ACE 2015: Day 1

This week I'm attending the Australian Conference of Economics.

The main event today was a debate on the topic that economics education needs saving. To me the debate revealed that the desire for change is widespread amongst the old and young alike within the discipline. What is not clear is agreement on an alternative - everyone wants to do 'something else', but agreeing on what that something else might be is a task never quite tackled systematically by potential reformers.

In my mind Rethinking Economics and Post-Crash have most clearly articulated an alternative pluralist, dare I say it, scientific, core. But few seasoned economists are willing to make such radical change. Opening the doors to cross-disciplinary research is scary. Alternative methods might just prove superior to the equilibrium representative agent models that dominate economics.

As a small example of just how hesitant even the relatively ope minds are in economics, when discussing that direct surveys of firm managers and anthropological-style observational studies of firms are a valid method in micro-economics (ala Alan Kirman) I was faced with the following response:

But how do we know that respondents would tell the truth? That's the power of models and various regression tools. We know the assumptions being made

But of course, most data that gets into these estimations is the result of a survey asking people to self-report their views, their income, their expenditure, and so forth. This response (from someone I respect white a great deal who is an excellent experimenter) simply reveals the narrowness of economics training.

To ram home the point, when Alan Blinder did actually send researchers to go and ask questions of firm managers and observe their decisions, his results, summarised in his fantastic book Asking About Prices, has had little relatively little impact on the profession. As Steven Keen writes in his review on Amazon

The chief author of this book is Alan Blinder, once a Vice-President of the American Economic Association, a Vice-Governor of the Federal Reserve, and currently President of the Eastern Economic Association. He is, in other words, no maverick, but firmly within the mainstream of economic thought. And yet the research he reports in this book challenges many of the accepted tenets of both micro and macro economics. 

The publication should therefore be taken seriously by the economics profession, and raked over carefully to find out whether what Blinder reveals is really the case, or simply a product of poor research. 

It speaks volumes for the way that economics handles contrary evidence to accepted beliefs that this has not happened. Blinder's book has instead simply been ignored. The book languishes around the 750,000 mark in Amazon's "best sellers" list, and this review will be the first ever given of it. Meanwhile Mas-Colell's Microeconomic Theory, published three years before Blinder's book, which states the accepted neoclassical microeconomic canon in excruciating mathematical detail, ranks in the mid 100,000s, and has over 80 reviews--most of them from economics PhD students and highly laudatory.

We'll see what Wendy Carlin, author of INET's CORE Economics project, has to say about it all on Friday.

Another productive chat was whether the core economics program could do away with supply and demand diagrams and market equilibrium altogether. Thinking this far outside the current norms are what is really required for change. So you know, two of us believed an economics course could be even more valuable the current standard courses by doing away with supply and demand as currently formulated altogether.

In another session on how to improve your academic writing some quality advice was offered

Focus on the problem of interest, not the method.

This resonated with me. I've long come to the realisation that economists have a small simple toolkit comprising equilibrium models of representative agents, who take that method to new problems, adopting the method across its infinite possible contortions to fit any problem - from reproductive choice, to education, and more. Even when vastly superior alternative are available. The simplicity itself, despite its irrelevance, seems to be quite attractive.

I had expected to be exposed more to new methods and new ideas but came away very much with the impression of the continued dominance of the core. One of the respected elders of the professions suggested we work together on a model of housing markets, but as soon as he talked about equilibrating forces of supply and demand I realised he hadn't actually thought about the housing market (crucially, the timing problems due to the real option nature of housing investment for landowners). Instead he was taking the method to a new area (for him at least).

More updates to come tomorrow.

Gay marriage: an institutional perspective

Since I last wrote about the issue I think we have all decided to just call it marriage now.

Four years ago I hadn’t put much thought into one of the big social questions of our time, so I wrote an intentionally controversial list of questions about the debate.

Since that time I’ve some effort into learning about the topic, and the topic of institutions in general. I’m not one to leave my questions unanswered or unexplored for long.

One big theme in my original questions about gay marriage was about how confusing it seems for modern gay couples to be attracted to what is basically a stifling old religious institution? Why do they even want to be in this club? Why not start a better ‘modern marriage’ club?

But I ignored the social and economic realities of institutions. Having now studied in quite some depth the formation and cooperative effects of in- and out-groups I must reconsider my views. Expanding the institution of marriage to allow for gay marriage, rather than superseding traditional marriage with some alternative ‘new marriage’ institution, is likely to result in a far more harmonious outcome.

Consider the diagram below showing on the left a society with two sub-groups; those who choose ‘old marriage’ for straight couples only, and those who choose ‘new marriage’ that allows for gay couples. Immediately we create a group division within a country or region. On the right is the alternative reinvention of a more inclusive institution of marriage. 

The importance of this divide becomes clear when we consider that group divisions lead to group loyalties in matters unrelated to the group itself. Such a divide will create competition between institutions of marriage that will see other social issues become divided along the new / old marriage lines.

To be clear, when people have little knowledge of an issue they default to a view that reflects that of their groups. Don’t know whether a free trade agreement is good policy? What does you political party say about it? Our groups and institutions allow us to put aside reason and default to the standard expected response without having to think every issue through.

If you don’t believe me, take a look at this vox.com post explaining recent research into how alignment of loyalty in politics has captured alignment of loyalties on race issues.

By introducing a new institution to compete with the old institution we are asking for continued disharmony and conflict as more social issues become divided on the lines of new and old marriage.

“I’m an ‘old marriage’ person, I couldn’t possibly believe that internet censorship is a bad thing”

By reinventing the same institution instead, we gather together with a little dose of self-delusion by rewriting history and creating marriage as a more inclusive institution. `Love is love’ we repeat to ourselves as we entrench the new normal into the collective consciousness.

The objective observer realises this is a big lie. Love is not love. Expanding marriage to include gay couples still excludes lots of love that we currently find socially unacceptable. We never thought that blacks could marry whites. Then we never thought gay couples could marry. Maybe one day the institution of marriage will allow of polygamy and sibling marriage (as it does in many places). It may sound ridiculous now, just as our modern views sounded ridiculous in the not-too-distant past. But the objective observer must see the institutional patterns this way, and for marriage it is one of expanding dominance across broader social spheres.

My big lesson from the past years of study is that in terms of internal harmony, reinventing our social institutions is often far better than introducing new institutions and the accompanying competition and conflict amongst them.

[Or maybe I am just defaulting to the view of my groups and have put aside reason]