This is a guest-bleg, inspired by Quiggin’s Zombie Economics project.
I teach in NYU’s Journalism department, where we have strong concentrations in both business and science reporting. I’m looking for some way to label and describe a particular flavor of bad economics reporting, so as to make the students more alert to it, as consumers and possible producers of such reporting.
Here’s the backstory. A couple of weeks ago, my friend Tamar Gendler introduced me to the the problem of easy knowledge, the notion that if you believe a particular assertion, you can produce inductive chains that lead to overstated conclusions. “I own this bike” can be seen as an assertion that the person you bought it from was its previous owner.
But of course you don’t know if that guy in the alley had the right to sell it, so an assertion that you own the bike can generate easy knowledge about whether he did. Instead, “I own this bike” should be seen as shorthand for “If the guy in the alley was the previous rightful owner, then I am its current rightful owner.” (Oddly, this also describes the question of the Elder Wand in Harry Potter Vol. 7, pp 741 ff. Tom Riddle died of easy knowledge.)
I was reminded of easy knowledge while reading Thomas Edsall’s NY Times column on
Can’t We All Be More Like Nordics? Asymmetric Growth and Institutions in an Interdependent World, a paper by the economists Daron Acemoglu, James Robinson and Thierry Verdier. (Acemoglu goes on to discuss this work in a post titled Choosing your own capitalism in a globalised world?.)
In their paper, Acemoglu, Robinson and Verdier model a technologically interdependent world where countries can chose either cutthroat or cuddly capitalism (the US and Sweden being the usual avatars) and each country can be a technological leader or follower but those choices are not orthogonal.
They then examine this model, and discover that:
…interpreting the empirical patterns in light of our theoretical framework, one may claim (with all the usual caveats of course) that the more harmonious and egalitarian Scandinavian societies are made possible because they are able to benefit from and free-ride on the knowledge externalities created by the cutthroat American equilibrium.
Not just the US but indeed the whole world would be worse off if we had public health care, because we have to treat poor people badly if Larry Page is to get rich, so that the Swedes can copy us. Because innovation.
Now there’s nothing too surprising in this sentiment—the headline “Neo-Liberalism Woven into Fabric of Universe, say Economists” could have run unaltered in every year since 1977. What is surprising—or at least what Tamar made me see with new eyes—is that the entire exercise is a machine for smuggling easy knowledge into public discourse.
Imagine I decide to model multiplying a number by itself, but, to simplify the calculations, I make the simplifying assumption that integers in the range [0,1] can stand in for all numbers. After running exhaustive tests, I confirm that X*X = X. I can now publish a paper that says “Interpreting the empirical patterns in light of my theoretical framework, one may claim (with all the usual caveats of course) that multiplying a number by itself creates no change in its value.”
And that’s true, right? As long as you accept my theoretical framework (with all the usual caveats), you also have to accept that X2 = X. After publication, the press can then report that teaching children “squaring”, as liberal school districts so often do, is a waste of tax dollars.
The only difference between my research into self-multiplication and Can’t We All Be More Like Nordics? is that it’s obvious what I’m up to, but the form is identical: Start with some assumptions, then test them, where the result is never anything other than foregone. Then claim that because the expected conclusion turned out as expected, belief in the assumptions is strengthened. (This is a generalized case of Daniel Davies’ rule for debating Milton Friedman.)
In Can’t We All Be More Like Nordics, as in all great intellectual smuggling, the miracle occurs in Step 2:
Second, we consider that effort in innovative activities requires incentives which come as a result of differential rewards to this effort. As a consequence, a greater gap in income between successful and unsuccessful entrepreneurs increases entrepreneurial effort and thus a country’s contribution to the world technology frontier.
If we assume that innovation requires income inequality, then we can conclude that innovation requires income inequality. QED.
This presented as fairly self-evident—“the well-known incentive-insurance trade-off … implies greater inequality and greater poverty (and a weaker safety net) for a society encouraging innovation”—even though a moment’s reflection is enough to bring up a host of questions:
One could go on and on.
The danger of papers like Can’t We All Be More Like Nordics? is not that there are sloppy assumptions; academic work is supposed to be self-correcting over the long haul. It’s dangerous because the press presents these papers as if they are scientific experiments, where prior assumptions were vetted and where the outcome was in doubt.
But neither of those things is true. The only thing Acemoglu, Robinson and Verdier show is that math continues to work as expected. They neither checked nor tested their initial assumptions in the design or outcome of the model.
This misdirection worked perfectly. When discussing the paper, Thomas Edsall (who I generally like) describes Can’t We All Be More Like Nordics? and its detractors, but then, when he gets to the part where he would grade the competing assertions, he throws his hands up:
For self-evident reasons, it is difficult for a political columnist to adjudicate these warring claims. Why? Here is Acemoglu, Robinson and Verdier’s first assumption:
That sure is a lot of math symbol things right there! This so frightens the ordinarily incisive Edsall that he forgets that if the assumptions are wrong, all the math in the world won’t produce a useful conclusion.
Now a lot of this is commonplace—economics has loopy and unsupportable views of human nature, economic modeling often assumes spherical cows, and so on—but what I need is something a bit more scalpel-like, a word or phrase or short description that captures the danger of thinking that self-consistent economic conclusions should lead us to believe in the real-world applicability of the assumptions.
I want something that reminds students “Don’t just look at the conclusions, which can be as mechanistic as a wind-up toy. Look at the assumptions.” Any ideas? (I don’t think ‘easy knowledge’ is it, as it isn’t self-explanatory, though instant comprehension may be an unreachable goal.) Is there any label for this habit of camouflaging suspect assumptions while emphasizing obvious conclusions?