Tuesday, March 07, 2017

The Teaching of Economics

In 2013, with funding from the Institute for New Economic Thinking, University College London, Friends Provident Foundation, Azim Premji University (Bangalore) and Sciences Po (Paris), a group of concerned economists created CORE, the Curriculum Open-Access Resources for Economics. Wendy Carlin from University College London led the initiative, and I was fortunate enough to have been involved from the outset. The group soon grew to encompass a couple of dozen members from a broad range of countries including France, Chile, Colombia, Turkey, and India.

CORE’s vision is that economics should be an inquiry into the fundamental problems facing humanity today and the ways that economic reasoning can address them, not just a training in abstract problem solving. We sought to directly address the problem of a lack of good teaching resources consistent with this vision, and the attendant issues, including limited incentives for faculty and their teaching teams to make use of what is available. 
   
Since its launch, CORE has successfully begun to produce high-quality resources for the teaching of economics through this global collaboration of scholars, and to distribute these resources free of charge worldwide under a Creative Commons license. Our e-book The Economy, currently in beta, is being taught as the required introductory course at University College London (UCL), the Toulouse School of Economics, Humboldt University (Berlin), and other top economics departments in Europe. It is also being taught at the Lahore University of Management Sciences, Azim Premji University (Bangalore), the University of Sydney, and Universidad de los Andes (Bogota). More than 2,300 verified instructors have been cleared for access to CORE’s full range of supplementary teaching materials, and over thirty thousand students spread across 78 different countries have registered for access to the e-book.

As part of its strategy to improve the teaching of economics CORE is now seeking to expand its outreach and impact in the United States. It will do so in collaboration with Barnard College, which has just received a major award from the Teagle Foundation for exactly this purpose. My department colleagues Homa Zarghamee and Belinda Archibong will join me in directing this effort. 

At the heart of the initiative is a series of workshops involving faculty and graduate students, who will be selected through a competitive application process and provided with stipends and partial reimbursement of travel costs. These workshops will be designed to bring together instructors who already have experience with implementing CORE, and a larger group of potential adopters. The first workshop will be held at Barnard on August 17-19, 2017. We will post a call for applications soon, and are currently in the process of hiring a project manager.

Among our goals is the creation of a cadre of confident, networked, new PhDs excited about making teaching a fulfilling and central part of their career in economics. Graduate students who complete a workshop will be certified as CORE-Teagle Fellows, a designation that we hope will become a credible signal of commitment to quality teaching among employers, especially liberal arts colleges and public policy schools. We would also like this to be a signal of scholarship potential, and will accordingly screen applicants for exceptional promise in both research and teaching.

Over the longer term, we also want to identify a set of institutional partners with shared goals for the improvement of economics education and a commitment to the development and use of high quality, open access instructional content. To further these goals, we will launch the CORE Consortium, a membership program for institutions willing to enter into a long-term, multi-year commitment to support faculty and graduate students using CORE, and host workshops on a rotating basis. By the end of the 36-month period covered by the Teagle grant, we hope to have at least half a dozen institutions on board as members, as well as a leadership team and an administrative structure.

We are enormously grateful to the Teagle Foundation for funding this exciting new initiative. Further updates will follow once a project manager is in place.

Wednesday, March 01, 2017

Reigns of Error

The death of Kenneth Arrow has led lots of people to swap stories about their interactions with him. Larry Blume has posted several of these on facebook, including the following response to my own contribution (quoted with permission):
This story is not at all surprising; Ken read everything. I think I mentioned elsewhere that my last conversation with Ken, this past June, concerned The Theory of Moral Sentiments. He and Amartya Sen were taking turns quoting from it, from memory... I could recognize the quotes, but not respond in kind. Once in a conversation about Nash equilibrium and rational expectations, Ken wondered if I had read Merton on expectations - not Robert Jr.: https://www.jstor.org/stable/4609267. He also had a good stock of Shakespeare to call on.
The link is to a 1948 paper by the great sociologist Robert K. Merton (father of the Nobel-winning economist). Reading anything at all by Merton is an excellent use of one's time, so I went through this paper. It's extraordinary. Not only does Merton provide a very clear account of equilibrium beliefs, but goes on to point out that even when these beliefs are correct in a narrow sense, they can hold in place an incorrect understanding of the social world. To translate this into the contemporary language of economics, Merton points out that the play of equilibrium strategies can go hand in hand with a deeply erroneous understanding of the game.

Merton begins with an account of a Depression-era bank run that perfectly captures the multiple equilibrium logic he has in mind:
It is the year 1932. The Last National Bank is a flourishing institution. A large part of its resources is liquid without being watered. Cartwright Millingville has ample reason to be proud of the banking institution over which he presides. Until Black Wednesday. As he enters his bank, he notices that business is unusually brisk. A little odd, that, since the men at the A.M.O.K. steel plant and the K.O.M.A. mattress factory are not usually paid until Saturday. Yet here are two dozen men, obviously from the factories, queued up in front of the tellers' cages. As he turns into his private office, the president muses rather compassionately: "Hope they haven't been laid off in midweek. They should be in the shop at this hour."
But speculations of this sort have never made for a thriving bank, and Millingville turns to the pile of documents upon his desk. His precise signature is affixed to fewer than a score of papers when he is disturbed by the absence of something familiar and the intrusion of something alien. The low discreet hum of bank business has given way to a strange and annoying stridency of many voices. A situation has been defined as real. And that is the beginning of what ends as Black Wednesday -- the last Wednesday, it might be noted, of the Last National Bank.
You can see why Arrow saw in this a precursor to the concept of Nash equilibrium, the existence of which would be established just two years later. There are also echoes here of the Diamond and Dybvig model of bank runs, in which the multiple equilibrium nature of the problem finds formal expression.

But Merton doesn't stop there, he considers how the people expressing the described behavior interpret the situation they are in. And here he observes an important disparity between the manner in which the situation is viewed by the the participants themselves, as compared with its interpretation from the analytical viewpoint of the social scientist:
The self-fulfilling prophecy is, in the beginning, a false definition of the situation evoking a new behavior which makes the originally false conception come true. The specious validity of the self-fulfilling prophecy perpetuates a reign of error. For the prophet will cite the actual course of events as proof that he was right from the very beginning. (Yet we know that Millingville's bank was solvent, that it would have survived for many years had not the misleading rumor created the very conditions of its own fulfillment.) Such are the perversities of social logic.
So beliefs are correct in one sense, but at sharp variance with reality in another. Such "reigns of error" are not something we economists pay much attention to, with one very notable exception. 

In his book The Anatomy of Racial Inequality Glenn Loury discusses the manner in which negative stereotypes about a group can become self-fulfilling through the incentive effects that the stereotypes themselves create. This is the phenomenon of statistical discrimination, introduced into the economics literature by none other than Kenneth Arrow. Like Merton, however, Loury is not content to simply identify the kinds of behaviors consistent with equilibrium beliefs. He wants to know how people with these beliefs will interpret the behaviors. And here he deploys the idea of biased social cognition, which can give rise to essentialist causal misattributions.

That is, behavior arising in equilibrium through the operation of incentives can be interpreted by casual observers as being a consequence of deep differences in character. And this has enormous consequences, since biased social cognitions can "cause some situations to appear anomalous, disquieting, contrary to expectation, worthy of further investigation, inconsistent with the natural order of things---while other situations appear normal, about right, in keeping with what one might expect, consistent with the social world as we know it."

Loury has argued elsewhere that the level of mass incarceration currently prevailing in the United States could not possibly be sustained were it not for its racial character. As long as essentialist interpretations of incentive-driven actions continue to be widespread, such high levels of confinement will not be seen as anomalous or disquieting, and will not give rise to urgent calls for action.

The economic method, for all its flaws, has one very important virtue: it shines a bright light on interests and incentives, and in doing so can challenge essentialist interpretations of social reality. But if this potential is to be realized, it is important to focus not just on the characterization of equilibrium behavior, but also on the reigns of error that distort our mental models of the underlying game.

Saturday, February 25, 2017

Arrow, Edgeworth, and Millicent Garrett Fawcett

There's not much one can say about Kenneth Arrow that hasn't already been said, but there's one personal story that I can add to all the tributes and remembrances. 

I met Arrow just once, at a Stanford conference in April 2008 that he and Matt Jackson jointly organized. While everyone else was seated around the outside of a large ring of tables, Arrow was on the inside, directly in front of the speaker. He was 86 at the time.

I was first up, presenting an early version of a paper with Sam Bowles and Glenn Loury on group inequality. Arrow interrupted me within the first couple of minutes – not aggressively at all, just seeking clarification about the information structure. Then, during a coffee break after the talk, he asked if I’d read a piece by Millicent Fawcett on gender wage inequality, published in the Economic Journal in 1892. That’s not a typo – he really meant 1892. I confessed that I hadn't.

Arrow said that Fawcett’s work was extensively discussed in a 1922 presidential address by Francis Edgeworth, but while many were familiar with the Edgeworth lecture, few had bothered to read Fawcett herself. 

It’s true. Edgeworth mentioned “Mrs. Fawcett” seven times in his address, and cited three separate pieces by her. His lecture was on “Equal Pay to Men and Women for Equal Work,” and one of papers he referenced was “Equal Pay for Equal Work,” published by Fawcett in 1918. Here’s how the latter begins:



I didn’t realize it at the time, but Dame Millicent Garrett Fawcett was every bit as remarkable as Edgeworth and Arrow, and economics was the least of her accomplishments. I imagine that Arrow saw in her a kindred spirit.