Robin Hanson's Call for Empirical Research
By David Henderson
UPDATE BELOW: Robin Hanson responds.
On November 21, Robin Hanson wrote a piece misleadingly titled “Imagine Libertopia.” I say “misleadingly” because he’s actually calling on libertarians to do less imagining and more empirical research. It’s excellent. I’m posting about it on this late date because November 21 was my birthday, and not just any birthday, but the one that the Beatles celebrated in this song. So I decided not to post that day.
Back to Hanson. His post makes some very good points. In fact, it reminds me of George Stigler’s plea to his fellow economists in his 1964 Presidential Address to the American Economics Association. Stigler argued that we shouldn’t keep addressing issues of government and regulation at the theoretical level, but, instead, should get our hands dirty by looking at the data. Here’s what I wrote about that speech in my bio of Stigler:
“The economic role of the state,” he said, “has managed to hold the attention of scholars for over two centuries without arousing their curiosity.” Stigler added, “Economists have refused either to leave the problem alone or to work on it.”
That is so George.
Back to Robin, who makes the same point in his piece. Now, the reality is that after Stigler’s speech, many economists did look more at the data and the data tended to show that the free market and economic freedom work better than government control. But Robin is not satisfied. There is more to be done, he says, and he’s right. Here’s a key excerpt:
On reflection, I realize that when I try to imagine more liberty, I mostly draw on a limited set of iconic comparisons, such as comparing airlines, trucks, and phones before and after US deregulation, or comparing public to private schools and mail in the US. Alas, we and our audiences should worry that we cherry-pick such examples to support conclusions we like.
We should be able to do much better than this. By now there are vast literatures discussing many industries in many places before and after regulation or deregulation, and describing specific times and places where certain products and services provided directly by governments, or provided privately. From this vast literature we should be able to identify many concrete patterns and “stylized facts” about how government-provision and heavy-regulation tends to change products and services.
I recall these suggestions for typical features of industries with more liberty:
Less “gold-plating” in materials and methods
More product variety, including more low quality versions
Faster innovation and product cycles
Fewer guarantees to workers or customers
Price, features vary more with customer features
Workers have less school and seniority
Less overhead spend [sic] on paperwork
What should be done? Robin writes:
Some people should work to extract patterns like these from our vast related literatures – I’ve looked, and there just aren’t many such summaries today. With such patterns in hand, we would be in a much better position to credibly describe how familiar products and services would concretely change if we were to provide them privately, or to regulate them less. And such credible concrete descriptions might allow many more people to become comfortable with endorsing such expansions of liberty.
Who should do this research? Robin has an answer there too:
This sort of project seems well within the abilities of the median grad student. It doesn’t require great creativity or technical skills. Instead, it just requires methodically surveying and summarizing related literatures. Perhaps some libertarian students should shy away from it in hopes of impressing via more difficult methods. But surely there must be other students for which this sort of project is a good match.
Of course, it’s not all or nothing. One of my favorite books, that does a lot of what Hanson is calling for, is Steven Rhoads, The Economist’s View of the World. In the 1990s, when I taught a special economics course for Operations Research students, I used it as one of the textbooks, with excellent results. (How do I know the results were excellent? The understanding they showed in in-class timed exams and comments like this from one of the students: “OK, professor, we get it. We’re all committed marginalists.”)
I do have one main criticism of Robin’s post. He writes:
When libertarians do focus on data, they tend to be very broad, or randomly specific. That is, they talk about how West Germany is better than East Germany, or South Korea better than North Korea. Or they pick on very specific examples, like regulations limiting eyeglass ads, and leave audiences wondering how cherry-picked are such examples.
Robin’s criticism here is not completely unjustified. If it were unjustified, I wouldn’t be bothering to highlight his post. It’s the West/East Germany and the South/North Korea comparisons that I want to defend. With all the variables that could affect economic growth, think about how hard it is to know what some of the most important factors are. After I commissioned a piece by Kevin Grier on the empirics of economic growth for The Concise Encyclopedia of Economics, I was surprised by how little we could say, compared to my priors. But even Kevin pointed out the stark contrast between those two pairs of countries and what that said about some economic freedom versus harsh totalitarianism. I elaborated on this theme in a sidebar that I wrote to go along with his article. (Scroll down to the bottom of the article.) Here’s the opening paragraph of my short piece:
Economists have great difficulty determining the factors that can be shown, empirically, to affect economic growth. Many factors–economic policy, starting point, culture, and climate–can matter. So when nature presents us with experiments that are as close to laboratory experiments as we are likely to get, we should pay attention. Two such “experiments” have appeared in the last sixty years: North and South Korea and East and West Germany.
UPDATE: Robin Hanson responds civilly, something that is always refreshing on the Web. Robin writes:
I very much agree that those nation pairs make very useful comparisons; sorry that what I wrote could mislead on that point. These comparisons do indeed suggest that “some freedom” is better than “harsh totalitarianism”, and they are good data-points on which to base stylized facts on the general effects of more liberty. Their main limitations are that they don’t say much directly about the effects of a lot more liberty than is found in West Germany or South Korea. To imagine even more liberty, we need those stylized facts.
I agree with Robin.