Are economists biased to be pro-management?

Luigi Zingales has a relatively new paper on that and related questions:

The very same forces that induce economists to conclude that regulators are captured should lead us to conclude that the economic profession is captured as well. As evidence of this capture, I show that papers whose conclusions are pro-management are more likely to be published in economic journals and more likely to be cited. I also show that business schools’ faculty write papers that are more pro management. I highlight possible remedies to reduce the extent of this capture: from a reform of the publication process, to an enhanced data disclosure, from a stronger theoretical foundation to a mechanism of peer pressure. Ultimately, the most important remedy, however, is awareness, an awareness most economists still do not have.

The paper is here, via the excellent Kevin Lewis.  And here is another new Zingales paper (pdf, with Guiso and Sapienza) on time-varying risk-aversion, here is the tail end of the abstract:

Consistent with a fear-based explanation, we find that subjects who watched a horror movie exhibit a higher risk aversion than subjects who did not. The size of the increase in risk aversion caused by the horror movie is similar to the one experienced by our bank’s clients during the crisis.

Comments

Makes sense. That's why you often find doctors advocating excessive care (they work hand in hand with lawyers who think lots of rules are necessary), and architects who thinking zoning commissions are cool, teachers who think the system is great, and so on. All of them are captured, if successful in their field under the status quo.

The workers of the world aren't tenured econonics professors - no wonder they don't get published in economics journals.

However, the idea that business school faculty might have a pro-management bias should not be exactly an earth shaking revelation - after all, I'm fairly positive that the GMU School of Business is not offering classes in union organizing 101 or an advanced course on strikes, their methods and goals.

There are plenty of economists that don't work in MBA programs. In fact the vast majority of MBA professors likely aren't economists. That said even a teacher doesn't teach wildcat strike for beginners or sit down strikes 101 doesn't mean he isn't sympathetic to labor. After all you aren't going to learn how to break strikes or hire replacement "scab" labor either at business school. Mostly you'll learn negotiation and mediation strategies.

Favorable to 'labor organizations' and favorable to labor are not the same; just like favorable to licensing organizations and favorable to the industry in question isn't the same.

If the authors really wanted to make their case they should have focused on how supportive economists are of importing labor so that management can reduce wages. I'm someone who is generally supportive of management, but completely supportive of labor when it comes to immigration. If I were in the world of professional economists that would be an almost non-existent point of view.

It is a shift in a supply and demand curve. So it wouldn't exactly be "nonexistent" in economics.

Good point. If only there were any peer-reviewed economic literature on the effects of immigration on wages...

What is the difference between importing labor to reduce labor costs and destroying unions to reduce labor costs?

After all, free lunch economics has taken over since Reagan, and in free lunch economics, consumers have infinite money and are not workers, and workers are just black holes sucking all the profit out of the economy and are not consumers.

Thus, according to free lunch economics, the higher the profits, the higher the supply, the higher the profits the higher the wealth increase to the 1%, and the higher the wealth of the 1% and the higher the supply, the higher the consumer spending using their infinite money.

Thus to boost consumer spending and create more wealth, slash labor costs any way possible.

The economic rules I learned pre-free lunch economics required workers get paid more to boost consumer spending, but that has been denied for over three decades as justification for killing off unions and for eliminating paying taxes to pay for labor to build public capital like water and sewer and roads but most important providing kids with the human capital of higher ed and trades qualification most often done through trade unions.

Businesses want free lunches, labor at low cost, skilled workers for free, and economists salute and change economics to eliminate the closed loop between labor income and consumption, thus justifying lower wages and higher consumer spending by declaring workers are not consumers and consumers are not workers.

Or regulate higher labor costs, so work can move to lower cost places or be replaced by technology...

Is this really a pro-management bias or an anti-labor bias? For example:

--In re government employees, most economists again focus on the benefits of private contractors (in order to reduce government employee labor dependence) despite evidence that has massively raised costs (e.g., the Defense Dept.) as outsourcing tends to breed even more managerial support staff while adding on bloated contractor costs

--In health care, most economists intuitively fixate on high salaries for physicians as a cost driver despite A) its low proportion of health care spend and the stagnant compensation growth rates since 1997 and B) evidence that increasing the number of physicians massively raises costs for the system because of supplier-induced demand (i.e., ordering more tests, etc.) --e.g., south Florida is the prototypical example of this counter-intuitive trend

In neither case, is there a true management but economist answers are predictable...

Where do you get "most economists"? I only find agreement between political hacks who were previously involved with economics pontificate on their collective world view.

I've seen more support for alternative views being discussed on the two examples expressed and neither of the two conclusions listed were the popular answer.

And is this entirely anti-labor bias or is there anti-labor monopoly bias as well?

It can't do much harm, though, because everyone will have assumed such a bias to exist anyway.

Most of the time markets tell the truth and governments lie. Generally management must follow the dictates of the market. Unions usually are trying to overthrow the market. Thus, serious analysis (economics) tends to "side," if you want to use that term, with management. No one can seriously believe economists are governed by "class interests," or something like that.

Thank you. In other news, physicists appear to be biased toward the "round earth" theory.

Why hasn't climatology been captured by the oil companies?

Ultimately, though, the problem with this is that "management" isn't an organized special interest. Until I see a "United Executives Of America" union crop up, this is nonsense.

Academic economists have side consulting practices. Ever hire an academic to be an expert witness. It's a market.

I know an academic economist who suffered cerebral whiplash when he went from his expert witness practice--primarily representing defendants--to serve some time as the chief economist at the Antitrust Division where he carefully critiqued the economic evidence of a defense economist who used the same methodology as he did, and now found fault with it.

No man differs more from another as he does from himself on a different day.

What does that mean, "a pro management bias"? Do they prefer management over investors? Management over labor?

Business schools train managers and investors (investment analysts); they don't train day-laborers. In general, I find such B-school economists tend to deal with topics related to management and investing. It's in the very nature of mandate. I wouldn't expect labor economists to primarily be concerned with commodity markets analysis; rather I would expect them to be concerned with labor markets and focus primarily on worker related issues. This is a surprise?

Most B-school economists, at least those I know, tend to be classical liberals. That is, the individual is the unit of analysis, and reward is assumed to be linked to personal merit. Such a mentality is anti-collectivist in its very assumptions. But to note this as a bias is likely saying that race car drivers are obsessed with speed. It's self-evident.

Maybe if the working class started endowing professorships in economics like the upper classes do, I suspect you might see some more papers sympathetic to the plight of workers.

Do they even teach "labor economics" any more? They did when I was an economics major 40 plus years ago. The teacher of the course was a Chicago graduate, no less. As for the influence of MBA economics, Ms. McArdle is exhibit A, she having learned economics by taking MBA economics classes while pursuing an MBA.

Berkeley, Northeastern, Cornell and University of Michigan all seems to have programs.

None has a course titled labor economics. Michigan's courses for economics majors has more math/statistics courses than economics courses.

Did you bother to check? David Card's website at Berkeley says he will teach "Economics 250A, Labor Economics" to graduate students this fall.

I have not read the paper, but I suspect that a more granular analysis (accounting for specialization) comparing micro, market, and macro economist biases would be revealing. Self-interest, confirmation bias, and all of that would suggest that each side would pick a constituent to preach to (and flatter?) that he thinks is more likely to apply his pet theory to the greatest effect. I suspect the micro economist would tilt towards the business agent, the market economist towards the investor, and the macro economist to government.

Next paper for zZngales should study this though:
http://www.cato.org/blog/opinions-climate-change-related-dependency-government-money

Apropo of nothing...or everything. I was wondering about economic history. We seem to have our hands full with today. How do people revise economic records from, say, the Depression? How does one correct the "sentiment drives the data"? Is it even possible if the data sets simply didn't exist. We might never know exactly what happened.

How does one distinguish between a pro-management bias and simply that papers that are not pro-management are likely to have more flaws or misconceptions?

When talking about economists being aligned with management, perhaps you should read

"Charles Koch's Brain", an article in Politico, which discusses Mercatus and the economists associated with it.

Very interesting read:

http://www.politico.com/magazine/politico50/2014/charles-kochs-brain.html#.VAiJjUuz6f0

Does a fish swim? The workers are usually thought as an input or cost so they rank somewhat above cattle to most economist.

So when the academy in general produces results that lean left, the response is "reality has a liberal bias." But when a small subset of the academy produces results that lean right, the response is "the academy is biased." I think I see how this game is played.....

Maybe someone can produce a paper or two.

Evidence where Teacher Union protection against competence testing results in better student results.

Shop Steward; How an uneducated rabble rouser can increase employment and market share.

Auto Production in the 1970's; How unionized workers in the US produced the highest quality vehicle and guaranteed dominance of the big three.

There are labor economists and they sound barking mad.

I tend to find that there is a certain tension between economists and managers.

Economists think managers overlook many exceedingly obvious fact about the general nature of economies at the aggregate level and the decision making behaviour of individuals at the micro level.

Managers think that economists overlook many exceedingly obvious facts about the general nature of various markets at the aggregate level, and the general motivations of individuals at the micro level.

The first group tries to build tidy explanations which can sum up the world in three variables or less for the purpose of tidy pedagogical and illustrative examples/models.

The second group engages in extensive use of the case study method, and consider every situation as unique, although certain tricks and tools are used to facilitate planning and thinking in these frameworks.

So there is some cross training. But definitely they work well together in constructive tension.

Most managers are required to take at least a few courses in economics, so despite the issue of capture and principal-agent issues being common content in 1st year business texts and 1st year economics texts, it seems as though managers are sufficiently aware of economics to package their arguments and methods in ways which are less open or easily criticizable by those in the best position to see straight through them.

Comments for this post are closed