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02 марта 2015, 13:55

Paul Krugman on the MIT History

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  My friend and "grown-up kid" Yann Giraud just called my attention to Paul Krugman's recent column, "Empire of the Institute", on Roy Weintraub's recently edited HOPE volume "MIT and the Transformation of American Economics" (to which three Playground kids contributed: Yann, Beatrice Cherrier and myself).   Krugman wanted to give his personal views on the period (after the 1970s) when "the Institute", through its graduate students, really occupied key places in the world of policymaking and policy debate: figures like Rudi Dornbusch, Olivier Blanchard, Stanley Fischer, Ben Bernanke, Maurice Obstfeld, Kenneth Rogoff, and Mario Draghi (besides Krugman himself), all became internationally renowned players in the economic arena.   To understand this phenomenom and to distinguish MIT from  Chicago economists, Krugman emphasizes the committment at MIT to "real-world" (or policy) relevant theories:   The result was that MIT macroeconomics was teched up — everyone learned how to write down and solve rational expectations models, everyone learned how to emulate Lucas disciples — but didn’t unlearn Keynesian insights. And MIT students developed a style that was either wonderfully pragmatic or disgustingly lacking in rigor, depending on your tastes (...)   But then, taking the argument one step further, what about the other types of "relevant" Keynesian theories that were developed at the same time in places such as Harvard, Berkeley, and Yale, just to cite a few universities?   Nicely, Krugman is conscious that he is exploring "the kind of question that should be handled by a professional historian of thought", and he nonetheless offers interesting insights into what was going on at MIT while he was a member of the Institute. Finally, take his opinion that the volume is "-- as Spock would say -- fascinating" as a welcoming invitation to dig into it!

27 февраля 2015, 10:36

What does Yanis Varoufakis want?

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With the approval of the reform proposals by the Greek government, the Euozone has returned to calmer waters. But it is only a brief interlude. With renegotiations due in a few months, it is a matter of time before tensions resurface. The future of the Euro will hence continue to depend on one small country and its charismatic Minister of Finance. Who is this Yanis Varoufakis, and what does he want? Based on his academic publications, interviews and blogposts an interesting picture emerges. By training, Varoufakis is not an economist, but a mathematical statistician. And similar to many academics who migrated from the ‘hard’ sciences to economics, Varoufakis has built a career on ridiculing economists’ inferior abilities in math and statistics. Also economists’ too simplistic belief in the miracles of the markets, their tendency only to see positive sides to technological progress, and the idea that to do economics is to build simple mathematical models, is derided by Varoufakis in witty and rhetorically gifted prose. At the same time, Varoufakis has been employed by economic faculties for some twenty-five years, in which he hence felt like an “atheist theologian ensconced in a Middle Ages monastery.”  Of course, that is first of all a surprisingly positive verdict of the open and pluralistic character of the economic discipline, but what is important here is what it indicates about Varoufakis’ intellectual self-perception. Like many heterodox economists, Varoufakis considers it his duty to unmask misguided beliefs, outright corruption, and stupidity in general.  (Yes, it’s great fun reading his work.) But at the end of the day, of course, he descends for dinner with the abbot and the other monks. Varoufakis offers a similar analysis in the case of what he calls the Greek implosion that unfolded since roughly 2010. This implosion was directly caused by fundamental faults in the overall design of the Economic and Monetary Union (EMU), says Varoufakis, faults which themselves were a consequence of a dominating influence of Anglo-Saxon cynicism. The market does not produce a stable equilibrium of prices and quantities, just look at the prices of stocks, houses, oil, and European government bonds. Maybe over a period of, say, ten years it does on average, but the short term fluctuations are far more destructive than such a meager success in the longer term. As with Varoufakis’ assessment of the economic discipline one cannot but conclude: nice point, well said, even if it’s a pity the problem always lies with the other guys. But the biggest question that emerges is, well, ok, so what should we do? What should this economic discipline look like instead? What could be an alternative organization of the eurozone that all could agree to and that would work better? Which comprise between different interests and ideas should we aim for? And which agreements and democratic control should be organized at which level? The building blocks in the various version of his Modest Proposal are either in the process of being implemented (European banking union), proposed before but politically not feasible right now (Eurobonds), or a bureaucratic nightmare of European proportions (European food stamps program). The up side is Varoufakis is a smart guy, smarter and better prepared perhaps than the majority of European Ministers of Finance, and he should be able to pull this off. The eurozone anxiously awaits his new blogposts and books.

20 февраля 2015, 15:12

Finding Till Düppe

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NB : once again, I am stepping out of my - self-inflicted - retreat to write on this blog, of which I am not supposed to be a permanent member anymore. Sorry for this self-indulgence. Earlier this week, I came across Pr. Olav Bjerkholt's critical assessment of Till Düppe and Roy Weintraub's recent book, Finding Equilibrium: Arrow, Debreu, McKenzie and the Problem of Scientific Credit (D&W in the following) Though it begins with a lot of praises on this fascinating account of general equilibrium proofmaking, it ends up with a much more critical assessment of the authors' work, which is characterized as 'sloppy' and inaccurate on a number of details. This is not my task to respond to this critique. The authors will surely do it themselves if they feel that there is any need for justification - in addition, I would not feel competent enough to engage in such a defense. What I think, on the other hand, is that the reviewer is a bit wrong when it comes to the scope and objectives of the book. The work which is represented in D&W belongs to what we have come to characterize as the 'contextual history of economics' genre. People who are not familiar with this kind of work often believe that doing ontextual history means that you are writing some kind of erudite account, which is only as good as the sum of historical facts that you are putting forth. It is, I believe, totally misguided. Contextual history of economics is not about these details, it's all about the bigger narrative - and that's the case whether you are writing micro- or macro-histories. I am not trying to find any excuse for inaccuracies here, what I am saying is that by pointing to a few details which he thinks the authors got wrong, the reviewer failed to acknowledge the real contribution of the book. So what is it? It's a book about scientific credit, which means that this is a book about how research in economics becomes crystallized; it is about how people made of flesh and blood are turned into names written in textbooks; it is a book on how Kenneth Arrow, Gérard Debreu and Lionel McKenzie have become - or have not become in the case of McKenzie - 'Arrow-Debreu-McKenzie', not the men, but the theorem. This is about what Foucault would have designtated as "the death of the author" and all the human consequences that are attached to that process. And that brings me to my second - and main - point. What baffled me in the review is how Till Düppe's input on this book is being underestimated. Admittedly, the author mentions the work Till has done on Debreu in the recent past but his review misses Till's larger take on the history of economics, which he expressed in his recent book The Making of the Economy: A Phenomenology of Economic Science. Till's main argument in this book is that economics is produced by actual human beings but that, following the increasing technicity of the field, the human side has been suppressed to produce a feeling of objectivity. In that sense, a lot of the questions expressed in D&W are part of Till's larger concerns. Of course, because a lot of people are aware of Roy's extremely influential body of work on the history of general equilibrium theory - and on the history of the so-called mathematization of economics -, and not as informed about Till's past work, they may end up thinking that it is Roy's battle and that he just enrolled a younger scholar along the way. It is not true at all and as someone who is lucky enough to know both of these great researchers, I can attest that I clearly see how their two voices are intertwined. This was not so obvious to me in the first place - when I learnt about the making of this book - but now that the final product is between my hands, I can say that I finally found Till Düppe in Finding Equilibrium.

16 февраля 2015, 23:34

Why Don't Economists Go to Hollywood Parties?

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                                 Featuring in the cinemas around the world, The Imitation Game offers us a romantic (and dramatic) view of Alan Turing's involvement with the World War II effort. A leading British mathematician, logician and a pioneering computer scientist, Turing was hired by the British government in 1939 (at the Government Code and Cypher School, GC&CS) to eventually lead a group of scientists involved in breaking the code of the German cipher system, which was a critical development in the defeat of the Nazis by the Allies. Turing's homosexuality is a theme that the director seems to want people to take it home, but it received a rather "mild" treatment in the movie.      What we have here, in my view, is A Beautiful Mind of Alan Turing (with Benedict Cumberbatch, acting wonderfully), instead of John Nash (with Russel Crowe). John Nash seems to be the scientist closest to economics to be featured in Hollywood, but economics was not really central to the movie plot (yes, I remember the scene in a bar when Nash thought that Adam Smith got the human interaction wrong...). In both movies, mathematicians are those extraordinarily gifted, intelligent individuals living in a world of their own and remote from the real world, who usually are socially clumsy. Several of these features are part of a broader view of mathematicians that was developed in the nineteenth century, and particularly in the first half of the twentieth century, as argued by Amir Alexander in a very nice 2006 article in Isis -- check also his 2010 book, "Duel at Down". I argued that Frank Ramsey (1903-1930), a Cambridge mathematician also very close to influential economists, went through a similar romantic canonization (here it is my latest installment on Ramsey).    Economists can also be socially clumsy, lonely scientists, and, on the top of this, greatly influential as argued by Marion Fourcade, Etienne Ollion, and Yann Algan in a recent Max Planck Institute working paper.  But economists have had no chance so far to be invited to a Hollywood party! None seem to have made their way to the Hollywood industry -- one in particular, John Maynard Keynes, had such a fascinating life that it is hard to understand why Hollywood hasn't picked him up...

07 февраля 2015, 08:38

History of policy evaluation: a few questions

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I need a history of policy evaluation. I want my students to know why and how the theories, tools and practices they will later use on a daily basis were conceived and spread, and a good 80% of them will participate in a policy evaluation in the next 10 years. This need also derives from my research program, aimed at understanding the transformation of applied economics between 1965 and 1985. Policy analysis is a large part of what economists mean by ''applying economics.” It is area of expertise most emphasized in the ongoing advertising campaign designed to reemphasize economists' contribution to society. Understanding the applied turn thus requires examining to what extent policy had shaped the kind of tools and knowledge produced by economists, but I have trouble reconciling the various histories I have read so far.  On the one hand, there are the “backward” histories in which economists reconstruct the origins of their evaluation tools and practices. Economic evaluation is now a field clearly delineated, as exemplified by the standardization of course syllabi: it covers structural econometrics, microsimulation, controlled experiments and natural experiments, with raging methodological controversies between proponents of “structural” estimation techniques and advocates of “reduced form” approaches. Each side has told its own story. James Heckman (in 1991, 2007, and 2010) traces the origins the the structural approach to the Cowles Commission econometricians' belief that social knowledge was advanced enough to allow the estimation of basic behavioral relationships, which could be used to forecast the impact of policies which hadn't been implemented yet. Such method was then dramatically criticized and amended by Robert Lucas, who famously pointed that the parameters Cowlemen estimated depended on agents' expectations, which in turn varied with policy rules shifts. Comparing the effects of alternative policies required the estimation of those policy-invariant “deep paramaters” found in strictly microfounded models (tastes and technology, for instance). This requirement however significantly complicated identification and made results very sensitive to model specification. As many economists, among whom David Hendry or Edward Leamer, voiced their concern with structural econometrics, an alternative set of techniques successfully implemented during the War on Poverty was spreading. The development of “randomized experiments” is usually traced to Ronald Fisher and Jerzy Neyman's analysis of the determinants of agricultural productivity in the 1920s. In the wake of the controversial Coleman report in 1966, MIT graduate student Heather Ross then proposed to conduct a randomized experiment to evaluate the impact of negative income tax. The resulting New Jersey Income Maintenance Experiment was largely publicized by scientists and public officials alike, so that the design was then applied to evaluate other programs, including housing allowances. Randomized experiments were even made compulsory to evaluate training programs through the 1988 family Support Act (see details in Levitt and List, Manski and Garfinkel, or Haveman). Although many voices soon pointed the ethical and methodological limits of randomized controlled trials (external validity, general equilibrium effects among others), a third wave of experiments swept economics from the 1990 onward, with, Steven Levitt and John List say, greater empirical and theoretical ambitions. The J-Pal is often mentioned as its flagship, with application ranging from development to labor and poverty issues.  On the other hand, historians have fashioned “forward” histories of public expertise, emphasizing how Cost-Benefit Analysis (CBA) developed in the wake of the Flood Control Act of 1936, became part of the larger process RAND scholars designed for the Department of Defense during the Cold War, and spread after Lyndon B. Johnson decided that the Great Society, in particular the many War on Poverty programs, required a generalization of the Planning-Programing-Budgeting system (PPBS) (see for instance Porter, or Jardini). This vast and multidisciplinary literature examines the broad area of “policy science” or applied “policy expertise,” in which policy design and administration are often emphasized to the detriment of evaluation. It analyses the antagonism between top-down (PPBS) and bottom-up (Community Action Programs) approaches to policy-making, documents the rise of an independent “policy science” with its own graduate programs and institutes, and ties the transformation of policy expertise to switch in governmental regimes, from Cold War defense establishment to Johnson's poverty activism and the subsequent rise of a neoliberal approach to the state. Some historical pieces also outlines the bigger trends underlining those narratives. In his forthcoming book, for instance, Will Thomas argues that scientists believed that their science's association with technology and rationality made it de facto policy relevant, but while some scholars (and historians) point to the recurring difficulties to catch policy-makers attention and implement their ideas, other claim that postwar science has been an instrument of political power, as seen by the Cold War and Great Society rationales, or the rise of “modernization theory.” Marion Fourcade documents the “economicization of social policy,” pointing to the integration of micro tools and concepts (efficiency, incentives, opportunity, tradeoffs) in policy-makers' discourse. She also investigates the differences in national policy traditions. She contrasts the American experimental orientation and its academic-based expertise with the British setting in which expertise is located in a network allowing for moves between academia, government bodies and think-thanks and the focus on efficiency is blended with a distributional concern (see also Pollitts). Her picture of France is one of fragmented and conflicting public expertise styles : the economists-engineers who invented cost-benefit in the late XIXth century, the “ENArchie” trained in the law/administrative tradition, and those academic scholars who tie policy analysis to a sociological deconstruction of institutions. These various strands are nevertheless similar in that policy analysis has traditionally been conducted by state-related experts for state management purpose.  An exemple of PPBS, around 1971.  Now, my difficulty is with matching the supply-side stories of economists and the demand-side narratives of historians. Here are the gaps I would like to be filled.  What were the relationships between economists, policy officials and professionals throughout? Beryl Radin argued that the history of policy analysis is pervaded by a conflict between the “world of analysis” and the “world of politics.” Does this applies to evaluation? Does this applies to economists? A related question is how economists' perception of their relations to policy-makers shaped their practices. In an illuminating account of the application of Cost-Benefit techniques to water resources management during the 1960s, Spencer Banzhaf ties methodological conflicts to alternative visions of economic expertise. Those economists who emphasized the primacy of consumer sovereignty thought it was legitimate to collapse individuals' valuations of the costs and benefits accruing to a policy into a single function and, on that basis, give advice to policy makers. Other scholars, including Robert Dorfman or Steven Marglin, believed that the electoral process had entrusted state representatives with some kind of political sovereignty. Weight the various objective of water policy (flood prevention, transportation, irrigation etc.) against another in the objective function was not economists' job, and multi-objectives CBA should be the rule, they argued. In his recent history of the Value of Statistical Life, Banzhaf similarly explained that economists shaped different evaluation tools depending on whether they thought the Department of Defense or USAF pilots themselves were the best judges of the value of their lives.  What was economists' influence on the choice of evaluation procedures by policy-makers? And reciprocally, did policy-makers weight in any respect on the structural vs reduced form debates?  What happened to Cost-Benefit Analysis? Historians explain that Johnson's War on Poverty fostered both CBA and experimental evaluation techniques. Economists then discuss randomized experiments vs structural econometrics debates. CBA is altogether absent from their historical narratives, and increasingly taught in separate courses (such as Stanford's policy analysis course). Lecturers explain that those techniques relate to distinct objectives, and should therefore be treated separately. Is the separate life of CBA a consequence of economists' obsession with causality issues ? Was there a transformation is their approach to evaluation (efficiency vs causality?). Or are CBA and RCT used by distinct communities (economists vs policy administrators? Or Environment vs health specialists)? All in all, is there an overarching story of “economic policy evaluation,” or are differences across fields significant? I've just mentioned the case of environmental economics, but it seems that in the US, UK and France alike, education and health policy experts have a (much older) separate culture of evaluation. Also, how do these methodological debates play out in the much media-exposed field of development economics? How about transportation, urban economics, and so forth. Also, is the internationalization of economic techniques gradually erasing national evaluation traditions? Otherwise, how are those tools incorporated into dissimilar institutional settings?

31 января 2015, 09:06

Coyle's "Wordly Philosophers 2.0": Suggested Readings

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Diane Coyle has a list of twelve economists who she argues "clearly shaped the character of economics in a meaningful and lasting way – going up to the early 1980s." As such, they would form the basis of the 12 chapters of the follow up to Heilbroner's The Worldly Philosophers. Below is the, with link to some autobiographical reflexions by those economists, and pieces where historians examine their wordviews. In some cases, dozens of references could be mentioned, so I restricted myself to the one or two first references that came to my mind (aka, written by those researchers I closely work with. Aka, a small sample of what historians of economics produce). Other candidates haven’t been investigated so far, so if there’s any master student thinking of a history of economics PhD reading this, this is something to think about.            John Nash : by Sylvie Nasar, obviously.    Ronald Coase : an obituary and that paper by Steven Medema. An obituary by Alain Marciano. Paul Samuelson : by himself, in Szenberg's Eminent Economists. Two "Samuelson Begins" papers by Roger Backhouse, the first on why Samuelson left Harvard for MIT, and the second on how Foundations (really) came to be.                Ken Arrow : his interview with Jerry Kelly. A worldview especially difficult to grasp. Düppe and Weintraub come closest in the first chapter of their book.   Milton Friedman : by himself (and Rose). I'm still recoving from the overdose I experienced will working on the lucky consistency of Friedman' science and politics a few years ago, so not much to propose. My last reading of the subject was Angus Burgin's invention of Milton Friedman. Gary Becker : (same as Coase. Passed away recently, hence many reflections on his worldview) an obituary by Jean-Baptiste Fleury. Becker begins, by Pedro Texeira. And even Becker by Michel Foucault via Kieran Healy.           Fischer Black : Perry Mehrling's book, what else? Robert Lucas : by himself. By Judy Klein.  Paul Romer : only interviews … any suggestion ?              Joseph Stiglitz : only his long Nobel bio … James Heckman : again, no reference except a short Nobel bio. Daniel Kahneman : Nobel autobiography ; When Kahneman meets Tversky by Floris Heukelom.  Coyle allows one suggested addition to her list. Mine would  definitely be Peter Diamond. His work radically transformed at least two fields : labor economics (search theory) and public economics (optimal taxation). He embodied a new kind of economists, the "applied theorist," as he called himself. And because any addition comes with a subtraction, I would drop Nash, whose contribution to game theory was immensely influential, but very focused. Other candidates in Coyle's list had a vision of how economics should be done, if not a philosophical one. Not Nash.

29 января 2015, 22:57

History of Postwar Economics: suggested readings (in progress)

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Diane Coyle is asking why most history of economics' narratives end up with Keynes. My response is :  1. No, it's not. There has been a surge in history of postwar economics research in the past 15 years. The transformation of economics in the Cold War era in now well-understood, and less is know about the 1965-1985 era (a flaw many researchers, including me, are trying to correct). 2. Because this scholarship is fairly recent, there is no textbook that offers a systematic account of the transformation of economics since Keynes. Yet.  3. In the meantime, here's my own Reader  (to be udpated in the next days). Needless to say, this list is totally biased by my own historiographic preferences, research interests, and personnal affinities. If you feel I should have mentionned such and such brilliant piece of history, of if you need references on another topic, keep calm and comment.   General Readings -Short version: Roger Backhouse's Palgrave entry on American economics since 1945. Short and comprehensive. -Long version: Roger Backhouse's textbook (economics though from Aristotle to now) -If you are looking for an international perspective: Marion Fourcade's comparative analysis of the development of economics in the US, Great-Britain, and France. One chapter per country, waving together technical, theoretical and institutional developments.  -An if you need a transition from interwar pluralism to postwar neoclassicism, here is the introduction of the volume whereby historians of economics crossed over. By Mary Morgan and Malcom Rutherford.  General tip: when interested in a subject, look for "history of ..." in the Palgrave Dictionary. Many short and informative entries. Then, go to the History of Political Economy webpage, and seach for a special issue on the topic you're interested in (IS-LM, economics and the social sciences, econometrics, etc.. List of past conferences here, special issue published the following year. JHET and EJHET also have special issues on various topics. EJHET is an especially relevant source for any query on European economic thinking.  History of General Equilibrium  short version: Arrow and Debreu dehomogenized (final paper [gated], free draft) by Till Duppe long version: Weintraub and Duppe's definite history of Arrow-Debreu-McKenzie, its spread and differentiated canonization.  Another account which emphasized the physical science roots of GE is Ingrao and Israel's Invisible Hand. On the relationships of physics to economics, the classics is Phil Mirowski's More Heat than Light.  History of Game Theory Robert Leonard's account of Von Neumann and Morgenstern's intellectual journey, from Vienna chessboards to the Theory of Games (1944) and beyond (short version, long version).  Nicola Giocoli's broader and more analytical treatment. He interprets the rise of game theory as a change in the self-image of economics, from a "system of force" to a "system of relation" science. And a more history of science perspective in which game theory is historicized as an interdisciplinary endeavour involving economists, biologists, mathematicians and war scientists. By Paul Erickson.  Interestingly, these three books reflect three different trends in the historiography of postwar economics. Giocoli's review of Leonard's book makes it very clear.  History of Behavioral Economics Fellow blogger Floris Heukelom has just published a sweeping histoy of the BE based on his dissertation. It ranges from Smith and Ricardo's days to Kahneman and Tversky's collaboration and ends up with the institutionalization of BE in the 1980s to 2000s.  Here's a helpful review of the book by Erik Angner, who has penned a famous BE handbook entry with Georges Loewenstein.   History of Experimental Economics Don't know many references yet, but the Palgrave entry written by Francesco Guala is a good introduction, and I'm currently reading the dissertation Andrej Svorencik will defend tomorrow on "the experimental turn." I'll hopefully post a full review next week.   History of Macroeconomics Fellow blogger Pedro Duarte has recently edited a book on microfoundations, which I have discussed here (with a few additional references). On new-classical economics, go to Kevin Hoover's webpage and help yourself. He has co-organized a witness seminar with Warren Young, whose transcript is here. Young has also written on the making of Kydland and Prescott.   Backhouse and Boianovski have just published a book on disequilibrium economics (see also Rubin's work on Patinkin).  History of Econometrics Mary Morgan's seminal history of econometrics stopped with Haavelmo, but subequent developments are covered in two books by Duo Qin. The first one deals with the 1930-1960 period.The new volume covers advances in econometrics from 1970 onward. Olav Bjerkholt has recently put a stream of papers on the history of the Cowles on SSRN. My favorite history of economics (up to Sims) is Epstein's, but it has been out of stock for a while. Oeconomia has just published a special issue on the topic.  Economics at MIT The lastest development in the history of postwar economics. A first collection of essays, edited by Roy Weintraub, is just out.  Economics at Carnegie One of the trending topics in history of economics. I've already listed most recent contributions, from Simon to Modigliani and Muth, Lucas, Cyert and March, at the beginning of this post. Economics at Chicago Has always concentrated a lot of attention, with a consequence that there's already a vast litterature on the subject. Check the companion book, edited by Ross Emmett. Steve Medema has written a lot on Chicago price Theory, and together With Dan Hammond (one of Friedman's specialist) has edited a reader on the subject. There have been recents attempts to rebuild the history of Chicago Economics, and to balance the hitherto strong focus on Friedman/Stigler. The resulting articles were collected by Phil Mirowksi, Eddie Nik-Khah and Tom Stapleford in 2011.  Finance The irresitible rise of finance theory has been famously told by Warsh, and is at the background of Perry Mehrling's biography of Fisher Black. Its performative character has been analyzed by Douglas MacKenzie, and Fabien Munieza. For more specific topics, see the "Pioneers" collection of essays edited by Geoffrey Poitras and Franck Jovanovic.  

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22 января 2015, 02:47

Yes indeed, we can blog it!

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Last year I pointed out here (and here) that macroeconomists were making themselves comfortable in the blogosphere to discuss theoretical, methodological, and, why not, historical issues of their field (see also a nice post by our fellow kid, Beatrice). It is indeed interesting that they find blogs as a good outlet for this kind of discussion: there seems to be a ring of making timely interventions on a present-day discussion, but this inevitably comes with a more informal tone and no academic requirements — one can express his own ideas more freely, give his own personal testimony perhaps in a non-systematic way, without being required to be a scholar when pointing out a past development of an idea or argument. It is true that macroeconomists, as microeconomists mostly do, blog also about “applied” topics (economic policy, growth, inequality, etc.). But, as I pointed out, you find much more blog discussion involving the history (and methodology) of macroeconomics, than of microeconomics. The challenges and opportunities that come with economists turning to history (rewriting it, “co-opting” it) in a time of flux using, unlike a generation ago, a short-attention-span technology such as blogs, motivated me to organize a roundtable at the last History of Economics Society (HES) meeting, in Montreal. I invited a group of historians and a macroeconomist (not necessarily active bloggers, some of whom I unsuccessfully tried to get involved into this) to reflect on all this: Steve Ambler (Université du Québec à Montréal), Kevin Hoover (Duke University), Marcel Boumans (Erasmus Universiteit Rotterdam), and myself. I finally bring this short video with some highlights of the discussion to the blogosphere, were it belongs (this is a long overdue post; my apologies). Enjoy! (If the video below doesn't work, you can access it HERE)

12 января 2015, 17:28

Bernard Maris (1946-2015), Charlie Hebdo and Incommensurability

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Dear blog reader, as you may know, I have decided to leave that blog quite some time ago. Nevertheless, I thought I would use my completely illegitimate administrator rights to post one last piece dealing with the recent events in France. To be clear, what I am going to say is not very deep. The events are too recent and painful. They left me speechless for a couple of days and there's nothing really bright that can be said on such a dramatic occasion. Seventeen people have been killed and my thoughts, as those of the millions of people who chose either to protest yesterday in the streets or to reflect upon the sad situation at home, go first and foremost to the victims. Among them, there was a fellow economist, Bernard Maris (1946-2015). While the focus has been on the cartoonists who were shot during the Charlie Hebdo killing, it is important to remember that other people were killed during the assault: a copy editor, a psychoanalyst, a cleaning operator, a cultural activist, two policemen and, then, an economist. Maris was well known in France as an essayist and as one of the main economic experts on the French public radio France Inter. Because his branch of economics was non-mathematical and did not use formal models, he was often overlooked by fellow economists for not publishing in professional journals, offering instead his views, expressed verbally, as a public intellectual. Yet, unbeknowst to the public, and maybe to some professional economists, Bernard Maris was a University Professor, who had begun his career at the University of Toulouse from 1975 to 1994, when he passed the 'Agrégation de l'Enseignement Supérieur" (the competitive exam that allows you to become a full Professor in France) and moved to the Institut d'Etudes Politiques there. So he was in Toulouse with the more mainstream - and equally missed - Jean-Jacques Laffont, as well as with the recent Nobel memorial Prize recipient Jean Tirole, who joined in the early 1990s. What an unlikely cohabitation it must have been! Maris was a heterodox economist who was very critical of mainstream economics, and expressed his views in widely diffused economic essays - which, ironically, some French students have used as introductory textbooks. He had begun his career working on distribution theory - in a neoclassical growth model - but had since then diverged a lot from mainstream economic theory, becoming an exegete of Keynes, and lately, focusing on the relaton between economics and literature. When I listened to Maris' economic analyses on the radio, I quite often - if not systematically - disagreed with his views. Yet it must be recognized that he was a good vulgarizer of economic thinking. That is not, anyway, the point I want to make. My point is that, like his fellow Charlie Hebdo writers, he was killed because he worked for a publication whose caricatures had been considered as insufferable by a number of religious extremists. Maris was not only a contributor to Charlie Hebdo, he was one of its co-owners and a defender, not of freedom of speech as many believe, but of the right to be offending, irresponsible and inconsequential.  This brings me to my second point. A lot of people in France, as well as in the rest of the world, want to interprete the killings as a blow against freedom of speech. That has been the main focus of the protests and the debates that has surrounded them. One question in that debate, especially in the British and American press, has been to assess whether freedom of speech is a universal concept that should be defended no matter the consequences and, therefore, whether newspapers and magazines located in free countries should publish the cartoons, even if they find them insulting - even racist. This is a very complicated debate, one that shows that free speech is an ultimately relative concept. As a French person, who has lived in the United States, I understand very well why an American editor would/should be reluctant to publish Charlie's cartoons: they were just not meant for an American audience. That type of mean, filthy, sometimes silly humor has a specific story in France, one that involved the Gaullist period and its frequent anti-liberty practices when it came to the press. Charlie Hebdo was created in 1969 after another newspaper, Hara Kiri, had been shut down by the government for publlishing a very offensive joke about Charles De Gaulle's death. Hence the name Charlie, a very informal way to call the late President. An emanation of governmental censorship, Charlie Hebdo would continue to exist to test the limits of free expression, but in a very French way: with a lot of bad taste. The cartoonists were all coming from a very anarchic tradition, they despised organized religion in all its forms as well as a lot of other -isms, including frequent attacks against feminism and communism. To say that the cartoonists at Charlie were racist - or islamophobic - is a bit of a misjudgment, because the truth is that those guys did not like a lot of things or people in the first place. When I was a freshman at Nanterre, I used to buy Charlie and my favorite section in the newspaper was the weekly column written/drawn by the then younger Stéphane Charbonnier - aka "Charb" - entitled: "Charb doesn't like people". Though I see similarities between Charlie Hebdo's cartoonists and some American graphic novelists - I think about people like Chester Brown or Joe Matt, for instance, I must say that there's nothing quite like Charlie Hebdo in the United States. American cartoonists, when they produce some provoking stuff, do it in a more confessional vein or, on the contrary, situate themselves in a larger tradition of critical inquiry - think about Joe Sacco, for instance. Unlike these traditions, Charlie Hebdo's cartoons were, most of the time, apolitical and amoral. They had respect for nothing or no one, not even for the dead. For this reason, the geopolitical consequences of their publishing the Muhammad cartoons were far beyond their grasp. What they perceived as silly entertainment was interpreted as grand political - religious, social, even racial - statements. The resulting story is, like most of the narratives we write in our history of economics/science paper, one of incommensurability: creative communities who end up facing some very strange culture they do not understand and that do not understand them. But our papers rarely end with a blood bath and a worldwide reaction. That makes the death of these cartoonists - and policemen, psychologist, cleaning operator, receptionist or economist - all the more absurd and saddening. 

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22 декабря 2014, 15:27

By the Way, Why Does the History of the JEL Codes Matter ?

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Full paper is here. Comments are much welcome.And because it’s an epic story (and because I suck at writing abstracts), there is an audio trailer below. I thank Paul for lending his Memphis accent.  First, because the history of the classification used by the American Economic Association is a relevant proxy to understand the transformation of economic science throughout the 20th century.   Classifying literature and scholars involves naming, listing, and ordering, and it had been accompanied by heated and explicit discussions on the status of theoretical and empirical work or on the dynamics, content and independence of applied fields: is there any theory that is not in some sense applied? What type of work does Macroeconomics cover? Is it a set of subject matters or a method? Should Urban Economics become an independent field? Should data gathering and policy discussions be classified separately? Classification debates highlights the variety of visions economists had of their discipline at a given time, and how economists' identity has evolved throughout the century. The resulting codes were however not a pure representation of the intellectual structure of economic science.  They also reflected the contradictory demands of users: librarians needed help in indexing papers and books; editors needed a way to select reviewers and referees; recruitment committees needed a way to classify the articles that were increasingly used to assess job candidates; the NSF needed a classification to use in evaluating scientific expertise; and the government needed a system to draft economists into the war effort, then to fill the growing demands of its departments, bureaus and agencies. Classification was also constrained by the evolution of technology, from punchcards to mechanical devices, computer and the internet, and the transformation of the size and role of scholarly publication.  To me, this project has been an attempt to track and document the dual process of unification around a core and fragmentation in dozens of applied fields the discipline seemingly underwent since 1970. Understanding whether “becoming applied” had been the key transformation of economics in the last 40 years is now a collective research project. But I suspect the JEL code story could be used as a teaching tool as well, a way to introduce students to the changing scope and nature of economics. The significance of scientific classification is especially important to recognize at a moment the AEA is considering a new revision of its classification. After a period of frequent revisions – 1948, 1956, 1967 and 1990 -- the classification had remained stable over the past 25 years. A few category headings were altered, and several subclasses were created within the existing scheme as new keywords were increasingly used by authors in EconLit. The opening of a new revision round would signal more fundamental changes in the structure of the discipline, and classification debates is  where these changes will be identified and assessed. In trying to pin down what changes created the need for a new revision, my initial guess was that there could a kind of hyperfragmentation. In the current scheme, there is only space for 7 more independent categories. What if many more fields should now be treated on a par with international, financial, labor, or public economics?  But one of my colleagues pointed to me that fields rather seemed to loose coherence as fields, so that there is only a wide and amorphous “applied micro” category left.  AttachmentSize beatrice_jel_intro.flv3.15 MB

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22 декабря 2014, 15:27

By the Way, Why Does the History of the JEL Codes Matter at All?

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Full paper is here. Comments are much welcome.And because it’s an epic story (and because I suck at writing abstracts), there is an audio trailer below. I thank Paul for lending his Memphis accent for this.  First, because the history of the classification used by the American Economic Association is a relevant proxy to understand the transformation of economic science throughout the 20th century.   Classifying literature and scholars involves naming, listing, and ordering, and it had been accompanied by heated and explicit discussions on the status of theoretical and empirical work or on the dynamics, content and independence of applied fields: is there any theory that is not in some sense applied? What type of work does Macroeconomics cover? Is it a set of subject matters or a method? Should Urban Economics become an independent field? Should data gathering and policy discussions be classified separately? Classification debates highlights the variety of visions economists had of their discipline at a given time, and how economists' identity has evolved throughout the century. The resulting codes were however not a pure representation of the intellectual structure of economic science.  They also reflected the contradictory demands of users: librarians needed help in indexing papers and books; editors needed a way to select reviewers and referees; recruitment committees needed a way to classify the articles that were increasingly used to assess job candidates; the NSF needed a classification to use in evaluating scientific expertise; and the government needed a system to draft economists into the war effort, then to fill the growing demands of its departments, bureaus and agencies. Classification was also constrained by the evolution of technology, from punchcards to mechanical devices, computer and the internet, and the transformation of the size and role of scholarly publication.  To me, this project has been an attempt to track and document the dual process of unification around a core and fragmentation in dozens of applied fields the discipline seemingly underwent since 1970. Understanding whether “becoming applied” had been the key transformation of economics in the last 40 years is now a collective research project. But I suspect the JEL code story could be used as a teaching tool as well, a way to introduce students to the changing scope and nature of economics. The significance of scientific classification is especially important to recognize at a moment the AEA is considering a new revision of its classification. After a period of frequent revisions – 1948, 1956, 1967 and 1990 -- the classification had remained stable over the past 25 years. A few category headings were altered, and several subclasses were created within the existing scheme as new keywords were increasingly used by authors in EconLit. The opening of a new revision round would signal more fundamental changes in the structure of the discipline, and classification debates is  where these changes will be identified and assessed. In trying to pin down what changes created the need for a new revision, my initial guess was that there could a kind of hyperfragmentation. In the current scheme, there is only space for 7 more independent categories. What if many more fields should now be treated on a par with international, financial, labor, or public economics?  But one of my colleagues pointed to me that fields rather seemed to loose coherence as fields, so that there is only a wide and amorphous “applied micro” category left.  AttachmentSize beatrice_jel_intro.flv3.15 MB

09 декабря 2014, 00:24

They called it a sunspot

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Coauthored with Aurélien Saidi.   One of the earliest attempts to tackle the problem of multiple equilibria in Macroeconomics was a byproduct of David Cass and Karl Shell’s engagement with Robert Lucas’s 1972 paper on ‘Expectations and the Neutrality of Money.’ Lucas’s contribution was to write down a market-clearing model with rational expectations and imperfect information, so as to generate a conventional Phillips curve without allowing inflation-unemployment tradeoff useful for policy prescriptions. For this purpose, he retained Phelps’s island modeling strategy and introduced two random variables, namely the increase in the money supply and the fraction of newly-born workers affected to an island, alongside a more traditional state variable, the nominal money supply. Equilibrium prices and quantities were thus defined as functions of the state variable and the joint distribution of the two random variables. Lucas’s Carnegie colleague David Cass could not pin down such definition of an equilibrium. Trained at Stanford in the sixties, where, in his own words “the bible...was Pontryagin’s original book on the maximum principle,” he conceived the equilibrium in the tradition of optimal growth theory standards, as a sequence of prices and quantities expressed in terms of a single state variable, usually the stock of capital. He accordingly took issue with Lucas’s definition of an equilibrium, which he did not find ‘obvious.’               At the University of Pennsylvania, Cass’s former fellow Stanford graduate student Karl Shell was also dwelling on Lucas’s paper, which he had accepted for publication in the Journal of Economic Theory. He was bothered with Lucas's conclusion that active monetary policy was inefficient, a concern he shared with many contemporary economists. But while most macroeconomists targeted Sargent and Wallace’s introduction of monetary policy into Lucas’s 1973 IS-LM framework with incomplete information and seek to counter their conclusions with the introduction of sticky prices or wages, Shell rather concentrated on another feature of Lucas's model: its OLG framework. “From the perspective of the consumption-loan model.... the policy implications drawn by Lucas seem to be counter intuitive,” he wrote in 1977. A few years earlier, he had demonstrated that the suboptimality often found in “overlapping generations” models – a name he preferred to Samuelson's “consumption-loan” because it highlighted the peculiar demographic structure and associated dynamic aspects –, was not a consequence of a restricted market participation, but of what he called the “double infinity” of dated commodities and individuals (Shell 1971). He thus set out to identify situations in which expansionary monetary policies were effective.    In 1974, Shell succeeded in recruiting Cass to Penn. At that time, they were  completing their long-term project of developing a wide range of economic applications to the Pontryagin maximum. Since Cass had also developed an interest in OLG modeling while working with Yale Professor Mehahem Yaari at the Cowles Commission, the pair carved out a linear OLG model with perfect foresight, similar to the one used by Shell in his 1971 ‘Notes.’ They identified several cases in which an expansionary monetary policy could correct welfare inefficiencies. Although the model was deterministic, Cass’s previous argument with Lucas over the definition of the equilibrium induced them to consider, as an aside, a stochastic version of their model. They introduced an extra random variable, which they believed would reflect the arbitrary beliefs of agents. Once taken into account, these beliefs drastically increased the set of rational expectations equilibria. Depending on the form they would take, one equilibrium or another would emerge, with the possibility that active monetary policy be efficient. This “belief” variable did not reflect any fundamental characteristic of the economy. As explained by Shell in the first draft presenting their results, ‘there is no intrinsic uncertainty in the model.’ Because it was arbitrary, Shell, remembering a conversation with Clive Granger, who was then studying the work of Stanley Jevons for a history of statistics, called his new variable a ‘sunspot.’ He did not mention the origin of the word that he had merely borrowed for “story-telling” purpose at that time, and he would later realize that Jevons’s own sunspots, aimed at explaining the business cycle through the effects of climate on crops, was a case of intrinsic rather than extrinsic uncertainty.               The pair presented their model at the Mathematical Social Sciences Board conference on growth theory they had organized in Squam Lake, New Hampshire, in the Spring of 1977, and Shell subsequently circulated a draft he had written for the lecture he gave at the Malinvaud-Roy seminar in November of the same year, during his one-year Guggenheim-funded visit at the CEPREMAP in Paris. On both occasions, the reception was extremely mixed. At Squam Lake, only Steven Salop exhibited an interest in the approach. At the CREPREMAP, Grandmont remembers, ‘we did not understand anything.’ Even young Penn professor Costas Azariadis, with whom Shell discussed his idea in great detail, initially considered their model ‘a fluke, something completely nongeneric.’ ‘Rational expectations,’ he claimed, ‘would surely rule out his sunspots.’ Also, the sunspot modeling idea was initially a short one-page add-on to their deterministic OLG model. But the raging debates on the Philips curve, the efficiency of monetary policy, and the proper way to model the economy launched by Lucas and others would quickly offer them the opportunity to appreciate the possibility opened by their new idea, in particular, how it could work as a selecting device which could pin down agents’ expectations on a specific equilibrium path in multiple equilibria situations.