Tuesday, January 01, 2008

Richard Florida and David Brooks have a point


NYTimes columnist David Brooks says it's important for people who write about events and politics to talk with people actually doing this stuff. Harvard economist and former Bush adviser, Greg Mankiw says economists need to take this advice seriously.

Many economists who write about policy rarely, if ever, encounter actual policymakers. Instead, they prefer to sit in the comfort of their ivory tower offices. (I know I do.) I wonder how different the economics profession would be if economists were expected to do a year of service outside of academia or, at the very least, if hiring committees rewarded a year of real-world experience as the equivalent of, say, a couple of academic publications. My conjecture is that the profession would be less creative but more useful.

I think it's a great New Year's resolution for social scientists across the board.Too many academics actually disdain talking to and engaging with people in the real world. Trust me, I've borne the brunt of it.

I disagree with Mankiw on the "creative" part. Economics and social science would benefit enormously on the creative side from more real world exposure and interaction. Carnegie Mellon Nobelist, Herbert Simon long said that talking with people was one of the more efficient routes to fundamentally new ideas. His theory of bounded rationality came out of his studies of actual decision-making. He liked to say creative insight comes from inductive research, as opposed to deductive research. Jane Jacobs told me the same thing: Talk to people, observe. Her theory of urbanism and economic growth was built from actually observing her neighborhood and people interacting in cities.

I have issues with them both on other matters, but I think they nail it here. My 15 months at Freddie Mac helped me develop insights for both teaching and research that I never would have received in the absence of the experience. And I am currently working on a presidential campaign where I am learning how I must persuade (rather than lecture)a group of smart people who come at issues from a different perspective from my own. And World Bank consulting has been among the most satisfying and edifying thing I have ever done professionally, even though it brings along with it its own frustrations. The point is that professors need to get out of their rooms if they really want to influence the world.


Acad Ronin said...

I agree with you (and disagree with Mankiw) re creativity. You might find the following letter of mine in The Economists' Voice relevant. http://www.bepress.com/ev/vol4/iss2/art6 Observation may (if one is fortunate) lead to puzzlement, which may lead to a hypothesis that then requires testing. Because "There is more to heaven and earth than is dreamed of in all your philosophies...", one is more likely to find a fruitful puzzle through observation in the world than in one's office.

Anonymous said...

Am very curious to hear your thoughts about why the federal govt. stopped reporting M3. The official line is that it's not particularly informative, and that it's expensive to collect the info.
Do you think that a factor might have been the extent to which they were using "repos" that involved mortgage backed securities? Was this increasing?

Anonymous said...

I think I answered part of my own question regarding repurchase agreements. From the fed website, repos as a percent of total reserves was about 0.1% back in the mid 90's. The last report has it at about 4.4%. Why, or if this is significant, is of course another matter altogether :)

Since we don't have the M3 numbers anymore (directly) it would be interesting to see what percentage repos represent as a portion of total money supply.

Sincerely, A. Nony Mouse