Why Doesn’t Economics Progress?

Don Boudreaux offers one hypothesis.

Academic journals are not the place to repeat long-ago-discovered truths. A bias, however, arises from this role of academic journals and of the need for scholars to publish in them – namely, a disproportionate amount of attention is given in academic journals to speculative ideas and to exceptions to long-ago-discovered truths. Foundational ideas and long-ago-discovered truths appear only in the background of academic journals, or whenever someone discovers (or believes that he has discovered) an exception to these.

David Henderson has his own take.

I read this as suggesting that the bias toward novelty in academic journals retards progress in economic thinking, by crowding out established truths. That may be an issue. But I have a different issue, which I will get to.

First, on the topic of trade across borders, I share with Boudreaux the presumption that once you establish that A has voluntarily bought X from B and that this was an ethical transaction, you are done. It is not relevant which side of a border B happens to live on. To come up with a relevant distinction, you will have to try some fancy intellectual footwork, and even then you are unlikely to overturn the logic of the free trader.

But for the most part, the problem in academic economics is not that truth has stood still and economists have moved away from it. On the contrary, I am struck that the economy is evolving faster than economics. Economists are still using 19th-century apparatus, such as the capital-labor distinction and marginal-cost pricing theory, in a 21st-century economy that those concepts do not fit very well. Even worse, many economists have so much confidence in their work that they are willing to advocate policy schemes based on very unreliable analytical methods. This gap between antiquated and inadequate models and the hubristic claims of economists is the issue that most disturbs me.

We are not white-coated scientists dealing with brainless inanimate objects or unintelligent lower creatures. We are not continuously cutting down on our ignorance and increasing the share of economic behavior that we understand.

We are studying phenomena that can change at a faster pace than we can acquire knowledge. We are studying humans who are embedded in institutions that are more nimble and clever than we are. In the markets where we attempt to make policy, such as health care or banking, there is usually much more knowledge embedded in the people and organizations that work in those fields than there is in our long-distance observation of them. And we are not gaining on them. They are gaining on us.

Posted in Economic education and methods | 5 Comments

Jeremy Bailenson on Virtual Reality

The book is called Experience on Demand: What Virtual Reality is, How it Works, and What it Can Do. It was a useful corrective to a lot of my naive impressions of the technology.

A few excerpts:

By January 2015, our lab’s state-of-the-art HMC, the one that cost more than some luxury cars, had been replaced by developer models of consumer HMDs like the Oculus Rift and the Vive.

HMD = head mounted display

if someone sees his avatar get lightly poked with a stick, and also physically feels his chest getting poked synchronously, the avatar is treated as the self. People “transfer’ their consciousness into it, according to dozens of studies.

People in taller avatars negotiate more aggressively, people in attractive avatars speak more socially, and people in older avatars care more about the distant future.

Virtual reality is going to become a must-have technology when you can simply talk and interact with other people in a virtual space in a way that feels utterly, unspectacularly normal.

But we are not close to that point.

One reason we might prefer avatars to video for communication is latency. . .videoconferencing at its essence is designed to send everything the camera sees over the network, regardless of how important the feature is concerning communication.

The neat thing about VR is that you don’t need to send all those pixels over the network over and over again. . .

Tracking the actions of two speakers, transmitting them online, and applying them to the respective avatars all occur seamlessly, and all the participants feel as if they are in the same virtual room

I have little doubt that virtual reality will be an excellent tool for spreading propaganda.

VR is about exploration, and storytellling is about control.

People who make movies are used to having control of where the user is focused. Good VR gives the user the freedom to focus anywhere. Contrast Hollywood movies with video games.

The educational field trip is the elusive unicorn.

Again, the conflict between exploration and control emerges.

by analyzing the body language of teachers and learners while a class was being taught, we could accurately predict the test scores of the students later on.

Very interesting result to think about.

To the extent that it is the teacher’s nonverbal communication that matters, and to the extent that students respond individually to nonverbal communication, students might learn better from avatars:

Virtual reality makes it possible for one teacher to give one-on-one instruction to many students at the same time. . .from a nonverbal standpoint

Posted in books and book reviews, business economics, technology and the future | Leave a comment

A useful statement of Jordan Peterson’s worldview

I found this essay by Matthew Pirkowski the best articulation of Petersonism so far. It is focused on a theory of tyranny as derived from an unwillingness to face the uncertainty and inevitable difficulties that arise in life.

It is difficult to excerpt, but here is a taste:

One must ally with Courage to tolerate uncertainty in all its forms: suffering, randomness, chaos, and failure — to admit to oneself that these forces exist as inevitable features of the human experience. When one discovers new explanations for mismatches between one’s beliefs and one’s current reality, it requires Courage to actually test them in the world of actions, to confront uncertainty with new and unproven strategies.

Posted in Libertarian Thought | 5 Comments

Off Topic: Cultural Appropriation and Dance

Ira Stoll is angry about a NYT interview with an Israeli modern dance choreographer.

Israelis stole folk dancing from the Palestinian Arabs in an act of “cultural appropriation,” The New York Times claims.

I think that he is over-reacting. In response (without referring to his piece), I wrote,

it was the most liberal-minded Jews who enjoyed Israeli dances that incorporated steps modeled on Arab debkas. Some of the choreographers had come from Arab countries and were proud of their heritage. Others wanted to promote their idealistic vision, which was for an ethnically and culturally integrated state, with Arabs blended seamlessly into the economy and life of Israel. In hindsight, this vision may seem naive , but it was well intended.

Posted in culture | 8 Comments

Off Topic: what I’m reading

Dan Hofstadter, The Love Affair as a Work of Art. I think I saw a book review he did and I liked his writing. When I got a sample of his book, I was intrigued because he starts with Benjamin Constant, although it turns out that Constant’s ideas are not discussed. Not sure I’ll finish it, even though he writes well. I don’t care so much about the people that he profiles.

The book is a chronicle of famous French love affairs of the early 1800s, in which introspection, infatuation, and letter-writing feature prominently. These French romantics approach relationships in a way that may seem foolish and self-absorbed, but gosh. . .compared with what we see now. . .how can we dare to criticize?

Posted in books and book reviews | 3 Comments

Shorter Jerry Muller

In a Q&A, he writes,

My critique is of what I call “metric fixation.” The key components of metric fixation are the belief that it is possible and desirable to replace judgment, acquired by personal experience and talent, with numerical indicators of comparative performance based upon standardized data (metrics); that the best way to motivate people within organizations is by attaching rewards and penalties to their measured performance, rewards that are either monetary or reputational (college rankings, etc.); and that making the metrics public makes for greater professional “accountability” — as if only that which can be counted in some standardized way makes for professional probity. My book is about why this so often fails to have the desired effects and leads to unintended negative outcomes, which, after decades of experience, ought to be anticipated.

Read the whole thing. His book is The Tyranny of Metrics.

Sounding rather opposed is Bryan Caplan, who writes,

If you’re teaching something existing tests can’t detect, write a better test! But if you’re teaching something no conceivable test can detect, you probably aren’t teaching anything at all.

Bryan seems to be saying that everything one can learn is measurable in some way. Can you test for curiosity? For intellectual humility? For willingness to question one’s own beliefs?

Posted in books and book reviews, business economics | 11 Comments

Algorithms vs. judgment

Jason Collins discusses the issue.

the reluctance to have our decisions and actions replaced by automated systems extends through a range of human activity and decision-making. It took nearly 50 years for people to accept automated lifts. Today, over three quarters of Americans are afraid to ride in a self-driving vehicle.

Automated systems tend to increase efficiency but at a cost of fragility. When algorithms are first introduced to a domain, humans are better at spotting circumstances that were unanticipated by the algorithm.

Amar Bhide, in A Call for Judgment, argues that the financial crisis in part reflects the fragility of a regulatory system (including internal regulations at financial institutions) that relied too much on formulas and too little on judgment.

But Collins points out that there are many situations in which humans over-ride algorithms in a harmful way. The challenge is to enable humans to distinguish situations in which the algorithm is making better calculations from situations in which the algorithm is missing something that the human sees.

Posted in business economics, Jason Collins is Indispensable | 6 Comments

Russ Roberts’ Twelve Rules for Life

I think that they are really good. Here is one example:

Give up a lot to be at a funeral

You can always find an excuse for not going. It’s in the middle of the day, you have a lot to do, the person is already gone, the family of the one who’s gone will understand, and most of all, how important is it really? Try to go anyway. Attending any funeral is a reminder of what’s important in life. Attending a funeral of someone who touched your life builds gratitude and is a kindness to those left behind.

My wife taught me this one. If a relative of one of our friends dies, we try to attend the funeral even if we did not know that relative very well.

Funeral services are deeply life-affirming. Eulogies provide a valuable perspective on life. They remind you of what is important. They remind you of what is best in people. And they tell stories of the variety of human experience.

Posted in Uncategorized | 2 Comments

Russ Roberts and Bryan Caplan

One of my favorite podcast episodes, because Russ pushes back so hard and of course Bryan debates effectively. For example, Bryan says,

I would say if there is no designable test that can show that people learn something, then they haven’t learned it. You might say the test is bad, in which case I would say, ‘Fine. Design a better test, and then show it to me.’ But, if you want to say that people have been transformed but it’s a way that no one can actually show, no matter how hard they try, then I’m going to say, ‘No. That just sounds like wishful thinking.’

Later, Bryan says:

I’m weird in this way, in that when I read something that seems true to me, like I just feel this incredible, this weight on the world: ‘I must repent. I can’t keep living the way I used to live any more. I’ve got to go and incorporate this knowledge into my decisions, day after day. And, I’m a sinner if I don’t.’ But even that is such a weird response to a book. Most people read Tetlock’s Superforecasting and say, ‘Oh, yeah. So interesting. Some people are really great at this stuff. Yeah. Right.’ And then they go back and live their normal lives.

This is interesting. Maybe there is an “ability to learn” that reflects hyper-sensitivity to new information. And can formal education affect the degree of sensitivity to new information?

Posted in Economics of Education | 5 Comments

Should economists intern in business?

I make that suggestion.

Economists continue to describe entrepreneurs as solving problems of resource allocation, when in fact business executives worry internally about talent development and culture. They worry externally about strategy in a complex environment.

Posted in business economics, Economic education and methods | 8 Comments