show. Both are Harvard professors, both have been in and out of policy making, both are intellectual leaders of the economics profession. On any criteria, these are not men of “new economic thinking”. Rogoff of his own initiative, Summers pressed towards it, had to defend the state of economics teaching and research.
Two unlikely responses were given, and even more unlikely, they overlapped (when Rogoff spoke Summers was not in attendance).
1. The first was to describe the failing of economics as a subject of “sociology”. As economists, and practitioners, both men were baffled by how young people in the profession are more interested in formal puzzles and define research as model building taking any empirical work as distraction. Both men confessed they were the same when they were starting. Unfortunately, no sociologist was in the audience, however…
2. The other response, more interesting because of its bizarre possibilities, saw Rogoff and Summers defending rational expectations models and efficient market hypothesis as an integral part of economics education and research because both provide “discipline.” No one followed up asking what discipline meant.
The panoptic suggestion hints that economists have a bit of the sociologist in them after all…
The INET conference is not intimidating at all. It’s 8.20am, the conference has not started, we are getting on a bus to Bretton Woods from Boston, and next to me are Ha-Joon Chang and Robert Skidelsky discussing structural deficits, while Fitoussi is in front of me after we finished a quick chat about welfare measurement. Bad morning to miss coffee. Two and a half hour later we’ve not only reached Bretton Woods but I’ve reached some new ideas and debates.
Lunch got even better, at the table with Skidelsky, Christian Wigstrom (on the INET curriculum board), Richard Brock, John Kay and Duncan Foley… And the name dropping has become silly by the time we’d made it to dinner. Haven’t made an ass of myself, which is always nice. At this point the conference is yet to start. From that I have a host of things, but for now, the best quote of the day about the 1944 US Treasury chief negotiator at Bretton Woods in 1944: “This is an overstatement, but, Harry Dexter White was a communist.” –Larry Summers, 8 April 2011. That followed a very warm recollection of Mr. White by the IMF Historian… Lovely
Historians of economics and economists have a tense relationship. For various reasons. We have already seen this tension showing up in this blog, in different ways: issues of building halls of fame, the art of making interviews and using it in historical accounts, issues on the veracity of stories told, discussions about strategies of publishing, and more recently the matter of using the past by economists and their refusal to be very informed by historical work.
We also know that the recent economic and financial crisis has resuscitated some economists like Keynes, Marx, Smith, Schumpeter, Minsky, Hayek, and others. Confidence in modern economics was shaken and criticisms were raised by prominent figures such as Krugman, among others. This made us wonder, as Beatrice wrote, whether history of economics would be seen as providing “useful knowledge for economists in a time of crisis”. Teaching of the history of economics became somewhat fashionable (mainly given the low interest it had previously). High hopes in our field, deservedly.
However, there is still a very tough issue that I am not sure how much the current crisis can change: the fact that historians of economics usually are affiliated to economics departments and are evaluated according to unfavorable rankings of journals. Recently, Daniela Parisi posted a message on the SHOE List (Feb. 24, 2011) announcing an assistant professor position at the Faculty of Economics of Università Cattolica del Sacro Cuore di Milano, Italy. When people went to check requirements and additonal information, they learned that that professorship would be assigned based on outstanding research according to a list of journals that had no history of economics journal in it. Some historians were offended and later Daniela explained that she posted that message:
Thinking of all the Italian economists working in the history of economic thought and of the historians of economic thought that have long taught economic subjects in Italy and abroad. In sending in the invitation, I thought of all those that, in reading it, would feel discriminated against. I sent it in to see the reactions the invitation would trigger…
More recently, the president of the History of Economic Thought Society of Australia (HETSA), Alex Millmow, posted a message on SHOE with a call for trying to save their journal, the History of Economics Review, from a downgrade, which would jeopardize the jobs of many historians and substantially limit the youngsters to have a chance of a decent academic life. A similar dreadful situation like this is happening elsewhere in Europe and in North-America.
Brazil is an odd country in this sense because the official ranking used by an agency of the Ministry of Education to evaluate graduate programs in different areas, including economics, has in its first category journals like AER, QJE, JPE, Econometrica, and top field journals such as HOPE and the Journal of Economic Methodology, among others. This is the product of a resistance work and it is not permanent: every three years the ranking is discussed among economists and it may change.
But the real question remains, how effective will be the crisis and the lack of confidence it brought to economics in having a permanent effect to the history of economics beyond generating demand for teachers of this subject: will it make economists more sensitive to issues of academic standards and ranking of historical work? (Of course, this question is important to the extent which historians of economics keep fighting to have positions in economics departments.)
The debate that began in the comment box has now moved to Brad DeLong’s Grasping Reality with All Ten Tentacles. I confess that I misjudged this affair. I thought I could jest with DeLong and I now get my comeupings, a good post by him but prefaced by a sort of character assassination that extracts the first two items of our discussion but forgets to pick up the other two (where in my humble opinion I look a bit better… and make clear my motivation is not “protecting my turf” it is calling for better scholarship). And now a lot of angry folks coming over to visit this blog ready to trash at our poor academic ethics.
I think DeLong has been very thoughtful and I relish the chance to answer him. This is not the first time that I read him on the topic. In 2008, I had noted his retelling of formative experiences with the history of economics, and the new post echoes the earlier one.
DeLong’s critique is that an historian should never dismiss the possibility that Adam Smith was offering a composite of economics, psychology and philosophy, and take a priori the alternative claim that Smith’s writings are part of that much broader unity Foucault called Episteme. I don’t see in DeLong’s post a fleshed out the argument about why one should opt for the Janus faced reading. There are a few clues, he rejects my reading as “fastpaced” (and we know “fast is bad”) and the double reading is well, twice a “fastpaced” one. On recall of his earlier 2005 post on the Episteme, I imagine that DeLong is suggesting a test on the episteme thesis. Or perhaps he is just setting up a more layered, plural set of readings, “let a thousand flowers bloom”. I think this is all reasonable.
But what if I don’t want to test the episteme? What if the history of economics is not even about “reading” and nailing down an interpretation?
DeLong’s emphasis is on “reading”, but historians of economics can do about other things too, with other records, with other questions. (As Vivienne Brown has long noted, there is an abuse of the canon in projecting upon Smith the problems of today’s social science. To no other author in economics does this happen as much as for Smith, the poor guy is cited for all kinds of conflicting purposes.) I am no Smithisian scholar, I write on the history of economics post-1945, but I have been privileged to teach the topic. In that setting I have come across some of the Smith literature, extensive as it is. Given that the subject of the working paper that started this all was the place of the economist in society (the worldly philosopher) I would have thought that a more fruitful approach would be to escape the tired debate about where Smith fits in the disciplinary grid. Is he a psychologist? A philosopher? An economist? What a tangle that is, particularly if the authors that argue that moral philosophy was then understood as part and parcel of natural philosophy are right (vide Schabas, vide New Voices), in that sense he would be a physicist too…
And does it get one anywhere? I think an historian of economics approaching this topic might do better by asking what work Smith’s text did in his society. What contexts nurtured its production and what debates it fortified and participated in? Why then not recognize that there is a whole school of political thought, the Cambridge School, Quentin Skinner, Emma Rothschild, and others that have approached Smith from the perspective of political history and seen how this work fits the pre-revolutionary debates of the Enlightenment. (This work, to which Tribe is somewhat associated too, runs into the 19th century in the work of Donald Winch, into the 20th century (this time without economists) with Stephan Collini). What made me cringe is that to look at the disciplinary grid is so far away from the issues and from an understanding of what history can contribute to the question posed.
The same is true of my other complaint that is missing from the re-posting. A reference in the Shiller’s text to the Baltimore Sun as record of the professionalization of economics. This seems to trivialize how momentous the academicization or professionalization of economics was… I would suggest the work of Mary Furner, Robert (Bob) Coats, Dorothy Ross, Ted Porter, Tim Leonard among others that have written about the Progressive Era and its formative influence on the American social sciences? And on the general topic of the profession how about reading the work of the Berkeley sociologist Marion Fourcade.
I don’t want to be writing down a reading list here, it seems inappropriate for this medium. The Shillers’ intuition that history matters for the subjects they raise is absolutely correct. Maybe they can write this history, but in the working paper they are far from it.
Imagine I write a paper on Behavioral Macroeconomics making off the cuff observations about the latest financial products and how my bank manager frames that information, and noting my friends and neighbors’ flight to safety or to risk on the flimsiest of whims. Imagine I make no reference to secondary literature, or to methodology as I approach the questions.
Were I then to submit this piece to general appreciation, say get Robert Shiller to referee it. How do you think he would assess my effort?
I am sure we would be fast and dirty in telling me to do something else with my time.
I have not written a paper on Behavioral Macroeconomics and have no intention of doing so. But Shiller has written a working paper, kind of on the history of economics (Cowles Foundation Discussion Paper No. 1788 – Economists as Worldly Philosophers). There is no thread to the argument, no understanding of context, and zero references to the vast body of work by historians on his subject. The working paper, I am sure, will get plenty of readers, downloads and comments. But were I ever to referee it, I would be fast and dirty in telling him to do something else with his time.
A few weeks ago, one contributor to the SHOE (Societies for the History of Economics) list asked a seemingly simple question: “Why did Marshall reverse the axes?”. In economics, indeed, supply and demand curves for a given commodity are usually drawn with prices on the vertical axis and quantities on the horizontal one. It may seem quite puzzling to undergraduate students who cannot understand why they do so, whereas prices are generally considered the independent variable and thus, according to standard practices in graphical representation at least, should be drawn on the abscissa. As another contributor quickly pointed out, the more common answer to this question is given in Mark Blaug and Peter John Lloyd’s Famous Figures and Diagrams in Economics: Marshall used to draw his demand and supply schedules this way because he considered price to be the dependent variable. As most early 20th century English-speaking economists got their economics from Marshall’s Principles, they followed this tradition, even though they rather took prices as the independent variable.
The answer, as Roger Backhouse cleverly notes, is not completely satisfying from a historical point of view, even though it may hold as a methodological explanation. A historical understanding of why Marshall reversed the axes should explore the way he and his contemporary fellow economists considered the place of geometry in mathematics, the way markets operated and more generally how they regarded the status of economics as a field. Though there might not be simple and direct answers to all these questions, one can find useful elements in the existing literature on Marshall, such as Peter Groenewegen‘s or Simon Cook‘s books.
Other contributors to the SHOE list do not seem more satisfied with Blaug and Lloyd’s answer than Roger but their reasons are diametrically opposed. One scholar, for instance, complains that common explanations refer to “tradition” or “precedent” and think there should be a more “penetrating” answer. But what is history about if it is not about the construction and persistence of “traditions”? What is a historical explanation if it does not deal with “precedent”? Instead, most SHOE list members who contributed to the topic pursued, message after message, a non-historical line of inquiry. For them, there should be an ontological explanation to Marshall’s reversing of the axes: in other words, the answer should lie in the ‘very nature’ of supply and demand itself and of the mathematical equations that underlie their graphical representation. This is of course wrong from a historical point of view but it is also misleading because it offers a poor view of how visual representations operate. Sociologist of science Bruno Latour has argued, for instance, that two-dimensional representations are useful because they are both immutable and recombinable. We can manipulate them, superimpose them, even though they have different origins and scales. We can even merge them with geometry and use tools upon them – though we cannot measure the sun, we can measure a picture of the sun. The consequence of this is that we cannot reduce graphs to mathematical equations. Supply and demand graphs are not only visual representations of preexisting mathematical equations, they are artifacts that can be used subsequently to produce or spread economic knowledge. This is what economists do when they construct Edgeworth boxes or multiple quadrant diagrams – who complains about “axes reversing” in that case?
Furthermore, in the particular case of Marshall and his contemporaries, the idea that graphical analysis is separate from mathematics is obvious. As Judy Klein correctly pointed out:
According to Marshall, the method of diagrams should be seen as separate from the method of mathematical analysis. By the 1870s, graphs were not substitutes of equations or tables pegged, with apology at the end of a work for the mathematically illiterate; they were tools for exploring and describing phenomena that could not easily be captured by algebra, calculus or words.*
Therefore, it is an anachronism to want to explain Marshall’s use of supply and demand graphs by referring to the equations of supply and demand functions which we are used to think of as premises of these visual representations but which in fact were not viewed as such by Marshall and the likes at that time.
It is quite puzzling – and even saddening – to observe that people who deem themselves ‘historians’ of economics and as such contribute to a ‘history’ of economics list systematically choose to bypass the historian’s toolbox in their discussions.
* Klein, Judy L. (1995) The method of diagrams and the black arts of inductive economics. In Rima Ingrid (ed.) Measurement, Quantification and Economic Analysis. London, UK : Routledge, p. 113.
In a 1950 paper, Paul Samuelson wrote:
The most rational man I ever met, whom I shall call Ysidro [when] told that he did not satisfy all of the v. Neumann-Morgenstern axioms, [..] replied that he thought it more rational to satisfy his preferences and let the axioms satisfy themselves.
This introduced in the extensive correspondence between Samuelson, Savage, Marschak, Baumol, and Friedman the idea of the “Ysidro Man” or “Ysidro functions.” In the letters (but not in published print) Samuelson also introduced his mother – as the non-economist acting on her common sense. Thus, for instance, Marschak would discuss with Baumol how best to axiomatize the behavior of Samuelson’s mother.
These archetypes are more commonly labelled homo economicus and homo sapiens – very dull terms indeed (and why the Latin anyway?). So, from now on, when we talk about the homo economicus let’s instead ask: What would Ysidro do? And when criticizing that economic conception as unrealistic, let’s do that by referring to what Samuelson’s mother would do.
Paul Samuelson asked in the title of a commentary to John Chipman’s book on Pareto (Box 6, Rare Books, Manuscript, and Special Collections Library, Duke University): “Do you
have talent for economic theory?”, and started it as follows:
You should cultivate chiropractory or plumbing if you can’t give the right definite answer to the following question:
“If the minimum cost of achieving at least adequate amounts of calories and vitamins is $39 per year, what must the minimum cost be of achieving exactly the specified amounts of calories and vitamins?”
Does anyone want to try, just for fun, to formulate a question that would serve similarly to the history of economics? Hum… I guess it should start with Smith and end with Keynes…
Since almost a year now I’m involved in local politics (a few long evenings a week). Apart from all the obvious differences between the business of politics and the business of history of economics, I’ve noticed an unexpected similarity. Whenever politicians receive information of any kind, they will immediately do two things: 1) Check where the information is coming from, and 2) See how they can spin the information to their advantage. Politics is founded on the firm belief that there is no such thing as objevtive, or value-free information – even though part of the rhetoric is that there is. Ok, you might say, surely you knew that before entering politics. I did, although I had never realized how strongly and deeply rooted this conviction is in every nerve of the political process. But I also think that how readily you, reader of this blog, recognize the self-evidence of this observation, testifies to how similar the history of economics perspective is to the political perspective. Although we do different things, we historians also treat all information – publications, archival sources, interviews – always and everywhere very explicitly as the product of its source. That is, we never treat the information without taking into account the origin of the source.
But academic economists (including the IMFs and OECDs of this world) do. In fact, when we as historians of economics are alerted by fact that economists could take some information about some phenomena as THE truth, we are alerted in the very same way as are politicians about the same economists. Ipso facto, when economists are alerted because we introduce this source- or context-dependence in the discussion, they are alerted in the same way as they are alerted when politicians start questioning the source of their information (or worse, start spinning it). Economics is a self-perceived body of value-free, objective knoweldge in between two realms of politics and history of economics with surprisingly similar world views.
Ps: Not implying any of the three is better than the other of course….
The great and good of economics have responded to an NSF call for ‘grand challenges‘ in economic research over the coming 20 years, and I can’t help wondering if the history of economics has any? No out-and-out historian appears to have replied, and none of the other authors seem to include historical topics. So are there no grand challenges in history?
Off the cuff I can’t think of a BIG question which lies unanswered, and I wonder what everyone here thinks? My immediate response would be that historians of economics should engage in a project to gather and make publicly available historical data – as recorded in past records, not translated into 21st century definitions – so that better empirical work can be done on the past. I guess a second point is a fuller exploration of the recent crisis and comparisons with past crises, although I am not sure how far such an endeavor could go. If one had to respond to the NSF call – in retrospect – what do you think the grand challenges would be?
For inspiration about the scope, In the NSF response Esther Duflo outlines a research agenda for all of development economics, Dale Jorgenson talks of reforming the national accounts, Nordhaus discusses global public goods and Rogoff talks of three challenges to Macro… So it’s BIG thoughts as we enter the new year – do we historians (of economics) still think those?
[Clement makes a set of suggestions below, and I have tweaked this posts to put it on top. Hope that is ok]