Rap is capitalist

The economics of rap lyrics would be an interesting subject for a pop econ book.

When I was a kid, I barely listened to rap, and most of what I knew was West Coast "gangsta rap." To me, gangsta rap was basically a form of chivalric fiction -  a glorification of the honorable, violent lifestyle of warriors in an anarchic society. It was all just "Mine enemies besmirched my honor, so I smote them down with the strength of my good right arm." Medieval knights were basically just gangsters, after all, so it makes sense that they'd have similar romantic myths.

I also was dimly aware of protest rap ("Fuck tha Police", Public Enemy, KRS-One, etc.) and 80s dance rap (a variant of goofy 80s dance music).

But as I got older and started to listen to more rap, I noticed one theme that was overwhelmingly common, and seemed to be getting more dominant: the rags-to-riches story. A huge amount of rap these days, and for at least the last ten years, has lyrics that are a variation on: "I was poor, then I made high-quality entertainment products, and now I am rich!"

For example, here's an excerpt from "Started From the Bottom," by Drake:

I done kept it real from the jump
Living at my mama's house we'd argue every mornin' nigga,
I was trying to get it on my own
Working all night, traffic on the way home
And my uncle calling me like "Where ya at?
I gave you the keys told ya bring it right back"
Nigga, I just think it's funny how it goes
Now I'm on the road, half a million for a show

This theme is absolutely ubiquitous. In the late 90s and early 2000s, around the time I started listening to more rap, it seemed to be totally replacing gangsta rap as the dominant lyrical message.

One interesting thing is how overwhelmingly capitalist this theme is. A number of (white) lefty humanities students I meet are quite enamored of rap, viewing it as a form of protest against the structural injustice of the capitalist system. But barely any of that has been popular for many years now. The overwhelming majority of the mainstream popular rap music from the last decade and a half has been about working hard, taking risks, reaping financial rewards, and enjoying a money-driven status-conscious consumerist lifestyle. In other words, a total and utter embrace of the capitalist dream. Of course, the successful business exploits of rappers themselves are now well-known; the capitalist dream goes way beyond music-making.

Modern rap also puts the lie to the idea, popular in right-wing media, that rap encourages a culture of poverty. That was true of gangsta rap - even if he amasses money and power, a gangster is expected to stay in his community and remain true to the lifestyle of the streets (much like the ideal of noble poverty in chivalric fiction). But modern capitalist rap is about hard work and risk-taking in the pursuit of prosperity - exactly the kind of values conservatives ostensibly want people to have. Ludacris, whose music O'Reilly has repeatedly failed to recognize for the satire that it is, even has a song advocating Randian selfishness.

So I think both lefties and conservatives get modern rap fundamentally wrong. It's just Horatio Alger, updated for a wealthier, more liberal, mass-media-driven age.

But rap is about the culture of Black America, and therefore it is about scarcity. You can't have rags-to-riches without the rags. Black America is much poorer than the rest of the country, and is therefore a world defined by the daily experience of scarcity; it's a world where every constraint always binds. That makes for some interesting economics.

For example, the drug trade figures prominently in rappers' stories of how they survived before getting rich. The standard rapper autobiographical tale has the rapper selling drugs until his music career takes off. Usually, this involves taking large risks, since it involves operating outside of the protection of the law. This, of course, demonstrates many of the unintended negative consequences of government prohibition of commodities.

Also, a world of scarcity is a world where transaction costs are too high for many kinds of market institutions to function. For example, equity markets. Here is an excerpt from Future's "Where Ya At":

Where your ass was at, dog, when I was in the Pyrex?
Where your ass was at, dog, when I was drinking Hi-Tech?
Where your ass was at, dog, came through the projects?
Where your ass at we keep that fully loaded contracts?

and also:

Where your ass was at when I was trapping in the stove?
Had to struggle to get where I'm at and sell dope

The song is addressed to someone who wants some kind of unspecified favors from Future now that he's a rich, successful musician, but who refused to help Future when he was a poor, struggling chemical manufacturer. Unfortunately, given the lack of formal equity markets, the dispute over just how much the person helped Future must be resolved by extra-legal means. Informal purchasing contracts, barter, and other economic workarounds also make frequent appearances in rap lyrics.

I don't think I'm reading too much into these songs, either; rappers themselves are obviously acutely aware of the importance of good formal economic institutions.

Rap lyrics paint a picture of how government has influenced the economy of African-American society, especially via the War on Drugs. An economic niche has been carved out and reserved for poor Americans. That niche offers the promise of a middle-class income, but at the price of horrible risk to life and limb. It has encouraged informal marketplaces with weak institutions, leading to high transaction costs and numerous market failures.

No wonder rappers are so proud at having escaped that situation and made it into the regular economy! I know I would be. Perhaps our politicians should listen to more rap music.

Russ Roberts predicts my policy positions

Earlier this year, there was an interesting debate between Russ Roberts of EconTalk and Adam Ozimek of Forbes about ideology and economics. Basically, Roberts (mostly on Twitter) took the cynical position that ideology governs much of people's stances on policy positions, that this is inevitable, and that we should just accept it. Ozimek said no, economists aren't as ideological as Roberts thinks, even commentators in the public sphere. He also said that if you find that your own positions are driven by ideology, it's a sign that maybe you should rethink how you form your positions.

More recently, the argument flared up again. Roberts declared the following:

Then one day I realized that if I knew one policy position of an economist, I could predict the others ones. 3/

— Russell Roberts (@EconTalker) October 20, 2015

I then challenged Russ to predict my positions on various policies. Initially I suggested that I would tell him three of my positions, and then name three other issues and ask him to predict the second three. He counter-suggested that he would merely pick a bunch of issues and predict my positions on all of them. I agreed, despite the fact that this was not as good a test of Russ' thesis.

Anyway, though, Russ did come through with the promised predictions, and posted them on Twitter. Here they are (sorry for the weird embedding of reply-tweets):

1/ I suggested I could predict an economist's policy positions if I knew one of them. @Noahpinion challenged me to pick his.

— Russell Roberts (@EconTalker) October 25, 2015

2/ Not really fair. I could read a bunch of his stuff. But I will try to be honest and let him respond. What do I know about him?

— Russell Roberts (@EconTalker) October 25, 2015

3/ Don't read him regularly. But I know he considers libertarians to be dogmatic and loony. He thinks econ is more scientific than I do.

— Russell Roberts (@EconTalker) October 25, 2015

4/ I follow him on twitter. So I know he is somewhat left-leaning politically. So this should be easy. But maybe he'll surprise. Here goes.

— Russell Roberts (@EconTalker) October 25, 2015

5/ He is happy ACA passed. Supports an increase in mw to either $12 or $15. Thought the stimulus was a good idea. Maybe wishes it had been >

— Russell Roberts (@EconTalker) October 25, 2015

6/ Generally thinks Bernanke did good job. Thought bailouts were necessary. Would support higher taxes on rich. Thinks CFPB was good idea.

— Russell Roberts (@EconTalker) October 25, 2015

7/ Wants unemployment insurance extended. Opposes school vouchers. Wants more govt $ spent on education. Likes idea of Fannie and Freddie.

— Russell Roberts (@EconTalker) October 25, 2015

8/8 Wants stricter gun control. Probably basically pro on trade and immigration but not for fully open borders. So, @Noahpinion--how'd I do?

— Russell Roberts (@EconTalker) October 25, 2015

OK, here is a scorecard. Russ named 13 policy issues and predicted my positions on all of them. I will give 1 point for a correct prediction, 0 points for an incorrect one, and 0.5 points if I don't really have a position or am not really sure. I will also include brief explanations of why I hold the various positions - not because I love hearing myself dispense opinions, but so I can prove that I'm being honest about what I think. Here goes:

1. ACA (Obamacare): I'm not sure. I don't really know much about health care policy. My instinct says that the most important health care problem in America is high excess cost of care, not the number of the uninsured. Obamacare does do some things to try to address the cost problem, and costs do seem to have decelerated somewhat in the last few years, but I just don't know how big of a factor Obamacare has been, or whether the cost slowdown is a permanent thing.

Score: 0.5 pts.

2. Minimum Wage Increase: I favor local experiments with $12 or $15 minimum wages but not a national minimum wage hike - at least, not until the results of the experiments have come in, which will take years. Even then, national minimum wages are generally not great because they don't take local cost differences into account. Also I think EITC dominates minimum wage in most respects, and if paid as a wage subsidy instead of a tax credit would dominate in all respects.

Score: 0 pts.

3. 2009 Stimulus: Yes, probably a good idea. The temporary tax credits didn't do a whole lot, but support for state spending probably did do substantial good. And the stimulus included a substantial amount of money to shore up our badly underfunded infrastructure. Moreover, the deficit (and spending as a percent of GDP) has since come down to normal levels, quieting people's worries that the stimulus was a cover for permanent increases in spending and/or deficits.

Score: 1 pt.

4. Bernanke: Yes, Bernanke did a good job. Monetary policy was probably a factor in averting a Second Great Depression.

Score: 1 pt.

5. Bailouts: Probably something like that was necessary. But I think bailouts were handled badly in the heat of the moment; should have been much harder on management of big banks, to avoid future moral hazard. Still, long-term net costs to the government of most of the bailouts (with the exceptions of AIG and GM) were zero. So I'll give Russ the point.

Score: 1 pt.

6. Higher Taxes on the Rich: I don't have a moral problem with raising taxes on the rich, and I doubt the efficiency cost would be that high (rich people aren't really working to consume). However, I am very pessimistic about our chances of actually getting the money from the rich people, who are very good at avoiding taxes. Taxes on the rich used to be much higher, but the share of tax revenue as a percent of GDP was about the same. I do, however, think a higher inheritance tax would be a great idea. Not only would it tax unproductive "trust fund babies", but it would also probably raise the happiness of many rich people themselves in the long run. I think most rich people - or at least, most "self-made" rich people - don't realize how much their kids will be spoiled by large inheritances. So inheritance taxes can help save rich people from their own mistakes!

Score: 0.5 pts.

7. CFPB: Seems like it has been doing good so far, though too early to tell whether it will remain effective in the long run.

Score: 1 pt.

8. Unemployment Insurance Extension: No. We're way past the recession. Unemployment insurance is an automatic stabilizer, but it does discourage work. And the more work gets discouraged, the more people's skills and resumes and work ethic decays, and the more danger they are in of falling into the ranks of the long-term unemployed.

Score: 0 pts.

9. School Vouchers: My God, what a terrible idea. Privatized education just fails, fails, fails whenever it's tried. History is clear: It does not work. Vouchers are also a form of faux-privatization, where the government pays the bills but doesn't administer the service. That is a clear and unequivocal recipe for ineptitude, waste, fraud, corruption, and inefficiency. Russ is totally right about my position on this one.

Score: 1 pt.

10. More Govt. Funding of Education: Not sure. Don't know how effective this is. It would probably depend crucially on how the money was spent, though I don't know enough to know what the "good" way is.

Score: 0.5 pts.

11. Fannie & Freddie: Bad. These agencies seem like yet another example of faux-privatization. Government provides the funding (in this case, in the form of a guarantee), but doesn't do the administration, leading to bad incentives. Also, I think we incentivize homeownership way too much in this country.

Score: 0 pts.

12. Stricter Gun Control: Probably not. I grew up in small(ish)-town Texas, where tons of people had guns and there weren't any shootings that I ever heard of (though probably some accidents). Canada has relatively high gun ownership and very little crime, including few mass shootings. Brazil has a small fraction of the gun ownership we have, and much higher crime. Meanwhile, we've had a huge drop in crime in the last two decades with no real increase in gun control. Let's try to replicate that success before we start disarming the populace. I will admit that my stance on this has wavered recently, in light of the rash of mass shootings, but I still don't think gun control is likely to have a huge effect. A much, much more important policy for reducing gun death would be to end the War on Drugs.

Score: 0 pts.

13. Trade and Immigration: Russ is right. I'm basically pro-trade and immigration, but not for open borders. I'm definitely more skeptical of free trade than the average economist - I think industrial policy can be useful for developing countries, and I think that trade with countries that manipulate their currencies can sometimes be self-defeating. I also think that international capital flows can be destabilizing and can reduce productivity in some countries. But I will still give Russ the full point.

Score: 1 pt.


Total score: 7.5 out of 13


That is slightly better than random chance. But remember, Russ follows me on Twitter, which gives him an advantage. Also, he was able to choose the issues, which gives him a number of additional advantages - he can choose positions on which a substantial majority of Americans agree, he can select several issues correlated to those on which he is most sure about my position, etc. Given this, I don't think Russ was able to predict my positions that well.

The only obvious cluster of predictive success was on policies relating to the financial crisis. Russ correctly predicted my positions on Bernanke, the bailouts, and the CFPB.

I think this exercise shows a number of different "failure modes" of attempting to model people's policy positions based on an assessment of their ideology. For example:

1. You may fail to assess people's ideology correctly. Russ probably didn't expect that I'd intrinsically value the personal liberty of owning guns. He also probably thought I would be more eager to tax the rich simply in order to reduce inequality (regardless of its efficacy).

2. Your model of ideologies may have errors. Russ probably assumed I'd have ideological reasons to support Fannie and Freddie, because he thinks I'm a liberal, and liberals support Fannie and Freddie. But I'm not sure this is true - I've never seen liberals defend those agencies. Maybe some have, but it doesn't seem to be a pillar of liberal ideology.

3. No model of ideology is perfect. "Liberal" is a name given to a cluster of ideas, but few people precisely fit that cluster. Most people have at least one or two positions that don't toe the ideological or party line. Each individual's ideology is complex, and the standard clusters, like "liberal" and "libertarian", are only approximate models. Russ probably didn't guess that my values would be "liberal" on the CFPB, "libertarian" on gun control, etc. Even I don't know what to call myself, ideologically.

4. People disagree on the facts, not just on values. In general, people with heterogeneous priors about the state of the world will fail to reach agreement even after seeing all of the same evidence. And when people form their policy positions, they consider efficacy of policies, not just whether the intended effect would be a good thing. Russ probably didn't bet that I would be pessimistic about the efficacy of taxing the rich, the usefulness of the ACA's tax credits, or the effectiveness of gun control. He also probably underestimated my uncertainty about the effect of Obamacare on health costs, the usefulness of education spending, and the employment effects of minimum wage hikes.

So anyway, this was a fun exercise, and thanks to Russ for taking the time to do it. I'm not sure how it really relates to the original Roberts-Ozimek debate, but it was interesting nonetheless.


Updates

A few people have suggested I was too hard on Russ in my scoring. I gave him 0 points on minimum wage, despite the fact that I like the idea of conducting natural experiments with local minimum wages. And I gave him only 0.5 points on taxing the rich, despite the fact that I favor a higher inheritance tax.

Well, maybe; it's hard to score precisely. Some things are closer to 0.7 or 0.3 than 0.5. I did the best I could. On minimum wages, my opposition to a national minimum wage, and my belief that EITC is just better, made me give it 0 instead of 0.5. In reality it's more like 0.2, rounded down. On taxes-on-the-rich, I gave 0.5, because it really depends on what we use the revenue for. If it's for inefficient subsidies or boondoggles like the F-35, I say *cut* overall taxes on the rich, while shifting from income to inheritance taxes. I don't want to raise taxes on the rich just to "soak the rich" and stamp out inequality, as many do. So I don't think this deserves more than a 0.5. 0.6 at most.

Then there were a couple where I rounded *toward* Russ' prediction. For example, on bailouts, I gave him 1 point, even though I think the bailouts were not executed well and created moral hazard. So that's really more like 0.8, rounded up. And on the stimulus, I think about half of it went to utterly useless (but not particularly harmful) tax credits. So that's more like 0.8 or 0.9, rounded up. My skepticism about the pro-trade consensus probably makes that a 0.9 as well, rounded up.

So overall I think I was fair, and my inevitable roundings came out a wash. Plus, this isn't a scientific test, so changing to 7/13 or 8/13 wouldn't change the basic message, which is about how "ideology cluster" models can fail.

How China got rich

I do not understand this Tyler Cowen post about Chinese catch-up growth:

It seems obvious to many people that Chinese growth is Solow-like catch-up growth, as the country was applying already-introduced technologies to its development. 

But how many other economies have grown at about ten percent for so long?  Was there not a secret ingredient added to the mix? 

Increasing returns to scale?...Something about Communist Party governance which enabled the corruption to be channeled productively into building more infrastructure rather than holding up progress?  Tiger Mom parenting combined with a relatively meritocratic exam system?... 

More radically, is there some “natural,” culture-neutral rate at which innovations trickle down from the world leaders to the poorer countries?  The diversity of growth rates would seem to indicate not.  Is each country then not innovating — with varying degrees of success — by building its culture-specific net for catching and transmitting global innovations throughout the nation?

I don't know about Tiger Mom parenting, effectively channeled corruption, or "culture-specific nets", whatever those are. I do know, however, that Solow catch-up growth is not about TFP increase or the diffusion of innovation!

There are basically two kinds of catch-up growth. The first is where you cheaply copy innovations from countries at the technological frontier. That's what Tyler is talking about. But the second, Solow catch-up growth, is far simpler - it's just about capital accumulation.

Countries don't start out with capital - they have to build it. So they save some of their production each year and use it to build productive capital (or trade it to other countries for capital). They do this until they have so much capital that they hit the point of diminishing returns, and depreciation starts to get so costly that it doesn't make sense to build any more capital (per worker).

Really simple. Save money, build capital. And that's exactly what China has been doing. Here's a graph from a Federal Reserve Board discussion paper from 2013:

A very smooth exponential increase in the capital-to-labor ratio.

Now of course, in the Solow model, that red line should flatten out and turn into an S-curve eventually, as the K/L ratio reaches the steady state. That day of flattening will be delayed by productivity improvements - i.e., by the other kind of catch-up growth (plus any original innovation China does along the way).

But a lot of Chinese catch-up growth - about two-thirds, according to a standard decomposition - looks just like the classic save-money-and-build-capital thing. China has many more roads, many more railroads, many more cars, many more trucks, many more buildings, many more machine tools, and many more computers per person than it did in 1980 or 2000.

We don't need Tiger moms, culture-specific nets, or increasing returns to scale to explain that.

In fact, though China's growth looks more productivity-driven than some other Asian economies, It is probably less productivity-driven than Japan's catch-up was. If you want to look for Asian countries with cultural secret sauces, I'd start with Japan instead of China. Remember, when we talk about China, we're talking about a country whose per capita GDP is still only about a quarter of the countries at the frontier. And it's not yet clear how rich China will get before its growth slows dramatically.

The question of how technology diffusion happens is, of course, one of the great unsolved and under-studied mysteries of economics.


Update: This paper seems relevant.

Econ critique scorecard

I wrote a post about lazy econ critiques, so some folks on Twitter were asking me "Which critiques do you think are good, and which are not?" So since I'm overjoyed when someone actually cares what I think enough to ask, I decided to make a list! Naturally, the critiques will be simplified and a bit straw-mannish, but you get the idea.


Bad Critiques

1. "Econ should stop pretending to be value-neutral."

Call me crazy, but I think researchers should try to keep facts and values ("positive" and "normative" econ) separate. They won't completely succeed, but they ought to try their best. No matter what your values are, you'll be better able to implement them if you know the facts as much as possible. That doesn't mean economists shouldn't have values, it just means they should try not to let those values interfere with their assessment of the facts.

"But dude, being anti-ideological is an ideology too!"

Mmm, an insightful and trenchant observation. Now go take another bong hit and leave me alone.


2. "Econ should stop pretending to be a science. It's just a SOCIAL science."

What does it even mean to "pretend to be science"? Does history pretend to be science? Does anthropology? Does literature? Social science has different kinds of data from the lab sciences, but you do the best with what you have.

As for the idea that human beings can't be studied scientifically - well, you hear a lot of people say that, but it seems blatantly and obviously wrong. There are lots of models that predict human behavior very well in various areas. Not just in econ, either, but in operations research and other fields. So this critique is just incorrect.


3. "Econ has physics envy."

Nah.


4. "Economists failed to forecast the financial crisis."

Hey, if you can't forecast, you can't forecast. We can't forecast earthquakes at all (except aftershocks). We can't forecast hurricanes very well. Maybe crises and big recessions are just really hard to predict.

Of course, the argument that econ ignored the importance of the financial system, leverage, etc. was totally valid, but much has changed since 2008 (see next section).

And I guess I'd like to see more academic macroeconomists express concern about the forecasting problem, but instead they've decided to just leave the job of forecasting entirely to the private sector (where tons of people are working on it).


5. "Econ focuses too much on equilibrium, which doesn't really exist."

I've got some news for the outside world. Economists have redefined the word "equilibrium" to mean "any solution of a system of equations." Every solution of every model is called an "equilibrium".

Now, some kinds of economic equilibria probably don't exist very much (see later section).


Critiques That Used To Be Valid But No Longer Are 

1. "Econ ignores the financial system."

Not anymore, they don't!


Critiques That Are Less True Nowadays But Still Somewhat Valid

1. "Econ relies too much on theory, and not enough on data."

Empirics are on the rise. Theory is a smaller part of what econ does these days. I still see large numbers of wanky theory papers at seminars and such. But it seems like more and more of them are either A) job market candidates proving they're smart, or B) old folks having fun because they can. Nowadays, as Paul Romer says, "[I]n the new new equilibrium, empirical work is science; theory is entertainment."

But despite the decreasing flow of new theory, or at least prominent new theory, some econ literatures are still crammed with mutually contradictory models for which the scope conditions are neither known nor specified. And the stock of existing theories is still enormous. In some areas, especially in macro, economists really do have theories that make almost any prediction, with no real way to choose between them except priors and politics. And many economists still have very little problem using modeling assumptions that have already been taken to the data with discouraging results.

Also, as someone pointed out in the comments, econ models often sacrifice too much realism for the sake of tractability. If you have to publish theory papers, but it's too hard to get a result using solid assumptions, you go with silly assumptions. Hopefully the decreasing importance of model-making will decrease the pressure to pump out this kind of silliness.


2. "Econ uses too much math."

Go back and read some papers from the 70s and 80s. They are much more obsessed with pointless mathematical rigor and aping the style of math papers.

Of course, that doesn't mean that econ uses math for good purposes. There's a lot of what Paul Romer calls "mathiness" going around.


3. "Econ is a front for neoliberal/laissez-faire politics."

This was definitely somewhat true for a while. Especially in the Cold War, where economists became part of the ideological opposition to communism. Milton Friedman and Friedrich Hayek really were the public face of the profession for a while. But since then, the profession seems to have drifted in a leftward direction, in terms of economists' views, the profession's public face, and probably the implications of the results in econ papers.

There are still a few old Cold Warriors left, of course. There is still a lot of Koch money being funneled to certain econ departments and think tanks. There is probably still a subset of economists who were drawn to the profession because it seemed more conservative than other areas of academia. And there are still the Austrians, running around pretending to have something to do with the profession.


4. "Econ is sexist."

Yep, but it's clearly getting better, thanks to increased awareness and to the efforts of the AEA and other organizations.


5. "Econ colonizes other social sciences while ignoring their input."

My sense is that the Gary Becker project, of trying to understand social/cultural phenomena with standard econ models, is not doing so hot these days. You still see a lot of this on blogs and in pop econ books, but within the profession it seems generally recognized that things like norms and social preferences drive a lot of social phenomena. The problem with Becker stuff, as I see it, was that it focused too much on very standard, classic types of utility. Once you start bringing in new kinds of utility like norms and social preferences, those utility choices end up driving the results completely, and fancy econ techniques become only marginally useful. But it still sells pop books.

As for not taking input from the other social sciences, econ is still very siloed. Behaviorists have taken some input from psych. And poli sci methods and econ methods are converging so much that they are often indistinguishable at this point, in certain fields. But econ still ignores the existence of sociology entirely. Hopefully, as empirical methods become unified in sociology and econ, this will change.


6. "Econ is enslaved to the financial industry."

There has definitely been some corruption. Incentives matter, obviously. I don't think it was ever that widespread - most economists have nothing to do with finance - but there was a bit. But the AEA instituted a stricter ethics code in 2012, and there is more scrutiny of economists who do sponsored research. So the problem seems like it's being addressed.


7. "Economists assume Rational Expectations, which is B.S."

RE doesn't seem to be a very good assumption, except sometimes in the long run when you also have some lucky properties like time-invariant stochastic processes. It is very true that in the past, economists - especially in macro - were essentially forced to assume RE. Nowadays we are definitely seeing more deviation from that orthodoxy - Bayesian and non-Bayesian learning models, bounded rationality models, and other stuff. This critique is still mostly valid, though.


Valid Critiques

1. "Econ spends too much energy on macro."

Yep. Seems like macro is about a quarter of the econ profession. But given data limitations, a lot of that effort seems to go into making useless models. Macro is the glamour division of econ, but maybe more economists should avoid the glamour and get down in the muck where there are real conclusions to be had.


2. "Econ is obscurantist."

Definitely. This is a problem plaguing much of academia. In math and physics there are natural barriers to entry, because getting stuff right, though possible is just really hard, so only really smart people can enter those fields. In lab sciences, huge fixed costs are the barrier, with a fairly high degree of smarts also required. But in social sciences and humanities, there are fewer natural barriers, so the practitioners have to create them in order to increase their monopoly rents.

One way to do this is hyper-specialization. You see a lot of this in history, for example. Another way is to make up a ton of bullshit neologisms and spend all day arguing over what they mean, which requires defining them in terms of other neologisms, ad infinitum. This seems to constitute most of "critical theory". But a third method is to artificially increase the level of intelligence needed to do work in your field. This seems to be the approach taken by econ, where people who will spend their careers digging up natural experiments to test simple linear models are nevertheless forced to learn what a sigma algebra is. It also might be the reason for the use of purely mathematical methods to study every possible problem, even when those methods may not help or illuminate. It might even be one reason for the turgid, impenetrable style of many econ papers...


3. "Economists are arrogant."

Well, when you get paid more than almost any other academics, constantly sought after for policy advice, and treated as a sage on every conceivable topic from how to find a good restaurant to how to find a good spouse, you do tend to get a little full of yourself! :-)


4. "Economists believe their theories too much."

"Models are just tools for understanding specific situations," says every economist who believes his own models are The Truth And The Way.


5. "Welfare economics is silly."

Yeah, pretty much. Add realistic non-standard preferences and everything changes wildly. Add time-inconsistency and it becomes utterly hopeless.


Critiques Of Whose Validity I Am Not Really Sure

1. "Econ makes people bad, selfish, and immoral."

There's some evidence to this effect, but it doesn't seem conclusive.


2. "Economists need to get out and have more contact with the real world."

I hear people say this, but I really don't know how much contact the average economist has with the real world. I know some who seem to have essentially none, and some who seem to have a lot.

3. "Economies are complex adaptive systems, hence you will never be able to understand them."

...Maybe. *shrugs*

4. "Econ 101 is filling kids' heads with bad ideas."

I'm not sure about this, since Econ 101 must be taught very differently at different schools. The only thing I really know that is constant across schools is the identity of the most popular 101 textbooks. And Mankiw and Krugman's textbooks are pretty good, I think, although they're almost all theory and very little about empirical evidence. That's something I'd like to see change at the 101 level, for sure.

5. "General equlibrium/Walrasian equilibrium sucks."

I'm not sure. I haven't seen a lot of general equilibrium models that look like they've had a high degree of success in explaining observed phenomena. But it's a big, big world out there, and there are LOTS of general equilibrium models, and people studying how these models fit the data.


Anyway, off the top of my head, there's my list. Anyone have any more you'd like me to add? Leave them in the comments!

Racial bias in police killings

There's a very interesting debate going on between Harvard's Sendhil Mullainathan and Barnard's Rajiv Sethi, on racial bias in police shootings.

Mullainathan looked at the data and found that police likelihood of shooting a black person in a given encounter was no higher (or barely higher) than their likelihood of shooting a white person. He concluded that while police may be racially biased in terms of how often they go after black people, they're not very biased in terms of how likely they are to shoot the people they go after.

Sethi said: Not so fast. Mullainathan just looked at the killing rate conditional on an encounter, but Sethi wants to also condition on the type of encounter, which probably differs on average across races. Police might be more likely to misinterpret nonthreatening encounters with black people as threatening, and therefore be more likely to pull the trigger. Sethi's hypothesis says that police basically give black people a hard time, initiating disproportionately many encounters for innocuous things (racial profiling), and then pull out the gun when they interpret those innocuous encounters as threatening situations.

Sethi might be right. But it seems to imply some odd psychology on the part of cops. It implies that cops routinely go after the people who scare them the most. It implies that cops routinely and preferentially launch themselves into what they expect to be threatening situations.

That would be really weird. It could be true, of course - maybe cops have an incredibly strong sense of courage and duty, forcing them to bravely stand up to the (not actually) threatening, dangerous black people time and time again. Or maybe there is some institutional pressure from higher-ups forcing cops to do racial profiling. These explanations were both suggested by a sociologist friend to whom I posed this question. But they feel like quite a stretch. Cops get a lot of discretion in who they stop. And I doubt they are usually driven by an almost pathological sense of duty and courage.

Let me offer an explanation I see as more likely: Cops often tend to shoot (or otherwise brutalize) people not out of fear, but out of wrath.

My hypothesis goes like this. Cops pull out their guns and their nightsticks when they see suspects as having challenged their authority. They are determined to maintain power and control at all costs (i.e., South Park nailed it). Black people are more commonly seen as challenging cops' authority, probably because a lot of black people grew up in a state of relative anarchy and therefore lack other people's conditioned response of instant meek submission to police.

This seems to be exactly what happened with Eric Garner. He wasn't threatening at all; he's obviously a big teddy bear, he doesn't have any weapon, and he wasn't making any move to attack anyone. But he's an insubordinate teddy bear, who thinks he can reason his way out of an unfair arrest. So the cops grab him and choke him to death.

It also explains why so many suspects get shot in the back. For example, Walter Scott. A man who's running away is not a threat. He is not a source of fear. He is, however, flouting authority. Same with Samuel Dubose. Type "police shoot black man" in Google, and "police shoot black man in the back" is one of the first results that come up.

Here the police shoot a black guy in a wheelchair.

This psychologically plausible hypothesis is also parsimonious, because it allows police racism to explain both racial profiling and excess unjustified brutalization of black people. It also implies that in areas with entrenched racial conflict - say, the South - white police will be more likely to kill black people, because they view blacks as socially subordinate (hence any backtalk or resistance will be seen as more unacceptable if it comes from a black person than if it comes from a white person). So that would be an interesting test.

Anyway, to sum up, I think Sethi is right to say that equal rates of shooting per encounter don't imply that police are unbiased. But I think his explanation - police fear of blacks - isn't as likely as a wrath-based explanation.

Of course, if you drag a cop in front of a judge (or the media) and ask "Why did you shoot that guy?", of course they're going to say they were afraid. Fear generates sympathy. But color me skeptical.

In the MISO soup

Robin Hanson declares that thanks to Big Data, we will soon discover the SUPER FACTORS that drive all of human differences:

In a factor analysis, one takes a large high-dimensional dataset and finds a low dimensional set of variables that can explain as much as possible of the total variation in that dataset. A big advantage of factor analysis is that it doesn’t require much theoretical knowledge about the nature of the variables in the data or their relations – factors are mostly determined directly by the data... 

[P]eople vary in far more ways than intelligence, ideology, and personality, and factor analyses have been applied to many of these other human feature categories. For example, there have been factors analyses of jobs, brands, faces, body shape, gait, accent, diet, leisure behavior, friendship networks, physical health, mortality, demography, national cultures, and zip codes. 

[F]actors found in different feature categories are often substantially correlated with one another. This suggests that if we put together a huge super-dataset describing many individual people in as many ways as possible, a factor analysis of this dataset may find important new super-factors that span many of these features domains. Such super-factors would be promising candidates to use in a wide range of social research, and social policy... 

I’d guess that the super-factors found in a super dataset of human details will instead be revolutionary. We will afterward see uncovering them as a seminal milestone in our progress in understanding human variation. A Nobel prize worthy level of seminality, or more. All it will take is lots of tedious work to collect a super dataset, and then do some straightforward number crunching.

Here's an object lesson in the perils of analyzing data without theory to guide you! Yes, it's easy to do a principal component analysis on a multidimensional data set and find some relatively small set of "factors" that "explain" most of the data. If we do what Robin says and throw everything we know about human characteristics into one massive data set and hit the PCA button, the STATA of the future will pop out our "super-factors" in short order.

One of the biggest super-factors will be income.

See, factor analysis doesn't tell you whether the factors cause all the other stuff, or are effects of the other stuff. In the world, there can be effects with multiple causes, and causes with multiple effects. In signals theory (a very different kind of signaling than the kind Robin is used to thinking about!), this might be called Multiple-Input-Single-Output and Single-Input-Multiple Output, or MISO and SIMO.

An example of SIMO would be anxiety disorder. A penchant for severe anxiety is going to affect your working life, your interpersonal life, your hobbies, etc. in statistically predictable ways. One cause, many effects.

An example of MISO would be income. Our marvelous market economy allows people to make money using a dizzying myriad of talents, skills, and resources. Some people make money by hitting a ball with a stick and running around a field. Some people make money by making big macro bets in financial markets, getting the first one right by luck, and then taking in billions of dollars in management fees. Some people make money by being friends with the right politician. Some people make money by inventing new kinds of semiconductors. And so on, and so on. One effect, many causes.

Since money can buy a ton of stuff, everyone wants money. And since money can buy a ton of stuff, almost anything valuable can be sold for money. So if income is among the set of characteristics in Robin's ultimate data set, it will undoubtedly emerge as one of the most important factors.

You can already see evidence of this in the media. Barely a day goes by without an announcement by Quartz or the Huffington Post that income differences predict differences in...you name it. School success, romance, self-confidence, frequency of weird eyebrow twitches. The assumption, of course, is that wealth privileges people in innumerable ways - i.e., that income is a SIMO kind of thing. But whether that's true, it's also likely true that income is a MISO kind of thing, where almost any positive or desirable trait can be leveraged - or is correlated with something that can be leveraged - to produce income. That, really, is why income is going to be correlated with almost any desirable human trait, no matter how little "privilege" remains in society.

So Robin's "super-factors" are quite possibly going to be very mundane things. MISO processes will cause a few desirable goals to be highly correlated with a large number of human traits that are useful in obtaining those goals.

Interesting, but hardly worthy of a Nobel. And a reminder that pure statistical analysis, without explicit theory to guide it, will be guided by implicit, simplistic theories.


P.S. - One thing Robin wrote that I didn't understand was the following:

As many people know, intelligence is the main factor explaining variation in cognitive test performance, ideology is the main factor explaining variations in political positions, and personality types explain much of the variation in stable attitudes and temperament.

Aren't these basically just labels? "Intelligence" is our word for cognitive test performance. "Personality type" is our word for stable attitudes and temperament. Seems to me that simply isolating a principal component and labeling it is a far cry from actually understanding what you're looking at.

State price indices! Get em while they're hot!

Martin Beraja, Erik Hurst, and Juan Ospina have constructed state price indices from retail scanner data! That's pretty badass. Nice job, guys.

I don't know what state-level price indices already exist, but these look pretty good, so if you need state-level price data for your research, you might want to mail these guys! It's only from 2006, of course, and it's biased because it only includes stuff that people buy in stores.

Anyway, Beraja et al. use their state-level data to help make a model of regional shocks. (I don't really believe the model that much, but that's not the point.) This kind of micro-flavored macro - "dissagregated" macro, if you will - seems to be getting more important. I've heard a number of other macro folks talk about making these sorts of models, and there seems to be a lot more focus on collecting region-, industry-, and firm-specific data. Related trends include models with heterogeneity, network models, and institutional models (for example, this one that I just saw presented).

That's cool. A lot of macro people seem to have woken up to the fact that their old model paradigms (NK, RBC, and the like) weren't really working, and new stuff is needed. And also, at the same time, woken up to the fact that the available data aren't very informative. The new micro-focused macro models, and new data sets, seem to be ways of trying to chip away at the problem. The new stuff hasn't taken over yet, but it's spreading.

Also, Beraja et al.'s data set demonstrates quite clearly how the IT revolution has dramatically increased data availability. I think everyone realizes that that's the big force changing econ right now.

Lazy econ critiques

Hey, you know, I like a good econ critique as well as the next person. Goodness knows, econ needs some critiquing. The profession is still too soft on wanky (i.e. useless or untestable) theory, still sloppy with the evidence, still focused too much on macro, still too enamored with libertarian ideas, and still too accepting of sexism. But compared to a lot of fields out there, econ is really on an upward trajectory. Theoretical particle physics is in the process of abandoning empiricism for wanky string theory, psych has a huge reproducibility crisis, anthropology has degenerated into leftist activism, and sociology appears to be in danger of following. Compared to those guys, econ looks like it's in pretty good shape, with much better data, more of an applied micro focus, and rapid innovation in empirical methodology.

BUT, it's Econ Nobel season, and so someone needs to do the job of standing up and repeating all the old disses. This year, it's Joris Luyendijk in The Guardian. Here are a few of the tired old chestnuts that we see trotted out from time to time (chestnuts can trot because they're horse chestnuts, so shush).


1. "Econ isn't a real science."

Luyendijk:

And yet on Monday the glorification of economics as a scientific field on a par with physics, chemistry and medicine will continue. 

The problem is not so much that there is a Nobel prize in economics, but that there are no equivalent prizes in psychology, sociology, anthropology. Economics, this seems to say, is not a social science but an exact one, like physics or chemistry – a distinction that not only encourages hubris among economists but also changes the way we think about the economy.

Are the Nobels glorifying peace and literature, and setting these fields up as "on a par" with the natural sciences? If so, it's just one more reason why Nobel prizes are silly. If not, then shush.

Sure, econ is (mostly) empirical instead of experimental. It relies mostly on real-world data and natural experiments instead of laboratories. So what? The same is true of ecology and astronomy. I don't see people writing articles every year saying that these aren't real sciences and shouldn't get big gold medals.


2. "Social science isn't science."

Luyendijk:

A Nobel prize in economics implies that the human world operates much like the physical world: that it can be described and understood in neutral terms, and that it lends itself to modelling, like chemical reactions or the movement of the stars. It creates the impression that economists are not in the business of constructing inherently imperfect theories, but of discovering timeless truths.

Um...almost all theories in all disciplines are imperfect. Newton's Laws don't describe all motion. The Germ Theory of Disease doesn't describe all disease. Our understanding of almost any subject is incomplete, and our leading ideas flawed.

And where is this law of the Universe that says that the human world can't be modeled like the world of particles or the world of cells and DNA? Does anyone have evidence to back up that contention? How the heck do you know that human behavior doesn't lend itself to modeling? If humans are so unpredictable, tell me why Google auctions get so much money from advertisers, or how economists can predict how many people will ride a train before the train is built. If you think social science can never be science, explain to me why these successes were possible.


3. "Economics caused the financial crisis."

Luyendijk:

To illustrate just how dangerous that kind of belief can be, one only need to consider the fate of Long-Term Capital Management, a hedge fund set up by, among others, the economists Myron Scholes and Robert Merton in 1994...Markets, it seemed, didn’t always behave like scientific models. 

In the decade that followed, the same over-confidence in the power and wisdom of financial models bred a disastrous culture of complacency, ending in the 2008 crash. Why should bankers ask themselves if a lucrative new complex financial product is safe when the models tell them it is? Why give regulators real power when models can do their work for them?

Someone doesn't know the difference between econ and financial engineering! The kind of neoclassical econ, based on rational agents and utility maximization, that gets so much grief on the blogs was not even involved in the models that brought down the financial system. Financial engineering is more applied math than econ - no assumptions of individual rationality, just a bunch of assumptions about statistical relationships. Yes, an unjustified belief in market efficiency helped people get complacent and ignore the gathering risks. No, economists were not the only, or even the loudest, voices telling people not to worry.

4. "Econ uses too much math."

Luyendijk:

Over the past decades mainstream economics in universities has become increasingly mathematical, focusing on complex statistical analyses and modelling to the detriment of the observation of reality.

Complex statistical analyses, eh? What do you think they are analyzing? Data. And what is data? Systematic observation of reality.

5. "Economics tries too hard to be value-neutral. In fact, it's always ideological."

Luyendijk:

Perhaps the most pernicious effect of the status of economics in public life has been the hegemony of technocratic thinking. Political questions about how to run society have come to be framed as technical issues, fatally diminishing politics as the arena where society debates means and ends. Take a crucial concept such as gross domestic product. As Ha-Joon Chang makes clear in 23 Things They Don’t Tell You About Capitalism, the choices about what not to include in GDP (household work, to name one) are highly ideological. 

So everything economists do is ideological, and instead of trying to pretend to be objective, economists should embrace the ideological nature of their discipline and try to have an ideology of Good instead of one of Evil. How many times have I heard this one?

There's just a small problem with that. If you embrace ideology, people won't take your ideas seriously unless they buy into the same ideology. If you discard objectivity in favor of activism, people will know that you are not an honest broker of ideas and evidence. 

Sure, it's impossible to eliminate all ideology from science (any science!), but you should at least try. 

Luyendijk:

The same applies to inflation, since there is nothing neutral about the decision not to give greater weight to the explosion in housing and stock market prices when calculating inflation.

Lujendijk, you don't have any idea what that even means. You want to say that the value of your retirement portfolio going up is the same as the price of milk going up at the grocery store?? Seriously?? Or did you just hear from someone that QE was causing "asset price inflation", and that this was Dangerous and Bad, and so you decided to toss that out there??

Before you criticize technocracy for hiding its politics, you should at least have a working understanding of what those politics are. 

Anyway, this litany of critiques, repeated ad infinitum since the crisis, strikes me as mostly pretty lazy. There are good critiques out there. These are not they. 

That said, I like Luyendijk's idea of adding a general social science prize to the Nobel roster. Nobels are silly anyway, so why not have one for every field? While we're at it, how about one in math and computer science, and one in psych/neuro/cognitive science? And one in visual arts? And one in writing snarky point-by-point rebuttals in blog posts?