Under- and over-explored areas in economics

by on October 20, 2009 at 7:28 am in Economics | Permalink

Hamilton, a loyal MR reader, requests:

Of those questions in economics whose answers interest you, which
question do you think is most under-explored, given its importance? And
why do you think that is?

Or, going the other way, to what question or questions has economics
been over-applied? Where have economists put too much effort?

Under-explored; Empirical studies of signaling behavior, peer effects, the kind of "questionnaire macro" pioneered by Alan Blinder on price stickiness.  Economic anthropology.  Neuroeconomics other than brain scans.  The economics of the emotions, an area started by Robert Frank.  Status and fame motivations.  Economic history.  The economics of the non-profit sector.  The economics of science.  How IQ and other cognitive measures interact with economic decision-making and economic rationality.  Behavioral economics of politics and public choice.  Anything Alex does.

Over-explored: VAR, most structural macro, "another open economy model," auction theory, auctions in experimental economics.  There's more, but today I'm not so interested in complaining.

That's my list, what's yours?

1 anon October 20, 2009 at 8:08 am

under-explored imo: economic growth and environmental damage(co2, forestation, over fishing etc.).

2 Bill October 20, 2009 at 8:28 am

underexplored: countercyclical budeting for states: when you have a recession, state government throws everything overboard (some should be thrown overboard, and pushes to have the federal government fill the budget gap; states which have rainy day funds, when times are good, cut the fund give tax cuts, only to have times go bad again and come out requesting a handout from the government.

3 Mark B October 20, 2009 at 8:32 am

Can you provide an example of economic anthropology (i.e., a good article)?

4 J. Goard October 20, 2009 at 8:41 am

Paleoanthropology: theories and simulations of the complex relationships between division of labor, trade, language, and the evolution of the human brain.

5 Eleanor October 20, 2009 at 8:47 am

Am glad that the non-profit sector has been mentioned! I work for a charity/think tank in the UK (New Philanthropy Capital) analysing charities’ work. It’s very hard to do this because of the lack of information, as well as cultural barriers. We are headed up by an economist, and employ several economists and people interested in the economists’ approach.

And our CE has just launched a charity that places volunteer economists in charities: http://www.probonoeconomics.com/

Would be interested in hearing from other economists interested in this field.

6 AADL October 20, 2009 at 8:58 am

The non-profit sector is an artifact (or maybe excrudesence) of the tax code. Get rid of that and it goes away.

7 Bill October 20, 2009 at 9:12 am

underexplored: alternatives to conspicuous consumption as a signalling device of income and/or status.

8 Luis Enrique October 20, 2009 at 10:50 am

Overstudied:

models in which one mechanism is isolated for study, and everything else in the model is stripped to the bare minimum.

Understudied:

models in which numerous mechanisms are thrown in at once.

[it’s not that I don’t understand the merits of the former]

9 adam October 20, 2009 at 11:10 am

Is there any non-fMRI neuroeconomics? I mean, I can think of a few things that might count (ie, area LIP type of things like Shadlen/Newsom do), but nothing that focused.

10 Bill October 20, 2009 at 11:24 am

understudied: how the knowlege of the existence of knock-off goods supports distribution channels known not to sell the knock off products; how the declining price of knock off products is an early indicator of declining brand value (controlling for the supply of knock off products).

11 David Heigham October 20, 2009 at 1:17 pm

Severely, negligently underexpolored by economists:

1. The macro-models that actually explain and track what is happening – see Dirk Bezemer’s paper at http://www.voxeu.org/index.php?q=node/4035 . This is the head of the charge-sheet because the intellectual climate for macro policy could have been so much more relevant in recent years if we had got our minds round these models.
2. Why, and with what implications is the Taylor Rule for interest rate policy so damn good in practice? The stupiest thing you can do with a rule of thumb that works is ignore it in your practice. The second stupidest is to expect it to be always right whatever the circumstances. We were not guilty of the second.
3. Testing our theories against data capable of contradicting them. John List, friends and rivals are beginning to chew on a sizeable hunk of this; but the field of testable untested hypothesis and theory is vast.
4. Analysis of non-market resource allocation. The field of the latest Nobel prize in economics, half of which has gone to someone outside our ‘discipline’. Apart from our relative neglect of the commons, of business (after a promising beginning) and (beyond the latest Nobel) government resource allocation, we still have remakably little to say about households.

Simply underexplored: Limits of time and space (shades of Fermat) do not permit a full exposition here.

Severely over-explored:
z. Rationality of markets. Before attempting to determine that all the universe’s angels sit or do not sit upon the point of a pin, it is prudent to question whether the pin in question has a point, and whether angels sit.
y. Theoretical games. The variety and fascination of theoretical games is umlimited. Regretably, those that are relevant to economics form a much smaller class.

12 Stephen Smith October 20, 2009 at 1:39 pm

Understudied: intracity transportation, land use, and urban issues. Honestly, how many American economists could really tell you anything about the period of history when urban/suburban Americans stopped taking the streetcar and started driving?

In general though I think economic/business history is the most understudied, and complex mathematical models of vague indicators are the most overstudied.

13 v October 20, 2009 at 3:11 pm

Internet related. The economy and social interactions are moving online and how do we quantify, analyze, predict and understand what goes on there?

14 Bill October 20, 2009 at 4:07 pm

understudied: characteristics of anonymous charitable donors that separate them from donors who receive notariety for their contributions.

15 Bill October 20, 2009 at 4:13 pm

understudied: investment behaviour of persons who like to gamble; investment behaviour of persons who buy excessive insurance.

16 Bill October 20, 2009 at 4:40 pm

understudied: theories that fail to predict or theories that are not supported by facts.

17 Bill October 20, 2009 at 4:50 pm

overstudied: investments and portfolio strategy of an economist who believes in the efficient market hypothesis

18 Donald A. Coffin October 20, 2009 at 5:09 pm

I don’t know that I’d say that the economics of non-profit organizations is underexplored. It may just be that a lot of us in the profession haven’t paid much attention to the work that’s being done. here’s the result of a 5-minute Google session:

Here’s the reading list from Burton Weisbrod’s syllabus for The Economics of Non-Profit Organizations at Northwestern:

The Nonprofit Firm Glaeser, Edward, ed. (Chicago: University of Chicago Press, 2003).

The Role of Non-Profit Enterprise, Hansmann, Henry (Yale Law Journal. 1980)

Who Benefits from the Nonprofit Sector, Clotfelter, Charles, ed. 1992.

Wither the Non-profit Wage Differential? New Estimates from the 1990 Census, Leete, Laura (Journal of Labor Economics, 2001)

Private Action and the Public Good, Powell, Walter, and Elisabeth Clemens, eds. (New Haven, CT: Yale University Press, 1998).

Behavior of Nonprofit Organizations in For-Profit Markets, Sinitsyn, Maxim and Burton Weisbrod (working paper, 2008)

Toward a Theory of the Nonprofit Sector in a Three-Sector
Economy, Burton Weisbrod

Altruism, Morality, and Economic Theory, E. Phelps, ed. (New York: Russell Sage Foundation, 1975).

To Profit or Not to Profit: the Commercial Transformation of the Nonprofit Sector, Weisbrod, Burton, ed. (New York, NY: Cambridge University Press, 1998).

Mission and Money: Understanding the University, B. Weisbrod, J. Ballou, and E. Asch (NY: Cambridge University Press, 2008, forthcoming).

Here’s a bilbliography from a project on the economics of non-profits led by Leonid Polishchuk and Alexandra Vacroux:

Andreoni, J. Toward a Theory of Charitable Fund-Raising. Journal of Political Economy, 1998, 106:1186-1213

Andreoni, J., and R. Petrie. Public Goods Experiments Without Confidentiality: A Glimpse Into Fund-Raising. Journal of Public Economics, 2004, 88:1605:23.

Auten, G., H. Sieg, and C. Glotfelter, Charitable Giving, Income, and Taxes. American Economic Review, 2002, 92:371-82.

Fukujama, F. Trust. Free Press, 1995.

Glazer, A., and A. Konrad. A Signaling Explanation for Charity. American Economic Review, 1996, 86:1019-28.

Glotfelter, C. Federal tax Policy and Charitable Giving. University of Chicago Press, 1985.

Handbook for Giving, Reciprocity, and Altruism. To appear in the Handbooks in Economics series.

Harbaugh, W. The Prestige Motive for Making Charitable Transfers. American Economic Review, 1998, 88:277-82.

Putnam, R. Making Democracy Work. Princeton Univ. Press, 1993.

Rose-Ackerman, S. Altruism, Nonprofits, and Economic Theory. Journal of Economic Literature, 1996, 34:701-28.

Rose-Ackerman, S. The Economics of Nonprofit Institutions: Studies in Structure and Policy. Oxford Univ. Press, 1997.

Weisbrod, B. The Nonprofit Economy. Harvard Univ. Press, 1988.

Here’s a link to the National Center on Nonprofit Enterprise’s database section: http://www.nationalcne.org/index.cfm?fuseaction=category.display&category_ID=19&CFID=718&CFTOKEN=54748512

Here’s a link to a webpage for a textbook, Managerial Economics of Non-Profit Organizations: http://www.routledgeeconomics.com/books/Managerial-Economics-of-Non-Profit-Organizations-isbn9780415433822

19 Mr. Econotarian October 20, 2009 at 7:00 pm

I concur with “Economic anthropology”. Stephen Gudeman has been doing some work like this, but I’m not sure he is actually getting anywhere. We need to study how different cultures deal with economic issues, and identify what lead societies to cultural norms that support or hinder economic growth.

20 ila October 20, 2009 at 10:30 pm

“The economics of science.”

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THIS!!!!

21 Andrew October 21, 2009 at 2:50 am

Understudied, I’ll put it in the form of questions that I don’t see discussed as much as I think they should be.
Why is wealth and income so concentrated when people’s abilities aren’t so concentrated?
Why do companies exist?
Why do governments exist?
Why do religions exist?
Why do charities exist?
Why aren’t employee owned organisations more prevalent?
Why aren’t customer owned organisations more prevalent?

22 Ben Ho October 21, 2009 at 11:49 am

@moggio – For Status, Robert Frank is also the person to read. Choosing the Right Pond is a good place to start

@Mark B – My favorite book on economic anthropology is by Ensminger et al.

It is funny, the understudied list (except for neuro and macro) is a good list of the topics I worked on and considered seriously in grad school (and I am thinking about these days).

It’s tough because I was also told that in order to make a career for yourself, you have to fit into a literature, and hard to do that in an understudied area.

Fortunately for me, Bob Frank’s department was hiring so I got a job, but otherwise it is still hard working in this area.

23 K Ackermann October 22, 2009 at 2:09 am

Something that has eluded economists is debt. Maybe that should be studied.

24 Prakash November 1, 2009 at 12:43 pm

Understudied – Modes of funding other than Equity and Debt.

How much is modern technology along resolving the “coincidence of wants” that makes money necessary?

Why isn’t the land tax used more often?

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