Sins of Omission and the Practice of Economics

George A. Akerlof1

Abstract Thispaperadvancesthepropositionthateconomics,asadiscipline,givesrewardsthatfavorthe“Hard”anddisfavorthe“Soft.”Suchbiasleadseconomicresearchtoignoreimportanttopicsandproblemsthataredifficulttoapproachina“Hard”way—therebyresultingin"sinsofomission."Thispaperarguesforre-examinationofcurrentinstitutionsforpublicationandpromotionineconomics—asitalsoarguesforgreatlyincreasedtoleranceinnormsforpublicationandpromotion,asonewayofalleviatingnarrowmethodologicalbiases.

1GeorgetownUniversity:gaa53@georgetown.edu.ThispaperisbasedonworkwithPascalMichaillat,assummarizedinourjointpaper,G.AkerlofandMichaillat(2018).IamespeciallyindebtedtoRobertAkerlofandalsotoGlennEllison,HuiTong,RobertJohnsonandmyfellowpanelists(JamesHeckman(organizer),AngusDeaton,DrewFudenbergandLarsHansen)attheprecursorAmericanEconomicAssociationsession,“PublishingandPromotioninEconomics:TheCurseoftheTopFive?”inJanuary2017.TheCanadianInstituteforAdvancedResearchhasprovidedinvaluablefinancialsupport.

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1.Introduction

Thisarticledrawsadistinctionbetween“Hard”and“Soft.”Itadvancesthepropositionthat

economics,asadiscipline,givesrewardsthatarebiasedinfavorofthe“Hard”andagainstthe“Soft.”

Thisbiasleadsto“sinsofomission":inwhicheconomicresearchignoresimportanttopicsand

problemswhentheyaredifficulttoapproachina“Hard”way.Itrecommendsare-examinationofthe

institutionsofpublicationandpromotionoftheeconomicsprofession.

2.HardandSoft

SinceAugusteComte(1853),ithasbeencommontoclassifysciencesaccordingtoaHard-Soft

hierarchy,withphysicsatthetop,andsociology,culturalanthropology,andhistoryatthebottom.2

Thisclassificationrelatestoprecision;anditcanbeappliedtosubfieldsaswellaswhole

disciplines.3Considerempiricalmethodologieswithineconomics.Quantitative—asopposedto

qualitative—analysisisonedimensionofbeingHarder.And,withinquantification,causalstatements

aremoreprecisethanthosethatonlyconcerncorrelation.Hence,empiricalworkthatfocuseson

identificationisconsideredespecially“Hard.”Economictheoryis“Harder"whenitisexpressedin

mathematicalmodelsratherthaninwords;andmathematicalmodelsareconsideredHarderwhenthe

mathcapturesfundamentalunderlyingideas/conceptsmoreprecisely.

2SeeCole(1983).3SeeSmithetal(2000).

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3.SinsofOmission:AModel

Thissectionpresentsasimplemodelof"sinsofomission"inthespiritofEllison(2002b).

Anacademicresearcherselectsfromasetofpossibleresearchtopics.Thesetopicscan

becharacterizedalongtwodimensions:(1)Hardness(i.e.,theeaseordifficultyofproducing

preciseworkonthetopic)and(2)Importance.4

TheresearchervaluesbothHardnessandImportance;buttheweightheplaceson

HardnessleadshimtotradeoffHardnessandImportanceinasociallynon-optimalway.Inthis

sense,heisbiased.(Wewilldiscussthereasonsforsuchbiaspresentlybut,fornow,takeitas

given.)

Figure1depictsthesolutiontotheresearcher’sproblem.Whiletheresearcherchooses

atopiclyingalongthe“frontier,”thefrontiertopichechoosesdiffersfromthesocialoptimum.

Hischosentopic(TopicA)isbothHarderandlessImportantthanthesocialoptimum(TopicB).

Ifweaggregateacrossallresearchers,weobtainapredictionaboutthe“cloud”of

topicstheprofessionwilladdress.ObservethattherewillbeasetofImportantbutSofttopics

whichwillnotbepursued;inthissense,biastowardstheHardintheprofessiongenerates“sins

ofomission.”

4 InEllison'smodel(2002b),researchersfaceatradeoffbetweeninvestingintheq-qualityoftheirresearch(whichisequivalenttoImportance)andther-qualityoftheirresearch(whichisequivalenttoHardness).Ellisonarguesthatdifferentnormsmayprevailintheprofessionwhichplacedifferentweightsonq-andr-quality.

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Figure1

Trade-offbetweenHardandSoftwithchoiceoftopicsonfrontieraccordingtomaximizationofindividualutilityatPointA,andaccordingtomaximizationofsocialwelfareatPointB.

4.ReasonsforBiasTowardsHard

Thequestionremains:whydoeconomistshaveHardnessbias?Isuggestthreepossible

reasons,whichalso,atleastpartially,explainwhythisbiashasbecomestrongerovertime.

Reason1:PlaceintheScientificHierarchy.Intheirarticle“TheSuperiorityof

Economists,”Fourcade,OllionandAlgan(2015)arguethateconomists"seethemselvesator

nearthetopofthepeckingorderamongthesocialscientists."5Economiststakegreatpridein

theirviewoftheirdisciplineas"themostscientificofthesocialsciences,"andtheylookdown

uponsociologistsandpoliticalscientistsfortheir"lesspowerfulanalyticaltools."6Thisdesire

forplaceinthepeckingorder,Iwouldargue,isaleadingmotiveforHardnessbias.

Reason2:TheEvaluationProcess.Rewardssuchasjournalacceptancesaregenerallymeted

outbycommittees(inthecaseofjournals,thecommitteesconsistofeditorsandreferees).When

rewardsarescarce,obtainingthemrequiresthatmost/allcommitteemembersconsent.

Precisionisarelativelywell-definedconcept;hence,itiseasyforpeopletoagreeregardingthe

Hardness/Softnessofresearch.Incontrast,Importanceisfuzzy,sothatitisrelativelyeasytodisagree

5Asslightlyparaphrasedandrearrangedfromtheoriginal.Thephrase"seethemselves"wasitalicizedintheoriginal.6AlsoquotedbyFourcade,OllionandAlgan(2015)fromFreeman(1999,p.141).

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regardingitsImportance.ThistendencyfordisagreementonImportanceisexacerbatedbytendencies

toinflatetheImportanceofone’sownworkanddeflatetheImportanceofothers’.

TheimplicationisthatevaluationsbycommitteeswillbebiasedtowardtheHard.

Furthermore,thescarcertherewards,thegreateristhelikelihoodofsuchbias.

Reason3:SelectionintotheProfession.Academicsarenotallthesame.Thegreaterthe

biastowardstheHardintheprofession,thegreaterwillbeselectionintoitofthosewith

intrinsictastesinthatdirection.Indicativeofsuchselection,Mankiw(2006)hasadvised

prospectiveapplicantstoeconomicsPhDprogramsto"takemathematicsuntilithurts."But,

Mankiwgentlyaddedthatinhisopinionthesestandardsaretoostrict;ifhewereamemberof

theadmissionscommittee,he"mightarguewith[his]colleagues'...excessive[sic]fondnessof

mathematics."7

Justasrewardsaffectselection,sotoodoesthemixoftypeswithintheprofession

affectrewards.WhenHardtypesareprevalent,theyoccupymoreoftheprofession’spowerful

positions(suchasjournaleditorships).Fromtheseprominentpositions,theybiasrewards:for

instance,byselectingHarderarticlesforpublication.Ofcourse,thesamebiaswillaffect

promotions.8

7 Mankiw(2006). 8 Twopapers—onebyBrockandDurlauf(1999),theotherbymyselfandPascalMichaillat(AkerlofandMichaillat(2018))—showthatbeliefsinascientificfieldwillconvergeifitspractitionershaveadesireforconformity.InBrockandDurlauf,scientistscontinuallyadjusttheirbeliefstoreducethedistancebetweentheirthinkingandthebeliefsofothers.InAkerlofandMichaillat,evaluatorsofcandidatesfortenurearebiasedinfavorofthosewithsimilarbeliefsandalso againstthosewithdifferentbeliefs. Inbothcases,thebeliefsconverge.Furthermore,thatconvergencewillnotnecessarilybetotheTruth(ortobestpractice).Onthecontrary,becauseofReason1(theroleofHardnessinthescientificpeckingorder)andReason2(itsfacilitationofagreement),followingfromthecomparativestaticsofequilibriuminAkerlofandMichaillat,thoseuniformbeliefsarelikelytohaveHardnessbiasinturn.

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OnereasontheprofessionseemstohavegottenHarderinrecentyearsisanegativefeedback

loop.BiasedrewardshavecausedtheprofessiontointrinsicallyvalueHardnessmore;theintrinsic

valueplacedonHardnesshasledtomorebiasedrewards.

5.SomeConsequencesofHardnessBias

ThissectionexploresthreeconsequencesofHardnessbias.

Consequence1.BiasagainstNewIdeas.Sofar,wehaveclassifiedtopicsaccordingtotheir

“Importance”andtheir“Hardness.”AnotherrelevantdimensioniswhethertopicsareNeworOld—or,

inKuhn’s(2012)terminology,whethertheyentail“normal"or“revolutionary”science.NotallNew

topicsareImportant;but,clearly,themostImportanttopicsareNew.Hardnessbiasinhibits

acceptanceofNewtopicsinatleasttwodifferentways.

First,Oldtopics/paradigmshaveavarietyoftoolsthataidprecision:suchasestablished

terminologies,conceptualframeworks,andempiricalmethodologies.WithbiastowardtheHard,

academicsworkingwithinsuchacceptedparadigmshaveanadvantage,sincetheycanborrowatwill

fromsuchtoolkitstostatetheirideasprecisely.Incontrast,thosewhoarepresentingaNewidea,are

disadvantaged,sincetheymustdeveloptheirowntools.AsexpressedbyFrey(2003,p.212)):"anew

ideaislesswell-formulatedthan...well-establishedideasandthereforerejectedforlackofrigor."In

thisway,demandforprecision(forHardness)impedestheintroductionofNewideas.

ThesetheoreticalfindingsofbeliefconvergenceunderrathergeneralconditionsaccordwithKuhn's(2012)viewthatscientistsbasetheirworkoncommonly-heldparadigms.Thoseparadigmsdonotjustpertaintosubjectmatter;theyinclude,aswell,beliefsaboutappropriatemethodologyfortherespectivefield.

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Second,Hardnessbiasreducestheabilitytochallengeexistingparadigms.Accordingtousual

procedureineconomics,asinsciencemoregenerally,Oldideasareonlyrejectedwhentheyareshown

tobeinferiorintestsagainstNewideas.SinceFriedman(1951)’sclassicessay,ithasbecomeall-but-

uncontestablethatnewtheoriesneedtogeneratetestablepredictions.Thisbeliefmayseem

innocuous;but,inpointoffact,itinvolvesrejectingSoftertestsoftheories,suchasthosewhich

evaluatemodelsbaseduponthequalityoftheirassumptionsaswellasthequalityoftheirconclusions.

Itespeciallyentailsexclusionofevidencefromcasestudies,whosedetailedevidencecanbehighly

informativeregardingcontextandmotivation.9WhileHardertestswithstatisticaldatamaybeagold

standard,restrictingthesetofpermissibletestsreduces—perhapsgreatly—theabilitytotesttheories.

Hence,biastowardstheHardmakesustooacceptingofexistingtheoryandinsufficientlywillingtobe

self-criticalasaprofession.

Consequence2.Over-specialization.BiastowardstheHardalsoencouragesover-specialization.

Generalistsneedtomeetthestandardsofprecisionformultiplefields,whilespecialistsneedonly

meetthestandardsofone.Hence,itiseasiertobeHardasaspecialistthanasageneralist.The

greaterthebiastowardstheHard,themorespecializationweshouldseeineconomics.

Indeed,specializationappearstobeincreasinginourfield.10Asonesymptom,

departmentsareincreasinglybalkanizedintosubfields,each,forexample,withitsown

9Fortheadvantagesofcasestudies,seeFlyvbjerg(2006).10 Sobel(2000,2001)hasproposedmodelsinwhichashock"decreaseinstandards"foronegenerationofapromotionchainwillleadtofurtherdeclinesinstandardsinfuturegenerations.ConsiderhowsuchadynamicwouldplayitselfoutwithashockintastestowardHardness(orSpecialization)andagainstImportance.SuchashockinaTime-0generationwillbereflectedinthepromotionsbytheeliteofTime0totheeliteofthenext(Time1)generation.BecauseoftheTime-0shock,thepromotionsbytheTime0-eliteintotheeliteofthenext(Time1)generationwillhaveincreasedbiasintastestowardtheHard/againsttheImportant;likewise,

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respectiveseminarseries.Theproliferationofsubfieldjournalsisanothersymptomofthe

trend.11

Consequence3.Evaluationsbasedonpublicationsin"TopFive.".Aswegaveseen,Hardness

biasresultsinspecialization.That,inturn,resultsinincreaseduseofjournalmetricsforevaluations.

Ineconomics,thishasespeciallytakentheformofevaluationsbasedonnumberof"TopFive"

publications.

Tenure,likemostotherrewardsintheprofession,ismetedoutbycommittees.Asone

approach,tenurecommitteescanevaluatethequalityofcandidates’work.However,discussionsof

candidates’workarelikelytobefraught—especiallywhentheprofessionisbalkanizedintosubfields.

Asalreadyexplained,academicsdisagreeaboutwhatisImportant;andtheretendtobesystematic

differencesofopinionacrosssubfields.

Buttenurecommitteescanfinessesuchdisagreementbyuseof"hard"metrics,ifthosemetrics

arealso—atleastarguably—neutralregardingsubfields.Thusitshouldnotbemuchofasurprisethat

HeckmanandMotan(2017)havefoundthateconomicstenure-and-promotioncommitteeshavegiven

increasingweightto“TopFive”publications(allofwhicharegeneral-interestjournals,with

thesepromotionswillwillalsohaveincreasedbiasinperformance,towardtheHard/againsttheImportant.Butthen,whentheTime1elitemaketheirpromotions,bothofthosebiases—intastesandinperformance—willbereflectedintheirpromotionstotheeliteofTime2:first,becauseofTime1'sincreasedbiasintastes.Butalso,iftheTime1eliteusesitsownperformanceasareferenceforpromotion,thattoowillresultinincreasedbiastowardtheHard/againsttheImportant.Wecouldimaginesuchasequenceintheprocessofincreasedbiastowardspecialization (whichisoneaspectofHardness). 11Inlinewiththethemesofthisarticle,therehasbeenpush-backagainstexcessivespecialization(andalsoHardness)inbiology.SeeCasadevallandFang(2014b).

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presumptionofsubfieldneutrality).12AsCasadevallandFang(2014a)havealsoobserved,thereisan

additionalbenefitintheuseofjournalmetrics—forthe“lazy.”

6.StateoftheProfession

Acollageofstatisticssuggeststhatresearcheconomists,especiallyyoungones,find

themselvesinanenvironmentthatcouldeasilyleadtosinsofomissionbecauseofexcessive

demandsforcomplianceinfavoroftheHardrelativetotheImportant.Assistantprofessorsat

researchuniversitiesarenotinagoodpositiontoputupmuchfightagainstthedictatesof

whatthejournalswant:especially,aswehaveseen,withTopFiveacceptancesplayingan

outsizeroleingrantoftenure.

Thedemandsbythejournalsarejustonemoreinalongseriesofpreviousdemandsfor

academiccompliancethatbegininhighschool,ifnotyetearlier.Thesearedemands:forhigh-

schoolperformancetoobtaincollegeacceptance;toobtainsufficientgrades/lettersof

recommendation/GREscoresforadmittancetograduateschool;toobtainthePhD;fora

graduate-schoolrecordsufficienttoobtainaladder-trackacademicjob.Ofcourse,allthat

compliance,usefully,forceseconomiststomasterthefield'scurrentparadigm;thosewhowish

tocorrectitsomissionshavespecialneedforsuchunderstanding.But,justastherecanbetoo

littledemandforcompliance,therecanalsobesomuchthatimportantproblemsare

neglected:eitherbecausetheproblemsthemselves,orthebestwaystotacklethem,are

deemedoutsidetheframeofwhatisacceptableinthejournals.

12WeightingpublicationsbytheirJournalImpactFactorsisanothermechanismforreachingconsensus.

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Thestatisticsonacceptancessuggeststheneedbyresearchers,especiallythoseonashort

tenureclock,toaccordwiththejournals'demands.Atthejournals,rejectionisthemode.According

toCardandDellaVigna(2013),circa2010,thoseinfluential"TopFives"hadacceptanceratesofonly6

percent.Thatfigurewasdownsome60percentfrom15percent,some30yearsearlier.Such

difficultyofpublicationisindicatedmoregenerallybyConley,Crucini,DriskillandÖnder(2013),who

measured"AER-equivalent"publicationsoftheannualcohortsofUnitedStatesPhDrecipientsfrom

1986to2000.Betweenthosecohorts,AER-equivalentpublicationsixyearsaftergraduationfellby

approximately40percent,forallofthe99th,95th,90th,85th,80th,75thand50thpercentiles(Conley,

Crucini,DriskillandÖnder(2013,Table3,p.1263)).

Youngacademiceconomistsfacingthetenureclockarethusincreasinglypressed.13Evenif

theyhaveopinionsdifferentfromwhat'sacceptabletotheeditorsandtothereferees,theystillmust

comply.First,evenbeforebeginningapaper,theymustconsiderwhetherthefinalproductwillbe

journal-acceptable.Andthentheymustdecidehowtoframeit;forexample,asan"AER-paper,"or

13However,whilethedataonchangesareunambiguous,thedataonthelevelofdifficultyforyoungpeopleisslightlydifficulttointerpret.ConleyandÖnder(2014)presentedseeminglydirestatisticsregardingpublicationbyrecentgraduates."Evenatthetopfivedepartments,"theysay,"itwouldbehardtoagreethatthebottomhalfoftheirstudentsaresuccessfulintermsofeconomicresearch.TheAER-equivalentpapersatthemedianatyearsixwasbelow0.1forallfiveoftheseschools,andinfactatzeroinmostofthem."13Furthermore,eventhe80thpercentileofgraduatesofalleconomicsPhDprograms,withtheexceptionofPrinceton(at1.01)andRochester(at1.14))waslessthanonesuchAER-equivalentpublication.ButinterpretationofthesenumbersmustalsotakeintoaccountConleyandÖnder'smuch-less-than-one"equivalence"creditsformostnon-AERpublicationsandalsotheirprorationofcreditsbynumberofco-authors(forexample,two-authoredpapersaregivenonlyhalfcredit).However,theirfindingsareingeneralaccordwithaten-year-afterwardssurveyofUSPhDgraduatesoftheacademicyear1996-1997byStockandSiegfried(2014).Forthoserespondentswhohadinitiallyreceived"full-timepermanentacademicpositions"(i.e.,tenure-trackjobs),mediantop-50-economic-journalspublicationswas1;themeanwas2.0(Table4,p.297).

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possiblyasan"REStud."Wehavenostatistics,inthisregard,concerninghowinitialdecisionsare

influencedbyconceptionsregardingwhatthejournalswillorwillnotaccept;butEllison(2002a)has

compiledstatisticsregardinganotheraspectinwhichthejournalshaveincreasinglytakenoverfrom

theauthors.

AccordingtoEllison,beforethe1960s,revise-and-resubmitswerefairlyrare(2002a,p.984).

Insofarastheyoccurredatall,theauthorwouldquicklysubmittherevision;rejectionwasuncommon.

Butanarrayofstatistics(Ellison2002a)showsthatthelengthoftimebetweensubmissionandfinal

acceptancehasincreasedgreatly(bothineconomicsandinotherfields).Theaverageincreaseatnine

economicsjournalsforwhichthedatawasavailablewasalmost185percent—from6.1monthsin

1970to17.3monthsby1999.14

Ellisondoesafurtheranalysisfordifferentjournalsregardinghowtheseincreasesaredivided

betweensubmissionandreceiptoffirstreview,andbetweeninitialrequestforreviseandresubmit

andacceptance.Hesummarizestheevidenceassayingthat"[roughly]one-quarteroftheslowdown

mayoccurbecausejournalsmaytakelongertoconductinitialreview"15:sothattheremainingthree

quartersoftheincreaseareduetotheincreasingdemandsforreviseandresubmit.Butthatprocess

is,ofcourse,almostentirelyaboutansweringthereferees,mostlytomaketheseto-be-accepted

papersmoreprecise.ThisevidenceissymptomaticofincreasingemphasisonHardness.Additionally,

itshowsthatmuchofthisincreaseddemandforHardnessiscomingfromdemandsbythejournals

themselves.

14Ellison(2002a,Table1,p.953).15Ellison(2002a,p.958).

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Ellisonalsosuggestsanotherindicator:pagesperarticle.Economicjournalarticles,hesays,

have(2002b,p.994-995)longerintroductions,moreextensionsofmainresults,andmorereferences.

And,alloftheseincreasesare,ofcourse,associatedwithwhatthispapercalls"greaterHardness."At

theTopFive,between1970and2010,paper-lengthhasalmosttripled.16

Insum,theeconomicsprofession,especiallyforyoungerresearchershasrapidlybecomemore

competitive.Themarketforacademicresearch,whichistheeconomicsjournals,leavesthe

researcherswithnochoicebuttoforeseethedictatesofeditorsandreferees,evenintheirinitial

conceptionofpapers.Theymustcontinuetocomplywiththoseeditorsandrefereesespeciallyafter

theyhavebeenluckyenoughtoreceiveareviseandresubmit.Thestatisticalevidencesuggestswhat

probablyeveryresearcheconomistofmyageknowsfrompersonalexperience:astimehaspassed

thosedemandshavebecomeincreasinglyinsistentandhaveincreasinglyemphasizedHardness.

Furthermore,theemphasisonHardnessislikelyattheexpenseofImportance.Asurveyof

economicsgraduatestudentsbyColanderandKlamer(1987,Table4,p.100)thusfoundthatonly3

percentofeconomiststhoughtit"veryimportant"fortheirsuccessto"haveathoroughknowledgeof

theeconomy";incontrast65percentthoughtit"veryimportant"tobe"smartinthesenseofbeing

goodatproblemsolving."Additionally,whenaskedretrospectivelyabouttheirPhDprograms'

emphases,morethanhalfoftwoseparategraduate-cohortssaidthattheirprogramsplaced"toolittle

emphasisonapplyingtheorytotherealworld"(HansenandStock,2004,p.267,Table1).These

opinions,arethussuggestiveofanenvironmentthatcouldspawnsinsofomission,becauseofbias

towardtheHard,andagainsttheImportant.

16CardandDellaVignahavecomputedthatbetweentheearly1970'sand2011-2012theaveragepagelengthofpapersat"thetop-five"increasedfrom16pagesto45.5(CardandDellaVigna,(2013,p.150andFigure4,p.151)).(Page-lengthswere"adjustedfordensity.")

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7.ExamplesofSinsofOmission

Thissectionpresentsafewexamplesofsinsofomissionfromeconomicsthatarerelatedtomy

ownrecentresearch.Thefollowingsectionwilldiscussimplicationsoftheseexamples.

FailuretoPredicttheFinancialCrisis.Intheaftermathofthefinancialcrisisof2008,economists

askedthequestionwhynoonehadpredictedit,atleastexactlyasithappened.Rajan(2011)saidthat

suchapredictionhadnotbeenmadesinceitwouldhaverequireddetailedknowledgeoftheoryand

institutionsinthedisparatespecialtiesoffinance,realestateandmacroeconomics.

Curiously,priorto2008,thosesubfieldshadlaidoutalltheelementsthatwerelaterdeemedto

havebeenthecauseofthecrisis.17Thosecontributionsincludedthepossibilityofafire-salecrashin

assetprices,drivenbythepostingofdodgyassetsascollateral;othersourcesoftail-risk;ahousing

bubble;theerosionofstandardsformortgageloans;theconflictofinterestbyratingsagenciespaidby

theissuersofthesecuritiesthattheyrated;andinteractionbetweenthemacroeconomyandthe

financialsystem.18Alltheelementswerethere.ButonlyRajan(2005)cameclosetocrossingallthe

necessarysubfieldboundariesnecessarytopredictthecrisisasithistoricallyoccurred.

17See,forexample,thereportoftheFinancialCrisisInquiryCommission(2011)regardingthosevariouscauses.18Reviewspost-crashalongwiththepre-crasharticlesthemselvesindicatethateverysignificantaspectofthecrashhadbeenthesubjectofworkbyeconomists:forexample,onfire-salecrashes,seeShleiferandVishny(2011)andMooreandKiyotaki(1997);onmis-accountingofcurrentprofitsthatwouldencouragetailrisk(forexample,seeHealyandParepu(2003)andPartnoy(2003));onthehousingmarket(forexample,seeGramlich(2007)andShiller(2012));onconflictsofinterestregardingpaymentstoratingsagencies(forexample,seeWhite(2010)andJiang,Stanford,andXie(2012));andontheinteractionbetweenthemacroeconomyandthefinancialsystem(seeforexample,BernankeandGertler(1995)).

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Therewereincentivestopresentthekeypiecesofthepuzzle,butnonetoputthemtogether.

FollowingCaballero(2010),regardingtheory,amodelwithallthepiecescouldnothavebeen

published;itwouldhavebeenconsideredtoofarfromprecise,simpleideas(suchasthosethat

motivatesimplenewKeynesianorDSGEmodels);and,inthisway,tooSofttomeritpublication.19

Regardingpredictionsfromempiricalevidence,thecrucialdatawouldhavebeenofthewrong

form.Dataontailriskwouldhavebeenrevealing.Butaneconomistwhohadbeenluckyenough,or

insightfulenough,toobtainsuchdataandperceiveitsimplications,wouldhavehadanotherhurdleto

cross.EvenIfshehaduncovered,forinstance,AIG’s533billiondollarsofcommitmentstoinsure

securitiessuchasCDS's,20shewouldhavestillneededtoturnitintothebasisforapublishablepaper.

Those533billiondollarsindicatedtailriskofsufficientsizetothreatenagiganticcrashofthefinancial

system;butitwasonlyasinglenumber.Itwasnotthestatisticalevidencethattypicallyunderlies

empiricalpapersineconomics.

ThisexampleofHardstandardsresultinginasinofomissionisstillofimportancetoday,some

tenyearsaftertheCrash.ReinhartandRogoff(2009)havetoldusthat"ThisTimeIsDifferent"—

19Caballero(2010)thusexplainswhymacroeconomistsdidnotpredictthecrisis.Hedividesmacromodelsintowhathecalls“Core”and“Periphery.”TheCore,hesays,isaDSGEorastandardKeynesianmodel.TherewasalsoaconsiderablePeripheralliterature,whichexploreddeviationsfromthisCore:butonlyonesuchdeviationatatime.Caballerogivesthemethodologicalreasonforsuchamodelingstrategy:“Theperipheryisaboutisolatingspecificmechanisms.[Therefore]itsurroundsthesourcesofthesemechanismswithassumptionsdesignedtokillunwantedeffectsthatwouldpollutethemessage.”(p.91)HesaysthattheoreticalmodelswereallowedtomakeonedeviationfromeitherastandardKeynesianmodeloraDSGEmodelatatime;buttheseveraldeviationsneededtopredictthecrisiswasoutsidetherangeofthepublishable.20FinancialCrisisInquiryCommission(2011,p.141).

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meaningthatitisn't.21Now,in2019,forthesakeofprevention,policymakerscontinuetoneed

predictionsofwhen,whereandhowthenextCrashcanhappen—asmuchastheyhadneededsuch

analysisbackintheearly2000's.TheHardstandardsforwhatispublishable,meantthattherewasno

incentivetomakesuchapredictionthen.Thatremainstruenow.

Motivations.Intraditionaleconomictheory,motivationscomefroma-priori

assumptionsregardingwhatpeopleplausiblymaximize.Butthereisamuchlessrestrictive,

andmoregeneral,characterizationoftherangeofpossiblemotivations22:thatpeopleare

motivatedthroughthestoriestheyaretellingthemselvesatthetimetheymaketheirdecisions.

Inturn,insofarashumanthinkingcanbedescribedasoccurringthroughstories,thatmeans

thatpeoplearemotivatedthroughthestoriestheyaretellingthemselves.23Thecoreof

sociologyandculturalanthropologyisethnography,whosegoalistouncoverandinterpretthe

storiesthatpeoplearetellingthemselves.Butthecase-study,interpretivemethodologyof

ethnographyisconsideredSoft.

Theprecedinglogicsuggeststhat,generally,thebiasesagainsttheSoftandagainstthe

Newcausebehavioralexplanationstobedownplayedineconomics.Thelogicfurthersuggests

21 Twootherincidentspriorto2008demonstratethevulnerabilityofthemoderneconomytofinancialcrash(evenpriortothemortgage-backedsecuritiesbubbleoftheearly2000s).SeeEdwards(1999)andLowenstein(2000)onthethreatofbankruptcyofLongTermFinancialManagementandLelandandRubinstein(1988)onportfolioinsuranceandthecrashof1987. 22Thisgeneralitygoesconsiderablybeyondtheconsiderationsincurrentbehavioraleconomics.23SeeR.Akerlof(2017)andCollier(2016)fortheroleofstoriesineconomics.Likewise,MorsonandSchapiro's(2018)CentsandSensibilityalsoemphasizesstoriesasamissingfactorineconomists'representationsofmotivations.McCloskeyhasalsostressedtheroleofnarrative;forasummaryofherrecentviewson"whatiswrongwitheconomics,"seeMcCloskey(2014).

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thatourclassofbehavioralmodelsisstilllimitedandhaveyettosufficientlyincorporateideas

fromsociologyandanthropologythatemphasizetheimportanceofstories.

Casestudieshelpusseewhatconstitutegoodassumptionsforourmodels,astheyalso

helpmakethecaseforbehavioraloverclassicalmodels.Economists'currentFriedman-type

approach,whicheschewstestingmodelsbasedonassumptionskeepsusawayfromcase

studies.Agoodhuntinggroundforsinsofomissionwillconcernthestoriespeopletell

themselves,butthatareoutsidetherangeofwhateconomistswoulda-priorisurmiseunderlie

"utility."Fourexampleswillfollow:eachofthemillustratingtheunappreciatedroleofstories

ineconomics.

Example1.TheSovietUnion.24TheanalysisoftheeconomicsoftheSovietUnionhas

demonstratedthefailuresofitssystemofcentralizedplanning.25Butthisanalysishasignoredanother,

perhapsequallynegative,aspectoftheSovieteconomy.TheBolshevikspromotedthestorythat

planned,forcedindustrializationwouldrapidlycreateaneconomicparadise;sothateventhesmallest

interferencewiththePlanwouldwarrantthemostseverepunishment.26

Thisstorylegitimatedmuchcruelty.AccordingtotheFirstFiveYearPlan,industrywouldfeed

tractorstoagriculturetomakegrain;andagriculturewouldfeedgraintoindustrytomaketractors.But

accordingtothestory,whenthedeliveriesofgrainintheUkrainefellshortofPlantargets,thefaultcould

notbewiththePlan.Instead,theshortfallsmustbeduetosaboteurs,whowerequicklyidentifiedas

kulakfarmersanddulydeported—sometoSiberia.Thosedeportations,inturn,reducedgraindeliveries

24ThisexampleisbasedonG.AkerlofandSnower(2016).25See,forexample,Ericson(1991)forsuchanalysis.26AlsoseeGarai(2017)forsuchaninterpretationoftheroleofidentityunderSovietCommunism.

16

yetfurther,especiallysincethesericherpeasantshadbeencontributingmorethantheirsharetothe

Plan'stargets.Asafinalstep,thepeasantsoftheUkrainewerethenforcedontocollectivefarms,where

theywouldusethetractorspresumptivelybeingproducedbyindustry.Thismoveaggravatedthe

disasteryetfurther,sincetakingahorse(oracow)ontoacollectivefarmwouldhavebeenahuge

liability;itwouldhaveidentifieditsownerasa"kulak."Whenthetractorseitherdidnotshowup,or

brokedowniftheydid,grainoutputfellyetfurther.TheUkrainianfamine,theholodomor,followed.At

everystepinthistragedy,"thestory"playedamajorrole:asitlegitimatedtheforcedmeasuresusedto

carryoutthedysfunctionalplan.

Example2.SmokingandHealth.Thereisafineliteratureontheeconomicsofsmoking.For

example,itestimatestheeffectsoftobaccotaxesonthedemandforcigarettes.27But,regardingsmoking

andhealth,anothertypeofpublicpolicy—largelyignoredbyeconomists—hasalsobeenremarkably

successful.Intheearly1960's,theU.S.SurgeonGeneral,LutherTerry,convenedanadvisorycommittee

tospelloutwhatwasknownaboutthequestion.Theresultingreport,SmokingandHealth:Reportofthe

AdvisoryCommitteeoftheSurgeonGeneralofthePublicHealthService,28changedthelegitimacyofviews

regardingsmoking.Withthisdocument,theU.S.governmentofficiallycreatedthestory:“smokingis

stupid.”29Ittherebyrefutedthecontentionsofthetobaccoindustrythattherelationbetweensmoking

andhealthwasundecided.Anti-tobaccoactiviststhenusedthisstorydowntheroadincrucialactions

thatresultedintheprohibitionoftobaccoadsonradioandTVandlater,thatjustifiedregulationsagainst

indoorsmokinginpublicplaces.(Thisbanonindoorsmokinghasbeenremarkablyeffective;witheach

puff,theoutdoorsmokers'expressionspropagatestoallpassers-bytheoriginalmessagethat"smokingis

27Seereferences,forexample,inDeCiccaetal(2002).28U.S.SurgeonGeneral(1964).29SeeG.AkerlofandShiller(2015,Chapter8),forthisinterpretation,includingwhatfollows.

17

stupid."30)FromthetimeoftheSurgeonGeneral'sReporttothepresentday,thefractionofadult

smokersintheUShasdeclinedfrom42percentto15.5.31Theroleofthestoryhasonlyawalk-onpartin

smokonomics32;but,absenttherestrictionsagainstSofttheoryandSoftevidence,thisstorywouldbea

staroftheshow.

Example3.GlobalWarming.Theroleofstoriesfallsoutsidetherangeofthestandardeconomics

ofglobalwarming.Yet,beyondthephysicalproblemofclimatechangeitself,thereisasecond

inconvenienttruth.AmongtheU.S.public,therearenotonlythosewhoviewglobalwarmingasoutright

hoax33;manymorealsofailtoperceiveitsurgency.34Thestoriesthatjustifycontinuedinaction,year

afteryear,areasimportantasthephysicalrealityofglobalwarmingitself.35Theimpactofthosestories,

howtheyareformed,andhowtheymightbealtered,areasimportantasissuessuchascapandtrade

arrangementsandcarbontaxesthatarenowcentraltotheeconomicsofclimatechange.

30Brandt(2007,p.267andp.288).31For42percentsmokersin1964,seeU.S.SurgeonGeneral(1979,Table2,p.A-10).For15.5percentcurrentsmokersin1917,seeU.S.CentersforDiseaseControlandPrevention(2017).32 DeCiccaetal(2002,2008)showthatestimatesoftheelasticityofdemandforsmokingwillbeoverestimatediflegislatorsarelessreluctanttovotefortobacco-taxincreasesinstateswithgreateranti-smokingsentiment.Thisworkgoesasignificantwaytobringingthe"smoking-is-stupid"storyintosmokonomics.But"anti-smokingsentiment"neednotjustbeanindependentvariable,asinDeCiccaetal.Toexplorethefullroleof"anti-smokingsentiment,"itmustalsobeadependentvariable.Thatalsoaddsanomittedpolicyvariabletoanti-smokingpolicy.33See,forexample,Inhofe(2012).34InaMarch2017Gallupenvironmentalpoll45percentofAmericanssaidthey“worriedagreatdeal”aboutglobalwarming.http://www.gallup.com/poll/206030/global-warming-concern-three-decade-high.aspx.But,whenrankedwithotherissuesthey“worryaboutagreatdeal”itusuallyplacesat,ornear,thebottom.InaMarch2015polltheyrankedit15thoutof15issues.Thepreviousyearithadbeen14th.http:www.gallup.com/poll/182018/worries-terrorism-race-relations-sharply.aspx. 35 Wefurtheradd,parenthetically,thatthepublic'santipathytocarbontaxesisanotheroddstorythatinhibitsclimate-changepolicy.

18

Example4.Macroeconomics.TheroleofstoriesineconomicshasbeenstressedbyShiller(2000)

forsometime;hisAmericanEconomicAssociationPresidentialaddresson“NarrativeEconomics”(Shiller

(2016))providesmanyfurtherexamples.Amongthem,36Shillersaysthatthenear-constancyoftheratio

betweenthemoneysupply(M)andnominalincome(Y)intheGreatDepression,maynotindicatethatM

causesY,asclaimedbyFriedmanandSchwartz(1967).Instead,Shillerargues,itislikelythatthestories

peopleweretellingthemselvesastheDepressionunfoldedandincomedeclinedwouldhavedecreased

peoples'willingnesstoholdmoney.Thus,heattributestheconclusionsofFriedmanandSchwartz(2008)

regardingthecausalityofMtotheomissionofavariable:thestoriespeopleweretellingthemselves.

8.CommentonExamplesofSinsofOmissionandWhyTheyHaveNotBeenChallenged

Theexamplesoftheprevioussectionallowusalsotoseeareasonwhymanysinsofomissionin

economicshaveremainedunchallenged.

Kuhn'sScientificRevolutions(2012)describesscientificprogressasoccurringas"normalscience"

uncovers"anomalies"withexisting,generallyacceptedparadigms."Scientificrevolutions"thatexplain

accumulationsofsuchcontradictions,thenleadthewayforwardtonew,betterparadigms.ButKuhn's

optimisticviewof"scientificprogress"failstoperceiveapossibilitythatisparticularlyrelevantto

economics.Supposetheparadigmnotonlydescribesthesubjectmatterofthefield;supposeitalso

describesthefield'sappropriatemethodology.Inthiscase,observationsthatcontradicttheexisting

paradigmwillbedismissediftheyviolatetheprescribedmethodology.TheHardnesspolicewillrule

themout,asinadmissibleevidence.

36Shiller(2016,p.989).

19

Wecanrestatethepreviouspropositioninanotherway.Webster'sdictionarygivestwo

definitionsof"economics."First,itisdescribedbyitssubjectmatteras"asocialscience

concernedchieflywithdescriptionandanalysisoftheproduction,distribution,and

consumption ofgoodsandservices."37But,Webster'sdictionaryalsohasaseconddefinition.

Economicsis"economictheory,principles,orpractices." Thatcorrespondstowhatistaught

ingraduatePhDprogramsineconomics.AccordingtoCraighead(2010),"EconomicsPh.D.

programsaretryingtotrainstudentstobecomeproductiveresearchers,nottoteachthem

abouttheeconomy"[italicsandunderliningintheoriginal].Thatis,PhDstudentsaretaught

theHardmethodsofeconomicresearch:mathematicalmodelingandstatisticalanalysis.

Abriefreviewoftheexamplesoftheprevioussectionshowsthatnoneofthemwould

qualifyas"sinsofomission,"accordingtothesecond,methodologicaldefinitionofthefield:

sinceeachoftheexamplesentailsmethods,oruseofevidence,thatisoutsidecommon

practicetaughtingraduateschools.Wesaw(followingCaballero)thattheoreticalanalysisof

thecrashwouldhaveentailedgoingbeyondthecurrentmethodologyforeconomictheory;and

itsempiricalpredictionwouldhaveentailedexaminationoftailrisk,forwhichtheevidencewas

unlikelytobeinstatisticalform.Furthermore,noneofthefourexamplesoftheroleof

"stories"wouldhavebeenclassifiedassinsofomissionwiththemethodologicaldefinition:

sincethosestories,likewise,wouldbedifficulttoobservewithstatisticalmethods.However,

withthefirst—subject-matter—definitionofthefield,eachoftheexampleswouldbea

respectivesinofomission.Financialcrashesareclearlywithinthepurviewofthesubject

37https://www.merriam-webster.com/dictionary/economics.

20

matterofeconomics;and,witheachofthefour"stories,"theiromissionsignificantlyaffectsa

respectiveeconomicproblemofsomeimportance.

9.SummaryandConclusion

Beforedescribingtheimplicationsofouranalysis,itisimportanttoemphasizewhat

has—andwhathasnotbeen—said.Thetheoreticalandempiricalaccomplishmentsofmodern

economics,obtainedwithHardstandardsfortheconductofresearch,shouldberightly

celebrated.Butsuchstandardsshouldnotbeuniformlyappliedtoalleconomicproblems;

especially,theyshouldnotbeappliedtothoseproblemsforwhichthosestandardsaretoo

restrictive:forlackofevidenceorbecausemotivationsignificantlydiffersfromstandard

economicassumptions.Differentterrainscallfordifferentvehicles.Asailboatisuselessin

crossinga(riverless)desert;acamelisuselessincrossingasea.

Thenormsregardinghoweconomicsshouldbedoneshouldcallforflexibilityof

methodology—insteadofinsistenceonmethodologicalpuritythatmightbeperfectforsome

Importantproblems,butleavesotherproblemsandotherapproachesoutsidethedomainof

economicresearch.

Historically,thoseparadigms—normsforhoweconomicresearchshouldbedone,and

alsoforwhatconstitutes"economicresearch"—havedevelopedoutofanevolutionaryprocess.

Neithertheoptimalityoftheresultantconclusionsofthefieldnoroftheresultantinstitutions

foreconomicresearchcanbetakenforgranted.38Atthejournals,thenormsforwhatshould

38ThenonoptimalityfromevolutionfollowsfromBrockandDurlauf(1999)andalsofromAkerlofandMichaillat(2018).

21

orshouldnotbepublished,andtheselectionoftheeditorsandthereferees,andtheirconduct,

shouldbethesubjectofexamination.Likewise,attheuniversities,theprocessesofpromotion

andtenureshouldalsobeexamined.JustasmedicineintheUnitedStateswasfamously

influencedbytheFlexnerReportof1910(Starr(2008)),thereisaneedforasimilarreport

todayonpublicationandpromotionineconomics.

Suchareportcouldbedividedintotwoseparateparts.Thefirstpartwouldanalyzethe

normsregardingtheroleofjournaleditorsandreferees.Asmentionedearlier,timesbetween

submissionandacceptanceareextremelylong(Ellison(2002a,2002b)),asauthorsandtheir

ideasarestrungoutwithoftenrepeatedrequestsforrevise-and-resubmitsaccordingtothe

tastesoftheeditorsandreferees.

Returningownershipofpaperstotheauthorswouldnotonlyshowgreaterrespectto

them.ItwouldalsoaccordwiththestatedpurposeoftwooftheTop-Fivejournals:astheAER

andREStudbothhavethewordReviewintheirname.AsIunderstandit,a“Review”isa

journalthattakessubmissions,anddecideswhichtoaccept/whichtoreject.Thatmeansthat

theeditorsandtherefereesshouldbeviewingthemselvesashelpmates,ratherthandictators

holdingauthorsatransombeforeacceptingtheirsubmissions.

AsecondpartoftheReportwoulddescribeappropriatenormsregardingcriteriaand

methodsofpromotion.Specialtopicsforexaminationwouldincludetheappropriate,and

inappropriate,criteriabasedonpublicationmetrics(suchasthenumberintheTopFive),and,

internationally,over-dependenceonpublicationinUSjournalsandevenonUSdata.

Recommendedreformcouldreducethesinsofomissionduetoinappropriateemphasis

onHardness.Furthermore,whilenotsolvingtheproblemofthecompetitiverat-racefornew

22

entrantsintothefield,itwouldprovidethemsomereliefbyencouragingthemtobringoutthe

bestinthemselves.Andforalleconomists,itwouldallowustoexpresswhatwewanttosayas

bestwecan:fromtheheart.

23

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Importance

FrontierTopics

Hardness

A

B