In a study published this year in Nature Neuroscience, several co-authors and I found that family income is significantly correlated with children’s brain size — specifically, the surface area of the cerebral cortex, which is the outer layer of the brain that does most of the cognitive heavy lifting. Further, we found that increases in income were associated with the greatest increases in brain surface area among the poorest children.
…I am part of a team of social scientists and neuroscientists planning a large clinical trial in which 1,000 low-income mothers will be randomly assigned to receive either a large ($333) or small ($20) monthly income supplement for the first three years of their children’s lives. Periodic assessments of the children and their mothers will enable us to estimate the impact of these cash supplements on children’s cognitive, emotional and brain development, as well as the effect on family functioning.
…Our clinical trial is designed to provide strong evidence regarding whether and how poverty reduction promotes cognitive and brain development. This study, however, will take at least five years to complete — far too long for young children living in poverty today. We should not wait until then to push for policies that can help inoculate young children’s pliable brains against the ravages of poverty.
Pointer from Mark Thoma.
Her policy suggestions seem to me to be based quite a bit on emotion, and some of them do not even (to me) seem related to children’s brain development. This makes me concerned that perhaps she is so emotionally attached to her preferred policy solutions that she is pre-committed to finding that poverty causes small surface area of the cerebral cortex, rather than finding that the correlation comes from income and brain characteristics being correlated between parents and children. This my be an example of a study where only a positive finding will be published; a null finding may never see the light of day.
I am glad that she wants to do a controlled experiment. If the results come out the way she would like, then it will be an important finding. I would be happy to volunteer to help audit the study.
Category Archives: Economic education and methods
More Thoughts on Economic Methods
Rodrik supports the mathematical nature of economics as bringing clarity of meaning, and argues that the subject is far more applied and empirical than its detractors realise. But he criticises large-scale macro models and time series regressions. “I cannot think of an important economic insight that has come out of such models,” he writes. He also flags up the lack of testability of many economic models: they purport to be deductions from theoretical principles, but as they are ‘deduced’ to explain a particular phenomenon (credit rationing, say), then that phenomenon cannot be used to test the model. “Very few of the models that economists work with have ever been rejected so decisively that the profession discarded them as clearly false.”
Pointer from Mark Thoma.
My line is that economists deal in non-falsifiable interpretive frameworks. Read Coyle’s entire post. She makes Rodrik sound like someone I would agree with, although not everything I have read of him would indicate that.
The conversation between Tyler Cowen and Dani Rodrik keeps circling back to methodological issues. For example, Rodrik is wary of overrating randomized control trials. Rodrik suggests that graduate students should spend more time in the real world.
I keep thinking of the quote of Minsky writing that economists are well trained but not well educated. You are trained to solve equations. Nowadays you are trained to do the sort of narrow empirical studies that Rodrik thinks are overrated. But you are not educated in history or financial institutions or secular changes in the economy.
Also, Noah Smith has more to say.
philosophical empiricism is far more frightening for economists than for natural scientists. Living in a world of theoryderp is easy and comforting. Moving from that world into a Popperian void of uncertainty and frustration is a daunting prospect. But that is exactly what the credibility revolution demands.
Read the whole post. As I read it, he thinks that economists will have to reconcile themselves to less theory and more empirical work. I do not really agree:
1. I think that economists rely a lot on what I call interpretive frameworks. These do not have standing in philosophical empiricism, because they are not falsifiable.
2. Philosophical empiricism does not provide a guide to evaluating interpretive frameworks. Unfortunately, economists have not thought about this question. Frameworks become popular because they are tractable or interesting, and they stay popular without ever being evaluated for usefulness.
3. I think that an interpretive framework is strong if it offers explanations in many contexts, if it does not encounter too many anomalies (phenomena that seem to run counter to the framework), and if it is reinforced by other beliefs.
4. Supply and demand is an example of an interpretive framework that is very strong. That is, it seems to explain a lot, one rarely encounters anomalies, and it is consistent with other beliefs that we tend to hold.
5. Keynesian macro is an example of an interpretive framework that is not very strong. Many anomalies have cropped up over the decades: the ability of the U.S. economy to rebound after World War II in spite of the staggering drop in government spending; the breakdown of the Phillips Curve in the 1970s; the failure of many Keynesian stimulus policies in many countries, including the U.S. And Keynesian macro is notoriously inconsistent with many other beliefs that economists tend to hold.
Olivier Blanchard Profiled
By Steven Pearlstein. The profile says a lot of good things about Blanchard, most of which are true. But it also includes this:
But for Blanchard, who had spent the better part of his career helping to build the new consensus, the crisis had not only revealed the inadequacies of what had been done so far but raised questions about whether it was possible to come up with one all-purpose economic model.
…“We ignored the financial plumbing,” Blanchard said. “We thought we could model it with a few simple equations,” he explained, based on what turned out to be false assumptions about the ready availability of buyers and sellers and the easy substitution of one financial instrument for another.
I would say that Pearlstein’s article suffers a bit from an excessive reliance on MIT insider economists as sources. And as Larry Summers put it, “But insiders also understand one unbreakable rule: They don’t criticize other insiders.”
The insiders created the artificial consensus around representative-agent, rational-expectations models with no institutional or historical perspective on finance. And they have not really moved very far from that consensus. For better or worse, macroeconomics is where it is today because of MIT’s insider economists, exemplified by Blanchard.
Noah Smith on Natural Experiments
With lab experiments you can retest and retest a hypothesis over a wide set of different conditions. This allows you to effectively test whole theories. Of course, at some point your ability to build ever bigger particle colliders will fail, so you can never verify that you have The Final Theory of Everything. But you can get a really good sense of whether a theory is reliable for any practical application.
Not so in econ. You have to take natural experiments as they come. You can test hypotheses locally, but you usually can’t test whole theories. There are exceptions, especially in micro, where for example you can test out auction theories over a huge range of auction situations. But in terms of policy-relevant theories, you’re usually stuck with only a small epsilon-sized ball of knowledge, and no one tells you how large epsilon is.
Pointer from Mark Thoma. Read the whole post.
Hypocrisy and Cowardice at Brookings
Sen. Elizabeth Warren, stepping up her crusade against the power of wealthy interests, accused a Brookings Institution scholar of writing a research paper to benefit his corporate patrons.
Warren’s charge prompted a swift response, with Brookings seeking and receiving the resignation of the economist, Robert Litan, whose report criticized a Warren-backed consumer protection rule targeting the financial services industry.
My remarks:
1. Robert Litan is one of the most decent individuals in the whole economics profession.
2. Giving Litan’s scalp (sorry for the pun) to Elizabeth Warren does nothing to bolster the integrity of Brookings. It amounts to speaking cowardice to power.
3. Go back and read this post. If Bob Litan crossed a line, then Martin Baily crossed it at least as far. The only charitable explanation for the differential treatment of Litan and Baily is that Brookings changed its policies in the interim (something suggested in the WaPo piece, but I do not know any specifics).
4. If I were in the administration at Brookings, I would not give in to political intimidation. I would obtain peer reviews of Litan’s study and either stand by the study or repudiate it, depending on those reviews.
The Basic Social Rule and Dissent
From Elizabeth Warren’s book, as relayed by a review in the NYT.
After dinner, “Larry leaned back in his chair and offered me some advice,” Ms. Warren writes. “I had a choice. I could be an insider or I could be an outsider. Outsiders can say whatever they want. But people on the inside don’t listen to them. Insiders, however, get lots of access and a chance to push their ideas. People — powerful people — listen to what they have to say. But insiders also understand one unbreakable rule: They don’t criticize other insiders.
Pointer from various places–I first saw it from Tyler Cowen.
Remember that the basic social rule is to reward cooperators and punish defectors. I believe that without such a social rule, trust would break down and we could not have markets. However, that does not mean that the social rule is always a wonderful thing. Criminal gangs operate the basic social rule, also–they reward people who cooperate with the gang and punish people who defect from it.
The basic social rule gets applied in politics and in academics. A visitor from Mars would have a really hard time understanding how macroeconomics got into the cul de sac in which it had arrived when Olivier Blanchard wrote that the state of macroeconomics is good. I would say that Dornbusch and Fischer were really good at rewarding cooperators and punishing defectors.
Confirmation Bias, Illustrated
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.
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.
Dani Rodrik on the Economics Profession
The social world differs from the physical world because it is man-made and hence almost infinitely malleable. So, unlike the natural sciences, economics advances scientifically not by replacing old models with better ones, but by expanding its library of models, with each shedding light on a different social contingency.
Pointer from Mark Thoma.
This is certainly closer to my position than the “I am a scientist and the other guy isn’t” rhetoric coming from other quarters.
The Book of Arnold on the Economics Profession
I am adding a new section, which includes the following:
In general, I shy away from using the term “social science,” because I do not think that economists can aspire to the same level of falsifiability as physicists. I believe that the difference between social science and natural science boils down to this:
In natural science, there are relatively many falsifiable propositions and relatively few attractive interpretive frameworks. In the social sciences, there are relatively many attractive interpretive frameworks and relatively few falsifiable propositions.
The reason that there are relatively few falsifiable propositions in the context of social phenomena is that there are many causal factors, and decisive experiments are rarely possible. Social phenomena are characterized by high causal density, to borrow a term from James Manzi.
As a result, economics is closer to history than to physics. If a historian wants to examine the causes of the decline of Rome, or the decline of empires in general, he or she will provide an interpretive framework. That framework cannot be falsified, but readers can compare it to other frameworks and make judgments about its plausibility.
For example, consider the phenomenon of the comparative salaries of men and women. Economists interpret salaries using the framework of human capital. That is, workers bring to the market different levels of ability, training, and experience, and this determines what they are able to earn. Sociologists use a framework that emphasizes group identity, status, and power, with men the more dominant group and women the more oppressed group.
If a study suggests that women earn less than men, even when controlling for years of education and other indicators of human capital, then this is anomalous for the economists. If a study suggests that most of the lowest-paying occupations are predominantly occupied by men, then this is anomalous for the sociologists. However, such observations will not prove decisive. By invoking other factors to explain anomalous results, each side can remain unmoved. Economists will not abandon their human capital framework, nor will sociologists abandon their group status framework.
. . .Economists who employ models think of themselves as “doing science,” meaning that they are generating falsifiable propositions. However, in practice, they rarely reject their preferred models. Instead, they explain away anomalous observations. In that sense, they are really using their preferred models as interpretive frameworks.
The Book of Arnold contains sections like this one, which argue in general terms against MIT economics. It also contains sections about practical issues, such as environmental sustainability and housing policy. The methodological sections are intended to mean something to Ph.D economists. The practical sections are intended to resonate with students and others who have much less economic background. It could be that there are diseconomies associated with trying to reach both audiences.
David Colander on the Economics Profession
Timothy Taylor points to an interesting series of essays by Colander. Self-recommending*. I was drawn to the one on Harvard-MIT incest.
What I’m saying is that modern mainstream economists seem to lack the all-round wisdom reflective of the great policy integrators of the past, such as Bob Solow, Charlie Kindleberger, Charles Goodhart, Paul Samuelson, Art Okun, Jim Tobin, Herb Stein, and Paul Streeten, to name just a few.
I agree that there is a generation gap. More recent generations take their own work much too seriously. I think that economists offer interpretations of reality, and alternative interpretations often have as much validity. I think that the older economists understood this, even if they did not explicitly articulate it. Subsequent generations lost this wisdom.
He goes on,
Modern mainstream economics is a bit off as a result of too much inbreeding. Specifically, my argument is that the gene pool of economists in the replicator dynamics of the profession is too small to prevent undesirable recessive traits from showing up in mainstream economists from time to time.
Recall that I describe Stan Fischer as the Genghis Khan of macroeconomics, because essentially every macroeconomist is descended from him.
*self-recommending is a Tyler Cowen term, which I recall he defined as a project that by virtue of the topic and author is likely to be worth reading.