Tag Archives: economics

Describing the relationship between economics and sociology as one between siblings

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A long profile of economist Raj Chetty includes a section on his look at the concept of social capital:

Chetty has found that opportunity does not correlate with many traditional economic measures, such as employment or wage growth. In the search for opportunity’s cause, he is instead focusing on an idea borrowed from sociology: social capital. The term refers broadly to the set of connections that ease a person’s way through the world, providing support and inspiration and opening doors.

Economics has long played the role of sociology’s annoying older brother—conventionally accomplished and wholeheartedly confident, unaware of what he doesn’t know, while still commanding everyone’s attention. Chetty, though, is part of a younger generation of scholars who have embraced a style of quantitative social science that crosses old disciplinary lines. There are strong hints in his research that social capital and mobility are intimately connected; even a crude measure of social capital, such as the number of bowling alleys in a neighborhood, seems to track with opportunity. His data also suggest that who you know growing up can have lasting effects. A paper on patents he co-authored found that young women were more likely to become inventors if they’d moved as children to places where many female inventors lived. (The number of male inventors had little effect.) Even which fields inventors worked in was heavily influenced by what was being invented around them as children. Those who grew up in the Bay Area had some of the highest rates of patenting in computers and related fields, while those who spent their childhood in Minneapolis, home of many medical-device manufacturers, tended to invent drugs and medical devices.* Chetty is currently working with data from Facebook and other social-media platforms to quantify the links between opportunity and our social networks.Sociologists embrace many ways of understanding the world. They shadow people and move into communities, wondering what they might find out. They collect data and do quantitative analysis and read economics papers, but their work is also informed by psychology and cultural studies. “When you are released from the harsh demands of experiment, you are allowed to make new discoveries and think more freely about what is going on,” says David Grusky, a Stanford sociology professor who collaborates with Chetty. I asked Princeton’s Edin what she thought would end up being the one thing that best explains the peaks and valleys of American opportunity. She said her best guess is “some kind of social glue”—the ties that bind people, fostered by well-functioning institutions, whether they are mosques or neighborhood soccer leagues. The staff at Opportunity Insights has learned: When an economist gets lost, a sociologist can touch his elbow and say, You know, I’ve been noticing some things.

A few thoughts on this description of a relationship between two academic disciplines:

  1. The family metaphor is an interesting choice. Both disciplines are in the larger family of social sciences. They share some common interests. They often bicker like siblings. But, they are not twins here – one is the older sibling, one is the younger. The family picture suggests the two disciplines are tied together forever but their standing within the family is a contentious one.
  2. The primary difference suggested above is one of methodology: economists look at lots of quantitative data, sociologists “embrace many ways of understanding the world.” There are methodological differences between the disciplines but also other important differences, such as theoretical assumptions about how humans and societies operate. If both fields move toward using similar methodologies, does this bridge their differences? I would guess not.
  3. The suggestion at the end is that economists need sociologists when there is something that is hard to uncover or goes beyond their models. If those conditions are not met, then relying on sociology may not be necessary. Might both fields be more open to working with each other before they run into issues? Do sociologist need economists to help them explain difficult things?

Speculating on why sociology is less relevant to the media and public than economics

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In calling for more sociological insight into economics, a journalist who attended the recent ASA meetings in Philadelphia provides two reasons why sociology lags behind economics in public attention:

Economists, you see, put draft versions of their papers online seemingly as soon as they’ve finished typing. Attend their big annual meeting, as I have several times, and virtually every paper discussed is available beforehand for download and perusal. In fact, they’re available even if you don’t go to the meeting. I wrote a column two years ago arguing that this openness had given economists a big leg up over the other social sciences in media attention and political influence, and noting that a few sociologists agreed and were trying to nudge their discipline — which disseminates its research mainly through paywalled academic journals and university-press books — in that direction with a new open repository for papers called SocArxiv. Now that I’ve experienced the ASA annual meeting for the first time, I can report that (1) things haven’t progressed much since 2016, and (2) I have a bit more sympathy for sociologists’ reticence to act like economists, although I continue to think it’s holding them back.

SocArxiv’s collection of open-access papers is growing steadily if not spectacularly, and Sociological Science, an open-access journal founded in 2014, is carving out a respected role as, among other things, a place to quickly publish articles of public interest. “Unions and Nonunion Pay in the United States, 1977-2015” by Patrick Denice of the University of Western Ontario and Jake Rosenfeld of Washington University in St. Louis, for example, was submitted June 12, accepted July 10 and published on Wednesday, the day after it was presented at the ASA meeting. These dissemination tools are used by only a small minority of sociologists, though, and the most sparsely attended session I attended in three-plus days at their annual meeting was the one on “Open Scholarship in Sociology” organized by the University of Maryland’s Philip Cohen, the founder of SocArxiv and one of the discipline’s most prominent social-media voices. This despite the fact that it was great, featuring compelling presentations by Cohen, Sociological Review deputy editor Kim Weeden of Cornell University and higher-education expert Elizabeth Popp Berman of the State University of New York at Albany, and free SocArxiv pens for all.

As I made the rounds of other sessions, I did come to a better understanding of why sociologists might be more reticent than economists to put their drafts online. The ASA welcomes journalists to its annual meeting and says they can attend all sessions where research is presented, but few reporters show up and it’s clear that most of those presenting research don’t consider themselves to be speaking in public. The most dramatic example of this in Philadelphia came about halfway through a presentation involving a particular corporation. The speaker paused, then asked the 50-plus people in the room not to mention the name of said corporation to anybody because she was about to return to an undercover job there. That was a bit ridiculous, given that there were sociologists live-tweeting some of the sessions. But there was something charming and probably healthy about the willingness of the sociologists at the ASA meeting to discuss still-far-from-complete work with their peers. When a paper is presented at an economics conference, many of the discussant’s comments and audience questions are attempts to poke holes in the reasoning or methodology. At the ASA meeting, it was usually, “This is great. Have you thought about adding …?” Also charming and probably healthy was the high number of graduate students presenting research alongside the professors, which you don’t see so much at the economists’ equivalent gathering.

All in all — and I’m sure there are sociological terms to describe this, but I’m not familiar with them — sociology seems more focused on internal cohesion than economics is. This may be partly because it’s what Popp Berman calls a “low-consensus discipline,” with lots of different methodological approaches and greatly varying standards of quality and rigor. Economists can be mean to each other in public yet still present a semi-united face to the world because they use a widely shared set of tools to arrive at answers. Sociologists may feel that they don’t have that luxury.

Disciplinary differences can be mystifying at times.

I wonder about a third possible difference in addition to the two provided: different conceptions in sociology and economics about what constitutes good arguments and data (hinted at above with the idea of “lots of different methodological approaches and greatly varying standards of quality and rigor.”) Both disciplines do aspire to the idea of social science where empirical data is used to test hypotheses about human behavior, usually in collectives, works. But, this is tricky to do as there are numerous pitfalls along the way. For example, accurate measurement is difficult even when a researcher has clearly identified a concept. Additionally, it is my sense that sociologists as a whole may be more open to qualitative and quantitative data (even with occasional flare-ups between researchers studying the same topic yet falling in different methodological camps). With these methodological questions, sociologists may feel they need more time to connect their methods to a convincing causal and scientific argument

A fourth possible reason behind the differences (also hinted at above with the idea of economists having a “semi-united face” to present): sociology has a reputation as a more left-leaning discipline. Some researchers may prefer to have all their ducks in a row before they expose their work to full public scrutiny. The work of economists is more generally accepted by the public and some leaders while sociology regularly has to work against some backlash. (As an example, see conservative leaders complain about sociology excusing poor behavior when the job of the discipline is to explain human behavior.) Why expose your work to a less welcoming public earlier when you could take a little more time to polish the argument?

A zoning paradox: sacred residential spaces are dependent on their market values

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The last page of Sonia Hirt’s book Zoned in the USA lays out a key paradox in the American zoning system:

Isn’t it ironic that American residential space is so sacredly residential (so protected from intrusion through land-use law, that is) only because it is so commercial (because it is an object of trade rather than an object of our sentiments)?

Perhaps this another piece of evidence that single-family homes are one of the biggest objects of American consumption as well as key pieces in the American economic system.

Bringing sociology and understanding culture to Wall Street

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A sociologist argues for the value of bringing a sociological perspective to Wall Street after noting how the president of the Federal Reserve Bank of New York recently used the term culture repeatedly and defined the term:

“Culture relates to the implicit norms that guide behavior in the absence of regulations or compliance rules—and sometimes despite those explicit restraints. … Culture reflects the prevailing attitudes and behaviors within a firm.  It is how people react not only to black and white, but to all of the shades of grey. Like a gentle breeze, culture may be hard to see, but you can feel it. Culture relates to what “should” I do, and not to what “can” I do.”

Dudley has a doctorate in economics, and spent a decade as chief economist at Goldman Sachs. But in his remarks he sounded more like a sociologist than an economist. His many mentions of “culture” could be significant. I’m hoping they mark the beginning of a change in how regulators think about reining in law-breaking and excessive risk-taking at banks. I’m also hoping that I had something to do with them…

So I studied sociology, and for my doctoral dissertation focused on the organizational culture of Goldman Sachs. The dissertation became a book, titled What Happened to Goldman Sachs: An Insider’s Story of Organizational Drift and Its Unintended Consequences (HBR Press, 2013). One of the changes I document in the book is how Goldman drifted from a focus on ethical standards of behavior to legal ones — from what one “should” do to what one “can” do.

After the book was published, Dudley got in touch. I met with him and his people, and discussed what I had learned in my study of sociology and, in particular, my in-depth study of Goldman. I made recommendations on how to improve regulation. Also, I sent him two pieces I wrote for HBR.org, one on the importance of focusing on organizational behavior and not just individuals, the other asserting that culture had more to do with the financial crisis than leverage ratios did.

One of the key conclusions I drew from my study was that to achieve sustained success and avoid firm-endangering risks, a firm like Goldman has to cultivate financial interdependence among its top employees.

Employees that can make big financial decisions on their own means that many will take big risks and a lot of money could be lost. This reminds me of some of the arguments of Nassim Taleb who suggests losses should not be shared, especially in unpredictable areas like the stock market or with innovative and cutting-edge financial instruments. Instead, there could be organizational cultures that promote more prudent financial decisions that may still be innovative and profitable but limit the possibility of major black swan losses.

Analysis suggests a sociologist in the running to win 2014 Nobel Prize for Economics

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A new analysis suggests five leading candidates for the 2014 Nobel Prize in Economics and one of them is a sociologist:

But a recent Thomson Reuters analysis predicts five leading contenders for the top honour in economics this year: Philippe M. Aghion and Peter W. Howitt for their contributions to growth theory, William J. Baumol and Israel M. Kirzner for their study of entrepreneurship, and Mark S. Granovetter for his pioneering research in economic sociology.

The first four names are well known in economics while the fifth is not actually an economist. Granovetter is a sociologist but his research appears to be the most interesting among that of the five contenders listed by Reuters. The caveat here is that the Reuters list is merely indicative, based on a quantitative analysis of the number of citations of each scholar in the discipline. The Nobel committee is unlikely to be influenced by quantitative metrics alone though the Reuters analysis claims that most scholars it has identified have eventually ended up winning the Prize…

There are earlier precedents when the Nobel committee has chosen persons outside economics departments for the prize, although a sociologist has never won it till date. The political scientist Elinor Ostrom, who shared the Nobel in 2009 with Williamson, is the most recent example. Ostrom challenged conventional wisdom by showing that common property resources can be managed successfully by user associations.

But a recent Thomson Reuters analysis predicts five leading contenders for the top honour in economics this year: Philippe M. Aghion and Peter W. Howitt for their contributions to growth theory, William J. Baumol and Israel M. Kirzner for their study of entrepreneurship, and Mark S. Granovetter for his pioneering research in economic sociology. The first four names are well known in economics while the fifth is not actually an economist. Granovetter is a sociologist but his research appears to be the most interesting among that of the five contenders listed by Reuters. The caveat here is that the Reuters list is merely indicative, based on a quantitative analysis of the number of citations of each scholar in the discipline. The Nobel committee is unlikely to be influenced by quantitative metrics alone though the Reuters analysis claims that most scholars it has identified have eventually ended up winning the Prize.

Read more at: http://www.livemint.com/Opinion/j2JrhcKugkycL6kysk1eHJ/Who-will-win-the-Economics-Nobel-this-year.html?utm_source=copy

Granovetter’s paper on the strength of weak ties is one of the most cited sociology articles. Even so, naming a sociologist as a winner of the prize for economics would be an interesting choice given the relationship between the two disciplines.

Cantor’s victorious opponent, an economics professor, to face off against Democrat sociologist professor

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The academic disciplines of sociology and economics don’t always get along so it will be interesting to watch an economics and sociology professor square off in Virginia’s 7th district:

In sociology, education is often championed as the best path to a vibrant society—an idea Trammell clearly subscribes to. He is running on a platform of college access, student-loan forgiveness, and special-education reform. In 2012, Trammell published a book, The Richmond Slave Trade: The Economic Backbone of the Old Dominion. (More recently, he has planned to write a vampire novel.) Trammell’s ancestor, Thomas Trammell, was an indentured servant when he arrived in Fairfax in 1671.

Brat joined the faculty at Randolph-Macon in 1996 after receiving his Ph.D. in economics at American University. Since then, he’s taught classes on micro- and macroeconomics, public finance, and business ethics. And he coauthored a paper titled, “An Analysis of the Moral Foundations in Ayn Rand”. Back in January, Brat told the National Review that while he doesn’t consider himself a Randian, “he has been influenced by Atlas Shrugged and appreciates Rand’s case for human freedom and free markets.”…

The idea of a Republican economics professor facing off against a Democratic sociology professor presents a near-perfect microcosm of American political thought. What matters most in governance—the good of the market or the good of society? Should government serve to keep the free market as uninhibited as possible, or to impose checks on the market to protect citizens? Is education or entrepreneurship a more important path to individual and collective success? These are questions ripe for a Poli-Sci 101 discussion.

Perhaps a bit overstated (the next, and last, paragraph of the story goes on to tell who has the highest score at RateMyProfessor.com) but it sounds like the two have different perspectives on the world.  Given their disciplines, it could be easy to caricature the two sides without seeing what exactly the points of agreement and disagreement are between the two candidates. Is it easy to argue its education versus free markets or would voters generally support both? It is not immediately clear how much voters care much about this academic food fight –  both candidates are PhDs after all.

If you are curious, here are the demographics of Virginia’s 7th House District which skews Republican and more white, educated, and wealthy than American averages.

According to the United States Census Bureau’s 2010 data for the 111th Congress, the total population of the district is 757,917. Median age for the district is 39.2 years. 74.3% of the district is White, 17.1% Black, 3.9% Asian, 0.3% Native American or Alaskan, and 2.1% some other race with 4.9% Hispanic or Latino. Owner-occupied housing is 72.0% and renter-occupied housing is 28.0%. The median value of single-family owner-occupied homes is $188,400. 88.1% of the district population has at least a high school diploma, 36.7% at least a bachelor’s degree or higher. 9.9% of the district are civilian veterans. 12.7% are foreign born and 20.1% speak a language other than English at home. 9.9% are of disability status. 68.2% of the district is in the labor force, which consists of those 16 years and older. Mean travel time to work is 26.2 minutes. Median household income is $64,751. Per capita income is $33,628. 5.3% of the population account for families living below the poverty level, and 7.6% of individuals live below the poverty level.

So perhaps the sociologist, compared to an economist, starts at a disadvantage.

Better to own or rent? Cost not the only factor

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As we live in the aftermath of the burst housing bubble, is it better to own or rent? While individual circumstances differ, some experts advise owning is cheaper:

One year ago, Trulia’s Rent vs. Buy Report, released by online real estate aggregator Trulia, found it was 44% cheaper to buy a house than to rent. Today, the gap has narrowed, due in part to rising interest rates and home prices. The newest edition of the report finds that buying a home is now 38% cheaper than renting. The report compares costs for a seven-year period using five calculations…

Peggy Jennings, a Broker/Realtor with Prudential Great Smokys Realty in Sylva, North Carolina, cites favorable interest rates, good inventory and relaxed loan requirements as good reasons to buy now. “Interest rates are still good. The inventory is improving as more people are deciding it’s time to sell. There’s going to be a lot of good inventory coming up, especially since the foreclosures from a couple years ago are now rehabbed and ready to sell,” says Jennings…

Even though it is a buyer’s market in many areas, homeownership is not the right choice for everyone. A primary consideration is how long you plan on being in an area. “I tell people if they are planning on living in an area for at least three to five years, then it makes sense to buy versus rent,” says Jennings. “When you go to buy,” Jennings says, “you have to pay quite a bit of closing costs. For a typical sale of $150,000 or $200,000, you’re looking at somewhere between $3,500 to $5,000 in closing costs. So it doesn’t necessarily make sense to buy a house and then within two years try to sell it, unless it’s a really awesome market and you think you’ll be able to sell at a good price.”…

Low interest rates, better inventory and relaxed lending standards make now a good time buy a home. In many markets, it is considerably cheaper to buy than rent. Although the Trulia report finds it is 38% cheaper to buy than rent nationwide, it’s important to note that individual markets can vary greatly. For instance, it’s 66% cheaper to buy in still-struggling Detroit versus only 5% cheaper in Honolulu. Even though the numbers show it is generally better to buy than rent, you should always consider the individual market and your own situation and preferences when making the decision to buy or rent.

This analysis is primarily about economic costs of owning versus renting. While this is certainly a large factor in housing decisions, it is not only the only factor. I would think that as long as homeownership continues to have some financial benefit over renting (though it would be curious to know what happens when this gap really narrows – or if it even reverses for some period of time), Americans also have a societal preference for owning a home. Renting is viewed in many places as temporary, housing for transient people who can’t get their act together. Ownership, in contrast, connotes stability, sound financial footing, and taking responsibility for your own property. These assumptions aren’t necessarily fair but this is the American milieu behind the bare economic costs of renting versus owning that also influences how many owner or rental units are constructed in the first place.

Nobel Prize winning economist Gary Becker on the difficulty of sociology

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The authors of Freakonomics and SuperFreakonomics are primarily interested in economics but they do make occasional mention of sociology. Here is one example involving the Nobel Prize winning economist Gary Becker describing his own life (page 15 of the deluxe edition):

“I began to lost interest in economics during my senior (third) year because it did not seem to deal with important social problems. I contemplated transferring to sociology but found that subject too difficult Fortunately, I decided to go to the University of Chicago for graduate work in economics. My first encounter in 1951 with Milton Friedman’s course on microeconomics renewed my excitement.”

Two things stand out:

1. Sociology is about social problems. This is a long-standing part of the discipline and the reason many introductory level college classes in sociology are about social problems. At the same time, this tends to portray sociology as more as an activist discipline – which it may be, depending on who you talk to – and less of a scientific enterprise.

2. Though he doesn’t say why, Becker suggests sociology was “too difficult.” From a smart guy, this is a nice hint that sociology isn’t just common sense. Society, groups, interactions, and individuals influencing each other leads to a complex set of theories and methods.

Don’t blame Black Friday and Thanksgiving shopping; they just expose the consumerist system

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As crowds gathered to shop on Thanksgiving and into Black Friday, there has been plenty of backlash from those who think this violates a sacred family holiday to those who don’t like that relatively low-paid retail workers have to work another day to those who bemoan the lengths Americans will go to fight over some doorbusters. All of this might be true but I think it misses the point: these two days simply lay bare American consumerism. In a similar way that Walmart and McDonald’s tend to take the brunt of complaints about big box stores and fast food restaurants, Black Friday and shopping on Thanksgiving share a similar fate: they simply make real what is true about Americans and what they want.

There is a whole system at work here. It involves buying single-family homes, talk about the American Dream (equated with acquiring certain items), dreams about scientific progress and mechanical abilities such that life will be easier, liking having choices more than enjoying the goods themselves, acquiring stuff, and an economy and financial system dependent on average citizens continuing to buy beyond subsistence items. This system involves some great advances put to interesting uses, things like the assembly line, the internal combustion engine, transistors and semiconductors, the mass production of houses, the rise of marketing, and mass media.

The lesson is that hardly any day all year long is sacrosanct any longer; more than family togetherness, more than patriotism, perhaps more than the Super Bowl (which combines all of these things in a different way), Americans enjoy shopping, good deals, and consumption. It is competitive and alluring and our collective retirement accounts may all very well depend on this behavior.

Krugman: prediction problems in economics due to the “sociology of economics”

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Looking at the predictive abilities of macroeconomics, Paul Krugman suggests there is an issue with the “sociology of economics”:

So, let’s grant that economics as practiced doesn’t look like a science. But that’s not because the subject is inherently unsuited to the scientific method. Sure, it’s highly imperfect — it’s a complex area, and our understanding is in its early stages. And sure, the economy itself changes over time, so that what was true 75 years ago may not be true today — although what really impresses you if you study macro, in particular, is the continuity, so that Bagehot and Wicksell and Irving Fisher and, of course, Keynes remain quite relevant today.

No, the problem lies not in the inherent unsuitability of economics for scientific thinking as in the sociology of the economics profession — a profession that somehow, at least in macro, has ceased rewarding research that produces successful predictions and rewards research that fits preconceptions and uses hard math instead.

Why has the sociology of economics gone so wrong? I’m not completely sure — and I’ll reserve my random thoughts for another occasion.

This is an occasional discussion in social sciences like economics or sociology: how much are they really like a science in the sense of making testable predictions (not about the natural world but for social behavior) versus whether they are more interpretive. I’m not surprised Krugman takes this stance but it is interesting that he says the issue is within the discipline itself for rewarding the wrong things. If this is the case, what could be done to reward successful predictions? At this point, Krugman is suggesting a problem without offering much of a solution. As a number of people, like Nassim Taleb and Nate Silver, have noted in recent years, making predictions is quite difficult, requires a more humble approach, and requires particular methodological and statistical approaches.