Jonathan Haidt on Academic Monoculture

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On the field of social psychology, he writes,

The lack of political diversity is not a threat to the validity of specific studies in many and perhaps most areas of research in social psychology. The lack of diversity causes problems for the scientific process primarily in areas related to the political concerns of the Left – areas such as race, gender, stereotyping, environmentalism, power, and inequality – as well as in areas where conservatives themselves are studied, such as in moral and political psychology.

As you know, I am concerned about a monoculture in economics, particularly in macroeconomics. I believe that the dynamics behind this monoculture are somewhat different than the ones that underly the alleged monoculture in social psychology. I think that macroeconomics came to be dominated by just a few professors who were so successful in placing their students that they came to dominate the entire ecosystem.

Earnings of College Graduates

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Kevin Carey reports,

The Department of Education calculated the percentage of students at each college who earned more than $25,000 per year, which is about what high school graduates earn. At hundreds of colleges, less than half of students met this threshold 10 years after enrolling. The list includes a raft of barber academies, cosmetology schools and for-profit colleges that often leave students with few job prospects and mountains of debt.

But some more well-known institutions weren’t far behind. At Bennington College in Vermont, over 48 percent of former students were earning less than $25,000 per year. A quarter were earning less than $10,600 per year. At Bard College in Annandale-on-Hudson, the median annual earnings were only $35,700. Results at the University of New Mexico were almost exactly the same.

Pointer from Tyler Cowen.

Confirmation Bias, Illustrated

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Scott Sumner writes,

And I just want to make sure readers are not getting lost in the weeds here. This is not one of those “he said, she said” where reasonable people can disagree on whether the PCE or CPI is a better price index. This is a pay/productivity gap being invented by using the slowing moving price index (NDP, which is similar to the PCE) to make worker productivity look better, and the faster moving price index (CPI) to make real wages look lower. That’s not kosher. You need to use the same type of index for both lines on the graph.

Brad DeLong writes,

I score this for Larry Mishel….

Pointer from Mark Thoma.
DeLong and Sumner are on opposite sides, and each is certain.

Fundamentally, I think that the reason that this happens is that economic propositions are not falsifiable. They only hold “other things equal,” and other things are never equal. A measure of worker productivity that is reasonable according to one person’s framework is not reasonable according to another person’s framework.

If you continue to insist that economics is a science in spite of the non-falsifiability of propositions, you end up deciding that those who disagree with you are evil and anti-science. As I say in the Book of Arnold, you end up wallowing in confirmation bias.

On this particular, by the way, my inclination is to agree with Sumner. That may be political bias on my part. But also, I think you would be seeing a lot of other dramatic things happening if productivity were outstripping wage growth. Very high demand for labor. A big improvement in international competitiveness, leading to large trade surpluses. etc. At the minimum, it seems to me that Mishel and DeLong owe us some comment on why these other developments do not seem to have taken place.

Contrary to what you see in online debates “this one chart” is never a debate-settler. You don’t make a convincing case with one chart. You need lots of disparate, corroborating evidence.

Paul Krugman’s Keynesian Framework

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AS Mark Thoma echoes, Krugman writes,

1. Economies sometimes produce much less than they could, and employ many fewer workers than they should, because there just isn’t enough spending. Such episodes can happen for a variety of reasons; the question is how to respond.

2. There are normally forces that tend to push the economy back toward full employment. But they work slowly; a hands-off policy toward depressed economies means accepting a long, unnecessary period of pain.

3. It is often possible to drastically shorten this period of pain and greatly reduce the human and financial losses by “printing money”, using the central bank’s power of currency creation to push interest rates down.

4. Sometimes, however, monetary policy loses its effectiveness, especially when rates are close to zero. In that case temporary deficit spending can provide a useful boost. And conversely, fiscal austerity in a depressed economy imposes large economic losses.

Note that there are no microfoundations anywhere. Which is fine, in the sense that microfoundations do not add anything to this framework. They do not make it more rigorous, in my view, because they squeeze the economy into a GDP factory.

Of course, I have a different framework, starting with point 1. I think that the drop in spending during a recession is like the thunder that comes during a storm. The thunder does not cause the storm, nor does the drop in spending cause the recession. See may essays on PSST if you need my views in more detail.

Contemporary Segregation

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Ann Owens writes,

Segregation of upper-middle-class and affluent families from all others increased the most. In 2010, families with incomes in the top 10 percent of the national income distribution lived in the most homogenous districts, with other affluent families like them. In contrast, we found that poor families have become slightly more integrated by income between school districts. However, given that high-income families have distanced themselves from others, poor families are likely integrating with working-poor or lower-middle-class families rather than the affluent.

Pointer from Mark Thoma.

As I have said, the affluent folks advocating for more Syrian refugees are unlikely to end up living next to them.

Incidentally, Charles Murray gives a generous review (gated) to Robert Putnam, which is particularly gentlemanly in comparison to Putnam’s treatment of Murray.

Gender and Culture

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A commenter writes,

I would posit that the phenomena they’re describing–gossiping, passive-aggressive, back-stabbing, shaming, and appeals to 3rd parties (hey-la, hey-la, my boyfriend’s back)–represents the worst kind of feminine social striving. If an honor culture full of duels, blood-feuds, and vendettas is the ugly, barbarous version of male social interactions, this ‘cry victim and try to sick a mob on my social rivals,’ ala the UVA rape hoax, is the female equivalent. Perhaps this was inevitable, given the increasing sex ratios on college campuses, but it’d be nice if level-headed adults would recognize this behavior for what it is and avoid indulging it rather than actively egging it on, as many campus administrators seem to do.

I think that this is an under-explored topic, because people are afraid to touch it. But I do believe that the political culture changes when women can vote and that the college culture changes when women are in the majority. It would be surprising if all of the changes are for the better, just as it would be surprising if all of the changes are for the worse.

I found in business that I felt uncomfortable in meetings that were nearly all male or nearly all female. The dynamics of both types of meetings bothered me, in ways that I found difficult to articulate. I want neither Randle McMurphy nor Nurse Ratched.

I believe that men and women tend to differ on the Big 5 personality characteristic known as “agreeableness.” For (low-agreeable) men, disagreement can be exciting and competitive (“wanna bet?”). (High-agreeable) women prefer not to have disagreement. Perhaps I am uncomfortable with the meetings that are dominated by males, because they strike me as overly confident and aggressive. Yet I am uncomfortable with the meetings dominated by females, because I feel that I cannot freely express a dissident point of view.

The Causes of Mortgage Defaults

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The latest paper is by Fernando Ferriera and Joseph Gyourko. This article about the paper says,

Ferreira’s data show that even with strict limits on borrowing—say, requiring every borrower to put 20% down in all circumstances—wouldn’t have prevented the worst of the foreclosure crisis. “It’s really hard for certain regulations to stop the process [of a bubble forming],” Ferreira says. “I really wish my research had showed that it’s all about putting down 20% and all problems are solved, but the reality is more complicated than that.”

This analysis has both good points and bad points. The good point is that it goes against the “predatory lending” narrative. As a home buyer, you were better off with a predatory loan in 2002 (when prices were still headed higher) than with a prime loan in 2006 (when prices were near the peak). The bad point is the implication that there was nothing wrong with loans with low down payments. In fact, it was those loans that allowed speculation to get out of control.

Scott Sumner thinks that the finding that many of the mortgage defaulters were “prime” borrowers is enough to confirm that mortgage defaults were caused by a slowdown in nominal GDP growth. But mortgage defaults do not come from a lack of nominal GDP growth. They come from negative equity among mortgage borrowers.* And that comes from house prices falling, for which the main cause was the rapid rise in the first place. And both the rise in prices and the subsequent wave of defaults were much exacerbated by the fact that so many borrowers, “prime” or otherwise, had so little equity to begin with.

From part of the NBER coverage of the paper that Sumner does not quote:

The authors’ key empirical finding is that negative equity conditions can explain virtually all of the difference in foreclosure and short sale outcomes of prime borrowers compared to all cash owners. Negative equity also accounts for approximately two-thirds of the variation in subprime borrower distress. Both are true on average, over time, and across metropolitan areas.

Let’s assume that we can agree that the big drop in house prices caused the wave of mortgage defaults. Three possibilities:

1. The drop in house prices was a purely exogenous shock.

2. The drop in house prices was due to the slowdown in nominal GDP growth.

3. The drop in house prices was due to the internal dynamics of a housing market that had become saturated with speculative buying with little or no money down.

The stories about the study make it sound like it was (1). Sumner believes (2). I vote for (3).

Adamantly.

UPDATE: See Megan McArdle for a similar point of view.

De-materialization Watch

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Linus Blomqvist, Ted Nordhaus, and Michael Shellenberger write,

Slowing population growth, demand saturation in developed countries, and improved technological efficiencies have all contributed to what is known as decoupling. Relative decoupling refers to impacts growing at a slower rate than population or consumption. Absolute decoupling means impacts are declining in absolute terms. The per-capita farmland requirement (cropland and pasture) has declined by half in the last half-century. In absolute terms, cropland has expanded 13% and pasture 9% in that time period, but the sum of the two has remained stable since the mid-1990s. Global consumption of wood has plateaued, contributing to a slight decline in the area of production forest since 1990. While overharvesting of wild animals for meat has increased in the tropics, most developed countries have decoupled from this form of impact. The world has almost entirely decoupled from whaling. Total water consumption increased by 170% between 1950 and 1995, but per-capita water consumption peaked around 1980 and declined thereafter. The least decoupled environmental impact is greenhouse gas emissions from energy: global per-capita emissions increased by nearly 40% between 1965 and 2013.

Pointer from Justin Fox, who adds insightful commentary. Via Mark Thoma.

There seems to be a lot of similar environmental commentary out this year. Ron Bailey’s new book, Jesse Ausubel’s paper, and now this (which credits Ausubel).

I recommend the entire paper. I think it would be accessible to students in freshman economics courses, and I really believe that if freshman economics ignores this topic, that means that the primitivists will be unopposed on college campuses.

Evidence for Sticky Wages?

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The WSJ reports,

Scant availability of skilled construction workers has hampered home construction at various times in the past few years of recovery. But the shortfall seems to have grown more acute of late, as new-home sales are up 21.2% so far this year from the same period last year and commercial construction has increased steadily.

This is an interesting phenomenon for several reasons. First, what happened to all of the construction workers that were laid off after the housing bust? Second, what is happening to wages in the construction industry?

In particular, why have wages not risen to a point where the market clears? Or have they in fact risen, and the phrase “scant availability” of workers means “scant availability at the wage that we would prefer to pay,” which is below the market-clearing wage.

Three Axes of Refugees

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The crisis du jour is once again aligning people along the three-axis model. The freedom-coercion axis says that borders should be open. The oppressor-oppressed axis says that people fleeing Syria are oppressed, and anyone who would keep them out is evil. The civilization-barbarism axis says that European countries that take in large numbers of refugees are committing cultural suicide. Just one of many examples in this genre:

Few intend or desire to adapt to European society. They may want to ride Europe’s gravy train, but by and large they feel contempt for its values. Many scorn Christians and Jews. They reject freedom of speech and religion. Most openly subjugate women and think that homosexuals should perish. Yet to hear Europe’s political class talk, accepting these newcomers and many more like them constitutes a moral test for liberal and Christian principles.

The author goes on to cite Gibbon on how Rome succumbed to barbarians.

My guess is that:

1. Most of those who support allowing more migration from the Middle East live in affluent neighborhoods.

2. Wherever the migrants from the Middle East end up, it will not be in affluent neighborhoods.

Libertarians should not be so quick to align with progressives on this issue. Be as suspicious about government involvement in “solving” the crisis as you are about government’s role in enforcing borders.

Imagine the decisions about taking in Middle Easterners being made by individuals, rather than by government. That is, imagine that it were up to individual households to take them in.

Or imagine that refugee resettlement had to be funded entirely through private donations. What if the political leaders doing their moral posturing on behalf of refugees had no access to taxpayer money. Instead, suppose that they had to contribute their own money or money that they raised through private charity.