Wednesday, December 17, 2014

Notes on the culture of economics

I'm finally getting around to reading Piketty's Capital in the 21st Century. That and a project at work has put economics back to the front of my brain. I found the below posts interesting.

Paul Krugman says in "Notes on the Floating Crap Game (Economics Inside Baseball)"

So, academic economics is indeed very hierarchical; but I think it’s important to understand that it’s not a bureaucratic hierarchy, nor can status be conferred by crude patronage. The profession runs on reputation — basically the shared perception that you’re a smart guy. But how do you get reputation? [...] [R]eputation comes out of clever papers and snappy seminar presentations. 
[...]  Because everything runs on reputation, a lot of what you might imagine academic politics is like — what it may be like in other fields — doesn’t happen in econ. When young I would have relatives asking whether I was “in” with the department head or the senior faculty in my department, whether I was cultivating relationships, whatever; I thought it was funny, because all that mattered was your reputation, which was national if not global.

Not all Krugman says is rosy for economists. Nevertheless, this is consistent with my experience when I was in economics. Econ has a hierarchical structure, but it's not based on patronage or solely "length of service."  For example, when I was at the Fed, the internal structure was quite hierarchical in terms of both titles and managerial responsibility. (It kind of reminded me of the military.) However, it also had a  paradoxically "flat" culture. Ideas were swapped and debated constantly. Though I was a lowly research assistant, my forecasts were respected and my input listened to. I was no exception; this was just how we operated.

Simply statistics brought another post to my attention. From Kevin Drum at Mother Jones: Economists are Almost Inhumanly Impartial.

Over at 538, a team of researchers takes on the question of whether economists are biased. Given that economists are human beings, it would be pretty shocking if the answer turned out to be no, and sure enough, it's not. In fact, say the researchers, liberal economists tend to produce liberal results and conservative economists tend to produce conservative results. This is unsurprising, but oddly enough, I'm also not sure it's the real takeaway here. [...]
 What I see is a nearly flat regression line with a ton of variance. [...] If these results are actually true, then congratulations economists! You guys are pretty damn evenhanded. The most committed Austrians and the most extreme socialists are apparently producing numerical results that are only slightly different. If there's another field this side of nuclear physics that does better, I'd be surprised.

(I'll leave it to you to check out the regression line in question.)

Simply statistics's Jeff Leek has a different take.
I'm not sure the regression line says what they think it does, particularly if you pay attention to the variance around the line.

I don't know what Leek is getting at exactly; maybe we agree. What I see is a nearly flat line through a cloud of points. My take isn't that economists are unbiased. Rather, their bias is generally uncorrelated with their ideology. That's still a good thing, right? (Either way, I am not one for the philosophy of p < 0.05 means it's true and p > 0.05 means it's false.)

Here's what I've told other people: microeconomics is about as close to a science as you're going to get. It's a lot like studying predator prey systems in the wild. There's definitely stochastic variation, but the trends are pretty clear; not much to argue about. Macroeconomics, on the other hand is a lot trickier. It's not that macroeconomists are any less objective than microeconomists. Rather, measurement and causality are much trickier. In the resulting vacuum, there's room for different assumptions and philosophies. This is what macroeconomists debate about.

Nevertheless, my experience backs up a comment to Drum's article:
Economists generally avoid and form consensus in regard to fringe theories. 

Translation: the differences in philosophies between macroeconomists isn't as big as you'd think. And they're tiny compared to our political differences.

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