Two Cheers for (Good) Theory

Everyone is having a grand-ole time cheering about the "new" empirical wave of economics. Write-ups about the recent Nobel winner, Angus Deaton, have talked all about his influence on data analysis:

His method of careful analysis of data from household surveys has transformed four large swaths of the dismal science: microeconomics, econometrics, macroeconomics and development economics.

He has brought microeconomics — traditionally a field populated by theorists — into closer connection with the data. Partly because of his influence, modern microeconomists are more likely to spend their days knee-deep in large-scale data sets describing the real-world decisions made by millions of people, and less likely to be mired in Greek-letter abstractions.

Much of the empirical revolution in economics has been enabled by the tools that Mr. Deaton developed. These tools reimagine the role of economic theory, using it to organize and interpret the tidal wave of data coming from the hundreds of household surveys conducted around the world each year.

Bloggers have gone nuts over it, but it's not only them. The John Bates Clark award has been heavy on the empirical micro lately;

(E)ssentially changing this prize from “Best Economist Under 40” to “Best Applied Microeconomist Under 40”. Of the past seven winners, the only one who isn’t obviously an applied microeconomist is Levin, and yet even he describes himself as “an applied economist with interests in industrial organization, market design and the economics of technology.”

I get it. Increased data and computational power have allowed us to do things we couldn't do 10 years ago. It has exploded.  Plus, for the blogosphere, the data turns into pretty pictures that we can all uuuhhh and aaawww at. FiveThirtyEight and others have made a whole industry out of this.

It's great. I love it.

But theory is ultimately the force that drives our understanding of the world. As Hayek wrote, the abstract is primary. That's why I love seeing Rakesh Vohra come to the defense of theory. I know; shocking that a theorist would defend theory... It's short, snarky, and spot on, as blog posts should be. (And hard to excerpt it so read it.)

If you'll indulge me and let another theorist try to defend the first theorist, using theory... I'll use a theory to try to think through the marginal benefits of theory and empirical work. I think Supply and Demand is a pretty useful theory for thinking through things... But I might be biased.

Let me try my best at making pretty pictures. (If FiveThirtyEight wants me to start designing charts for them, I'm available. Call me.)

Suppose because of a technology "shock" the marginal cost of empirical work declines. This causes a shift to the right of the supply curve of empirical work, lowering the marginal value of empirical work.

supplyshift (1)

This LOWERS the marginal value of empirical work. The next regression gives less value than before the technology shock.

If you believe, like I do, that empirical work and theoretical work are complements, then this should cause a shift of the marginal benefit of theoretical work. I don't think that markets adjust instantaneously, so there might be lag for the theory market to adjust to the change in the empirical market.

demandshiftIf this model gives us any insight into the markets for research, I'd say it says the exact opposite of the standard conclusion.

The marginal value of theory is now HIGHER, because of the "data" revolution. If today is between the shock and the final adjustment of theoretical work, the marginal value of the theory will continue to grow.

So I'll get back to my theory work...

Emphasis of Economics and Math

Yesterday's post tried to lay out why I believe the fundamental difference between Austrians, Chicago school, and Samuelsonian economists is only one of emphasis. Thinking more about it, I was reminded about an interview with Kirzner that also bring in the use of math in economics (one of my favorite topics to get myself in trouble).

In an interview for Liberty Fund, Kirzner says the following (54:20):

If one believes that the description and analysis of equilibrium states constitutes the central task of economic analysis, then the role for mathematics is clear and indisputable because mathematics can and should and is able to grapple with the meaning of an equilibrium state... and to the extent that's all one has to do, then mathematics would be fine. The problem is, as Austrian see it, is that that is mere footnote to what economists ought to and should be doing, that is understanding the market process.

If I keeps things like this in mind, I am forced to be more sympathetic to different approaches. The reason some people don't use mathematics is because it is not well equipped to analyze what those people think is important. The reason other people force everything into mathematics is because they do want to analyze equilibrium states.

The same applies to non-math differences. In Becker's textbook, the focus is on describing how whole markets work. If that's what I want to do, his aggregation techniques might appeal to me. If I think the study should be that actions of individuals, I will not want to aggregate in such ways. It's a difference of emphasis, compared to anything antithetical.

This whole point might be trivial, but I forget it. I doubt I'm the only one.

Of course, that just kicks the can. Then the question becomes, not what techniques and models should we use? But, what is worth studying? And I wish I had an answer for that... If you do, let me know.

Update:

Michael Harris tweeted at me something I found quite interesting.


I think that gets at one important aspect. If Austrians wanted to study the same things as non-Austrians, they would use the same tools. I'd bet the reverse is also true.

Austrians vs. Chicago School vs. Samuelsonians: *Only* a Difference of Emphasis

A long, long time ago, I had the bold idea to work through three textbooks in economics from three different perspectives: Murray Rothbard's Man, Economy, and State, George Stigler's Theory of Price, and Mas-Colell, Whiston, and Green's Microeconomic Theory, or as I separate them: Austrian, Chicago, and Samuelsonian.

Boy, was I naïve then? I also set myself the goal of trying to translate these texts into short blog posts as a way to learn. While I gave up on the blog posts (to no-one's disappointment), I kept reading each book. Almost two years later I can report that I've finished working through each book. Worked through, not necessarily understood everything...

I chose this strange task, because I had always been fascinated by different approaches to economics. What does it mean to do economics? How have different people answered that problem? All these questions are generally things grad students aren't supposed to worry themselves with.

I couldn't help it.

While my perspective can never be completely balance to judge these three books, I worked hard to give each a friendly reading. As I'll explain, reading each with a friendly eye was extremely valuable. Maybe I even understand a thing or two from each book. I definitely understand more thoroughly why different economists believe different approaches are the right way to go. I'm more sympathetic to the disagreements in presentation and style. Honest people just have disagreements on what is important.

A Few General Thoughts

This post is about  my thoughts after studying each book. If you want to read this as a comment on different "schools" of thought, go ahead, but I'm focusing on the books. However, there is an inherent problem in reading too much into this, because I'm talking about textbooks, compared to pioneering research. Deal with that as you wish.

I came into this project most sympathetic to Rothbard's approach, but left sympathetic to Stigler's. At no point was I a fan of MWG, probably because grad school forced me to study MWG, while the others were simply "for fun." There is a dryness is MWG that is hard to handle, although it was more wordy and entertaining than a lot of the references I used for first year. What does that say about graduate school?

MWG is clearly the most advanced in terms of mathematics and is only workable for grad students. There is no value in studying it before you know the math. Stigler reads like an intermediate text these days, but funnier and clearer. Man, Economy, and State is basically an intro textbook, so it's accessible. Sorry, Rothbardians. It's true. That's not an insult.

Luckily for me though, Rothbard throws in comments that an intro student would glance over, but are food for thought for an economist. Anyone who tries to disregard his book because it seems simple is missing out on lots of insights. It was definitely worth going through for me, even after reading Mises's Human Action a few times. If you're someone who is sympathetic to Austrian economists and would read with an eye to learn from it, it is worth the read. If you're going to read it just to find holes, it's not worth the investment. Finding holes is too easy if the reader doesn't appreciate the Austrian approach.

Similarly, if you're going to read MWG and stop on page 116 because the term "social welfare function" appears without a sneer, fine. You're not going to learn. If you absolutely reject the use of mathematics in economics as a Mises Institute presenter said in a speech to students (48:00), the same thing will happen. You cut yourself off from a whole world of economists.

If you pick of Stigler and laugh at the fact that he doesn't define axioms to start from, you're missing out. Does everyone get my point? Read these books to learn from a grow, not criticize. That's my goal in general.

A Difference Of Emphasis

The rest of this post is where I am going to get in trouble...

While I went into this project expecting to see completely different approaches to economics, the books were remarkably similar. This might make sense when one remembers that each book is still within neoclassical economics, roughly Walrasian, Marshallian, and Austrian. Nothing is heterodox. However, I was surprised. I had learned economics on the internet where everyone spends their days criticizing how dumb the "other" side is.

No. Each method is valuable in its own way.

The distinction comes from each book's particular emphasis, what the authors think is important. The emphasis of MWG is on a completely closed, axiomatic system, defining every part of a model and solving for an equilibrium. For Stigler, the emphasis is on simple, intuitive models that can applied to many problems. For Rothbard, I see the emphasis on coordination of production through prices. Of course there is Rothbard's emphasis on his form of praxeology and being able logically derive economic theory. Yeah, yeah, yeah.

But this is a "peculiarity of presentation."

Speaking about various school of thought in 1933, Mises (p. 288) wrote that

these three schools of thought differ only in their mode of expressing the same fundamental idea and that they are divided more by their terminology and by peculiarities of presentation than by the substance of their teachings.

Just to see how many people I can make mad, this quote still applies to neoclassical schools of thought in 2015, as exemplified by Rothbard, MWG, and Stigler. Mises didn't believe this even by 1957. But I'll disagree with The Master.

Each book's main focus is what Hayek called the pure logic of choice. Given some axioms, derive implications about people's choices. Each books focuses on equilibrium, even though they may have different ways of dealing with disequilibrium. Each has their demand curves sloping downwards, although MWG and Stigler might allow for hypothetical "Giffen goods." Each talks about markets that work to coordinate everyone's actions.

Of course there are also some differences in the tools that people will get hung up on.

  • MWG's theorem/proof style is confusing to people who didn't study that type of math.
  • Rothbard's rejection of advanced mathematics, indifference curves, or cardinal utility might confuse many economists.
  • Stigler's hand-waving, trying to balance between rigor and applicability might turn both sides off.

Yes, if you want to read the three books only looking for the differences, there are plenty of faults in all books.

However, I consider these ancillary to the general topic. None of these should stop readers from being able to learn economics from each book. These are all still *micro* texts. They deal with individual, purposive action. The have buyers and sellers interacting in a market. They have models to capture this. They are working to understand how markets work. Again, all are within the same neoclassical tradition.

The authors change the presentation of the material, but I don't see the fundamental issues that arise from these distinctions. Certainly nothing that would make it impossible for all three groups of economists to learn from one another.

Austrians may disagree with omitting discussions about the structure of production. MWG fans might miss the formal game theory in the other two books. I'll argue that the more fruitful way to read this disagreements is not worry about it. MWG thinks game theory is one of the important topics; the other do not (and they are old). Rothbard spends 300 pages on production; the others do not. Each book has a set of priorities. Space is limited.

Now, I'm sure some people will say that I do not appreciate the importance of some of these differences. They may say that cardinal/ordinal utility is too important to just brush aside. Or math is too fundamental that anything without math isn't "real economics." Fine. Spend your days tearing down the other approach. I'm not sure that is fruitful.

If person A says that the important thing in economics is having a model derived from axioms of preferences, but person B says the important part is having an easily applicable model, how are we to decide? Certainly, it is not a matter of science. I have my thoughts on what are important things to include and what are not. However, I see that as closer to disagreements over favorite band than to substantive disagreements that would hinder learning from each other.

To all economists, this is a plea saying that "the other guy" is not as crazy as you might think. That is my main take-away from reading these books. Authors have thought through economics seriously, but happens to disagree with you. You are only hurting yourself if you don't learn from him.

Moving Forward

I am constantly looking for common ground for research. I want to use insights from all of these and will keep reading in each traditions, particularly their approach to the core theory through textbooks. It helps me understand the hidden assumptions in each framework and clarifies these ideas in my teaching. I'm working through Kirzner's Market Theory and the Price System, Becker's Economic Theory, and Krep's Microeconomic Foundations. Wish me luck! And tear me apart in the comments 🙂

Summer Update

Surprise, surprise. I haven't been blogging as much as I hoped to over the summer. After a few posts looking back at first year (which sucked btw, BORING!, the year... and maybe the blog post), now I've hit a dry-spell. I do want to write more about first year, but I also need to look forward. Lots of other things are going on and blogging just falls down.

In the meantime, here's what I've been up to since I'm not blogging. You can read this post as a long excuse to both my readers...

Official Duties (ha ha)

My main focus over the summer has been for a fellowship I am receiving this summer. The fellowship is for students to spend the summer working 1-on-1 with a faculty member. Prof. David Rahman was kind enough to agree to put up with my shenanigans for the summer, and hopefully longer.

I'm working with him on developing a simple, intuitive model that looks at how dictators use propaganda. My question is simple, when will dictators use propaganda and when will citizens believe it? It is related to my master's thesis, but I'm following a different literature this time. It's a variation of something called global games.

Rahman has been suggesting tons of papers to read through and because I'm a little slow it has taken a lot of time. Trying to figure out the model is even harder. Surprise, surprise! After 2 months, I have not mastered the ability to create simple models and solve them. That's what I need to work on... I'll keep trying.

Also, as I wrote before, I was an Mercatus Center Adam Smith Fellow this past year. (I also get the pleasure to do it again next year!) For one week this summer, I got to attend a conference on classical liberal economists. I was able to also present and discuss my paper on Smith and Hayek while there. I received lots of great feedback and had many fun discussions about all things related to social science. The program is just a blast in so many dimensions. It allows me to get out of the strict confines of pure econ.

Despite the great feedback from people at the Smith Fellowship, I sent it out earlier in the summer and got my first reject. That was an odd feeling, but good to get the experience. It's not going to be the last rejection. Now I'll need to revise it and send it out again. With everything else going on, I don't know when I will focus on it.

Other Random Econ Stuff

I've also been lucky enough to spend the summer doing other fun econ stuff and I have more to come. In addition to a week out at Mercatus for the Smith Fellowship, I spent a weekend out at the Public Choice Outreach Conference and another weekend out discussing recent work in the politics, philosophy, and economics tradition. As always, these weekends are fun and I learn a lot.

The peak of the summer econ activities was a week talking about Hayek. Liberty Fund hosted a week-long colloquium discussing Hayek's contributions. The group was made up of economists, political scientists, and philosophers. It was a lot of Hayek for one week, but exciting. I learn so much when I'm around non-economists. They see the world differently than me and that's great. That's how you get gains from trade, when each side has something unique.

Besides that, I've been filling the time with lots of random ideas on all topics, from optimal taxation to the Panic of 1907 to rational irrationality. A typical grad student, I have no idea what I'm working on.

I also started a food blog with my wife to keep some non-econ things in my life.

What's Coming Up

I have one more personal vacation and two more professional trips this summer. That will be enough traveling to get me through the summer... I'll have another weekend out at Mercatus (about the 100th in the past year, wait, that can't be right?) and a few days at the Sante Fe Institute. At Mercatus, the topic is Austrian economics. At Sante Fe, the topic is complexity. Both should be a lot of fun.

All that traveling has made me almost forget this coming year. Oh well. I'll think about that when it comes. I'll probably also indulge myself by blogging about the second year in my econ PhD also...

In the meantime, I'll just thank God every day that I get to spend my days learning economics. It is the coolest subject in the world and I am truly blessed to get paid to learn about such fun stuff.

 

 

 

 

Behind First Year: The Numbers

(Update: I passed both exams on the first attempt. Hopefully that helps readers to judge the information below.)

Grad students constantly talk about how much they work. It's a badge of honor to explain how terrible life is. Even I have gotten a little mopey about things lately. I apologize.

This post attempts to put some numbers to the amount of work one specific PhD student did. My purpose is not to brag, neither about how much nor how little I worked, but simply explain how the time I put in. (If it turns out I failed my exams, I'll make a note on this post in the future.)

Instead of relying on my biased recollection, I used data. Of course, this has its own biases, but it is better than my memory.

Since about 2 years ago, I've used an app called Toggl to track my time. I highly recommend it. It pushes me to work more and stay focused. I always feel bad when I'm clocked into work and I'm actually checking Twitter, since I'm only fooling myself. That pushes me to get back to work.

A quick note on how I track my time: when I arrive at the office and start to actually work, I mean actually work and not just get ready for the day making tea, I begin clocking my time. I have the app on my phone, iPad, and on a browser. I am able to keep them synced reasonably well. When I take a break to eat, I switch the tag to "Personal." When people come into my office to chat, I do the same. I want to get a real estimate of my time doing each activity.

I originally tried to keep track of smaller categories of activities, but I've found my optimal tracking is with broad categories like Personal, Courses, Studying, and specific projects.

Categories I included as "work" time:

  • Courses: the actual course lectures
  • Coursework: studying, problem sets, related readings
  • Non-Coursework Econ: reading for my Adam Smith fellowship, fun economics readings like Hayek, programming, departmental lectures
  • Projects: I have three papers at various stages and I've tracked the time on them.
  • Blogging: This is the least like work, but I only tracked about 10 hours over the year. I likely missed a lot of blogging time or put it as personal.

The most obvious bias is from checking Twitter. If I just glanced quickly, say less 30 seconds, I wouldn't mark the time. If I got in a conversation, I would count that as personal time.

I tracked personal time to try to see how much time I was wasting at the office. If I wasn't working, I wanted to be home with my wife. My apologies to her for wasting the time I did at the office.

Categories I included as "personal" time:

  • Eating
  • Browsing the internet
  • Working out
  • Practicing Spanish

So here is my non-perfect data from September 1st to May 27th. Continue reading

Year 1 = Finished (Hopefully)

While I am not really done with first year until I have passed both exams, I'm going to act like the first year is done. At least, I'll do that for a few weeks.

This morning I finished my 2nd prelim, which was in macro. The first was in micro. I hope to write more reflections over the coming weeks about first year. I hope to get my thoughts down when I have a clear head, but also remember what first year is like. I don't want time to distort my perception.

Both exams were easier than I expected. While that doesn't mean I passed both, it is nice to come out and feel better than when you went in.

But it's hard to tell. As I said in a earlier post, the grading is a mystery. I'll have to wait until the pass/fail comes in to really know.

The 5 hours of the actual exam was a unique experience. While I'd taken long exams for my physics undergrad or for things like the GRE, these were more exhausting than I anticipated. Luckily, there was lots of candy (the food of champions I believe) to keep me fueled for the exam. It was mentally draining. I expect to crash in about an hour.

There was such a build up to micro that I crashed after that. The rest of that day and the next, I couldn't study for macro. I came to the office and tried to focus, but I was completely fried. That is something I did not schedule for, leaving me with 2 less days for macro than I expected.

Overall, the exams were fair.

I started studying in January, which made life easier for me at the end. It was still a rush over the past few weeks, but less so than for people who started in March.

My advice to anyone who has to take these exams, start early. This seems obvious, but not everyone does it. Maybe other strategies work for other people. It wouldn't have worked for me. Seeing stuff over several months allowed some things to stick by the end.

Maybe what I did wasn't enough. Maybe I should have started last September. I won't know whether my strategy worked until the end of June when we get the results.

But this year is now sunk. I did what I did. All I can do from here is maximize my utility going forward. In the immediate future that includes a BBQ with our department. Over the weekend that involves a bachelor party. Over the summer that involves more time with my wife and maybe some economics. Actually, there definitely will be lots of economics. I can't give it up. It's an addiction...

Prelims: T-Minus 12 Days

Blogging has been a little slow. There have been interesting conversations going on throughout the blogosphere, but nothing I could join in on. Things are just too busy. (Excuses, excuses...)

As I've said before, the first year of an econ PhD at Minnesota is a build up to prelims. Prelims are overwhelming at times, but the year is still good. I spend my days learning economics. That's awesome. Not ideal to do so much memorization, but economics is still better than anything else I'd do all day.

But everything has a cost. So I have limited my amount of blogging over the last few months. Hopefully this summer will lead to more. For now, prelims are center.

For people who haven't been through prelims (specifically Minnesota prelims), this structure might seem odd. Why all this build up for an exam that doesn't matter? Isn't a PhD about research? Good questions. I don't know. People act like there is a reason, but no one can articulate what it is. It's just something I have to do, like learn cursive or go through hazing in college.

In under two weeks, I have my first prelim exam. It's in microeconomics and will look something like this. I remember looking at the exams before class started and being completely overwhelmed. I didn't know how to do anything. That feeling has only slightly changed.

There are 4 sections, one for each of our quarters:

  1. Consumer and Producer Theory
  2. General Equilibrium
  3. Game Theory
  4. Mechanism Design

In each section, there are a range of topics. Some topics I understand, especially from 1st quarter since I've had time to study them. Some I am still clueless about (everything in mechanism design). From now until May 20th, I'm working to fill in the gaps.

After all the joy of studying micro, I will have another week to focus solely on macro. The exam for macro is longer (5 hours compared to 3 hours), but more structured. For macro, the courses build on each other more directly than for micro. Studying for one subject helps (at least a little) for the others. For micro, that is not the case. Each section is basically independent in micro.

That makes studying for macro less overwhelming. It doesn't seem so varied by topics, but has more depth on one topic. That one topic is the Dynamic Stochastic General Equilibrium model (DSGE). Sometimes we set up the problem in one way, sometimes in another. Sometimes there are taxes, sometimes not. Whatever.

While there has been much criticism of this type of macro, DSGE is still the main framework for modern macro. Therefore, DSGE = macro for first year UMN students. We can debate the issues with that later. For now, I must ignore those concerns.

DSGE and the micro topics above are what I have been focused on for months and hopefully will only have to focus on for a few more weeks. Ideally, I will pass both. But economists don't care too much about ideal worlds.

If I don't pass, summer means studying. We get a second shot at the exams in August. However, I'd rather spend my summer learning about things that interest me, like network theory or agent-based modeling, than studying for an exam. My reading list, and stacks of books I bought without reading properly, is embarrassingly long. I hope summer makes a dent in that.

Oh well. That all has to wait. Wish me luck.

Models, Who Needs Them?

There are many books that I've read that continue to influence my thinking. An important book for me is "Philosophy: Who Needs It?" by Ayn Rand. This book was important, not because I became a Randian. I didn't after that book nor "Atlas Shrugged". Instead, it was the first book I read that urge me to think about philosophy.

Before Rand, I was like most people, scoffing at philosophy, dismissing argument as "just philosophical." I, in all my infinite wisdom, didn't need to think of the mumbo-jumbo philosophy.

Rand's main argument in the title essay is that the question isn't whether to have a philosophy or not. Every person must have a philosophy of how to live their lives. It's unavoidable.

The options are to follow the philosophy that we absorb through life or consciously choose our philosophy. If we do the first, our philosophy might come indirectly from parents, friends, teachers, or celebrities. It might be whatever we pick up through our day-to-day.

Or, as Rand argues we should know what our philosophy is and why it is our philosophy. We can think deeply about the way we want to live our lives and work to pursue that. Instead of passively floating down the river, we can direct our philosophical boat in the direction we want.

The answer to Rand's question "who needs it?" We all do.

Economic Models

The same is true for models of the world, although I have economic models in mind for this post. For this post, I'm using the word "model" to mean a systematic way of analyzing economic questions. We can debate elsewhere the difference between models, theories, frameworks, etc.

If you don't want to talk or think about economics, you don't need a model. That's fine. Economics is not as fundamental as philosophy.

But I haven't met anyone yet who doesn't talk about economic issues. Every time you blame those greedy oil companies for high gas prices, you're using a theory of economics that you probably picked up without knowing. As Rothbard reminds us,

[i]t is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a ‘dismal science.’ But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.

After reading Rand, I realized I can passively pick up my economic analysis from newspaper or our humanities professors. Or I can pick the models I use and then do are best to understand how to apply them. Models push me to clarify my thinking. That's why economists love models and are insistent on being explicit about them.

Using models might seem odd to non-economists who aren't used to talking about or thinking about models explicitly. I know it was weird for me when I first studied economics.

Our love of models comes up in discussions with critical students, who usually invoke some heterodox economics. Complaints are levied against the common models, say standard consumer theory. "Individuals aren't rational" is one classic complaint. Sometimes Samuelsonian economists get annoyed at these complaints and ask "what's your model?" That is not because economists are evil jerks who want to crush any outside opinion. Every economist I've met is nice and willing to discuss models. We love that.

Instead, we are looking for what model the complainer has in mind. Only then can we judge whether it is a helpful way of looking at the world. If the model you use is "corporations are evil and cause all the bad in the world", fine. You should at least know that so you can decide for yourself whether that is a good model.

Models are just tools, nothing more, nothing less. The economist who insists on a model does so because he finds it easier to discuss a topic when it is clearer where people are coming from. Once a model is put forward, then we can talk about what are the costs and benefits of using it.

People cannot debate economics, nor any social science, without at least using implicit models. It's not only ill-advised, but impossible. One person asserts QE will cause inflation. He is using a model, probably not a good one. If a person says capitalism impoverishes Africa. He is probably invoking a poor model.

Since it's impossible to not use models, I want to know what model I am using. I hope the people I discuss economics with have the same goal. This is an idea I've been going on about all week on Twitter.

To be clear, the models don't need to be equations. A supply and demand graph is a model, and a damn good one. Sometimes equations help clarify a model. Sometimes they don't. Either way, I want to choose my models carefully to aid my understanding of the world.

Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually slaves of some defunct economist.

My advice to other: Don't be the "practical men" who Keynes is talking about. Figure out which models you use and only use the ones you want.


There are many references that explore the nature and role of models, specifically how economists use them. Some that people recommended by Erik Angner and Beatrice Cherrier are here, here, and Mary Morgan's book The World in the Model: How Economists Work and Think. Morgan's book is by far the most thorough examination of models that I've seen.

What Football Taught Me About PhD Economics

MRBethel_0190

(Disclaimer: Most of what I say below, Pete Boettke already said better. A lot of the ideas come from things he has written or said. Of course, any mistakes or dumb ideas are all mine.)

One of the great honors of my life was being able to play college football. It left me with a bad back ("and probably some brain damage," yells the crowd), but I wouldn't trade those years for anything. I continue to use the life lessons I learned on the field every day of my life.

On my first day of college football, my defensive line coach, who is as good of a coach and man as I've ever met, said "forget everything you knew about playing D-Line. That was good in high school. Congrats. It got you here. I will teach you how to play college football."

And he went on to teach me more than I could have imagined. I'd like to think he turned me into an okay college football player. Without his advice and training, I would have been crap. He knew what he was saying.

The game is completely different at the college vs. the high school level. If you come into the college level thinking it is still high school, you will get crushed. It's not only a higher level, but a different game. What works in high school does not work in college, so players are better off forgetting what they learned. (Of course, if you are a true FREAK, which I was not, you can do whatever you want.)

That doesn't mean that I truly forgot everything. That's impossible. But as much as possible, I needed to clear my head of what I thought a D-Lineman should do. I had to go back to stage one and learn how to take a single step. Over, and over, and over again. Step. Step. Step.

We spent hours just working on our first step. An outsider watching might say, "why would you have players doing the same drill 1000 times? Doesn't everyone know how to step after being a baby? That's not how football is played. You should play real football."

People who say that don't know the sport.

My first year in a PhD has brought me back to Day 1 of football camp, August 2008. I've had to relearn it all. I never can (nor want to) forget my understanding of economics that I discovered through reading people like Thomas Sowell, Walter Williams, or Murray Rothbard. But I'm now playing a different game now. I signed up to play a new sport, not blog or pop economics, but professional academic economics.

To play that sport, I needed to go back to stage one and learn my first step. Day one micro involved basic producer theory, but with advanced notation. Day one macro involved defining equilibrium "concepts." That might seem basic.  It is. But it's a new game.

The way academics talk about producer theory or equilibrium is not the way undergrad courses or blogs talk about these concepts. Demand isn't a curve, but a vector. It doesn't slope downwards, but the matrix of partial derivatives with respect to price is negative semi-definite. Equilibrium isn't where two lines cross. It's a whole page of definitions.

Getting down those basics takes a long time. That's what first year (and more) is about. We spend the year learning basic academic economics. It's long. It's tedious. It's probably a waste of time. But ultimately, I believe there is a light at the end of the tunnel and first year is definitely worth it. In the words of the scripture, this too shall pass.

Before my Austrian friends think I've completely crossed over to the dark side (I've already annoyed them too much), let me add two things.

First, I don't mean that players or students have to think what they are learning is the best way. What are the odds that all of your teachers are right on everything? Students and players should have questions about why they learn what they learn. But it takes a lot of arrogance (which I certainly have been guilty of) to come in and think you know how the game should be played on day one.

My advice to myself and others: be patient. Learn the game. After you have developed an understanding of the new game, make your ultimate decision on how it should be played. If you're right, you'll win games in football and publish articles in economics.

A second point I want to emphasize is that students ultimately must find their comparative advantage. When I started college football, I had to learn to play how everyone else played. That's just the nature of being 1 person learning in a group.

While the basic skills you learn help everyone, each player eventually needs to figure out how he best plays. For me in football, that was different from most people. I was 2 inches too short, 40 pounds too light, and 0.3 seconds too slow. I had to learn my unique style. My style wasn't right for everyone. It was right for me.

For me in economics, I don't know what my style is. Hopefully I will find it someday.

Most people will play traditional economics. That's fine. If you're interested in something non-traditional like Austrian economics, you have to adjust your play to that. You'll get crushed if you try to play like a pure theorists or econometricians. That's not your comparative advantage.

Take Pete Leeson. He is one of the most interesting young economists in the world. My guess: he would be a nobody if he tried to imitate what comes out of MIT. Instead, he works on what he loves and does it well. He is more successful and the profession is more interesting, because he doesn't imitate.

Grad school is about finding the area that I can contribute to. If I don't want to be a traditional football player, there is a huge difference between finding a niche (pass rushing, for example) and sitting on the bench all year. If I insist that my "economics" is right and no one else agrees, I'll have to enjoy sitting on the bench.

I came here to play. So I'll keep working on my steps. Hopefully, I'll get a few good hits in along the way, like the top picture 🙂

Reply on Austrians and Math

(I apologize to any commentators for the slow response. I just got back from my honeymoon and as much as I love discussing economics with you, it wasn't my first priority.)

We should not write so that we can, but that we must, be understood. - Marcus Quintilian

One might think that after 4 years at a good liberal arts college I might be able to write. You'd think I'd be able to make a small point. A las, that is not so. I will keep working. Thank you to all who put up with my poor writing.

My goal in my last post was simple. I wanted to encourage people, like myself, who are interested in Austrian economics to do one thing:

Give math a shot.

That is all I wanted to do. It wasn't a bold claim and I don't think anyone disagreed with that point. Most people probably dismissed it as trivial.

Yet, I didn't believe there is a single post/article by someone friendly to Austrians urging people to study math. I still haven't heard of one. If you know of one, please let me know and I will post it.

I didn't want to get into discussions of the usefulness of continuity or the benefits of advanced mathematical economics. But people latched on to the continuity or mathematical economics. Those are interesting conversations, but they've been had other places.

I just wanted to say to someone like me during my undergrad, someone who had read more Mises.org than academic Austrian journals, "Hey, Austrian economics is really cool. Keep studying it. But also don't be turned off to math. It can be helpful to understand the world if used right." Continue reading