Angus Deaton writes an entertaining letter for the Royal Economic Society’s quarterly newsletter. In his latest missive, he discusses how the scope of US economics is changing, by discussing the presentations from this year’s PrincetonÂ job market candidates.
Among the topics presented on this year’s job market were studies of the prison parole system in Georgia, (several) of HIV/AIDS in Africa, of child immunization in India, of the political bias of newspapers, of child soldiering, of racial profiling, of rain and leisure choices, of mosquito nets, of malaria, of treatment for leukemia, of the stages of child development, of special education, of war and democracy, of the effects of TV coverage on democracy, of bilingualism and democracy, and many others. (Among the leading departments, only Stanfordâ€™s graduate students appear to be working almost exclusively on traditional topics.)
Twenty years ago, there was essentially none of this. Applied theses were mostly applied price theory, using a set of generally agreed-upon (preferably â€˜frontierâ€™) econometric methods. Issues that seem central now, like poverty, inequality, national and international health, education, the environment, and much of economic development) were left to other disciplines on the grounds that (standard) economics had no framework for analyzing such ill-defined topics.
So what is it that economics brings to malaria, child soldiering, or the consequences of parole boards? Price theory is certainly no longer our comparative advantage. It is not that it cannot be applied to a wide range of topics, as Gary Becker and others have repeatedly shown. But if current graduate students know anything of price theory, it would have had to have been self-taught, because it is no longer on the curriculum in the â€˜bestâ€™ American departments. (Except Chicago where it hangs on by a whisker, and where in a last ditch attempt to preserve it from extinction, Becker, Kevin Murphy, and Steve Levitt are running an intensive price theory summer camp for graduate students from outside of Chicago.)
The advantage that economists have, if advantage it is, is their data handling skills (most social sciences are far from comfortable with millions of observations, to say the least), as well as their well-developed armoury of econometric techniques. If the typical thesis of the eighties was an elaborate piece of price theory estimated by non-linear maximum likelihood on a very small number of observations, the typical thesis of today uses little or no theory, much simpler econometrics, and hundreds of thousands of observations. (The amount of computing time has remained more or less constant.) The extent to which data can effectively be substituted for theory is clearly a topic that is being actively explored, at least empirically. …
In the end, it is hard not to think that the quality of research owes more to people than to methods. Certainly, the best of the job market candidates this year made important advances and showed great imagination and skill, irrespective of the unresolved methodological debates that divide the profession. Given this abundant talent, and the new-found (or re-found) commitment of young economists to the great issues of poverty and health around the world, there is surely no fear for the future of economics. And perhaps one day soon, there will once again be a closer dialogue between theory and application.