Saturday, April 26, 2008

Economics - Late Beginnings, Conventional versus Non-conventional, New And Exciting Future

A burgeoning area of interest for this weblog has been economics. Understanding the principles of economics seems essential to better understanding many of the issues that are of interest to me.

My favorite econblog, as with many others, is Marginal Revolution. Not too long ago, Tyler Cowen, one of the bloggers featured at Marginal Revolution provided some basic economic history. Why economics was late in starting via Marginal Revolution by Tyler Cowen on 4/5/08. I've added some additional links to Wikipedia articles.

I've already posed the question, I'd like to add two points. First, sustained economic growth in the Western world starts in 17th century England, as shown by Greg Clark. Interest in economic reasoning then comes rapidly, first from the mercantilists, then in Adam Smith and some earlier free trade thinkers, such as Dudley North and Nicholas Barbon.
Second, the idea of "private vices, publick virtues" was central for eighteenth century economic thought and for social science more generally. This came from Bernard Mandeville (drawing upon the French Jansenists) in 1720. It's no accident that Mandeville lived in the Dutch Republic, which had very little censorship. No, I am not a Straussian but the merits of that viewpoint are often overlooked.

What I have found fascinating in learning more about economics is how it can be related to so many fields including biology, psychology and even physics. This, however, continues to raise questions about one of the foundational concepts in economics - the economic/rational human or human economicus.

Back on 2/19/08 at had the post The conventional theories in economics and politics contend that people act...The conventional theories in economics and politics contend that people act rationally.

Elizabeth Kolbert reviews a pair of books that suggest that's not really the case.
Some of these heuristics were pretty obvious -- people tend to make inferences from their own experiences, so if they've recently seen a traffic accident they will overestimate the danger of dying in a car crash -- but others were more surprising, even downright wacky. For instance, Tversky and Kahneman asked subjects to estimate what proportion of African nations were members of the United Nations. They discovered that they could influence the subjects' responses by spinning a wheel of fortune in front of them to generate a random number: when a big number turned up, the estimates suddenly swelled. (link)

What is of particular interest is how this best serves ongoing efforts to bring greater benefit to the world.

Back on 2/21/08 Tyler Cowen of Marginal Revolution gave us "What's new and exciting in economics?"
I received dozens of diverse responses, but there was still a runaway winner. The small group of economists who work at the Jameel Poverty Action Lab at M.I.T., led by Esther Duflo and Abhijit Banerjee, were mentioned far more often than anyone else.
Ms. Duflo, Mr. Banerjee and their colleagues have a simple, if radical, goal. They want to overhaul development aid so that more of it is spent on programs that actually make a difference. And they are trying to do so in a way that skirts the long-running ideological debate between aid groups and their critics.

Tyler Cowen also provides the more practical future for budding professional economists that not only has relevance for them, but for ourselves because it defines where the brainpower for our economy will be coming from.

The future of economics via Marginal Revolution by Tyler Cowen from 4/3/08
In a nutshell, foreigners and empirical work:This short paper collects and studies the CVs of 112 assistant professors in the top-ten American departments of economics. The paper treats these as a glimpse of the future. We find evidence of a strong brain drain. We find also a predominance of empirical work.Three-quarters of the bachelor degrees were obtained from abroad. Macro, econometrics, and labor economics are the most popular fields, see p.8 for the full list. Here is the paper, hat tip to Pluralist Economics Review

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