Two factors shaping the economics profession today

by on October 30, 2009 at 7:16 am in Economics | Permalink

I see two significant long-term trends, both of which are probably unstoppable:

1. In percentage terms, fewer and fewer economists are Americans by birth and upbringing.  Non-Americans are less likely to be fully fluent in English, which encourages mathematics.  Non-Americans also tend to be less market-oriented in their thought.  In any case they are less likely to stand along traditional U.S. ideological fault lines or even share ideological fault lines with each other.

2. Empirical work has a shorter half-life than does theory, at least on average.  Yet most people today, including at top schools, do empirical work.  There will be fewer giants and more middling-size figures of temporary import.  If you tenure a top empirical economist, what does your department look like when he or she is 60?  What percentage of these people are skilled enough, or care enough, to continue reinventing themselves?  Maybe some top departments won't look so top in twenty years' time.  

I believe also that the higher relative status of empirical work favors the status of women in the economics profession.

Field experiments have a longer half-life than regressions, precisely because they are so costly to redo.

C October 30, 2009 at 7:40 am

Can you back those statements up with empirical data, please?

Michael Tinkler October 30, 2009 at 7:59 am

#2 is really interesting – the tenure structure changing rankings.

Bill October 30, 2009 at 8:24 am

1. Faculty members pick would be faculty members. My observation is that mathematical theoreticians pick empricists who support their world view, and not those who do not share their world view. So, instead of diversity of views, what you get is complementary competencies supporting the same world view.

What is interesting is when an entire field shifts, and the department is of the homogenous world view. The lack of diversity in world views makes it difficult for the department to attract new talent, because it is viewed as inhospitable.

That’s where higher level management at the dean level is necessary to make sure there actually is diversity.

2. What is also missing from the discussion is department funding sources and academic consulting opportunities and practices. I see too many faculty members bending their research and writing towards the lucre. In my area, antitrust, IO economists, through the consulting firms that hire them, have quite clearly developed their research towards ares where there is consulting and litigation value. This is very apparent when you compare European IO with US IO economists: Europeans, in my view, are a bit more honest, more willing to question Chicago orthodoxy with some really strong theory, supplemented by game theory, such that the Europeans like Tirole and others, have become the thought leaders in ways that we never would have expected.

MPS October 30, 2009 at 8:34 am

First off, you should celebrate the reduction of Americans among top economists. It means your field is becoming internationally competitive, which means you’re drawing better talent. (If you go to a conference in say physics, you’ll find the vast majority of people are not natural-born Americans.)

If “empirical work has a shorter half-life than theory,” then it’s just an odd quirk of the sociology among economists, and will change in the long run. Think about it. This is why scientific understanding is so persistent — for instance why we still teach Newton’s laws and such. When understanding is based in empiricism, then it’s correct, at least in the empirical context it was developed, even as new theoretical ideas may challenge and refine understanding at the frontiers.

Ryan October 30, 2009 at 9:11 am

I’m trying to figure out what you mean to be implying about the status of women in economics. You seem to be suggesting that they are weak theoreticians.

Felipe October 30, 2009 at 9:21 am

I like the comments, but I am not sure I agree about the half life of empirical work. There are two trends pushing for an increasing importance of empirical work: one is data availability, the other is increased processing capacity. Data availability tends to shorten the life-cycle since it means it is easy to go from one data set to the next. However, this is not true about processing capacity, which may give an impulse on empirical work based on ready made data, but also on surveys and collected data. If anything this pushes towards tighter and tighter integration of theory and data. This is probably more time consuming than doing just pencil and paper theory or just reduced form regressions.

One interesting question is what drives the trend towards large randomized experiments (which tend to be quite time consuming). Is it wider availability of resources? It is also interesting to think where this will lead us. Perhaps a situation like experimental physics, where certain institutions concentrating the huge amount of resources needed to undertake the experiments? Wouldn’t that be a boon for the likes of MIT and Harvard?

Last point: Mathematicians bloom when they are young, but historians bloom when they are old. Relying more heavily on data makes economists less like mathematicians and more like historians. Perhaps this is something worth thinking about.

Highgamma October 30, 2009 at 9:30 am

For wealthy schools, I think number two will be solved by an increase in buyouts of professors to promote more turnover.

Mario Rizzo October 30, 2009 at 9:40 am

“Empirical work has a shorter half-life than does theory, at least on average”

And yet there is so much worthless theory especially among the applied mathematicians. The very best theory has a longer half-life. But there is so little good theory. On the other hand, there is a fair amount of middling empirical work.

Furthermore, if theory today is just applied mathematics and people do their best math when young, I think going with empirical economists might produce the better “old” departments.

Will October 30, 2009 at 10:01 am

He isn’t saying women are weak theorists, but when was the last time you saw a woman doing theory?

Ryan Vann October 30, 2009 at 10:13 am

“I’m trying to figure out what you mean to be implying about the status of women in economics. You seem to be suggesting that they are weak theoreticians.”

I took it to mean that since many of the professorship jobs in Econ are currently held by males, a high turnover (due to empericism becoming irrelevant more quickly over time) presents more opportunities for those positions to be held by women. Of course, this ignores tenure and unionization of the field. I don’t know what else Mr. Cowen would be implying, as maths are still dominated by males; so, Economics moving ever more towards a strictly math model based social science seems to favor male professorship.

Econometron October 30, 2009 at 11:03 am

I’ve come to the realization that Tyler Cowen has immense public appeal and influence on young economists. While I’ve enjoyed Tyler’s musings on this blog over years, I think he is increasingly posting comments to spark reader interest (either through contrarian tactics or by appealing to the masses through populist viewpoints). He would rather be popular and read, than right on particular issues. Anecdotally, I find him making several off-the-cuff remarks without any supportive evidence. I worry about this precisely because of his widespread influence. Of course, a blog is not peer-reviewed work but shouldn’t scholarly discourse be about advancing our knowledge base, not making headlines. Bottom line: I’m disappointed by the trajectory of Tyler’s recent commentary but fortunately Alex Tabarrok continues to post insightful and at times non-intuitive analyses which he seems to always provide empirical support even if not robust.

Asif Dowla October 30, 2009 at 11:20 am

How about a government bail-out for American students studying economics?

All joking aside, I tell my students that they will be competing globally to get a slot in a Ph.D program in economics. A graduate students coordinator for a major Ph.D. program told me that he could fill his incoming Ph.D. class with foreign students with perfect GRE’s. Many graduate programs have hidden quota for American students. I do not have any problem with this type of industrial policy.

Andrew October 30, 2009 at 11:40 am

So, I have a question for all the math genius profs. When was the exact point where it was decided that training was no longer part of the job description?

It continually amazes me how little academia actually tries to accomplish the things people think it exists for.

Intrigued October 30, 2009 at 12:24 pm

“Non-Americans also tend to be less market-oriented in their thought”.

Non-American physicists are just as quantum-mechanics oriented in their thought as American physicists.
Non-American biologists are just as darwinian-evolution oriented in their thought as American biologists.
Non-American mathematicians are just as proof oriented in their thought as American mathematicians.

So if Non-Americans tend to be less market-oriented in their thought, could it be that market-orientation is just a cultural brainwash instead of a solid empirical finding?

Ricardo October 30, 2009 at 1:21 pm

“So if Non-Americans tend to be less market-oriented in their thought, could it be that market-orientation is just a cultural brainwash instead of a solid empirical finding?”

Bingo!

Barkley Rosser October 30, 2009 at 1:25 pm

Regarding women who are strong mathematical economic theorists, try
for starters Beth Allen, Susan Athey, Laura Gardini, Iryna Sushko,
and Nancy Stokey.

Paul Johnson October 30, 2009 at 2:03 pm

Somewhat similar thinking to J. Daniel Wright:

I wonder if future U.S. economics doctoral programs will look more like the current GMU doctoral program with foreign programs specializing in the math-intensive approach.

Intrigued October 30, 2009 at 6:43 pm

“Tracers work both ways.”

In general yes, Andrey.

However, do you think the following are equally likely
( a ) 300 million brain washed into market orientation
( b ) 6 billion brain washed into skepticism about market orientation

The point is that the rest of the world (or most of it, any way) will embrace good american thought – like the polio vaccine, democracy, or even a pair of jeans. (Leaving aside the demonstrably stellar contribution of american scientists in the real and exact sciences.) So the fact that the rest of the world may not be embracing market orientation as much as americans do is more likely to be a sign that perhaps americans may be off on this one.

Intrigued October 30, 2009 at 10:52 pm

Tom, skepticism about market orientation does not equate to belief in socialism.

Skepticism is hardly default human behavior – if anything wanting a belief system is the default human position (such as religion or the “market-orientation” that is referred to in this post. )

fundamentalist October 31, 2009 at 12:50 pm

Today, everyone but economists and politicians laugh at economics. No one else takes it seriously, especially not financial and investment experts. As math econ becomes increasingly esoteric and unrealistic, the trend toward irrelevancy will continue. Politicians will continue to look to economists to rubber stamp their policies for greater inflation and government control, and in order to meet that demand, economics will become increasingly socialist. But whole generations will grow wealthy and die without learning any economics, as they have done in the past because economics is totally useless for making money or running a business.

rob October 31, 2009 at 3:04 pm

“However, do you think the following are equally likely
( a ) 300 million brain washed into market orientation
( b ) 6 billion brain washed into skepticism about market orientation”

Yes, the odds are in favor of the American market orientation being backwards. But there is just one thing I don’t understand. Why then American universities?

Nylund November 1, 2009 at 1:34 am

I am the only American in my graduate program. I was also at a severe disadvantage mathematically compared to my fellow students. James’ comment is spot on. American schools do not prepare their econ undergrads well for the mathematical rigor of an econ Ph.D. student. The undergrads at my school often ask me what they should do to prepare themselves for a Ph.D. program, and my usual advice is, “become a math major.”

But, I also believe being an American helped me. Although uncertain, I fear there must have been a little bit of reverse affirmative action in my department. I was one of the few to make it through the first year when many smarter and better students did not. I strongly believe that the department made an exception of me for they thought my native English-speaking skills would be of value (as a TA or lecturer). Most undergrads find heavily accented and poor-speaking professors to be very frustrating, and I think there may eventually be a backlash eventually. I also believe there might be some negative PR repercussions for an American university to not have any American students in their program.

As for the empirical stuff. The reasons for it are obvious. More higher quality data that is more easily accessible, and the great leaps in personal computing. If I want to do a million iterations of a complex process, I can! That is pretty cool. I do not think of this as a bad thing. For a long time, theory existed in a bit of a vacuum. Even now, you still see quite a few papers trying new empirical techniques to verify a long-standing theory taken as gospel. These results are often unsatisfactory, and maybe, given enough empirical work, people might realize they will have to update theories that for so long have been assumed to be true despite much evidence in to support it. Empiricism might help weed out a litany of long-standing theoretical fallacies.

Tracy W November 1, 2009 at 8:13 am

Charles Firth, well, it does depend on your definition of useful. But, anyway:
– Ending of the military draft system (Milton Friedman’s riposte, to a general saying that he would not like to command an army of mercenaries, was “General, would you rather command an army of slaves?”
– Abolishment of the Corn Laws in England
– West Germany’s post-WWII economic miracle
– Hong Kong’s post-WWII economic miracle
– Introduction of individual transferrable quotas in NZ, Australian, Icelandic, Canadian and US fishing markets
– Development of the international student markets in NZ (from a conversation that went “hey, why have a limit”?)
– In the US, enforcing open markets amongst the different states as part of the constitution, opening up the then world’s biggest internal market
– Freely floating market-determined exchange rates as we moved away from the idea that a country needed a lot of gold to be rich
– Central bank independence to bring down inflation

And this is not an exhaustive list, merely what comes to my mind.

Paul November 1, 2009 at 5:42 pm

The only economics worthy of study is the study of Human Action. What does it mean to be a human economic animal? Why do we engage in this or that economic behavior? What is the economic result of this behavior?

To the extent that empirial economics can address these questions, it has some validity. Otherwise, “Beware of accountants disguised as economists.”

David November 13, 2009 at 12:43 pm

Americans can do math modeling. I did. I wanted to do it, I applied to a top PhD program saying I wanted to do it, I got in with financial aid, and that’s what I did in my dissertation.

My university did the right thing, and I got no more than what I was rightfully entitled to.

It was fun. Unlike many of the foreigners, I was in grad school because I wanted to be, not because I needed it for a visa. If you have an idea about markets (something Americans have more of than others, in my experience) there is more stuff for you to model, and the math required is not much more than engineering math. Nobody will tell you that you can do an interesting model. That’s a confidence you must have in yourself.

If there’s a quota to allow American students into PhD programs, I didn’t see it. GRE scores aren’t everything. The weakest students in our program were foreigners. If the foreigner isn’t a math genius, he has nothing else to fall back on, nothing else to contribute.

Our universities have a lot of government contracts. They should favor Americans, at the graduate (tuition-free) as well as undergrad (paying) levels.

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