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Today’s Economist: Nancy Folbre: The Science of Prophets and Profits

January 14, 2013 by Leave a Comment

Nancy Folbre, economist at the University of Massachusetts, Amherst.

Nancy Folbre is an economics professor at the University of Massachusetts, Amherst. She recently edited and contributed to “For Love and Money: Care Provision in the United States.“

Some say economics is not a science at all, because it doesn’t successfully predict the future. Others point accusingly at a lack of unanimity. Many construe fierce political convictions as a sign of bias.

Today’s Economist

Perspectives from expert contributors.

Wrong on all three counts. Both science in general and economics in particular are much more interesting than these formulas imply. The meetings of the American Economic Association and the larger umbrella of organizations in the Allied Social Science Association in San Diego in early January offered plenty of examples.

Seldom can any science accurately predict the future. In a region particularly susceptible to earthquakes, it’s impossible to say when and how cities like San Diego will be shaken. Sea levels are rising as a result of global climate change; no one knows exactly when they will flood the first floor of the luxury hotels.

Many economists, themselves, long for unanimity. One paper, “Views Among Economists: Professional Consensus or Point-Counterpoint?” by Roger Gordon and Gordon B. Dahl of the University of California, San Diego, presented at a session on “What Do Economists Think About Public Policy Issues?” used data from a regular survey of economic experts to assert that opinions differed little as long as extensive research was available.

In another paper at the same session, “Comparing Beliefs of Economists and the Public,” Luigi Zingales of the University of Chicago, asserted that public opinion is least swayed by economists when economists are largely in agreement.

Two discussants – both with strong claims to economic expertise – begged to differ with the first of these presentations.

Paul Krugman of Princeton forcefully asserted that disagreements regarding macroeconomic policy are momentous. Justin Wolfers, currently at the University of Michigan, offered a sharp and funny analysis of policy differences between “Team Blue” and Team Red” among surveyed experts, acknowledging that, in some cases, he used Facebook pictures to infer political affiliation. His analysis got even more laughs from the audience than the official humor session on Friday night.

A voice from the audience complained that the expert panel survey, assembled by the University of Chicago’s Booth School of Business, was limited to about six faculty members from each of the seven “most elite research universities in the U.S.” The session organizer seemed taken aback by the very possibility that any respectable economist might feel unrepresented by such eminences.

Differences among economists teaching at elite research universities and others are probably quite significant and deserve attention in survey research.

These differences of opinion don’t signal immaturity or inadequacy in scientific endeavors; they are a driving force of scientific progress. As the well-known philosopher of science Thomas Kuhn explained, dominant paradigms typically become encrusted and resistant to change, making it difficult for their adherents to even perceive anomalies that are inconsistent with existing theory.

Burgeoning research in behavioral economics speaks to this issue, pointing to many examples of putatively rational consumers behaving in distinctly irrational ways. So-called framing effects influence the way everyone, including scientists, interpret information. Sometimes the only way to see how one is implicitly framing a problem is to face a direct challenge from someone who frames it completely differently.

The late Professor Kuhn contended, even more assertively, that older scientists almost never relinquish a theoretical frame, but are, thankfully, eventually replaced by a younger generation that has smaller intellectual investments in the status quo.

Some economists are probably convinced that their own views, however imperfect, are more accurate than those of the public at large and that more unanimity (even if slightly forced) would increase the profession’s policy impact. They should, instead, consider how fully discredited the profession would be if all its members (rather than just a few leading lights) agreed on a policy measure that turned out, in retrospect, to be completely incorrect.

In other words, there are benefits to a diverse portfolio.

As Professor Zingales pointed out, the carbon tax, which most surveyed economists favor (as do I), is so disliked by voters that politicians of both parties are loath to raise it.

Political allegiances are clearly linked to theoretical frames. Knowing whether someone leans left or right is often makes it possible to predict where they stand in economic debates. But it does not follow that those who clearly or even vehemently state their allegiances are somehow more biased than those who don’t.

Trying to evenly split the difference between left and right defines a path that is about as predictable as either of the extremes – and heavily influenced by both.

Better to have differing views debated openly and to identify all sources of financial support for research. To its credit, the American Economics Association just officially adopted conflict-of-interest rules, as Ben Casselman wrote in The Wall Street Journal, “in response to criticism that the profession not only failed to predict the 2007-8 financial crisis but may actually have helped create it.”

Economists can’t vow impartiality. But they should always reach, with humility, for the truth.

The Marxist historian E.P. Thompson put it this way: “The evidence is there, not to disclose its own meaning, but to be interrogated by minds trained in a discipline of attentive disbelief.”

Article source: http://economix.blogs.nytimes.com/2013/01/14/the-science-of-prophets-and-profits/?partner=rss&emc=rss

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Today’s Economist: Nancy Folbre: Austerity for Posterity

December 24, 2012 by Leave a Comment

Nancy Folbre, economist at the University of Massachusetts, Amherst.

Nancy Folbre is an economics professor at the University of Massachusetts, Amherst. She recently edited and contributed to “For Love and Money: Care Provision in the United States.“

Whether Democrats and Republicans come to budgetary agreement before the end of the year, it seems likely that some Americans are going to be thrown off a fiscal cliff. Even President Obama’s proposals call for cuts in discretionary spending that will disproportionately affect low-income children.

Today’s Economist

Perspectives from expert contributors.

The chasm between pro-family rhetoric and anti-family policies is widening. We are told to raise more children in order to prevent the aging of our population. We are told that education is the key to national economic success in this “age of human capital.” But what we see is a growing political effort to reduce public spending on children.

As Eduardo Porter recently explained, proposed cuts to federal spending will leave government as little more “than a heavily armed pension plan with a health insurer on the side” — not an entity likely to offer a helping hand to families struggling to support and educate the next generation.

Provisions now teetering on the edge of possible elimination include those that increased eligibility for the child tax credit and the earned income tax credit, which augment the after-tax income of families with children. Funds for Head Start, Early Head Start and child-care assistance will almost certainly be squeezed. Cuts in federal support for college attendance (both Pell grants and tax breaks) are likely to kick in, worsening student debt.

The probable cuts come on top of increased economic stress for those in charge of posterity. As the 2012 National Child and Youth Well-Being Index Report published by the Foundation for Child Development documents, the percentage of children living in families below the poverty line has increased over the last decade to 21.4 percent in 2011 from 15.6 percent in 2001.

More than a third of African-American and Hispanic children were living in poverty in 2011.

The median income of families with children up to 18 years old has declined significantly — more than $6,000 in inflation-adjusted dollars — over the same time period. Parents are less likely to be securely employed than they were in 2001 and more susceptible to unemployment and involuntary part-time work.

Investments in the early education of young children, widely considered to offer a high social and economic payback, are declining. After steady growth in the 1990s, the percentage of 3- and 4-year-olds enrolled in prekindergarten programs has failed to grow significantly for the last 10 years.

The number of children enrolled dwindled in 12 states, including Arizona, which dropped state support for its program. Four states (Michigan, Minnesota, Missouri and Ohio) enrolled a smaller percentage of 4-year-olds than a decade ago.

Inflation-adjusted state spending on prekindergarten declined in 2010-11 for the first time ever. Inflation-adjusted spending per child also declined; partly as a result, several programs lost ground on quality standards (as monitored by site visits).

A new report by Legal Momentum comparing single-parent families in the United States with those in 16 other high-income countries finds that the American families are more vulnerable to poverty despite putting in longer hours of market work.

In other words, lack of effort to find paying jobs doesn’t explain their plight. Rather, the jobs they find pay poorly, and lack of access to child care and sick leave makes it difficult for them to hold onto a good job when they find one.

The level of social assistance for single parents (primarily through Temporary Assistance to Needy Families and the Supplemental Nutrition Assistance Program) varies from state to state in the United States but is consistently lower everywhere than in any of the comparison countries but for Spain.

But while policies in many European countries are far more generous than those in the United States, they too are being crimped by austerity measures. A new report from Eurochild, an organization promoting the welfare and rights of children and young people, points to their growing vulnerability to cuts in social spending.

One could make the case that our increasingly elderly voting population is worried more about its own economic future than that of the next generation. But it’s not clear that voters have a clear picture of the intergenerational impact of public spending, as neither political leaders nor academic researchers have laid this out in clear detail.

One thing is clear. Austerity that leads to reduced investments in children will reduce posterity’s prosperity.

Article source: http://economix.blogs.nytimes.com/2012/12/24/austerity-for-posterity/?partner=rss&emc=rss

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Economix Blog: Nancy Folbre: A Real Right to Work

December 17, 2012 by Leave a Comment

Nancy Folbre, economist at the University of Massachusetts, Amherst.

Nancy Folbre is an economics professor at the University of Massachusetts, Amherst. She recently edited and contributed to “For Love and Money: Care Provision in the United States.”

All Americans willing and able to work have a right to paid employment. If the private sector can’t generate sufficient jobs, the public sector should provide them.

Today’s Economist

Perspectives from expert contributors.

This definition of “right to work” obviously differs from the one that Republican legislators in Michigan deployed when they passed a new law absolving workers from the responsibility of paying union fees even if they gain contract benefits from them. But perhaps their actions will dramatize the need to challenge their framing and reclaim the genuine meaning of the phrase.

Most of us live in a world in which paid employment is the only avenue to economic self-sufficiency. Without it, families maintained by working-age adults are largely dependent on the kindness of strangers, otherwise known as extended unemployment insurance and food stamps. Yet, for more than four years, this nation has tolerated levels of unemployment that have essentially made it impossible for most of those seeking paid employment to find it, with a ratio of unemployed workers to job openings of more than three to one.

Some Republicans have long insisted that many of the jobless, relaxing in a billowy social safety net, simply aren’t trying hard enough to find a job. My fellow Economix contributor Casey Mulligan makes a similar argument when he contends that the poverty rate should have risen ­between 2007 and 2011, but didn’t ­because public assistance was neutralizing the effect of job loss and undermining incentives to work.


But Shawn Fremstad of the Center for Economic Policy and Research challenges that methodology, pointing to measurements showing that the poverty rate did rise significantly among working-age adults over this period.

Further, increased unemployment contributed to economic stress across most of the social spectrum, not just among the poor and near poor. Between 2007 and 2011, average household income declined in all four bottom quintiles.

Expansion of unemployment insurance and means-tested benefits are not the best solution to persistently high unemployment. As John Stuart Mill emphasized many years ago, those who are capable of supporting themselves should not rely on the habitual aid of others. But Mill went on to explain why such aid is sometimes necessary:

Energy and self-dependence are, however, liable to be impaired by the absence of help, as well as by its excess. It is even more fatal to exertion to have no hope of succeeding by it, than to be assured of succeeding without it. When the condition of any one is so disastrous that his energies are paralyzed by discouragement, assistance is a tonic, not a sedative: it braces instead of deadening the active faculties.

Paralysis by discouragement is a pretty good description of a growing segment of the United States population. In general, the higher the unemployment rate in a state, the higher the percentage of discouraged workers (those who did not search for work in the previous four weeks, for the specific reason that they believed no jobs were available for them) and the higher the percentage of marginally attached workers (those who did not search for work in the previous four weeks, for any reason).

Labor force participation has declined significantly since the last recession began, especially among less-educated men.

The best way to encourage American workers, increase family income and reduce public spending on unemployment insurance and food stamps is to create more jobs. The simplest way to create more jobs is to increase public-sector employment. The federal government could also invest in programs to encourage small businesses to hire workers to improve our aging physical infrastructure (including roads and bridges), our social infrastructure (including early childhood education and home services for the elderly) and our environmental sustainability (including improved energy efficiency and installation of the solar voltaic technologies that Germany now heavily relies upon).

All these investments offer a high social rate of return that private businesses can’t easily capture on their own.

By contrast, there is no evidence that lower tax rates for the rich promote either job creation or economic growth (a detailed study on this topic by the Congressional Research Service was withdrawn as a direct result of Republican protest).

President Obama and Congressional Democrats have called for more stimulus spending aimed at job creation, only to meet tremendous opposition from Republicans. Preoccupation with deficit reduction has crowded out discussion of job creation. Public employment grew steadily during the previous Bush administration. During the Obama administration, however, it has significantly declined.

Now, it appears that any remaining concern with job creation may be thrown over the fiscal cliff.

The next time someone with a comfortable paycheck tells you that American workers no longer have a work ethic, please explain to them that right now, there’s not enough paid work to go around.

Which is why we should fight for a real right to work.

Article source: http://economix.blogs.nytimes.com/2012/12/17/a-real-right-to-work/?partner=rss&emc=rss

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