Saturday, April 17, 2010

Larry Summers Shows the Real Purpose of Education

To persuade.

Larry Summers has two Nobel laureates as uncles (Samuelson and Arrow). He was an economics prodigy, getting tenure at Harvard before he was 30. He is about as smart and educated as one can be.

And so now, the Wall Street Journal outlines his sell-out to the Obama machine. Summer's specialty, if anything, was labor economics (here's Summers' take). He did a couple papers, noting the well-documented fact that increasing unemployment insurance increases unemployment spells--if you pay for something, you get more of it. It makes obvious sense, it wasn't a surprising result, and no one disputes it.

So, how does Summers explain why now he thinks an increase in unemployment insurance will decrease unemployment? Well, a partial derivative is not necessarily the same sign as the total derivative. In theory, they could be different. In practice, they rarely are, and extraordinary claims require extra-ordinary evidence. But the benefit of a PhD in economics is you can rationalize this stretch much more efficiently than others. Anyway, Summers now argues that unemployment benefit increases will reduce unemployment through the fact that now, we are not at full employment, so the fiscal multiplier is especially strong. I have never lived during a period when we were at full employment, which Summers defines as ' where nearly every person who wants a job is able to obtain one'. I guess their earlier work was in some fantasy world of full employment, and in real life all that research is irrelevant, which I'm sure was not mentioned in those articles. Summers's casuistry highlights that ultimately, scientists are not far different than mercenary lawyers, articulate advocates arguing for a greater good.

Summers already demonstrated his lack of integrity in the gender-science hullabaloo, where he at listed among several explanations for the lack of female scientists that women could be less scientifically oriented in some natural way (motivation, analytics). He then cowardly backtracked, and got his deserved punishment, showing himself no friend of either PC leftists or those who think the hypothesis is legitimate.

It's good to know more, but don't think that the primary reason people become scientists is to find truths, but rather, to fortify their egalitarian or libertarian prejudices. Not all, but most.


Brian Hewes said...

I believe both Rob Hanson and your "favorite" Taleb talk about how education or thought is not primarily used for finding truth, but used to support status or other prejudices. From Taleb - "At the Harvard Symposium for Hard Problems in Social Science, Emily Oster presented a very simple, elementary problem: almost all people with type-2 diabetes can be cured by losing a little bit of weight. They are made aware of it, yet they usually gain weight after diagnosis. It is so obvious that we know what to do yet do not carry the action because thinking can be largely ornamental. The proof of the sterility of (a significant class of) knowledge was right there (among the obvious evidence that population has been gaining weight in spire of technological and educational progress). Yet the others social scientists kept exalting the value of "education" in spite of this simple devastating evidence. Someone even suggested teaching more "critical thinking". This is the great sucker problem: people who teach truly think that teaching, or, worse, preaching, cures."

As an anecdote I live in Boulder, CO. We have the highest educational attainment per capita in the nation. Is any of this used to find truth? Not really for most people it is status seeking or used to spread the gospel of rich white liberalism. Truth or the search for truth is seldom mentioned.

Michael F. Martin said...

I agree with your characterization of academics, but it's important to mention the mechanism. The road to tenure is long and hard, and truth-seekers are often casualties. But that's not all a bad thing. Not everybody cam be original all the time. This is an especially important point for you, Eric, since your ideas are so forward-looking and unorthodox: each field has a limited capacity to incorporate new ideas within a given window of time. That capacity narrows and widens in different same-width windows; but it is always a limit on creativity in the field.

Simply put, we need most people to b followers rather than leaders, most of the time. If we could live it out, few of us would enjoy life amidst a cacophony of independent thinkers. (Although the few of us who would, ironically, would be the most worthy of following.)

Brian Hewes said...

@Michael I don't know if truth seeking and coming up with an original idea is the same thing. Would not climbing up the Mountain of an already known truth thus expanding the known truth still be truth seeking?

Michael F. Martin said...

I didn't mean to say they are the same. But the same mechanism seems to discourage both, and discouraging creativity isn't all bad.

Sometimes you take a hit for the team. I don't see Summers's behavior in this case as intellectually dishonest, but politically expedient. If he were still a tenure academic, I'd read it much differently.

Brian Hewes said...

@Michael have you read Robin Hanson's The Myth of Creativity?

Michael F. Martin said...

Hadn't seen it, but that's the ticket.

Anonymous said...

I'm confused. Is Summers an economist or a scientist? Economists may think economics is a science, but scientists don't.

Anonymous said...

and furthermore, in the spirit of your last blog entry, you're using an anecdote to make a general point. This is not evidence of anything other than one person's behaviour.

Eric Falkenstein said...

It's a blog post, not a book or journal article. I make observations using anecdotes that I think are general. That's blogging.

Pete S said...

Effect 1) Fiscal stimulus may, or may not, be an efficient way to create jobs. That said, economists would agree that, in an economy with high unemployment (relative to average levels) fiscal stimulus does create jobs.
Effect 2) An increase in the level, or duration of, unemployment benefits would have the greatest effect when it is relatively easy to find a job. But if it is difficult to find a job, we would expect this effect to be much smaller.
Eric: Are you saying that, under all conditions, Effect 2 dominates Effect 1? Doesn't there have to be a point where unemployment is so high, and finding a job is so difficult, that a change in benefits has a negligible effect on job seeking behavior? In that situation, wouldn't all that we are left with is the effect of the fiscal stimulus?

Anonymous said...

hey, no worse than christina romer and her volte face on fiscal multipliers.

Anonymous #5 said...

Summers writes:

In the wake of the worst economic crisis in eight decades, at a time when eight million Americans have lost their jobs in the previous two years, there can be no doubt that the overwhelming cause of unemployment is economic distress, not the existence of unemployment insurance.

This is the crux of the matter. This is a very old debate; conservatives believe that unemployment is caused by wage rigidity that prevents the labor market from efficiently clearing, and so government interventions like unemployment insurance can only have adverse effects.

Contrary to what you suggest, Summers has never belonged to this school of thought. Furthermore, you portray "economic science" as being committed to this explanation of unemployment, and that only biased ideological partisan politics and "the Obama machine" steer economists away from this truth. To call this misleading would be an understatement.

Anyway, glad to see Robin Hanson's name appear in the comment section. A one-trick pony ("let's reduce morally-tinged social phenomena X to amoral selfish status-seeking") who never seems to get around to applying this trick to himself.

Drewfus said...

@Pete S
...economists would agree that, in an economy with high unemployment (relative to average levels) fiscal stimulus does create jobs.

Economists can do all the agreeing they like, but what they can't do legitimately is to make comments that presume an outcome - especially a politically preferred outcome - like, "fiscal stimulus creates jobs".

One might hypothesize that "fiscal deficits create jobs (in times of high unemployment), but the term 'stimulus' implies that the policy is effective, not because this has been found to be the case via scientific investigation, but by definition. That is not science, it's word games.

Fiscal deficit does not necessarily equal fiscal stimulus, no matter how many economists 'agree' otherwise.

Drewfus said...

@Anonymous #5
Robin Hanson a one-trick pony? So what would suggest is the average trick-rate for ponies?

For liberal ponies, there is but one trick shared by the entire crowd - that being that all social problems defined can be eliminated, just as long as we spend enough public money and give enough power to government bureaucrats. 'We', in this context, is of course just a euphemism for government.

"Yes, the government can", - sums-up liberalism perfectly.

Anonymous said...

Nice blog post.

Seems the debaters here want to argue over fiscal policy (again), when you clearly blogged on Summer's obvious hypocrisy, a different topic as one can find him so no matter which "Summers" you agree with on policy.

Someone should explain the point again.