The Drag on Economic Growth from Nathan Myhrvold, Patent Troll
Department of "Huh?!": Libertarians Forecast Inflation Department

Drums Along the Firth of Forth: Andrew Gelman Tries to Understand How Economists Think...

Make that "whether economists think"...

Andrew Gelman:

One of the easiest ways to differentiate an economist from almost anyone else in society: Pop economists (or, at least, pop micro-economists) are often making one of two arguments:

  1. People are rational and respond to incentives. Behavior that looks irrational is actually completely rational once you think like an economist.

  2. People are irrational and they need economists, with their open minds, to show them how to be rational and efficient.

Argument 1 is associated with "why do they do that?" sorts of puzzles.... Argument 2 is associated with "we can do better" claims such as why we should fire 80% of public-schools teachers.... The trick is knowing whether you're gonna get 1 or 2 above. They’re complete opposites!... Steven Levitt:

One of the easiest ways to differentiate an economist from almost anyone else in society is to test them with repugnant ideas. Because economists, either by birth or by training, have their mind open, or skewed in just such a way that instead of thinking about whether something is right or wrong, they think about it in terms of whether it's efficient, whether it makes sense. And many of the things that are most repugnant are the things which are indeed quite efficient, but for other reasons -- subtle reasons, sometimes, reasons that are hard for people to understand -- are completely and utterly unacceptable...

Isn;t it interesting, I thought, that Levitt is identifying economists as rational and ordinary people as irrational. That's argument 2.... In other settings... we'd hear him saying how everyone responds to incentives.... The two different arguments get pulled out as necessary.... Which in turn reminds me of this self-negating quote from Levitt protoge Emily Oster:

anthropologists, sociologists, and public-health officials . . . believe that cultural differences -- differences in how entire groups of people think and act -- account for broader social and regional trends. AIDS became a disaster in Africa, the thinking goes, because Africans didn't know how to deal with it. Economists like me [Oster] don't trust that argument. We assume everyone is fundamentally alike...

I love this quote for its twisted logic.... Economists are different from everybody else, because . . . economists "assume everyone is fundamentally alike"! But if everyone is fundamentally alike, how is it that economists are different "from almost anyone else in society"?...

My impression is that these quotes come from a simple division of the world into good and bad things:

  • Good: economists, rationality, efficiency, thinking the unthinkable, believing in “circumstances”

  • Bad: anthropologists, sociologists, public-health officials, irrationality, being deterred by repugnant ideas, believing in “culture”

Good is entrepreneurs, bad is bureaucrats. At some point this breaks down. For example, if Levitt is hired by a city government to help reform its school system, is he a rational, taboo-busting entrepreneur (a good thing) or a culture-loving bureaucrat who thinks he knows better than everybody else (a bad thing)? As a logical structure, the division into Good and Bad has holes. But as emotionally-laden categories (“fuzzy sets,” if you will), I think it works pretty well....

I'm just trying to understand how pop-economics can so rapidly swing back and forth between opposing positions.... It’s ok to distinguish economists from ordinary people (economists are rational and think the unthinkable, ordinary people don’t) and it’s also ok to distinguish economists from other social scientists (economists think ordinary people are rational, other social scientists believe in “culture”). You just have to be careful not to make both arguments in the same paragraph.

P.S. Statisticians are special because, deep in our bones, we know about uncertainty. Economists know about incentives, physicists know about reality, movers can fit big things in the elevator on the first try, evolutionary psychologists know how to get their names in the newspaper, lawyers know you should never never never talk to the cops, and statisticians know about uncertainty. Of that, I’m sure