As Alex and I were writing our Journal of Economic Perspectives piece on the economics activities of the National Science Foundation, I found it striking how little serious discussion there has been of the topic. You’ll find only a few scant references in the paper, and some of those are quite old now. This is part of a more general reluctance of economists to use economic tools to understand themselves.
I worry about the discourse-chilling effects of having government fund social science in this way, just as I worry about the implicit censorship effects on those who might seek to someday chair the Council of Economic Advisers.
On the NSF, let me be clear. I had a long meeting with some of the decision-makers at the economics division, and I found them to be extremely helpful and open and fair. I have little doubt that if I, now on record as somewhat of a critic of current procedures, submitted a grant request, it would be evaluated with full objectivity.
The problem is, the rest of the world doesn’t know that.
Addendum: You will note this section of the paper:
Another public good the NSF might fund is simply a study of which of its previous expenditures on economics have had the greatest marginal value-added. Based on conversations with NSF staff in economics, we are not able to identify such a study. One proposal would be to fund such a study and then follow many or all of its recommendations; after all, the NSF presumably believes it is capable of generating useful research results with practical implications.
Here John Cochrane comments on our paper. If you are wondering, this was my favorite part of the paper:
A related question is to consider the elasticity of supply for quality economic research, with respect to wages or payment. Over the last few decades, many in the economics profession have concluded that tax cuts for high earners, at current tax rates, have relatively small effects on labor supply; for example, that argument is often cited as one reason why the Bush tax cuts passed into law in 2001 yielded disappointing economic results. Yet when it comes to NSF grants, there is often the implicit presumption that the elasticity of supply for economic research with respect to additional government grants is relatively large. We are agnostic on the elasticity question, but without understanding this issue, it is difficult to evaluate NSF bang for the buck, and thus economists should not be so confident about the efficacy of this funding.
File under: “Elasticity Optimism for Me, but not for Thee.”