Two Interesting Questions
By Arnold Kling
1. David Warsh writes about a project in which economists were asked to come up with a long-term research agenda in economics. It appears to me that the suggestions are heavily weighted toward technocratic thinking. If anyone had asked me, I would have proposed an agenda of an audit of past exercises in technocratic policy. What were the intended results? What were the actual results? What were the unintended consequences?
2. Tyler Cowen asked the question of what one is optimistic about and what one is pessimistic about.
I am optimistic about technological change. For example, my guess is that we are very close to reaching the point where computers can grade tests with essay questions. We are close to the point where thousands of students can be taught for about the same cost as a class of one hundred students. That is a big deal. And I believe that there are equally big deals pending in some other fields.
I am pessimistic about ideological gridlock. Recently, a friend sent me a link to an anti-market screed that he had recently heard and asked me to comment. All I could say was that the speaker and I disagree, and neither of us is likely to change the other one’s mind.
As an indicator of this gridlock, I give you the left’s rush to the defense of the energy department loan guarantee program. See, for example James Surowiecki, as linked to (presumably approvingly) by Mark Thoma. Ten years ago, center-left economists would have been highly critical of government making loan guarantees to particular firms. They would have argued instead for general subsidies for long-term research or for carbon taxes. What would have been considered indefensible ten years ago is considered necessary to defend today. (Not by everyone. The Washington Post editorial page takes this more traditional center-left approach)
The way I look at it, advocates of centralized, technocratic management respond to every failure by demanding more power for technocrats. Those of us who are opposed are equally committed to our point of view. Most of the cries for compromise or for bipartisanship strike me as calls for my side to surrender.
I think that underneath this gridlock is a battle for status. I think that the peak years for status for technocrats were the 1940s through the 1960s. Since then, I see a trend toward technocrats experiencing (but becoming less willing to acknowledge) failures and loss of popularity.
In the 1970s, the technocrats who supported wage and price controls as a solution to inflation admitted their mistake. If such a failure were to take place today, I do not think that it would be acknowledged. The technocrats’ grip on status is more tenuous today, which means that they feel that they have less margin to be generous with those of us on the other side.
I do not see a mutually acceptable solution emerging.Here are some more notes on the economists’ proposals for a research agenda.
James Heckman suggests that noncognitive traits are important for skill formation. (I think of conscientiousness, for example.) He suggests that these traits can be improved, particularly later in life, but the methods for doing so need to be discovered.
Here is the abstract of David Cutler’s paper.
I propose as a central question for the social and behavioral sciences the following topic: why do people and institutions not do things that are so obviously in their self-interest, even when they want to do so? We have numerous examples of this phenomenon, from individual behavior such as seatbelt use and medication adherence, to firm outcomes such as quality improvement or cost reduction. The ability to encourage what people know to be right is central in many policy debates, including the recent health reform discussion in the United States. I indicate three lines of inquiry as promising in understanding this question: characterizing the motivation of individuals; understanding group decision-making; and undertaking interventions.
Cutler and I are in very different places on this. He thinks that with the right interventions by central planners, people will make better decisions. I take the Hayekian view that learning is largely decentralized.
David Autor and Lawrence Katz look at labor market polarization. They identify two issues. One is that the demand for high-skilled workers has risen relative to the demand for mid-skilled workers. The other is that college attainment rates have stagnated for males. Both of these trends are found in other developed countries. Thus, it is not just the U.S. education system that is unable to increase the college attainment rate of males.