further decline of economic intellect?
Source Jim Devine
Date 06/01/27/10:04

January 27, 2006/New York TIMES
Students Are Leaving the Politics Out of Economics

Taking as a model the research techniques that Steven D. Levitt
displays in his best-selling book, "Freakonomics," graduate students
in economics are focusing on small insights about the economy rather
than broad theories that explain how the overall system works. In
doing so, they are withdrawing in effect from political debate.

The broad-brush approach was a defining characteristic of the
economists who were shaped by the Depression. The younger generation
has tried to shun prescriptions that seek to cure the economy's ills.
Instead, they cast economics as a scientific inquiry, using
mathematical models, for example, to explore the economy without
becoming advocates for one solution or another.

Mathematical modeling tries to determine such things as rates of
economic growth by plugging into computer models assumptions about
inflation, hiring and the like. It is still the thrust of graduate
training, but the students themselves are pushing for training in
another form of exploration empirical research like that of Mr.
Levitt, which relies on statistical evidence.

Mr. Levitt, a 38-year-old professor at the University of Chicago,
analyzes data that seem to explain behavior why the crime rate has
declined, for example and that is what a growing number of graduate
students in economics want to do, according to a poll of 230 of them
at seven prestigious universities.

"They don't see themselves as having political persuasions," said
David Colander, an economic historian at Middlebury College, who
conducted the poll and a similar one in 1987. "They see themselves as
doing the best analytical-statistical work that can be done, better
than in sociology and other social sciences. They are telling you what
the options are, but not which option to choose."

Mr. Levitt says his research, for example, finds a strong correlation
between legalized abortion and the decline in crime. Thirty-three
years after Roe v. Wade, the population of unwanted, crime-prone young
Americans has shrunk, he argues, and so has the crime rate. But does
that mean Mr. Levitt favors choice?

He demurs. "As an economist, I am better than the typical person at
figuring out whether abortion reduces crime," he said, "but I am no
better than anyone else at figuring out whether abortion is murder or
whether a woman has an intrinsic right to control over her body."

The students, in their answers to the poll, applauded an education
that teaches them to be researchers and to stay away from policy. The
poll and its implications were debated in a panel discussion at the
annual meeting of the American Economic Association in Boston this
month, and in follow-up interviews.

What the discussion and interviews reveal is a distinct difference in
the way economics is taught to undergraduates and graduate students.

"My undergraduate students are tremendously interested in public
policy, and I teach it to them in principles of economics," said N.
Gregory Mankiw, a Harvard economist who served as chairman of
President Bush's Council of Economic Advisers and got into hot water
with the administration by declaring that the outsourcing of jobs
overseas was a form of free trade ultimately beneficial to the United

Back in the classroom, Mr. Mankiw explains to undergraduates why free
trade is good policy. "I am teaching the next generation of voters,"
he said. "In graduate school, however, we are training the students to
use the tools of economic research."

Those tools rarely tell the whole story. Mr. Levitt's explanation of
the falling crime rate, for example, also factored in the rising
prison population, but not the impact of television or culture or the
aging of the baby boomers. The mathematical models plug rational
behavior into their equations, but only some of the psychological
quirks that behavioral economists increasingly catalog.

The modeling of trade dynamics usually assumes that countries
rationally trade the goods and services that each produces most
proficiently despite mounting evidence that trade in the 21st
century is not so straightforward. Moreover, the models and the
increasingly popular empirical research rarely acknowledge altruism as
an incentive, although Adam Smith stressed its importance, in addition
to self-interest.

Arjo Klamer also stresses the role of altruism. He trained in
economics at Duke, taught at three universities in this country and
then, discouraged by the drift of academic economics in the United
States, returned to his native Netherlands, where he teaches the
impact of culture on economic behavior at the University of Erasmus.

"Altruism is an incentive for all sorts of behavior," said Mr. Klamer,
who participated in the panel discussion in Boston, having worked with
Mr. Colander on a similar poll of graduate students in 1987.
"Scientists cooperate with each other in their research," he noted as
an example, "and soldiers go to Iraq because they are willing to
sacrifice their lives for a common good."

The latest poll involved graduate students at the University of
Chicago, Columbia, Harvard, Princeton, Yale, Stanford and the
Massachusetts Institute of Technology. Among its results were that 10
percent of the first-year students considered themselves politically
conservative, but that percentage rose to 23 percent by the fourth or
fifth year. Fifty percent considered economics the most scientific of
the social sciences, almost double the percentage in 1987. Half
embraced the assumption that behavior is essentially rational, the
same percentage as before. And 30 percent said that empirical
economics was very important, up from 16 percent in the 1987 poll.

"More and more, 'freakonomics' is becoming mainstream economics," Mr.
Colander said. "That is the research that young economists see
themselves as doing."

Mr. Levitt and his co-author, Stephen J. Dubner, a writer and
noneconomist, correlated advertising slogans with real estate prices,
for example, to determine which slogans are connected with higher
sales prices.

In the same vein, two empirical economists Alan B. Krueger at
Princeton and David Card, now at the University of California,
Berkeley determined that a modest increase in the minimum wage did
not discourage employment, and Jonathan Gruber at M.I.T. found a
relationship between regular churchgoing and higher incomes. But they
did not take the next step, from research to advocacy.

Explaining the reluctance to advocate, Mr. Colander said that the
graduate students were better at mathematics than their counterparts
19 years ago, and that made them comfortable with this approach.

Graduate schools rarely offer courses in the history of economic
thought, the poll showed, and fewer students than in the 1980's have
read the works of the giants in their field Adam Smith, for example,
or David Ricardo, Alfred Marshall and John Maynard Keynes.

These eminences painted the economy on a broad scale and were far more
engaged than modern economists in political choice. "Keynes looked out
the window and talked to people, and that fed his psychological
insights," Mr. Klamer said.

Research, theory, anecdotal observation and policy prescriptions were
much more intertwined. That was also true of recent Nobel laureates
like Milton Friedman, Paul Samuelson, the late James Tobin and Robert
Solow, all of them young people during the Depression drawn to
economics, as Mr. Solow put it, to repair the world through government
intervention in a private sector that could not repair itself.

"If you can control inflation this way," Mr. Solow said, describing a
viewpoint that he considers too narrow, "then the economy will go back
on its own in reasonably good time to as good a set of conditions as
its institutions will permit."

"We have lost our optimism that the tools of economics can be used to
manage the economy," Mr. Levitt said, "and we have moved to a much
more micro view of the world. We can tell you whether labor unions
raise productivity or stifle innovation or raise wages, but we are
reluctant to judge whether the tradeoffs are good or bad."

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