When your neighbour wins the lottery

19 June 2013 by Leave a Comment

I’m not sure if the format of the Dutch postcode lottery is common, but it certainly creates some interesting incentives. In this lottery, a random postcode is drawn from the 430,000 postcodes in the Netherlands, with each postcode having, on average, 19 households. Each person in that postcode who has purchased a ticket in the lottery receives €12,500 for each ticket that they hold (people can buy more than one ticket), and one ticket in the postcode is awarded a BMW.

If your postcode is drawn but you do not own a ticket, you know with certainty that you would have won if you had purchased one. You will also know that there were other winners in your postcode, and given the typically small size of a postcode, it is likely that you know some of those winners. With 30% of the Dutch participating in the lottery, there is a good chance that one of those winners is your neighbour.

It was with information from this lottery that Peter Kuhn and colleagues decided (ungated working paper here) to look at two of the more interesting questions in economics. First, how do people react to a wealth shock? Do they smooth consumption over their lifespan, or do they blow it all at once? Second, how do other people react to this change in relative wealth? If my neighbour wins the lottery, does it change my behaviour even though it does not affect my absolute well-being?

Kuhn and colleagues obtained their data by surveying people covering four groups – winning lottery participants, people who lived in a postcode that won but who had not purchased a lottery ticket, lottery participants in postcodes who had not won, and those who do not play the lottery from those unsuccessful postcodes. This combination allowed the researchers to compare behaviour of those with and without lottery tickets in winning postcodes, while controlling for differences in characteristics between those who play the lottery or not by examining differences in unsuccessful postcodes. The researchers asked questions about a range of factors, including household composition, demographic variables, labor supply, happiness, car ownership, income and lottery participation. Questions were asked about both current behaviour and behaviour a year earlier, which was intended to capture behaviour six months before and after the lottery result.

On the question of how the income shock affects the behaviour of the lottery winner, the results supported the idea that people smooth consumption over their lifecycle as winning the lottery had no effect on most household expenditure. What they did find, however, was an increase in car and durable purchasers by the winners, which supports the idea that shifting the timing of purchases of durables is one way in which people smooth consumption. It is also consistent with the idea that people have self-imposed borrowing constraints.

The result for which this study is more famous is the effect on the neighbours. Having a neighbour win the lottery increases the unsuccessful person’s probability of purchasing a car in the next six months by around 7 per cent, which the authors consider large relative to the size of the effects on the lottery winners themselves. This also reduces the average age of their car (no surprise given they are more likely to have purchased a new one). Interestingly, there was no effect on happiness for either the lottery winners or their neighbours, which is problematic for a relative income based model of happiness.

It’s not easy to interpret this result. That the increase in consumption by neighbours occurred only in relation to a visible item of consumption – a car that the neighbour will surely see – is suggestive of what the authors call “keeping up with the van den Bergs”, but the transmission path is unclear. Are they copying the purchase of a car, or responding to the known change in relative income? I sense that the dynamic between a neighbour who knows they missed out on a certain lottery win if they had bought a ticket and their triumphant neighbour would be much different to the case where that income shock was from another source.

I’d like to see two separate experiments, one involving knowledge that a neighbour won the lottery (but without the car or durable expenditure by the winner) and a second with only the signs of expenditure. My (speculative) suspicion is that the lottery knowledge would dominate. An experiment tracking neighbour responses to new car purchases might also be interesting, as if visible consumables are what the neighbour responds to, the windfall may not be strictly required.

As an end note, I’d heard about this paper before I got around to reading it, and I was surprised at the gap between what I had heard and the strength of the author’s claims. I’d seen this result waved around a lot as a sign that people respond to relative income changes, but there are some complicating factors that make it difficult to interpret the causative pathway. The happiness result also does not help the “relative income matters” case (nor possibly my speculative suspicion).

Kuhn, P., Kooreman, P., Soetevent, A., & Kapteyn, A. (2011). The Effects of Lottery Prizes on Winners and Their Neighbors: Evidence from the Dutch Postcode Lottery American Economic Review, 101 (5), 2226-2247 DOI: 10.1257/aer.101.5.2226

Filed Under: Economics Tagged With: , ,

Height through the millennia

17 June 2013 by Leave a Comment

For the last year or so, I have had sitting in my “to blog” pile a 2004 New Yorker article about the increasing height of Europeans relative to Americans. It has a lot of interesting content. It talks about how height peaked in Europe around 800 AD, before declining through to 1700 (largely associated with the rise of cities), and then commencing an upward climb. It notes how Mexican-American teenagers have now equalled the United States norm, while American Mayan teenagers have gained four inches on Guatemalan Mayan teenagers in around two decades. The overarching point of the article is also interesting, that being the failure of heights to increase in the United States (after screening for issues around immigration, race etc.) since the 1950s while European heights continue to rise.

I’ve delayed putting a post up as I’m still getting my head around a lot of the research in the area, and I’m not sure if the main concern was still current following more recent studies. But some recent events have triggered me to put together this post despite still not being fully across the area. The triggers include some comments following my recent post on obesity (to which those observations on Latin American height directly relate), the death of Robert Fogel, a passage in Marlene Zuk’s Paleofantasy and some comments by James Flynn in Are We Getting Smarter?.  So, here are a few interesting snippets.

Robert Fogel is interviewed in the New Yorker article, including about his work Time on the Cross: The Economics of American Slavery:

Historians had long insisted that slavery was not only inhuman; it was bad business—hungry, brutalized workers made the poorest of farmers. Fogel and Engerman found nearly the opposite to be true: Southern plantations were almost thirty-five per cent more efficient than Northern farms, their analysis showed. Slavery was a cruel and inhuman system, but more so psychologically than physically: to get the most work from their slaves, planters fed and housed them nearly as well as free Northern farmers could feed and house themselves. …

Steckel decided to verify his mentor’s claims by looking at the slaves’ body measurements. He went through more than ten thousand slave manifests—shipboard records kept by traders in the colonies—until he had the heights of some fifty thousand slaves; then he averaged them out by age and sex. The results were startling: adult slaves, Steckel found, were nearly as tall as free whites, and three to five inches taller than the average Africans of the time.

The height study both redeemed and rebuked “Time on the Cross.” Although the adult slaves were clearly well fed, the children were extremely small and malnourished. (To eat, apparently, they had to be old enough to work.) But Fogel was more than willing to stand corrected.

From Zuk’s Paleofantasy, a suggestion that the costs to stature of the shift to agriculture were only transitory while humans adapted to the new diet:

The skeletons of ancient farmers are filled with evidence of tooth decay, iron deficiency anemia, and other disorders. Diamond notes that the Greek and Turkish skeletons from preagricultural sites averaged 5 feet 9 inches in height for men and 5 feet 5 inches for women, but after farming became established, people were much shorter—just 5 feet 3 inches and 5 feet, respectively, by about 5,000 years ago, probably because they were suffering from malnutrition. The teeth from skeletons of Egyptians who died 12,000 years ago, about 1,000 years after their people had shifted from foraging to farming, were rife with signs of malnutrition in the enamel: a whopping 70 percent of them, up from 40 percent before agriculture became widespread.

Then a funny thing happened on the way from the preagricultural Mediterranean to the giant farms of today: people, at least some of them, got healthier, presumably as we adapted to the new way of life and food became more evenly distributed. The collection of skeletons from Egypt also shows that by 4,000 years ago, height had returned to its preagricultural levels, and only 20 percent of the population had telltale signs of poor nutrition in their teeth. Those trying to make the point that agriculture is bad for our bodies generally use skeletal material from immediately after the shift to farming as evidence, but a more long-term view is starting to tell a different story. For example, Timothy Gage of the State University of New York at Albany examined long-term mortality records from around the world, along with the likeliest causes of death, and concluded that life span did not decrease, nor did many diseases increase, after agriculture. Some illnesses doubtless grew worse after humans settled down, but life has had its “nasty, brutish, and short” phases at many points throughout history.

In Are We Getting Smarter? Flynn offers some thoughts on whether height and IQ gains have a common cause in improved nutrition:

The connection between height gains and IQ gains over time is significant only because it may signal nutrition as a common cause. Coupled with the assumption that nutritional gains have affected the lower classes disproportionately, this brings us back to the IQ curve. Wherever height gains persist, presumably nutritional gains persist, and where nutritional gains persist, IQ gains should show the predicted pattern, that is, gains mainly in the lower half of the curve.

This is not always the case. Martonell (1998) evidences that height gains persisted in the Netherlands until children born about 1965. Yet, cohorts born between 1934 and 1964 show massive Raven’s-type gains throughout the whole range of IQs. The French gained in height until at least those born in 1965. Yet, cohorts born between 1931 and 1956 show massive Raven’s gains that were uniform up through the 90th percentile. …

Norway … counts against the posited connection between height gains and IQ gains. The upper classes tend to be taller. Yet, height gains have been larger in the upper half of the height distribution than in the lower half (Sundet, Barlaug, & Torjussen, 2004). This combination, greater height gains in the upper half of the distribution, greater IQ gains in the lower, poses a serious problem. Are there two kinds of enhanced nutrition, one confined to the upper classes that raises height more than it does IQ, the other affecting the lower classes that raises IQ more than it does height?

If the above is of interest, also have a glance at an earlier post of mine on Fogel, which was triggered by a NYT profile in 2011.

Filed Under: Economics, Evolution Tagged With: , , , ,

A week of links

14 June 2013 by 2 Comments

Links this week:

  1. There have been some strong reactions to the Edge piece on Napoleon Chagnon (I pointed it out last week, and if you haven’t yet, give it a look). Some are entertaining, although most are not particularly enlightening. Jason Anstrosio goes the epigenetics maneuver and Stephen Corry pins death rates among ancient hunters on hunting accidents.
  2. If you’re risk averse, don’t do science – become an actuary.
  3. The Faroe Islands Health Ministry plans to genetically sequence everyone on the island who wants it.
  4. Overview of the Flynn effect (unfortunately gated if you don’t have journal access).
  5. George Monbiot on rewilding (audio download)
Filed Under: Economics, Evolution Tagged With: , ,

World economic history in two diagrams

12 June 2013 by 5 Comments

Gregory Clark opens A Farewell to Alms with a strong claim:

The basic outline of world economic history is surprisingly simple. Indeed it can be summarized in one diagram: figure 1.1.

Clark (2007) Figure 1.1

I like Clark’s claim, but I’m now convinced that we need a second. From Michael Kremer’s Population Growth and Technological Change: One Million B.C. to 1990:

Figure I plots the growth rate of population against its level from prehistoric times to the present.

Kremer (1993) population growth

Even though there was negligible per person income growth through the Malthusian era, technological change was accelerating. As more people leads to more ideas (as there are more people to come up with them), a larger population leads to faster technological progress. Technological progress in turn allows for further population growth. The resulting pattern is faster than exponential growth in technology and population – a dynamic that does not show up in Clark’s chart.

If I were to stretch it to a third diagram I would want something that captures the dynamism of the Malthusian era – population bottlenecks, different rates of growth across different populations and the like – but I’m not sure what that chart would look like yet.

Filed Under: Economics Tagged With: , ,

Genetics and the increase in obesity

10 June 2013 by 8 Comments

In a discussion on the rise of mental health issues at Core Economics, Paul Frijters touches on the increase in obesity over the last 50 years.

One can basically out of hand reject the excuses most individuals give for their problems as being the reason. The rate of increase rules out any reasonable role for genetics. The fact that the poor suffer more from obesity, whilst it is cheaper to eat less and whilst food has always been cheap for the rich, rules out any obvious effect of the lower price of food or the availability of fast-food. The sustained increase over a long time rules out any story depending on some major current crisis. Like it or loath it, but it is clear that one must look at ‘cultural factors’ to have a hope of understanding what is going on.

A big hint comes from cross-national differences amongst rich countries, where things like wealth and food affordability don’t differ much. As you can see here, the Anglo-Saxon countries, and then particularly the US, stands out. Whilst a third of adults in the US are now obese (with about 25% of Australian adults), only 4% of Koreans and Japanese are such, and in the more egalitarian Northern European countries (Sweden, Norway, Holland) rates are below 10%. The same holds for Italy and France, though rates in those countries too are quite a bit up from what they were 50 years ago. So your one major clue is that there are major unexplained differences over countries.

I’ve heard this “it can’t be genetics” argument from a few people recently. And in some respects it is right. Clearly, the genes in the population have not changed substantially over the last 50 years. However, to dismiss genetics in trying to understand obesity is ignoring an important piece of the puzzle.

First is the high heritability of obesity – both before and during the increase in obesity of the last 50 years – usually measured in the range of 55 to 85 per cent. This level of heritability exceeds that measured for most behavioural traits (although it is in the realm of heritability for intelligence). This suggests that both before and after the increase in obesity, genetics plays a substantial role in who is obese. As the environment has changed (such as the “cultural factors” that Frijters alludes to), people of different genotypes have responded in different ways.

Another pointer to the role of genetics is in the high levels of obesity and obesity-related diseases in some populations, particularly indigenous populations with a limited history of agriculture. Pacific islanders, with almost no history of grain based agriculture, have the highest rates of obesity in the world. American Indian and Alaskan Natives (as a group) have the second highest level of obesity in the United States of any major ethnic group (behind people of Pacific Island origin). In Australia, aboriginals and Torres Strait Islanders are twice as likely to be obese as Caucasians. The costs of obesity, such as Type 2 diabetes, also tend to higher for these groups.

Frijters’s point on the response of the rich and the poor to food prices also has a hint of genetic factors. These groups are not the same. The rich and poor differ in average levels of IQ, willpower, conscientiousness and a host of other traits with a genetic component (even if you don’t believe there is a genetic component, you still should not treat them as the same). So when we ask why obesity is higher among poor people (or less educated people), we should ask what role those traits and their underlying genetic influences play. When faced with the same choices, they are likely to select different options.

These traits might also be relevant for cross-country comparison. Should we be surprised that East Asian countries where populations have higher measured IQ, lower rates of time preference and higher savings rates also have lower rates of obesity? (Obviously, on a cross-national basis, this is not the complete explanation. For example, East Asians in the United States have higher levels of obesity than their counterparts still in East Asia, although they are obese at rates lower than Caucasians and other ethnic groups).

We should also not be too quick to dismiss price. It is not only absolute price that matters, but also relative price of different food types. As argued by Rob Brooks, Steve Simpson and David Raubenheimer, simple carbohydrates have never been cheaper relative to protein. If you are price sensitive, you may shift consumption towards simple carbohydrates. As someone who tends to avoid simple carbohydrates, I can also attest that a large part of the relative price of food is the search effort in finding a low carbohydrate option.

The reason this matters also has an evolutionary basis. Eating food is not a simple “eat calories and feel full” process. Different foods create different responses in appetite. Brooks and his colleagues base their argument on the protein leverage hypothesis, which is a hypothesis that humans have a stronger propensity to regulate protein intake than they do for other non-protein calories. Humans eat until we satisfy out basic daily protein need. If the food we are eating has low protein content, we need to eat more before hitting that satiation point. These extra calories are what make someone obese. Trends in carbohydrate, protein and fat consumption in the United States over the last 40 years offer support for this argument.

Arguments such as the protein leverage hypothesis also have interesting implications for any arguments about the willpower of the obese. Someone eating a diet high in simple calories would need more willpower to constrain their calorie intake than someone on a high protein diet.

While Frijters points to the cross-national differences as a major clue to why obesity has increased, the above suggests that within country and cross-population differences will also be useful. The cultural changes that have resulted in the increase in obesity play out in different ways depending on who the person is. Genetics is clearly not the only factor that should be examined – look at the Anglosphere compared to Northern European countries – but any cultural explanation will need to accord with the evidence that the cultural changes do not affect all people equally.

Filed Under: Economics, Evolution Tagged With: ,

A week of links

7 June 2013 by Leave a Comment

Links this week:

  1. Pinker, Wrangham, Dennett, Haig, Seabright and friends on Napoleon Chagnon (including interviews with Chagnon).
  2. Another Andrew Gelman swipe at those “Psychological Science”papers.
  3. From late last year, but worth a read – John S Wilkins takes a look at sociobiology (Parts 1, 2, 3 and 4 follow) [HT: Åse Kvist Innes-Ker].
  4. Like Zuk’s book, an interesting take on the paleo diet, but beating a straw man.
  5. Rob Brooks and I have an article up at Evolution: This View of Life on the rise of “breadwinner moms”.
Filed Under: Economics, Evolution Tagged With: , , ,

Paleo-hypotheses

5 June 2013 by 9 Comments

In my post on Marlene Zuk’s Paleofantasy, I referred to a review by John Hawks. Hawks suggested that Zuk’s fantasies should be thought of as hypotheses to be tested. I was not convinced that Zuk used this approach, but Hawks’s comment triggered me to write a list of what are the most interesting questions about the paleo lifestyle that I would like to see more evidence on. The list is below.

The common thought that runs through them, beyond Zuk’s points about recent evolution, is that adaptation to a particular diet doesn’t mean it can’t be improved. Also, humans faced broadly varied diets in our past, so I expect that humans have much flexibility in what we can eat.

I should also note that I am posing these questions not as a challenge to the central tenets of the paleo diet, which I expect will largely hold. However, if the answers to these questions fall a certain way, the resulting dietary recommendations probably won’t be called paleo.

Finally, while there is already evidence on the likely answer for some of them, the questions are far from closed.

  1. How does the performance of our mental hardware vary across different diets? I ask this for two reasons. First, we haven’t only evolved physically since the dawn of agriculture, but also mentally. Second, while the paleo-diet may be a good starting point, there must almost certainly be some ways it can be improved, particularly in the context of specific domains such as intelligence. [For me, this is the question I'd most like to know more about.]
  2. How does the paleo-diet compare to the Mediterranean or the Okinawan diet in terms of longevity? Or other health measures? Evolution doesn’t shape humans to live as long as possible. It shapes us to have viable offspring. I should also throw in the growing evidence that the costs of carrying some extra fat are not as high as some people claim.
  3. Following from this, what are the trade-offs? If a diet full of red meat improves health and reproductive success at some age points, does it increase cancer risk in old age? Is there a trade-off between physical and mental output? I am skeptical of claims of a world without trade-offs.
  4. On the flip side to the above two points, what of Michael Rose’s argument that traits at different ages may not be directly linked, and selective forces act more strongly when we are young? Is a paleo diet more beneficial during old age, as the selective forces associated with agriculture have had less opportunity to shape traits that express when we are old? If we switch over to a paleo-diet at age 40, what costs of our pre-40 behaviour persist?
  5. While there is plenty of evidence about the potential for human evolution since the dawn of agriculture, the potential for evolution of our microbiome is orders of magnitude larger. What is the effect of the changes in our microbiome? If someone eats a paleo diet, their microbiome is considerably different from when they were eating a diet full of sugar and grain. But how much does a paleo-diet microbiome today resemble the human microbiome of tens of thousands of years ago?
  6. Grass seeds tend to be poisonous. But how much has the level of poison changed since humans commenced farming grains relative to our ability to digest those poisons? There is likely to have been significant evolution of grains if less poisonous varieties were selected for (and communities that farmed them would likely have had an advantage). Is rice really that bad?
  7. How much of the benefit of the paleo-diet comes from simply excluding sugars and highly processed flour? If you read the paleo testimonials on sites such as Mark’s Daily Apple, I’m guessing most of the benefits came from cutting out the junk and getting some exercise. I’m sounding like Marlene Zuk here, but I’d like to see this tested.
  8. How much of the benefit of the paleo-diet is due to calorific restriction? When the muffins or donuts get passed around at work, you say no. Not only are you excluding simple carbs, but you are also consuming less calories than you might have otherwise.
  9. If we remember that most people hanging out on paleo-websites are the people for whom the diet works, what is the actual rate of attrition of people who chose a paleo diet as opposed to other diets? I know that I find the paleo-diet to be an easy to use heuristic, but is this the case in general?
  10. How do the answers to these questions change as we look at people of different ethnicity with different agricultural histories? How much variation is there within these groups?
  11. And an exercise question – how much variation is there in feet type between people and populations? Is barefoot running better for some people’s feet than others?

I’m sure I can come up with more, but these will do for the moment. Explorations of some of these questions would probably make a nice blog post, so I’ll revisit some of them soon.

Filed Under: Evolution Tagged With:

Zuk’s Paleofantasy

3 June 2013 by Leave a Comment

For some time, the “Paleo” lifestyle has been due for a decent critique from the perspective of growing evidence about the rapid rate of human evolution. Humans have evolved markedly since the dawn of agriculture, with adaptations ranging from disease resistance to the improved ability to digest starch. So when I heard of Marlene Zuk’s Paleofantasy: What Evolution Really Tells Us about Sex, Diet, and How We Live, I was looking forward to that critique being provided.

And Zuk certainly provides a critique. She relentlessly pulls apart the ideas that we are well adapted to the Paleolithic environment, or that rapid environmental change means that there is mismatch between the environment and our genes. As Zuk points out, evolution does not result in stasis and there is no point at which we are ever completely adapted to our environment. We will always be a collection of bootstrapped responses to changing conditions.

However, Zuk’s critique was not the one I was hoping for. As was the case for the promotion pieces and reviews that I read before reaching the main course, Zuk parades a series of straw men rather than searching for the more sophisticated arguments of Paleo advocates. Many chapters begin with misspelled comments that Zuk found under blog posts. While Zuk shoots the fish in the barrel, the more interesting targets are not addressed.

In a Nature review, John Hawks suggests that Zuk’s use of the term ‘fantasy’ is a reference to hypothesis forming, where we play with hypotheses and try to falsify them. I tried to read the book in that light, but it is hard to do. Zuk appears so keen to throw Paleo-enthusiasts under the bus that she does not give many of the hypotheses the thought that they deserve.  At times Zuk seemed almost desperate to find someone to be on the other side of her debate, such as when she chose Ryan and Jetha’s Sex at Dawn as her punching bag for her discussion of sex differences, even though Ryan and Jetha are almost on their own with their thesis. Where she did write qualifiers about not everyone believing in the straw man that she was about to dispatch (which was often), she would proceed to torch the straw man as though the just acknowledged view did not exist.

Take the chapter on diet. Zuk points out that many humans have evolved lactose tolerance. Those with a longer history of agricultural diets have genetic adaptations to allow them to digest starch more efficiently. Even the foods we eat have evolved, with potatoes formerly bitter and lumpy, and corn having a shape and size more like a stalk of rice. But these are points most Paleo-advocates would happily concede. They are not seeking a historical re-enactment. Their argument is not that we have not changed at all, but that the changes have not been enough to make a diet full of grains and sugar superior to a diet of meat, nuts, fruit and vegetables. Whether that is the best diet could be the subject of an interesting debate (i.e. testing the hypothesis), but this is not the argument that Zuk engages with.

Moving to a more substantial point, a review in Evolutionary Psychology nicely summarises Zuk’s mismatch argument as being at three levels: there are no mismatches as all species are adapted to past environments, not current ones; even if mismatches occur, we are not in a position to understand them; and the mismatch perspective has not proven beneficial.

On the first of these, Zuk pushes too far by highlighting cases of rapid evolution while ignoring cases where mismatch does occur. Her description of the evolutionary bootstrapping that must occur when organisms encounter new environments points to the potential of mismatch. Zuk’s arguments about the difficulty in understanding mismatches leans towards saying it is all too hard, and not engaging in the sort of hypothesis testing that Hawks refers to. And on the point that the mismatch hypothesis has not proven useful, there are times where Zuk shows just how useful a mismatch perspective might be. She acknowledges that the high sugar content diet of the last 50 years is not something we are matched to, and provides some interesting points on barefoot running and the evidence of the cost of cushioned shoes. The mismatch between current and past physical activity (accompanied by the suggestion that people should simply “get off the couch”) is almost too obvious to mention.

Having said all the above, I still enjoyed the book. There is a lot of punchy writing, many important research results and underneath her advocacy style, some interesting questions about diet, exercise and other “Paleo” lifestyle features. However, my instinct is that many people won’t see these points due to Zuk’s approach, which will lead to a less interesting debate than we could have had. I suppose this post is further evidence of that.

*To avoid getting completely derailed by style instead of substance, next week I’ll write a post on what I consider to be the most interesting questions about recent evolution and the Paleo lifestyle.

Filed Under: Economics, Evolution Tagged With: , , , ,

A week of links

31 May 2013 by Leave a Comment

Links this week:

  1. Andrew Gelman critiques the recent paper on bicep size and political preferences.
  2. Our food is evolving. John Hawks comments.
  3. A nice article on growing evidence that a bit of extra weight later in life is not a bad thing.
  4. If you’re not subscribed to the a replicated typo feed, get on it. More on memes.
Filed Under: Economics, Evolution Tagged With: , ,

Modelling versus theory

28 May 2013 by Leave a Comment

While looking for something completely unrelated, I came across this 2007 Econ Journal Watch paper Model Building versus Theorizing: The Paucity of Theory in the Journal of Economic Theory. From the abstract:

We argue that a model may qualify as theory only if it purports to answer three questions: Theory of what?, Why should we care?, What merit in your explanation? We examine the 66 regular articles appearing in the 2004 issues of Journal of Economic Theory—“the leading journal in economic theory” —and apply the three requirements. … We find that 27 articles fail the first test (Theory of what?) and 58 articles fail at least one of the three requirements. Thus, 88 percent of the articles do not qualify as theory. … We contend that the journal’s claim to scientific status is doubtful, as well as the very title of the journal. A truer title would be, Journal of Economic Model Building. More generally, we challenge calling model building “theory.”

While I would be reluctant to get drawn into an argument about what is theory, Klein and Romero’s argument about the lack of relevance of much economic modelling is important. They go on to say:

All stakeholders should be concerned that scholarly prestige will be leveraged in a way that feeds mere scholasticism, rather than real contributions to science, learning, and culture. Even if scholastic arts did not distort thought and understanding, they certainly might divert them from the things that matter more. If JET—and many other outlets—consists mainly of crafts that lack integrity as explanation, it does not deserve much prestige within the enterprise we call economics. This article, then, speaks to all stakeholders — elected officials, taxpayers, tuition payers, donors, university administrators, faculty, students, and other citizens concerned about the character and content of economics. …

Our concern is to challenge the semantics that hold that every model is (or entails) theory. We maintain that scientific culture understands theory to entail requirements of importance and usefulness. Theory must serve real purposes of the science, thus, arguably meriting attention from the scientific community.

Of Klein and Romero’s three questions, I usually worry about the third. Economic models are often not tested and even less commonly discarded. Klein and Romero point to some evidence.

It is possible that other economists take published models and subsequently supply the commitment to empirical relevance necessary to graduate the models to theory (Hausman 1992, 273). Whether such graduation occurs is a question calling for further research, but investigations by Philip Coelho and James McClure (2005; 2007) suggest that few models graduate to theory. In one investigation, Coelho and McClure identify the JET articles published in 1980 and containing at least five lemmas. They find that there were 12 such articles. They then investigate the articles that cite those 12 papers. As of June 2006, there were 237 articles that cite the 12 JET articles. They report that of 237, only nine utilize data. Of the nine, only two articles attempt a direct empirical assessment of the model’s results, and zero render a judgment of “accept” or “reject.

I sometimes fear that a lot of the work integrating economics and evolutionary biology might fall at this hurdle (particularly the discarding bit), as there are more theorists than experimentalists in this area. But thankfully there is so much relevant empirical work being done in evolutionary biology, anthropology, experimental psychology and behavioural economics that it’s going to be hard to maintain a poor theory in this area without somebody pulling it apart.

Filed Under: Economics Tagged With:

A week of links

24 May 2013 by Leave a Comment

Links this week:

  1. Robert Kurzban reports on a very cool dictator game experiment. Do people only give money in experimental conditions?
  2. Nicholas Gruen digs up a nice Alfred Marshall quote.
  3. Peter Turchin calls on cultural group selection to explain the transition to farming. Or maybe it’s because “people like to own stuff“.
  4. Noah Millman on Jason Richwine. And another take-down of the paper suggesting the Victorians were smarter than us.
  5. The French fertility transition.
Filed Under: Economics, Evolution Tagged With: , , ,
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