Quantitative and qualitative economics

A post on the Scientific American blog asks, "Is Economics More Like History Than Physics?" I do not think that this is a useful question to ask, in that it implies that we must choose one approach or the other. A much better question is how we might use each kind of approach (historical and scientific), what insights there are to be gained from each, and what pitfalls each presents. This is really a two-sided argument (or perhaps a two-front war): there is nothing inherently wrong with the use of mathematical tools to analyze economic questions, and these methods have generated many valuable insights; but non-mathematical methods may also be useful. 

Where'd that paper go?

Over a year ago, I wrote a paper called "Curbing the Dangers of High-Frequency Trading" and submitted it to the Economists' Voice.  The final acceptance came through in March of 2012.  The official link is here, and an ungated copy is here.  Here is the problem: I didn't know where to find the published version, or even  that it had been published, until this week.

How much research?

This story touches on an issue that has been in the back of my mind for a while: how much of a university's resources, including faculty time, should be dedicated to research rather than teaching.  The value of having faculty engaged in research is often not obvious to students, and even some faculty would prefer to have their evaluation and rewards based solely on teaching.  As I see it, there are two purposes of academic research.  One is that good teaching depends on good thinking, and so teachers need to spend a lot of time and energy thinking about their field.  Research is the most active kind of engagement.  From an extensive study of university professors, Ken Bain finds that the best teachers are all active in their fields in some way.  This is probably obvious to any teacher/researcher.  The point of higher education is not to learn things from people who learned those things from other people for the purpose of teaching them.  The other benefit is that research is a kind of public good, with potentially widespread effects.  Every idea in every undergraduate textbook was once a piece of research that was known to and understood by very few, and these ideas have benefits far beyond the universities themselves.

I believe in the value of research in both senses, and I think that some colleges and universities do not support research enough; but I also suspect that research-oriented universities are too focused on research.  Although it would be extraordinarily difficult to measure, I would guess that the marginal benefit of research is fairly sharply declining, in both senses.  For the teaching part, doing lots of research rather than some research just isn't that beneficial.  (Frances Woolley says that research is a signal: i.e. that professors do research to demonstrate their intellectual quality.  I think this explanation is a little thin.  If you simply want to use research as this kind of measure, you don’t have to do lots and lots of it.  Quantity of output would be one dimension of the quality of a researcher, but it wouldn't be hard to focus on other measures that would minimize costs.)  It is more difficult to evaluate the question of what resources to devote to research for the sake of public knowledge.  The benefits of research are stochastic and may not become apparent until well after a project is completed.  Again, however, there has to be a declining marginal benefit: researchers will focus on their most promising projects first, and the projects that seem most promising ex ante will, on average, be the most fruitful ex post.  (There is also the question of whether tomorrow's knowledge is coming at a cost to today's students, and the more fundamental question of to what extent public universities are even intended to serve students' interests.)

Given the difficulty in assessing the benefits of research in any precise way, here is another way to consider the question.  Academic researchers (and administrators, most of whom are formerly active researchers) are influential in deciding how university resources are allocated.  Academics like doing research, and many of them only tolerate teaching as a necessary burden that comes with the research job.  Even those who don't actively dislike teaching would like to minimize their teaching loads.  If these same people have enough influence, there is no reason to think that resources are being allocated in a way that balances all the costs and benefits.  Personally, I think that a 2-2 course load is about right for an active researcher.  I think it would also be reasonable for universities to take a broad view of what kinds of intellectual activities are valuable for faculty members to engage in (like blogging!), although issues arise in evaluating anything other than traditional research.

What bothered me about the article was that some of the people quoted in it talk about university research as if it is a yes or no proposition--not acknowledging the difference between turning the University of Texas into a "downmarket trade school" and simply placing less emphasis on research--or talk about its benefits without consideration of the costs.

Data data data

David Brooks comments:

If you asked me to describe the rising philosophy of the day, I’d say it is data-ism. We now have the ability to gather huge amounts of data. This ability seems to carry with it certain cultural assumptions — that everything that can be measured should be measured; that data is a transparent and reliable lens that allows us to filter out emotionalism and ideology; that data will help us do remarkable things — like foretell the future.

Brooks goes on to give examples of the valuable insights that data analysis can give us.  The means we have of gathering and analyzing data are indeed very impressive.  I think there is a potential problem, which one might call "data worship," a more extreme version of Brooks's "data-ism": quantifiable data is often seen as the only valid way of answering any question, and I sometimes think that natural or social scientists view questions that are not amenable to quantitative analysis as not worth asking.  Just an impression--I've never heard that expressed explicitly.