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The Future of Economics Isn’t So Dismal

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By DAVID LEONHARDT

Published: January 10, 2007

Chicago

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Dan Dry/University of Chicago

Emily Oster did AIDS research

The Economists and Their Research

Oster
on AIDS

Fryer
on Racial Inequality

Finkelstein on Medicare

DellaVigna
and Malmendier on Health Clubs

Olken
on Corruption

Gentzkow
and Shapiro on Media Bias

Gabaix
on C.E.O. Pay

Wolfers on
Point Shaving

Rothstein on Schools

Chetty on Dividend Taxes (pdf)

Karlan on Philanthropy (pdf)

A List
of the Economists' Web Sites »

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Economists
to Watch

On a summer day a few years ago, a recent college graduate named Emily Oster
was talking to her boyfriend about the research that was, and wasn’t, being done
on the spread of AIDS. She was an aspiring economist at the time, getting ready
to go to graduate school, and she was struck by the fact that her field had
little to say about why some countries had such high H.I.V. rates.

To most people, that may not sound like a question an economist needs to be
asking. It’s more the domain of epidemiologists or public health workers, and
they were already doing good work on it.

But economists have been acting a lot like intellectual imperialists in the
last decade or so. They have been using their tools — mainly the analysis of
enormous piles of data to tease out cause and effect — to examine everything
from politics to French wine vintages.

As the daughter of two economists, Ms. Oster probably understood this better
than most 22-year-olds. Her father, Ray Fair, invented a semi-famous economic
formula that has an impressive track record of predicting presidential
elections. Her mother, Sharon Oster, studies business strategy.

So during her time as a Ph.D. student at Harvard,
the younger Ms. Oster took on AIDS in Africa. Her most provocative finding was
that Africans didn’t really behave so differently from people in countries with
much lower H.I.V. rates. They did not have many more sexual partners than
Americans on average. And, like Americans, Africans had cut back on unsafe sex
in response to AIDS — or at least relatively well-off, healthy Africans had.

Poorer Africans, who of course make up the continent’s overwhelming majority,
had made fewer changes. They had less of an incentive to practice safe sex, Ms.
Oster concluded, because many of them could not expect to reach old age, whether
or not they contracted H.I.V. Any attack on AIDS should therefore include an
attack on poverty.

“This is not the kind of thing epidemiologists would do. It’s not the way
they would have framed it,” Ms. Oster, now 26, said. “It’s an idea only an
economist would love.”

Whatever you think of her conclusions, there’s no denying that her subject is
more interesting — and, yes, more important — than the esoteric fiscal and
monetary models that once dominated economics. Ms. Oster is studying death, not
taxes.

Last weekend, hundreds of economists gathered in Chicago for their annual
conference, where they interviewed one another for job openings, presented new
research papers and had the occasional glass of wine. This was my sixth such
conference, and I have often been stunned by how much of the research here, like
Ms. Oster’s work, would interest non-economists.

As “The Soulful Science,” a new book by Diane Coyle, puts it, there has been
a “remarkable creative renaissance in how economics is addressing the most
fundamental questions — and how it is starting to help solve problems.” The
reams of data that computers can now crunch have ushered the field into a new
golden age, Ms. Coyle writes, yet most of its accomplishments are not widely
known.

So before this year’s conference, I did an informal poll of about 20 senior
economists around the country and asked a single question: who are the young
(untenured) economists doing work that is both highly respected among experts
and relevant to the rest of us? Who, in other words, is the future of
economics?

Thirteen names came up more than once, and I’m sure a scientific survey would
have produced a longer list. As it is, though, the list is incredibly diverse.
It includes Justin Wolfers, who once worked for an Australian bookie and is now
an expert on online prediction markets , and Raj Chetty, who grew up in both
India and Milwaukee and studies antipoverty policy.

Ms. Oster is on the list, and so is the boyfriend with whom she first
discussed her AIDS ideas: Jesse Shapiro, now her husband. He has done innovative
work on, among other things, the benefits of television for some toddlers. The
two of them are the inaugural fellows at a University
of Chicago research center run by Gary Becker (a Nobel
laureate), Steven Levitt (co-author of “Freaknomoics”) and Kevin Murphy
(winner of a MacArthur genius award).

In fact, the least diverse aspect of the list of 13 — the full roster appears
above — may be the way that its members have chosen their mates. Six of them are
married to another person in the group.

In the end, this new era of economics matters because it has a chance to
influence the world that is its subject matter. Ms. Oster, for example, has
presented her work to the President’s Commission on AIDS and others, and her
findings seem to be one small part of the recent push for better H.I.V.
prevention measures.

In Massachusetts, a 41-year-old economist named Jonathan Gruber helped design
the new state program to provide health insurance for every resident, which is a
model for the California plan announced on Monday. The new federal pension law,
meanwhile, encourages employers to sign up workers automatically for 401(k)
plans largely because academic research has shown just how costly
procrastination is.

For all this success, though, there are still two big obstacles holding back
the economics revolution. The first is that the field remains too narrow in its
approach. As David Colander, an economist at Middlebury College, notes,
researchers are rewarded — with job offers, endowed chairs and prizes — for
finding statistically significant patterns that can be published in prestigious
journals. They’re generally not rewarded for collaborating with experts in other
fields to put those patterns into better context.

As a result, there is too much “cleverness for cleverness’s sake,” Mr.
Colander says, and not enough “judgment and wisdom.”

The second obstacle is that when economists do uncover a nugget of true
wisdom, they’re often hesitant to follow it to its natural conclusion and to
become principled advocates for better policy. Theirs is not to judge, they
insist, only to report what they find. Otherwise, they may risk their reputation
for impartial research.

Which is a fair point. But it’s a risk worth taking, because the alternative
is frankly much worse.

When David Hume, the philosopher and friend of Adam Smith, called for the
establishment of a “science of human nature” in the 18th century, he helped
invent modern economics. The new generation of researchers will probably come
closer to realizing his vision, and to making economics a true science, than any
of their predecessors.

But think about what scientists do when they uncover a problem: they try to
solve it. To do otherwise is to let an impressive piece of research turn into a
scientifically rigorous piece of trivia.

E-mail:
[email-masked]

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