Category: Economics
Statement of Commitment to Academic Freedom and to Intellectual Merit
Academic freedom and intellectual merit are under attack in the United States, from both the left and the right. The norms of the university and intellectual life are fragile and need protecting because such norms are always in tension with political and economic power.
The undersigned members of the GMU Department of Economics express their commitment to academic freedom and to intellectual merit.
Addressed to the George Mason University (GMU) community and the public at large
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American universities have professed allegiance to two ideals. First, the ideal of academic freedom – the right of students and faculty to express any idea in speech or writing, without fear of university punishment, and secure in the knowledge that the university will protect dissenters from threats and violence on campus.
Second, the ideal of intellectual merit – the right and duty of academic departments to hire and promote the most brilliant, creative, and productive faculty in their fields, and admit the most intellectually promising students, without pressures from the administration.
These ideals are the cornerstones of liberal education. They protect faculty and students who hold views unpopular on university campuses. Academic freedom protects existing students and faculty who dissent from current dominant academic opinion and ideology. No matter how unpopular their views, they know the university will protect them. As stated in the University of Chicago Statement on freedom of expression and as quoted in GMU’s “Free Speech at Mason” Statement:
[We must hold a fundamental commitment to] the principle that debate or deliberation may not be suppressed because the ideas put forth are thought by some or even by most members of the University community to be offensive, unwise, immoral, or wrong-headed.
Intellectual merit protects prospective students and faculty who speak and write against current dominant viewpoints. No matter how unpopular their views, they know that university administration will not obstruct or prejudice their admission, hiring, or promotion.
Recently, both of these ideals have come under attack. Pressure for conformity has intensified and universities have increasingly interfered with departments’ personnel decisions. For example, at some universities, one of the more egregious new practices is the requiring of written “diversity” statements by prospective students, staff, or faculty, then used to discriminate among candidates, often by quarters of the university with interests other than those of the department or unit. Such methods recall arrogations of the past, such as The Levering Act of 1950, used against radicals.
We strongly believe the attacks on academic freedom and intellectual merit are deeply mistaken. The classic rationales in favor of these ideals are sound. To protect them, viewpoint diversity must be celebrated and academic departments must maintain their ability to select, hire, and promote students and personnel based on intellectual merit. We insist that the degree of institutional autonomy that the GMU Department of Economics has traditionally enjoyed is vital to the health of viewpoint diversity not only within the university but within the academy writ large.
It is vital that every department in a university enjoys independence, so it can dare to be different and keep viewpoint diversity alive. George Mason University has excelled in supporting viewpoint diversity with a variety of diverse departments, centers and organizations. Viewpoint diversity at George Mason has benefited the university, the United States, and the wider intellectual world.
Indeed, some of the Department’s chief contributions have taught that all forms of authority can exert power to excess, and that guarding against such excess calls for the very ideals affirmed here, respect for dissent and intellectual merit.
We, the undersigned members of the GMU Department of Economics, look forward to continuing our independence to do good economics according to our judgment, guided by the ideals of academic freedom and intellectual merit.
Signed by the following GMU Department of Economics faculty (full-time & emeritus):
1. Jonathan P. Beauchamp
2. James T. Bennett
3. Donald J. Boudreaux
4. Bryan D. Caplan
5. Vincent J. Geloso
6. Timothy Groseclose
7. Robin D. Hanson
8. Garett Jones
9. Daniel B. Klein
10. Mark Koyama
11. David M. Levy
12. Cesar A. Martinelli
13. John V.C. Nye
14. Thomas C. Rustici
15. Vernon L. Smith
16. Alex Tabarrok
17. Karen I. Vaughn
18. Richard E. Wagner
19. Lawrence H. White
Is Economics Self-Correcting?
The subtitle of that article is Replications in the American Economic Review, and the authors are Jörg Ankel-Peters, Nathan Fiala, and Florian Neubauer. Here is the abstract:
Replication and constructive controversy are essential for scientific progress. This paper reviews the impact of all replications published as comments in the American Economic Review between 2010 and 2020. We investigate the citation rates of comments and whether a comment affects its original paper’s citation rates. We find that most comments are barely cited, and they have no impact on the original papers’ subsequent citations. This finding holds for original papers for which the comment diagnoses a substantive problem. We conclude from these citation patterns that replications do not update the economics literature. In an online opinion survey, we elicited viewpoints of both comment authors and original authors and find that in most cases, there is no consensus regarding the replication’s success and to what extent the original paper’s contribution sustains. This resonates with the conventional wisdom that robustness and replicability are hard to define in economics.
If you see a critical comment in the AER, the odds that it is correct, and significantly so, are really pretty high, given the barriers to getting in. Yet no one seems to care. (Note that the lack of caring is connected to the Bayesian inference that the published critical comments likely are correct.) This is to me one of the more significant indictments of the economics professions as we know it today. And it is not obvious how we might change this state of affairs.
Here is the argument in tweet storm form.
Dollars, dollars, everywhere…
As if the dual currency exchange is not enough to contend with, Argentina has around 15 different exchange rates, including a “soy dollar” for soy exports, a “Qatar dollar” for Argentine tourists travelling to the World Cup last year, and even the “Coldplay dollar”, a special exchange rate for paying foreign entertainers that made a name for itself when the band had a string of sellout concerts last year.
Here is more from the FT, via Tom V.,
Home bias in top economics journals
Two of the top economics journals have institutional ties to a specific university, the Quarterly Journal of Economics (QJE) to Harvard University and the Journal of Political Economy (JPE) to the University of Chicago. Researchers from Harvard, but also nearby Massachusetts Institute of Technology (MIT), and from Chicago (co-)author a disproportionate share of articles in their respective home journal. Such home ties and publication bias may harm, but also benefit, article quality. We study this question in a difference-in-differences framework, using data on both current and past author affiliations and cumulative citation counts for articles published between 1995 and 2015 in the QJE, JPE, and American Economic Review (AER), which serves as a benchmark. We find that median article quality is lower in the QJE if authors have ties to Harvard and/or MIT than if authors are from other top-10 universities, but higher in the JPE if authors have ties to Chicago. We also find that home ties matter for the odds of journals to publish highly influential and low impact papers. Again, the JPE appears to benefit, if anything, from its home ties, while the QJE does not.
That is from a new paper by Dirk Bethmann, Felix Bransch, Michael Kvasnicka, and Abdolkarim Sadrieh.
Earnings Are Greater and Increasing in Occupations That Require Intellectual Tenacity
That is the title of a new paper by Christos Makridis, Louis Hickman, and Benjamin Manning, here is the abstract:
Automation and technology are rapidly disrupting the labor market. We investigated changes in the returns to occupational personality requirements—the ways of thinking, feeling, and behaving that enable success in a given occupation—and the resulting implications for organizational strategy. Using job incumbent ratings from the U.S. Department of Labor’s Occupational Information Network (O*NET), we identify two broad occupational personality requirements, which we label intellectual tenacity and social adjustment. Intellectual tenacity encompasses achievement/effort, persistence, initiative, analytical thinking, innovation, and independence. Social adjustment encompasses emotion regulation, concern for others, social orientation, cooperation, and stress tolerance. Both occupational personality requirements relate similarly to occupational employment growth between 2007 and 2019. However, among over 10 million respondents to the American Community Survey, jobs requiring intellectual tenacity pay higher wages—even controlling for occupational cognitive ability requirements—and the earnings premium grew over this 13-year period. Results are robust to controlling for education, demographics, and industry effects, suggesting that organizations should pay at least as much attention to personality in the hiring and retention process as skills.
Of course that is very much accord with some of the claims Daniel Gross and I make in our book on talent. Via the excellent Kevin Lewis.
The link between IQ and income is overrated
Garett Jones was the one who first put me on to this idea, now it is in a Bloomberg column, excerpt:
The evidence is striking. One study of CEOs of large Swedish companies found that on average they ranked at the 83rd percentile of measured IQ (for CEOs of smaller companies, the rank was the 66th percentile). That’s above average, but it’s hardly a cluster at the top of the distribution. Many CEOs undoubtedly achieved their position through hard work, charisma, people skills and other abilities, not to mention luck.
In the broader distribution, the connection between IQ and income is also positive but underwhelming. One study concluded that moving from the 25th to the 75th percentile of IQ correlates with a 10% to 16% boost in earnings. That may feel significant when you get it, but it doesn’t push you into a whole new socioeconomic class.
The connection between IQ and achievement at the very highest tiers is in my view still an open question. Here are some recent results, in my view not yet confirmed as the correct overall point of view:
One recent study, also based on Swedish data, showed two results of significance. First, much of the intelligence-earnings correlation weakens significantly and plateaus above salaries of 60,000 euros a year. Second, and perhaps more surprising, people in the top 1% of earners had lower IQs than the earners immediately beneath them.
Why that is the case, it’s hard to say. But one possibility is that the very smartest people prefer a more balanced life rather than working all the time. Or perhaps they prefer occupations with higher status and somewhat lower pay. Money isn’t the only thing you can enjoy. Maybe having a lot of it can make it harder to trust potential friends or spouses.
Recommended.
Is business doing our saving for us?
That is the theme of my latest Bloomberg column, as U.S. household savings rates often fall between three and five percent. From the column here is one bit:
Are such low savings rates unsustainable for an advanced economy? Not in view of America’s business saving. Looking at the US Federal Reserve’s series on undistributed business profits, it starts to rise significantly in the 1970s, and takes off around 2000 (with a dip for the financial crisis), and currently stands a bit above $1.2 trillion. There are other ways to measure business savings rates, but generally they show a significant upward move over the last few decades.
On net, gross US savings rates are hovering between 17% and 18% of GDP. Again, there are different ways to measure the relevant variables. But under any plausible approach the US is not having to survive on saving only a few percent of personal income.
This is related to those stories about some of the most successful US corporations sitting on billions of dollars. Maybe you view that as wasteful or extravagant. But a more helpful response might be: “Better them than me!”
Data on personal savings typically neglect pension plans and realized capitals gain on financial assets and homes. In that sense the personal saving rate also is higher than is typically measured. Yet here, too, much of the credit goes to business. If equities are high in value in the aggregate, that is a tribute to corporate productivity more than to brilliant investing.
But do recall the Garett Jones strictures that if you don’t save enough you may not enjoy compounding returns over time.
Britain’s Long Timeline of Housing Decline
In 1947 the British Town and Country Planning Act made planning permission a requirement for land development; ownership alone no longer conferred the right to develop the land. A decline in construction was predictable but housing is a durable good. Even today more than a third of the British housing stock dates to before 1947. So it has taken time but, according to a new study, the act has had a slow but long-run depressing effect on construction with the result that today the average house in England costs more than ten times the average salary.
Britain has a severe housing crisis, especially in the most prosperous places in the Greater South East. Across England, the average house costs more than ten times the average salary, vacancy rates are below 1 per cent, and space per person for private renters has dropped substantially in recent decades.
This report explores the root cause of the UK’s housing problem, how policy in this area has developed over the last 75 years, and what action policymakers need to take to deliver enough homes in the UK.
…This report uses this new data and other sources to compare British housebuilding and outcomes to that in Ireland, France, Belgium, the Netherlands, (West) Germany, Austria, Switzerland, Denmark, Sweden, Norway, and Finland from 1955 to 2015. It finds that Britain’s housing shortage began at the beginning of the post-war period…
Housebuilding rates in England and Wales have dropped by more than a third after the introduction of the Town and Country Planning Act 1947, from 2 per cent growth per year between 1856 and 1939 to 1.2 per cent between 1947 and 2019.
This has been a key factor behind the UK’s long-standing housing crisis, which has led to inflated property prices and soaring rents in recent decades.
Willingness to pay for upper-caste status
How much are individuals willing to pay for privileged status in a society with systemic discrimination? Utilizing unique data on indentured Indians in Fiji paying to return to India, I calculate how much upper-caste individuals were willing to pay historically for their status. I show the lower bound of the value of the uppermost castes in north India equaled almost 2.5 years’ gross wages. The ordering follows hypothesized inter-caste hierarchies and shows diminishing effects as caste status falls. Men entirely drive the effects. My results show some of the first evidence quantifying caste status values and speak to caste’s persistence.
Here is the paper by Alexander Persaud, with data from the turn of the 20th century, via the excellent Kevin Lewis.
What should I ask Simon Johnson?
Other than “why don’t you have a better Wikipedia page?” Here is one excerpt:
Simon H. Johnson…is the Ronald A. Kurtz Professor of Entrepreneurship at the MIT Sloan School of Management… From March 2007 through the end of August 2008, he was Chief Economist of the International Monetary Fund. He is the author of the 2010 book 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown along with James Kwak, with whom he has also co-founded and regularly contributes to the economics blog The Baseline Scenario.
He has an extensive publication record, including in political economy, economic history, and economic growth, he studied earlier Russian reforms, and he has books on science policy (with Jonathan Gruber) and the national debt (with Kwak). Most notably his forthcoming book is with Daron Acemoglu and is titled Power and Progress: Our Thousand-Year Struggle Over Technology and Prosperity, due out in May. He is a Brit of course.
So what should I ask him?
The Inflationary Effects of Sectoral Reallocation
The COVID-19 pandemic has led to an unprecedented shift of consumption from services to goods. We study this demand reallocation in a multi-sector model featuring sticky prices, input-output linkages, and labor reallocation costs. Reallocation costs hamper the increase in the supply of goods, causing inflationary pressures. These pressures are amplified by the fact that goods prices are more flexible than services prices. We estimate the model allowing for demand reallocation, sectoral productivity, and aggregate labor supply shocks. The demand reallocation shock explains a large portion of the rise in U.S. inflation in the aftermath of the pandemic.
That is from a new paper by Francesco Ferrante, Sebastian Graves, and Matteo Iacoviello. From the Board of Governors, 3.5 percentage points if you had to say how much. Via Nick Timiraos.
Give Cash, Proverb Contest
Give Directly is looking for a proverb to promote the idea of giving directly:
The most common critique of giving cash without conditions is a fear of dependency, which comes in the form of: “Give a man a fish, feed him for a day. Teach a man to fish, feed him for a lifetime.”
We’ve tried to disabuse folks of this paternalistic idea by showing that often people in poverty know how to fish but cannot afford the boat. Or they don’t want to fish; they want to sell cassava. Also, we’re not giving fish; we’re giving money, and years after getting it, people are better able to feed themselves. Oh, and even if you do teach them skills, it’s less effective than giving cash. Phew!
Yet, despite our efforts, the myth remains.
The one thing we haven’t tried: fighting proverb with (better) proverb. That’s where you come in. We’re crowdsourcing ideas that capture the dignity and logic of giving directly.
Submit your direct giving proverb.
The best suggestions are not a slogan, but a saying — simple, concrete, evocative (e.g.). Submit your ideas by next Friday, March 3, and then we’ll post the top 3 ideas on Twitter for people to vote on the winner.
Advice for the new World Bank chief
From my latest Bloomberg column:
First, contrary to the prevailing wisdom, the World Bank should not make climate change more of a priority. Climate-change issues are more closely associated with rich and middle-income countries than with the poorest countries. The very poorest countries, because they have small economies, do not as a rule emit much carbon. Indoor air pollution, such as burning wood or fuel for heat or cooking, is usually more of a problem. Those emissions can be toxic, and the World Bank should try to help reduce them. But that won’t do much to cut carbon emissions.
The World Health Organization estimates that about seven million people die each year from the direct effects of air pollution. For poorer countries, alleviating that problem should be a greater priority than fighting global climate change.
The reality is that if the World Bank can help elevate some very poor countries into middle-income countries, climate-change problems will become somewhat worse — at least in the short to medium run. “We make climate-change problems worse” is not a marketable slogan. But it is selfish to try to get the World Bank to do more good for the wealthiest nations and less good for the poorest nations, which is essentially what prioritizing climate change would do. And of course the world’s wealthier nations are broadly coincidental with the major shareholders of the World Bank…
If there is any area where the World Bank should double down, it is in public-health interventions. Over the last several decades, the successes have been extraordinary. In Africa, for instance, child mortality rates have plummeted, and many public-health indicators have improved considerably, especially outside of major conflict zones. Why not invest more in what is working?
Recommended, with further arguments at the link.
MRU One Million Users!
Marginal Revolution University hit a milestone last week: the one millionth use of our interactive econ practice tools!
Interactive tools help students learn economics and help teachers deliver great econ education. To celebrate, the MRU team has just released a 6-day high school unit plan on inflation complete with lecture slides, videos, and interactive practice and we’re offering high school teachers a chance to win billions of dollars to check it out. (Ok, Zimbabwean billions but still pretty cool!)
More generally, check out our free economics courses and teaching resources at MRU and our superb principles of economics textbook, Modern Principles of Economics. Next stop: Ten million!
My Progress Studies conversation with Jon Baskin of The Point
No, not Nilsson’s The Point, the other one! Here is the piece, here is one excerpt:
JB: What did you learn from reading Plato?
TC: Reading Plato, it struck me—I’m thirteen years old here—but it struck me how much the whole rest of the world is by no means on board with the things I thought were good. So Socrates is constructing his ideal republic, and you can debate whether Plato really favored it, or whether Socrates really favored it, but those ideas are out there. You ban the poets? You want to be like Sparta? Those are big issues.
And even then, when I read Plato, I saw it as a dialogic mode of thinking, rather than believing that Plato was endorsing everything Socrates said. The dialogues are rich and fruitful. And people hold a lot of different points of view. So to try to refine dialogic modes of thinking about progress, and indeed everything: that was the biggest lesson I got from Plato. And then just how smart some of the early people were. And that’s not unrelated to progress studies. In the modern world there are a whole bunch of ways we’re clearly much smarter, like programming computers. Are we smarter in every way? Will we produce our own Adam Smith or Plato? Tough questions.
And:
JB: I want to talk a little bit about Tolstoy. Max Weber, in his famous 1917 lecture “Science as a Vocation,” says that Tolstoy is the person who most sharply raises the question of whether the advances of science and technology have any meaning that go beyond the purely practical and technical. And he quotes Tolstoy saying that, basically, for the person who puts progress at the center of their life, life can never be satisfying, because they’ll always die in the middle of progress. How would you respond to this charge from Tolstoy about progress?
TC: I’m pretty happy and Tolstoy was not, would be my gut-level response.
Self-recommended!