Economics: Ten years down the road?

In 2010, the National Science Foundation (NSF) invited individuals and groups to contribute white papers that describe grand challenge questions in their sciences that transcend near-term funding cycles and are “likely to drive next generation research in the social, behavioral, and economic sciences.” Simply put, which are the areas that would drive the next cutting edge research?

I like to think of the NSF as being similar to the Australian Research Council (ARC) we have in Australia. The ARC grants are given out every year. Correct me if I am wrong. But, I don’t think the ARC has done anything like this before – a call for future research ideas ten years and more down the road.

There are quite a few in the Economics field. These are the ones that I was quite intrigued by:

– David Culter: Why Don’t People and Institutions Do What They Know They Should?

The author lists a few examples, such as: i) When it comes to medical errors, and hospital-acquired infections, there are standards, monitoring, and the ubiquitous checklist that exist in theory, but not yet in practice. Throughout the medical system, people and institutions do not do things that are valuable, inexpensive and relatively straightforward. ; ii) (or even simpler, something we can all relate to) Only 69 percent of Americans always wear a seatbelt when they drive, even though 95 percent of Americans believe that a seat belt would help them in an accident.

So true! To touch on this topic superficially, I can certainly think of some other examples. For example, everyone kind of agrees that some regulatory changes are necessary in the financial system, yet we are not doing so. Similarly, I can think of how companies like Nike and Addidas continue to overwork its sweatshop workers, even though it’s unethical, and they know they should be doing something about it. But, why isn’t something done? A quick conversation with a friend brought up an interesting suggestion. According to said friend, as long as peers around the people who runs these institutions are fine with such behaviours, there is no reason for them to change and do the “right thing”.

 

– Dani Rodrik: A Research Agenda in Economic diagnostics

Well, this is just excellent, and a short read.

“The shocking thing about economics is that very little research is devoted to what might be called economic diagnostics: figuring out which among multiple plausible models actually applies in a particular setting…. The absence of serious research on “choosing among models” results also in graduate programs in economics producing PhDs who are woefully undertrained when it comes to applying their trade to the real world. A student of industrial organization, say, will be exposed to many different game-theoretic models of imperfect competition. But s/he will not be exposed to a systematic exposition on when it is appropriate to apply one of these models and not another. Over time, of course, good economists develop a knack for performing the needed diagnostics. Even then, the work is done instinctively and rarely becomes codified or expounded at any length….A research program in economic diagnostics would help economists think systematically about how to choose among competing, necessarily simplified representations of reality. It would contribute expertise about which model to apply where. It would make researchers better applied economists and more useful policy advisers.”

I can actually relate to this, not just when it comes to choosing multiple plausible models, but also when it comes to choosing between multiple plausible techniques. There have been occasions when it can be tempting to simply choose a technique over another, just because “everyone else seems to be using this technique in this field.” But, have you really thought about whether there is a need to use that technique? Or, perhaps a simpler technique/model might do an even better job?

– Hal Varian : Clinical trials in Economics

– Edward Glaeser: Bounded Rationality in Markets and Government

– Alesina Alberto: Pushing the boundaries of Economics

A compendium of the white papers is available here.

On another note, I chanced on an intriguing read today: Can beggers be choosers? This certainly isn’t novel or new. But, this is the first time I have read about such an experiment conducted in details and the reactions from each option. Also, if you have the time, read the AER paper on “Matching and Sorting in Online dating“.

Yes, I know I am working on a PhD purely based in the field of macroeconomics. But, I have always had a soft spot for social experiments (having conducted one or two of my own this year just to satisfy my curiosity); behavioural economics that brings in concepts from other fields such as Philosophy, politics, culture; impact of social norms/networking on behaviour and hence economics. Maybe there will be an opportunity to do research in these areas one fine day!

 

 

 

 

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