Economic Ideas Forum

Hello, thank you all for coming to our first annual economic ideas forum I’m Lynne Kiesling, I’m faculty member in the economics department I am the associate director of the John H Schneider Center for Economic Research at Purdue The center was founded three years ago as the Purdue University Research Center in Economics And its mission is increasing understanding about how economic markets work, how wealth is created, and the impact of government regulation The vision of the center is to become a leading producer of policy research that examines the marketplace And increases knowledge regarding government regulation and its impact on the economy, prosperity, and innovative endeavors Our focus is on regulatory and policy relevant economic analysis This economic ideas forum is a result of generous support of the Hugh and Judy Pence family And they’re here with us today, so I’m thrilled that we can thank them in person for their generous support of our work, thank you >> [APPLAUSE] >> Thank you >> I also wanna thank Professor John M Beck for his leadership in starting this research center and setting it up for success And a final round of thank yous before I introduce our participants in our fireside chat today I’d like to thank Krannert’s external relations team, in particular Lou Underwood, who’s done a great job with logistics And the folks who’ve done the communications and logistics have been great, including Tim Newton, Chris Knotts, and Mary Kinova as well So thank you very much We’re really honored to have James Heckman as our guest for the first Economic Ideas forum Professor Heckman is a Henry Schultz Distinguished Service Professor in Economics and the college at the University of Chicago There he also serves as the Director of the Center for the Economics of Human Development, and Director of the Social Program Evaluation In 2000 he was awarded the Bank of Sweden Memorial Prize in honor of Alfred Nobel [LAUGH] I think that’s the way it goes now, for his work in microeconometrics Among his other accomplishments, he’s a member of the National Bureau of Economic Research, the Econometric Society, and the National Academy of Sciences At Chicago, he also has appointments in the law school, and the Harris School of Public Policy This afternoon we’re featuring Professor Heckman in conversation with David Hummels, Dean of the Krannert School of Management Dean Hummels is a faculty member in the economics department, as well as a leading scholar in international trade, on questions involving offshoring, product differentiation, barriers to trade And the broader impacts of aviation, infrastructure, and trade facilitation on trade and economic development So please join me in welcoming them >> [APPLAUSE] >> Thanks everyone for being here Our plan for this afternoon is for us to have a back and forth for about 45 minutes And then we’ll have about 30 minutes of Q&A from the audience So as we go along be thinking about questions that you can pose to Professor Heckman So I wanna jump right in with a couple of questions Actually, we were sort of sharing some notes on the way over He grew up in Colorado, and I grew up in Colorado He was a bachelor scholar, I was a bachelor scholar We were both on faculty in Chicago for a while He has a Nobel, I- >> [LAUGH] >> Don’t, but nevertheless >> Yet >> Yet, yes, I like that optimism So let’s start, so your undergraduate degree was from Colorado College in mathematics How’d you become interested in pursuing economics? >> Well, I went to a liberal arts college, which may not be a welcome thing to say here at Purdue But I went and one of the benefits at that college, at that time in particular, was that students can take a lot of independent reading courses and venture out So as I was interested in mathematics from the beginning I found it interesting, I enjoyed it, and physics, too, took a lot of physics But I also was interested in social science, such as I understood it at the time, and so I shopped around So by shopping around, I mean, I took two credit course in anthropology, courses in other fields actually in social science And then by accident more or less, I took a class in my junior year on what would you think now is the history of economic thought But it was really a class about development Starting with Adam Smith, looking at Ricardo, going through the classics And at that time going through this work by Arthur Lewis, actually, Theory of Economic Development And so to me it was an extremely interesting class I really enjoyed it and it wasn’t just a single tutorial, it was a group of us together And I found it to be very, very stimulating and more than stimulating just that, this is an interesting field

And some of the economists then said look, you know mathematics, mathematics is highly valued in economics Think about becoming an economist So I took more courses in economics and I liked them And it was a field that I thought was extremely good In fact, one of my teachers there at Colorado College gave me his copy of Samuelson’s Foundations of Economic Analysis And I looked at the book, I read it, it was fascinating to me I had physics, it was basically 19th, early 20th century physics applied to economics, but to me it was interesting, very interesting So I thought well this is a pretty good field, and so I ended up going to graduate school in economics That’s how it, and just by accident, everything happens by accident I went to Colorado College in the first place, so there’s series of accidents but I think that was to me it was very interesting And it did allow me to, because all my life as an undergraduate I actually was interested in social questions But I didn’t really have much of a framework to analyze these social questions Civil rights was a big issue at that time, still is now, I guess, but in a different form And questions about trade and inflation, these are all good questions And I thought I could really learn something about it >> So speaking of your time at Princeton, there had been a growth in the use of highly aggregated macrodata >> Yeah >> Up until the time you were there, but what really spurred the growth of, and sort of the applications, in the area of dis-aggregated, microeconomic datasets? >> Well, it’s interesting One of my first fields at Princeton actually was in something that would be called macro time series analysis, so I did a lot of work on spectral density estimation Princeton was very strong at the time John Tukey was alive and well, and there were people like Granger and Hatanaka, who had just left when I arrived And their legacy was there, their book is still sometimes used for aggregate time series So I did a lot of time There was an economist there named Phil Howry, who was probably not so well known but he was the undergraduate thesis advisor of John Taylor >> Okay >> And Taylor had just posted his undergraduate thesis at his website He sent me the link, recently And it’s interesting, because it was feedback control applied to the economy These questions fascinated me I thought this is really great and But then I started doing the spectral density estimation on the, then, fairly short macro time series And I had like 20, 25 observations And even though it’s a simple form of non-parametric estimation, it was pretty unstable, the numbers I became a little disillusioned with that So I kind of moved away, thinking maybe there wasn’t so much data there And I was empirically oriented, I was doing a lot of They didn’t a lot of demography actually at the same time >> Okay >> So, what happen to me, and I think it happened to a lot of people at that time was it certain kinds of data became available So, literally at that time Linda Johnson had this war on poverty that actually created a lot of programs in the United States But one of the legacies which I don’t think is sufficiently appreciated, is that part of the war on poverty, somebody, I don’t know who it was, insisted that the programs that were put in place be evaluated >> Okay >> So there was an evaluation mentality, and with it, the collection of data, and it was micro-economic data So one of the data sets collected was a so-called survey of economic opportunity And that was more or less the first wave, the first survey of what we think of as a PSID now >> Right >> Which has been going for close to 50 years And- >> That’s the Panel Study and Income Dynamics >> Yeah panel study, it’s very widely used for studying income dynamics even to this day So, and then I got interested in that They were large data sets, but Princeton had good computer power, at least I thought relative >> Right >> Technology, I mean the handheld technologies would dominate Princeton was really doing a lot of applied science in particular weather forecasting It was a legacy of John actually that they had this system of differential equations They would solve each night on what was then high end technology called IBM 36091, probably you didn’t know it >> [LAUGH] >> But you’d feed cards into a card reader and so forth But it gave a relative sense of power, I could really do things

And so I got this data, and then some other data from National Longitudinal Survey of Women And I just got very interested in this whole question of female labor supply And then by chance a very famous economist from Colombia came down, gave a lecture at Princeton, his name is Jacob Mincer, he became my colleague later And I found his work extremely interesting, he worked on the labor supply of women So these things kind of went together, and I said there’s a huge amount of opportunity And I remember thinking look, these guys who are looking at labor supply don’t really understand the theory of consumer demand That was Samuelson circa the Foundations of Economic Analysis And so I thought, there’s some, not only arbitrage opportunity but really interesting to look at the household as a utility maximizing model, and to use modern consumer theory So there really was a sense that the labor economists of the day didn’t know what an income effect was, didn’t really know what a compensated effect was And things that we now think are completely standard, there was a little bit a cultural lag And at Princeton in particular a lot of the labor economists were basically institutionalists There was a young guy who with whom I wrote quite a few papers Worly Ashenfelter who was a senior graduate student, but we interacted a lot and wrote papers So what happened is this kinda the data were available and these techniques were fascinating There are a whole set of questions I really didn’t know how to analyze binary data I mean, you could do it by regression, but I thought there are some problems And at the time, there was a book out by Arthur Goldberger, Econometric Theory And if you read the book, still, I don’t know if it’s in print, but he does have two or three pages on binary data But he created some interesting ideas Just to me it was interesting, I really thought it would be very very useful to kinda look at this So I went between statistics and economics, I took a lot of statistics courses, I worked with two key Well, worked with, I talked to him, he was a very open guy, in many ways But I wasn’t satisfied, I thought the idea was to try to understand the mechanisms of labor supply And so, very obvious questions were things like look, you have a lot of data missing on wages for women who aren’t working, how am I gonna determine the labor supply? So very simple model, but at the time people weren’t really estimating things like reservation wage, and so I can see, well, I can derive the reservation wage I have an early paper in econometric doing exactly that, and using them, the participation decision, to work or not, I should say, as a source of information on preferences So that was actually, as main supporter turning a problem into a source of new ideas So I just got fascinated and one thing led to another And I got interested in life cycle labor supply, but the data were there But in truth, most of what I wrote for my thesis, was I never published I mean, I went on and got in to more interesting things because I moved on to Columbia and found some very interesting colleagues >> So, this pattern of newly available data reshaping fields and causing us to rethink ways to approach problems, seems to repeat itself at various points in time We’re certainly In the middle of one of these eras right now where everything under the sun is measured I think anybody out there with a smartphone active right, we’re tracking your location to see where you’re at, and a whole host of other things Digital lag on this on this campus we’re sort of measuring moisture in the soil at one centimeter grids >> Right >> And so, I think as you sort of think about how that kind of availability of data reshaped your work, any thoughts on what this sort of new wave of ubiquitous data is going to do to how we approach these fields? >> I think for example that the use now of administrative records You were talking about the Danish data, I’m actually using that as well >> We should write together >> That’s fine! >> [LAUGH] >> No, but actually I am, I’m actually giving a paper in Denmark in a few weeks looking at inequality in Denmark Which is actually more than most people want to acknowledge and most Danes want to acknowledge, and that’s another whole subject But the fact that you can put together lifetime records You mentioned health data, but you can also get data on crime, education, early health, like you know, scores, and school, health register data, and you can follow these people over their life cycles So I think that kind of administrative data, and

then the match worker firm data is changing what we think can be done Recently in the US, we’ve had some attempts to integrate administrative data, we’ve been slower, much slower But recently the IRS data has been merged slowly It’s not a very good process yet, but slowly being merged to census and American Community Survey data And you’re basically gonna get now I think much richer histories about labor force, and social dynamics, and income mobility So, I think once the data are available, I think economists exploit these opportunities And I think now economists have become very very sophisticated, in not only analyzing the data but suggesting how to create data >> Do you think it should change the way we train students at the PhD level or even as undergraduates? >> Well, I think the idea of economics as an empirical field has become more More feasible if you want to say Precisely because of the computing power But also because of all these data sources you just mentioned So for example going back to the Danish data I remember I was talking about social mobility in the US I had a post doc from Denmark And in the course of my lecture I showed some results from US data In the course of my lecture he replicated that analysis on Danish census data, which he had access to And that created, first of all it was an interesting replication and secondly it allowed us to imagine what would be useful in a country studies So I think it’s just easier to do data And economists, I think, should be trained maybe a little more critically in how to model data analysis So I think there’s been kind of too much enthusiasm for just the purely empirical And I think asking to step back and interpret the data is still something that needs to be emphasized more But I do think that particular training is, there’s a quote that I frequently use, I hope nobody’s heard it before I mean, it’s in the very first issue of Econometrica, the premiere journal where you just published a paper in economics and statistics and the union of those fields But this was written in 1933 when the journal was formed Frisch, a very famous economist, Frisch actually was saying at the beginning is that now data are being collected at a very rapid rate This is 1933, Kutsenits was just starting the national accounts But what he did say was correct, even more correct, he says, but he says so there are lots of effects that people are finding This effect and that So those are empirical relations But he said what’s missing is an interpretive framework And if we’re not to be overwhelmed by the data, we really need an interpretive framework And so in that sense I think the structure of economic analysis is becoming even more relevant with the abundance of data and so forth I mean, we don’t wanna just codify effects >> Codify? >> Yeah >> So I was gonna say, you’re not a fan of machine learning techniques, or? >> Well I think machine learning techniques are great And I think they will develop more using prior information in a way they haven’t yet You could guide a learning algorithm so that it satisfies certain constraints and so forth It just hasn’t been done, most of the people doing it are not economists They want to try to do something that’s kind of theory free, and I think that’s a mistake for economics It’s great for coming up with good predictors, wonderful, very powerful methods But I think it really is beginning now at the beginning And I think when it starts to really flourish in economics will be when it actually starts being informed by economic theory and informing economic theory That’s the beauty of it But now we can digest chunks of data that we couldn’t do before The danger is being overrun with these effects that Frisch was talking about in ’33 So I gave you the 10,000 patterns that came from cross validated data and what do I do with it? And I think there are some prototypes I was telling some people earlier, Degauston and Tobias in particular, had a student, have a student now He’s an assistant professor at Yale these days But he was using machine learning techniques, and some of these big data from Sweden, trying to determine the sources of entrepreneurship Who becomes an entrepreneur or not? So we used machine learning techniques on this Swedish data to get patterns,

life cycle patterns about how the earnings dynamics were, who became an entrepreneur, who exited And the machine learning algorithms, using different parameters for growing the forest, and so we actually came up with seven basic patterns And they were clearly different patterns They were beautiful patterns You looked at them It wasn’t 7,000 It was seven And then he could look at those patterns and say, I think I can rationalize that So he wrote down a very simple economic model to rationalize it And it did rationalize it to a certain level But then that simple model didn’t capture a lot of other phenomena that many economists wanna see, so it built a structural model on top of it So all three parts, that’s where machine learning was very creative, but he went beyond just saying, here are the facts That’s the danger, but the patterns are deeply beautiful, I admire them, I must say I saw these facts and they were just amazing what the profiles were, and they really were distinct patterns of entrepreneurial dynamics So I think I see that as a prototype for what can be done and should be done I’m sure there are others, but this is the one I know best >> So let me take you back earlier in your career So you finished at Princeton and then you joined teh faculty at Chicago So who are you- >> Well, Columbia >> Columbia first, right? And then Chicago So who are some of your earlier influences in those first positions? >> Well, when I was at Columbia, I was a colleague with Jacob Mentzer for three years, and it turned out that then, the National Bureau of Economics Research, which is now Headquartered in Cambridge, was in New York And it was a focal point, so there were people like Finis Welch, who was a leading labor economist, Melvin Reader was at the graduate school, Bob Willis, a number of people were at the National Bureau And this Columbia group that I was tossed into, and really found very very stimulating, had been developed by Backer and Mincer in previous years Becker had left, when I accepted the job at Columbia Becker had said he was going back to Columbia He had been visiting Chicago and then changed his mind at the end But I had already signed on So I wanted to work with Becker and with Mentzer cuz I had learned a lot about their work in the last years of my life and graduate life at Princeton So but then I found that this labor group was very stimulating They had ideas they were looking at new data, and looking at micro data and Becker ignited that Not only that group of senior faculty, but there was a whole host of graduate students who are hanging around And I actually inherited quite a few of Becker’s students, I was on their committees and it was an education for me I could read their theses, a lot of them became very distinguished economists in their own right Somebody like Mark Rosenzweig who’s now at Yale, been at Yale for a while was an example but Michael Grossman There were many, many students And I found that as an educational experience Some maybe not as famous So working on those dissertations and interacting with those people I’ve found was very stimulating I just did, even though I’d read some of the papers I got immersed in this culture for awhile And people like Welch There are a lot of good ideas floating around In that sense I really felt it was stimulating And people who would work night and day but there were other colleagues as well So I felt lucky I think, in terms of the rankings, Columbia was going down a bit by the time I was there I don’t know what the rank was But I do remember when it fell off the top ten list, I was there And I know Bill Vickory was there and he was very sad that the National Research Council had ranked eleventh or something So the people didn’t take themselves as seriously as people would like a top one or two places maybe And so with junior faculty we’re very open So I got a lot of, I mean, go to lunch everyday with people like Vickery, Calvin Lancaster There were a lot of people like that And some good junior faculty from whom I learned a tremendous amount There’s a relatively young economist named Raj Chetty who’s making quite a splash But his father was on the faculty actually at Columbia And his father was a Bayesian econometrician, trained by Arnold Zellner at Wisconsin, who had then gone to Columbia And I learned a tremendous amount of Bayesian econometrics that I didn’t know from him I had Zellner’s books and he was also doing optimal control theory We wrote a bunch of papers, actually And again, it was flat I wasn’t tenured He wasn’t either, as it turned out But the point is, is that I was able to get So I felt that it was a good choice, because it wasn’t that I wanted to be,

but I could learn from these guys, and at lunch And they were open Then Ned Phelps came a bit later, and so I felt that that kind of open exchange was good and so I really found it stimulating >> So you spent the large portion of your career at Chicago >> Yes >> And I think there was a time when there was a very well defined Chicago school of thought >> Correct >> Friedman and Stiglar and the rest >> Right >> If you look at the faculties at the places where economists hang around at Chicago now they seem far more eclectic So I guess the question is, is there still a Chicago school, and if so, how would you characterize it? >> That’s a very good question, and I would say that there are some at Chicago who would say, there is no Chicago school Or at least the Chicago school you’re referring to is gone I think there’s some truth to that, in the following sense, that In the 1960s and 70s, and I think even in the 50s, Friedman was championing a line, trying to distinguish, really attacking Kenzian economics Really, the whole idea was applying price theory everywhere >> Becker was the supreme example of that in applying it to individual phenomenon, fertility, marriage, obviously educational choices and the like So there was this kind of pioneering zeal But I think there was an atmosphere at that time in a lot of economists apartments that incentives really didn’t matter I mean, the Keynesian labor supply model of the time really, it didn’t exist I mean, really, it was a kind of view You had these unemployed people hanging around There wasn’t any systematic discussion of choice in the labor market, for example and in other dimensions There was a view that the multiplier worked when prices were fixed And we understood that later So Chicago was highly distinctive and was running against the notion which I think was kind of aversion of Keynesian economics And Keynesian economics that was somewhat against the market, that views the market had failed Back in the 30s, I think, Chicago, even then with people like Knight and Viner were very actively pushing the view of markets and pushing the view of markets But I would also argue that even in the 30s and 40s Chicago was somewhat eclectic See what people forget was that at the Kohl’s Foundation and in the department, we had Oscar Longeye Oscar Longeye wrote the economic period of socialism while he was at Chicago We had a lot of people who were very ardencanesians and people like Jacob Marsjek and many others Koupmans So the fact is these groups were very different, they clashed I think they clashed too much and I think that led to their departure of one of the groups But I think that that intellectual tension actually was very fruitful for Chicago at the time But now you’re asking, does the Chicago School exist There are books written about the Chicago School, even to this day But they generally stop in the late 70s and early 80s They kinda peter out and some of the members of the Chicago school are not at Chicago, or who people would be Like, McCloskey would be considered still Chicago school Although, you know, he felt rejected by the Chicago school and he was a he then so I can properly use that description But the fact is that I think it has become somewhat less distinctive And I think as a result, I think in some sense Chicago was very successful So by the late 70s I think, many of the Chicago points of view were adopted I remember as a graduate student, people attacking Becker and considering him some kind of fanatic I mean who the hell would study fertility and marriage and price theory and these labor supply I mean Becker was wildly attacked by some demographer because he had babies as consumer durables You know there were things like this and he was making analogies and he was doing it deliberately provocatively But he was trying to build incentives in So he was viewed as a nutcase in the late 60s But then the work started to become accepted, I think And it got accepted And so increasingly, and Friedman left, and Friedman brought, Friedman had a kind, he was a very smart guy Very open to people I don’t know, you didn’t interact with Friedman >> I didn’t, no >> He was very open, especially to junior faculty He’d go to dinner with them, you could talk very fruitful But he also had a kind of a Messianic He had a mission He had a mission and he admits himself that, by the late 60s or so, he was more or less out of technical economics And he was into advocacy for a certain kind of free market approach

But he did bring that attention He was the Chicago [INAUDIBLE] And Stigler too So you had these two articulate people, very, very articulate And then things got a little more technical with Becker I guess And then people like Harry Johnson Harry Johnson was a dissenter in this whole process But I think that group still had some tension and that tension was creative But I think if you ask kind of the Chicago Price Theory Approach, which is what people call the Chicago School, probably has dwindled somewhat in its influence in Chicago Used to be three-quarters sequence of price theory Now it’s one-quarter >> Okay >> And you know, the curriculum is more common You know game theory You know Stigler opposed game theory violently as you know >> Really? >> Yeah I mean but that was the first round of game theory This is game theory ala Oskar Morgenstern 1949 when he was attacking And monopolistic competition So there was a sense that you know Chicago had won because so many people were emulating this But at the same time there were other developments going on in economics, and I think in some parts of those developments Chicago was slow Because it was, it’s not that it was intolerant, it just it was slower probably to acknowledge the importance of some of these other mechanisms We had people like Sandy Grossman Holmstrom but I remember Holmstrom visited and people said, maybe he’s not really, not a real economist or something Some people said that, I always thought he was good I ended up teaching a class with him at Yale He’s very good But the point is is that I think maybe they slowed down a little bit And for a while Chicago became very, very, it quit growing I mean, it had a very fixed, aging faculty and maybe didn’t catch up in some sense with some modern developments in economics, but I think it’s lesson is out there But I think price theory, I think it’s unfortunate I think price theory is very valuable, but I don’t know if you teach it here, for example How much price theory is being taught But I think it’s a very valuable framework for organizing and interpreting data, so anybody, no matter how sophisticated and technically, or in trying to look, looking at kind of the basic feel of the data, understanding how prices might work, getting a first cut, I think that’s very valuable And I do think that’s starting to diminish, and I sadly I am afraid that the Chicago school is much less distinctive >> Interesting >> I’ll give you an example, how much it’s changed, and it’s something that some people are deeply offended by, but it’s interesting, historically When Stigler came to Chicago, he was given a chair called the Walgreen chair That’s the drug, the pharmacy chain It’s very rich He gave a big chair, very well endowed And that chair he held for, I think, close to 20, 25 years until he died, I think That was basically, he died Then it was given to Bob Fogel, who was an economic historian Fogel was using price theory to explain economic history Then Fogel died Well, who got the chair now? Do you know who has the chair? >> I don’t >> Okay, Richard Thaylor So you went from Stigler to Thaylor and you have to understand that that’s quite a change >> That is >> That’s quite a change And in some sense, well you can say it’s distinctive personality Certainly it’s distinctive But I mean I guess the point is that the emphasis, think about it for a second I mean Stigler and Becker were writing you never want to talk about preferences explaining anything And you might say that some of the other worry is replacement might be using preferences to explain a lot and maybe everything So I think there has been that kinda change >> So you mentioned earlier that this notion that Freedman sort of shifted his focus into essentially, he was on a mission >> He was, yeah >> So one of the things that I think is notable about your career is that recently you have stepped into policy advocacy, especially around early childhood development At least that’s what it looks like from where I sit >> Yeah, yeah >> Maybe you have a different view of that And I’m sorta curious about what that progression is like, to go from sorta studying, in a very careful econometric sense, investments in early childhood development to having a sufficient belief in what you’ve found to advocate for policy >> Well, this is an area where actually I would honestly defend the statements I make about this question And when I entered the area there was immediately kind of fuzzy, at least from the point of view an economist, some fuzzy claims about efficacy, even the notion of what these programs are doing, even the measurement of the skills So I felt, by looking at primary data sources, original data sources and augmenting those data sources, but I really have learned something about the dynamics People have always talked about the influence of the mother, the family

There was work actually back at Columbia one of those thesis, Arlene Liebowitz, who’s at UCLA had done some work on the importance of mother’s education on child development The data were very crude but it was the kind of in the right spirit of things So but what I think what I found was that so this was a case where it was accidental I produced some studies that I think actually showed things like rates of return and showed economic benefits That got picked up by advocates so I actually was kind of lifted out of obscurity, at least obscurity in this kinda community And the work was featured because it was viewed as hardcore work And I think it is I recently completed a study of looking at rates of return on another program, the ABC Very painful work, forecasting future earnings You’re accounting for forecast uncertainty It’s tough In fact, it’s a lot harder than many of these advocates understand The advocates know the answer and that bothers me Cuz I don’t know the answer I have never known the answer in that sense I still don’t know it But I think in this case I have a pretty good hint that the answer is positive There’s a lot of intuition So still to this day, it actually is a serious issue in the sense that the advocates, they know the answer and at some key point they’ll say, we know the answer, we don’t need any further research But as we were talking about in earlier forum today, there’s still a lot to be learned about exactly what the mechanisms are, what’s an efficient program And so there is, I find the advocates to be really, I don’t enjoy them to be honest >> Even the people who agree with your work? Well, just because they agree, I mean, it’s why do they agree? If it’s just that they like the conclusion and they reach that before they read my work, it’s okay, I guess I’m happy they use it, but that’s not why my work was done in the first place And as long as they support the work, that’s fine I mean but what happens if show some negative effects or you challenge some conventional wisdom and I have, and some reason, papers and so forth And they don’t like it so much and they keep their, so, and I think that’s becoming a serious problem for a lot of academic research >> And so talk about that a little bit I mean I think that there’s this, this sort of idea about having broader impact And weighing in on policy debates And I mean, do you think that’s something academics should stay out of? Should they weigh in? What’s your view? >> Well I think there’s an interesting dynamic that’s going on now And I think it has to do partly with the technology, the social media, etc But I think increasingly, that what’s happening is that, I think when I was at Chicago early on, I came across some files And I shouldn’t have been reading the files but they were out in front They were public more or less, and they were about how Chicago set up a program In a training program it turned out in Chile And you can see the Rockefeller Foundation, the Ford Foundation, they really wanted economic literacy in South America They felt Latin America, and the Chileans were willing to host these So what came out of it was a very long-standing relationship between The University of Chicago and the Catholic University in Chile But it was a training program It was a technical training point People went down They were teaching labor economics They were teaching some economy metrics Teaching development, public finance, and so forth >> This is the origin of the leader of the Chicago boys >> Correct, correct But I mean there was no political motive But what was interesting, and even earlier, people like in the Ford Foundation wanted to bring Frisch to the US, because there was a belief, I think at that time, that factually informed policy was the way to do it I think this was a view that emerged only in the early 20th century Somebody like Walter Litman, in some sense he got arrogant The idea is that only the expert should be making, he needed experts to make policy But I think there was a belief that social science could deliver on that I think nowadays there’s less belief Forget about the presidency I meant, forget about the president I think more generally there’s a view that’s becoming And I think it’s partly the sense that a lot are dissenting voices And there are plenty of willing economists I don’t know if you saw this video that was made about, what was the name of it? It starred some leading economist It was a video about the financial crisis >> Okay The Big Short? >> No, even earlier >> Because I was going to say, Thaler was in that He was very entertaining >> Yeah, he was entertaining in that Correct No, this is earlier than The Big Short >> Okay

>> Now I’m talking about, there was another movie made and it featured some people who had Kind of made consulting reports advising certain liberalization of markets where they collapsed And so they seem to be some sense of intellectual corruption going any way So I think that some economists, I mean so the view I think is that economics is maybe less trusted And I think there’s less demand out there now for facts, I think it’s sad I mean, there’s still demand I think it’s very important to put rates of return out there Look at social policy and make policy on the basis of it But I’m wondering if that isn’t somewhat an antiquated notion in the way public policy is currently made I know there’s some congressmen and senators, who do make decisions that way But I also know there are a lot of people who don’t But I also think there’s kind of been an unhealthy relationship between academics and the press And I think part of it is the decline of government funding, of research And I think there has been, NSF has been cut back, they had some programs The NIH has been curtailed in some ways and so but what’s happened of the foundations that have come up Now most foundations, I don’t wanna criticize any foundation heads here but most foundations are headed by people who don’t really, they may have certain ideas and certain beliefs But they may not be all that technically inclined, and may be able to evaluate the good from the bad, but many are directly involved in advocacy I mean they really want conclusions And so what’s the best way to reach a foundation head, is to have your work featured in a prominent newspaper, or set of newspapers, to go on media So what’s happened increasingly, is a phenomenon where people might say we’ve gone what, from public intellectuals to, what is the term that’s used as a replacement? But essentially people who are kind of public figures Making broad public statements, sweeping statements, but without a lot of support But attracting attention So for example I would say, somebody who I personally despise is Malcolm Gladwell, only because he makes so much of this stuff is just nonsense that he makes up, it’s nonsense, it’s factual nonsense And it’s harmful nonsense when social policies made on it But yet, Barack Obama had Malcolm Gladwell in the White House And many literate people stop at the level of The New York Times, or some popular journal, Atlantic, or National Review on the other side So there would be a variety of So what worries me is that more and more a lot of the influence is being, of the research, is being kind of piped into those figures to make a broad-sweeping statement that has a huge impact Sound bites matter a lot And as a result, I think the research is being diverted to kind of get your 15 minutes of fame, your headline, and then to tailor your research for that And I think that is corrupting I think it is corrupting but I can understand this lucrative Because first of all, the foundations and the groups supporting you are getting a lot of visibility in their work And they’re doing it through your research and part And you’re getting a lot of fame, and so forth and so on 15 minutes of fame, though A lot of these guys come and go and they finally get caught up and people understand what they did But, I think that is a dynamic that has emerged in the profession >> So, what would you urge for a young academic economist whose work may have policy implications Just urge caution? Stay out of it entirely, what do you think? >> Well, no I think our work does have real bearing I mean on real issues In the long run I think it has very great bearing See, I still work on some of these questions, early childhood education, job training programs, and the like because I do think down the road there are informed people who will guide or So I think we’re now kind of in a wave of advocacy and maybe an anti-intellectual wave that’s sweeping a lot of policy these days So I don’t know how rational public policy is and how rational, it seems like Congress itself was polarizing and even the discussions are not even So I don’t know, you’re an international economist, I can’t even imagine you’re too enthusiastic about the Trump tariffs, for example [LAUGH] >> Well, so, but I think that’s a great example, where I think that there’s a lot of nonsense out in the public sphere And that there’s a role for people who are trained and informed and who understand the research to be a voice for saying these policies don’t make any sense >> Exactly, but I think we should also recognize there are times when there’s a heated

public feeling one way or the other where evidence plays a very weak role But I think one should still aggregate and accumulate that evidence, because it does grow I think in the end, and for example, 60 years ago when people were analyzing education as kind of an investment, the term human capital, some people found offensive What humans as capital, it sounds like slavery or something, wasn’t good And slaves actually were a form of human capital But the fact that is now, everybody accepts it, and people understand it And they understand it just as a matter of policy Education is good, we look at the rates of return So I think in the long run people will, the things that hold up and survive the test of time, and economists are good at trying to knock each other off, so as long as they can survive that process, then I think those things that last will actually be will have a lasting effect, but it may take a while So I don’t wanna stop it, but what I worry about is that a lot of foundations and a lot of groups don’t see it that way And they don’t wanna support anything but the advocacy group So somebody willing to make a cheap comment about this or that, may well get a lot of support and as a result be able to prosper And I think that’s dangerous So if young economists are finding that they have to kind of I wouldn’t say prevaricate or lie but I think kinda shape their research to conform with some norm about I’ll give you an example Now, this may be really controversial but- >> Please >> Think of the issue about race >> Okay >> Race, I mean right now in American society race is a taboo subject It’s become almost beyond public discussion, we can’t honestly talk about it >> Mm-hm >> In many, people get tarred and feathered, literally for making statements One of the best established facts by any labor economist looking at almost any data set sharp ability differences between among different ethnic and racial groups That’s a fact And it’s a fact that you have to live with It’s not some manufactured reality And yet a lot of people want to say that anybody uttering that phrase should be abolished I don’t know how it is here at Purdue, if you have honest, maybe you don’t want to get on the subject then [LAUGH] >> No, no, we’ve sort of Were doctors of the Chicago policies on free expression, so- >> No, I think that’s important So I think this kind of open, so to me, the discussion of race, just think of the polarization right now Last month, the New York Times had its featured headline that massive racism was keeping black men down, not black women by the way, but black men, so it’s racism The idea is we have this massive surge of racism Meanwhile Roland Fryer, who’s a black economist, and a lot of Others are saying the declining role of discrimination in America and that it’s much more kind of family class based Well that’s not a trivial debate to settle, that’s a really important debate Is it gonna be like a civil rights enforcement policy? Are we gonna reeducate people about racial perceptions? Or are we gonna think about building families, building skills, and so forth? That’s a first order question And I think we have to be able to address it, honestly, and come out with a answer It’s not that they’re mutually exclusive, but many, many I think right now the view, racism is too easy an explanation Now, now- >> Well let me ask you this So you’re in the economics department at Chicago, but you also have appointments at the Harris School, and some other folks >> Right >> Am I right about that? >> Correct >> So what I’m curious about, especially for these sort of fraught issues like the one you were just speaking about How important is it for people to get out of their disciplinary homes and see the issue from distinct perspectives? So not just economists but sociologists and other folks, kind of coming at these kinds of issues to sort of see their blind spots in the analysis >> Well for example, the sociologists on these questions of family and on questions of even race and wage differentials, have a large body of work I mean, you’re looking at inter 30 or 40 years ago the sociologist were way ahead of economist and even technical, certain technical fields like duration analysis and event history analysis But so the cooperation with sociologists is natural, they have a database, they don’t have the same interpretive models But you would hope that over at least for the same data you would agree on the same set of facts And I think that’s a very productive group But it’s also interesting to talk across disciplines, even with a sociologist, but especially other disciplines, to see what their takes are on these differences

And so to me it’s very informative, sometimes frightening, but informative that there are points of view about race, about differences among individuals, that you can see are deeply believed, they’re deeply held And I think any kind of public discussion about these issues has to recognize that as a point of view and address it Even if you think it’s wrong you don’t just say, that’s nonsense I think you can say, look, here’s some facts, let’s see where we can get common ground of agreement and about the facts What worries me is that sometimes in some of these comparisons people don’t even want to do that They’ll say, I’m not gonna get near it I was in a symposium a couple of years ago at the University of Chicago The University of Chicago is celebrating, I’ve forgotten, some anniversary in the social science division And we were talking about the importance of the family, something that’s been studied by many Chicagoans Becker wrote some famous work, but there others as well And sociologist and people in the human development, they’re all a group of people starting, the family lawyers and so forth And we looked at what family resources and we said, look, there has been a very big trend in families being split up I mean a lot of people are now writing about the two Americas You have the, a lot of sorting is going on We are finding much more sorting even by neighborhood residential status in terms of income and social economic status Most of the children who are growing up outside of wedlock and with very, are really traditionally in homes that are relatively poor, not very well resourced, and their parents are not highly educated If you look for example, the out of wedlock birthrates of college graduate women, about ten percent, very low Other groups, 60%, and you get down to high school drop outs And so I think you have to say to them But people saying that, no, no, and it turns out some groups are over represented And okay, the question is, are there common socioeconomic factors? Or is there something uniquely about a group? And they would say even discussing this is offensive And there’s a whole set of controversies that go along about culture Take culture, many people find that very, very difficult to talk about There are all these discussions, the what was the title? This book about, I’m going to forget the name of the book, but there are plenty of discussions about cultural differences, about child rearing and so forth And people see very successful families, and groups with very successful families, other with less successful families, measuring success by the child’s achievements, arrest rates, educational attainment, earnings, and so forth So getting into that zone of culture, which economists really don’t know all that well, I mean we’re starting to venture into it But it’s really a deep and unsettled question at least in economics, and other fields have tried to attack it and address it Economists probably could address it more constructively than they do now But recognize that it is a factor and understanding what’s So addressing that I think we can actually make very important contributions >> So I’m gonna ask one more question, but those of you who might wanna ask a question at the mics just step on up so we’re ready to go as soon as I ask this last one So this is an university administrator question in light of what you just said Those kind of connections that really enrich discussion and debate and research Is that the sort of thing that should just rise organically in the academy? Or are there things that we should do to try and facilitate more of the kind of interactions and, so economists don’t understand culture Is that something we should do something about or just let individuals figure it out? >> Well I think that there is a fear I mean we have a certain filtering process now, how people get into the profession and stay in the profession And the very filter itself affects the future of the profession So I think there’s a sense that if people venture too widely from the standard base, they become, they risk possibly obscurity and ending up in the basement of some consulting firm far away from the academic environment they were aiming for So I think there’s a lot of academic playing it safely, and therefore not being willing to tackle some of these big issues Like any young professor who was talking about race who wasn’t tenure might well be committing academic suicide, especially if his tenure’s reviewed

by people who are interdisciplinary and have very strong views about race But some of the other matters about the family, and ability differences, and on and on and on So I do think that the academic, I think it’s difficult I think people are relying too much on kind of tenure processes that are too formulaic and don’t recognize kind of creativity and difference It is very hard to recognize that though When is somebody doing someone genuinely new and not? Think of Acraloss’ paper on limits When that was originally published that viewed it as a joke And Spence too, the signaling work So that was the era of general equilibrium, right And so this looks so low grade, the kind of simple price theory models they had It was not very technical so you know this just wasn’t good Sard’s theorem wasn’t anywhere in sight and so forth So the question was then how the profession can get past that Now I think in many cases, they did get past it Ackerlot survived and prospered with some glitches along the way But I do think that sort of examining the basic quality of an investigator, of a young candidate, it’s harder then relying on just kind of journal accounts and so forth >> Well so you’ve spoken about this problem with relying on some outsourcing tenure decisions to the editors of top five publications >> No >> And- >> It’s a huge, huge question >> Yeah, so one of the ways we talk about it here is that reading is a higher order skill than counting >> [LAUGH] >> And we should encourage reading whenever possible >> Reading’s very costly, as you know >> It is, it is costly So what do you do about that? >> Well, but look, I mean we have a paper we’ve written, you saw a version of it at the AA meetings in Chicago last year actually But basically what we can see, I mean if you look at tenure promotion rates, you list speed, whether you’re promoted at all, being in the top five, so called top five journal plays a big role, everybody knows it And actually in tenure discussions, I don’t know how they are here, but in a lot of tenure discussions, not just in Chicago but in many other places, I know this from colleagues, are basically saying this guy have so many top fives And it certainly universities, one top five is certain for tenure, and I know that for fact, I’m a co-editor of one these so call top five journals And so the question is this, is this kind of centralization? First of all, if you ask questions about how useful are the top five within individual fields, you’ll find in a lot of, what do you think is the most influential journal in development? I would guess the Journal of Development Economics, no? >> No, the World Bank Economic Review It’s the most cited, very highly cited And so you think about econometrics, what’s more cited, Econometrica or the Journal of Econometrics? The Journal of Econometrics >> Yeah >> And in a lot of the field journal So it’s a very funny business we have going on, I think it’s perverted in some sense Everybody ends up being a field specialist, more and more The generalists are kind of dying out, very hard to be a generalist It’s really tough to know all fields in economics now I think that might have been possible in 1940 or 1950, I think it’s impossible now So you do have to delegate, you have to rely on your colleagues and do things But I think right now you do have this specialization And so the tenure funnel is asking people to publish in general interest journals, but the people voting on tenure are themselves largely reading and publishing in special field journals So there’s a sense of hypocrisy here going on, hypocrisy And what’s even more damaging, we start to look at some of these statistics What we see is that if you look at journals that are not top five, like the Economic Journal or the Review of Economics and Statistics, they’re very highly cited In fact they’re actually, they overlap strongly, and in one case they overlap completely with one of these so called top five journals So that if you just look at how many people are reading and citing those journals, and they’re off limit I mean, there’s this big discontinuity If you get into Review of Economics and Statistics, it’s like you’ve fallen off the face of the Earth in some environments So I think the structure has to be, but it is time intensive, and I agree with you I think it’s a question though in demanding maybe that there be more interaction on the actual work rather than just counting journal articles But the pressure on the young faculty is intense, it’s huge They’re all kind of looking, trying, gaining, will this editor like this paper?

Should I cite this guy’s work? Should I be, and on and on and on And it’s corrupting, in some sense We computed incest coefficients And the incest- >> Wait, incest coefficients? >> Yes, we have incest coefficients And it’s asking, how important was it to be in the circle, like PhD from the House Journal or an affiliate, in some ways, of the House Journal within a network for publishing And for some journals, it’s very high For the Journal of Public, the lowest ranking journal in this incest was Econometrica, partly because Econometrica has fixed terms, it rolls over Now there’s no way that anybody’s gonna seize control of the journal Econometrica But other journals, like The Quarterly Journal of Economics, they’re- >> The House Organ of Mass- >> Yeah, no, but you can see, if you look at incest coefficient, it’s quite high PhDs or people that work with PhDs, so people say, well, how do you publish in the journal? And so the answer would go, to be a PhD from Harvard might be the best answer for that So I think that’s bad I think it creates then a, especially if that is, as it is, one of the top five journals JP has some of that, but in terms of the incest coefficient it’s quite a bit lower, but higher than Econometrica And if you look, for example, at influence of these journals, many people say one very influential journal is the American Economic Review More citations to that But if you look at citations per paper published, not so high The AER is not doing all that well Publishes a lot of junk But it publishes many many papers, many more than almost any other journal And so as a result it gets a lot of citations, but not per journal article >> Interesting >> So even the indiscriminate use of citation counts, allegedly codified in the top five, is not being used in the way that you would And in fact if you want a high citation journal and you’re in economics, then Science Magazine or Proceedings of the National Academy of Sciences has a much higher citation count than any of the a fore mentioned journals And but that’s viewed as having fallen off the face of the Earth And there you get the very wide community, but you’re not appealing to the specialist So I think it shapes the profession The junior economists here can testify I think I asked them to, I don’t know how many We had this survey that we sent out It got a very poor response rate, though >> [LAUGH] >> And I guess they think we’re gonna use it against them, but we’re not But the point is is that I think that many, I’ve talked to a lot of young economists And it’s hard not to, they sit down and they start I’ve remember being at dinner conversations at conferences, and they talk about this guy as being really a hot star And so say, what about him? Well he has three top fives, and they list where it’s published And I say, wait, what did he do? What was done? They won’t even know that They know that this person has three top fives, or she has four top fives or something And so to me, we’ve moved to kind of a very, it’s kind of a Twitter type evaluation system where it’s fast and furious and you can just count or look at citation counts People introduce that So you can get a big citation count by publishing a crummy paper that gets a lot of refutations And it happens actually, it happens So you ask what can you do? I know it’s time intensive, but I think that we should, first of all, recognize that it’s there And you realize that the profession has grown and the number of slots at these top five journals has not essentially grown So what’s happened is the probability of anybody Publishing in those top five journals has shrunk just from the sheer volume If you just think about it as a random sorting So it’s become a filter that’s increasingly high and then it can be manipulated You can decide I mean, I know and it’s not a good feeling I think, that I can give conferred tenure on somebody by accepting his or her paper at certain universities, I know that That’s not a good power for me to have or any single person to have And even editorial board, I should be able to maybe contribute, but not So I think that’s too, I don’t know, I consider it a very arbitrary filter But I do think it leads to a certain style of economics And maybe it’s more like replication economics or so one foot in front of the other Joe Blow did this, I can do a little better, and so it’s very clear, it’s predictable

If you come along with something off the wall that is just totally unacceptable For example, take Becker’s book on racial discrimination or take, we talked about Akrilov, but there are a lot of other papers where the mainstream thought this was nuts Search theory, when the original rounds of search theory I think it’s very significant that if you look at a lot of the citations for the search theory Nobel Prize they weren’t all, predominantly, even, in the top five journals They were journals like the International Economic Review, Jet, and so forth Journals that are considered off the, why? Because those journals would entertain something new It was somewhat technical It was off beat But they could recognize the fundamental integrity of what was going on That’s true, they were valuing partly on the technical contribution So I do think we should recognize just our own mistakes in the past And recognize that some of these other notions, some of these really avant garde ideas, we should at least consider their potential value But that requires maybe, and maybe if all the faculties consist of people who’ve gone through this process, and who themselves has spent their whole lives trying to publish on the top five, then they won’t be very sympathetic to this They’re too busy getting themselves getting their own top fives out I guess So it does create a kind of mindset that may not be very constructive for the future of the field That worries me considerably >> So let’s take some time for some questions from the audience So we have two microphones up here So I was wondering, you mentioned that Denmark paper And this kinda ties together a few things But I think we can learn some really interesting stuff about mobility that we kind of didn’t know before from that kind of analysis using that big data And asking kind of deeper questions that have been asked in that literature And I was wondering if you could comment briefly on what some interesting things we might learn from deeper international comparisons like what you and Dr Landosau did there, might be >> Well, I think people are increasingly using these administrative data sets, I mean, here in the US Jetty and so forth We don’t have quite the quality of the data that the Scandinavians have, but I think you can learn a lot, simply because you can put pieces together You’re looking at trade shocks on health, sounds really interesting I think that the fact that we can now have matched worker firm data sets changes IEO, and it changes in international trade that we can do things we don’t know So I think the access to this data really just opens the opportunity to study questions The recent paper about wage gaps and the extent in which male/female wages where due to productivity differences and due to other factors This was in Denmark, again And having pretty good measures of productivity the scholar found that productivity played a role, but it wasn’t a predominate issue for any wage gap that was there In fact, there weren’t wage gaps in certain categories for women So I think it just it enriches the kinda questions we can answer But there’s a mystery we have in Denmark I think it’s a mystery And it’s a mystery that Denmark is a social welfare state which is near equality I mean, the so-called inter-generational coefficient, how much the post tax transfer income of the father, or the parents I should say, influence the outcome of the child That coefficient is very low, which means there’s a lot of mobility from the condition compared to what goes on in the US So we can learn from that But what we’ve also learned which is interesting, is that despite what are very substantial quality and expenditures, I mean, school expenditures, health expenditures, a lot of the disparities that receive so much attention in the US None the less, there are still substantial, substantial differences by family background in Denmark And this is even among Danes You can take the Turks and the North Africans who came into the environment, take out any immigrant group and stay within the so called original Danes or native Danes group You can still find substantial differences that persist over the life cycle So that’s an interesting question So a lot of the candidate explanations have been eliminated Public expenditure, targeting, why are those gaps there? Well, the one obvious candidate is sorting

There’s a lot of sorting And it’s gone up in Denmark Just as much in the US So there’s a sense if you have the equality and expenditure, you can have a lot of inequality and outcomes if the parents are actually investing more So you have equally qualified schools, but you’re adding to the school additional parenting input that’s not present for other kids with less advantage And so equalization ironically can lead to fundamental disequalization in terms of outcomes So I think we can learn things about that We’re looking at that right now, we’re looking at those kinds of roles, yeah >> Please >> With regards to advocacy groups trying to shape research, or somebody trying to shape research towards a certain talking point or to get published How do we safeguard against outside influences trying to corrupt research? >> Well, I think there is a policy increasingly by journalists that talk about who is directly sponsoring the research So if you’re research has been sponsored by say Lorillard Tobacco Company, something, American Tobacco Company, British American Tobacco Company I’m not quite sure which ones survive And you’re writing about smoking, and you’re writing about something that concerns the regulation of these companies That should be revealed and that has to be revealed It’s not always revealed What should we do about it? What can we do about it? Well, it’s hard I mean, agendas get set by organizations If people are deeply interested in the structure of a particular problem and wanna focus on that problem, you can at least have lots of papers on that topic And it’s hard to avoid that I mean you could say, well no I wanna sponsor everything I think the government review panels are partial protection But they’re not safe There is certainly a lot of insularity, a lot of inbreeding They’re very very, I mean, we form clubs And I think increasingly economics and other fields have these clubs, support groups, right? They reinforce each other, they read each other’s papers, they reject the other’s papers, they fund people like them, and they basically reject the people not like them And It’s difficult to break into those support groups I would say a lot of universities can do that in part by bringing in dissenting groups Bringing in people who have different points of view But then if the different points of view are arrived at through very, through basically absence of data Suppose that somebody says I was inspired by reading Das Kapital, that’s my evidence, and somebody else is saying I was analyzing the American Community Survey and saw this I don’t know if you wanna weight those two kinda sources equally, but that’s a judgment I’m sure, I know there are a lot of people who would weight the Das Kapital reader and far more than a bunch of number runners from the ACS But I do think that we can encourage this kind of diverse point of view I think it’s very hard I think it’s getting harder, so I can announce them I don’t know what the exact cure is, but I do think that the advocacy group shape and the foundations have moved away Ford Foundation is not funding a lot of basic research They fund advocacy for certain outreach efforts Whereas in the 1920s and 30s they were funding only like agricultural research and so forth So, there’s still foundations that fund research, Howard Hughes and medicine There are and actually, the surprisingly in many groups that are allegedly very politically oriented, actually are supporting basic science, like Koch brothers, actually I know their hot button number in certain political domains But I think they’re also supporting a lot of hard core science at universities And you see the Eli Broad Institute, so the Broad group was actually So there are still some supports I’m not saying it’s all bad But I mean, look, take this vanity project that Zuckerberg had in the Newark public school What’d he spend, $50 million? He wanted to make a splash See that’s where the billionaires have this deep weakness They want a program with their name on it and a light splash Right? And so he spent $50 million on the Newark schools And everybody says it was a total disaster Right? It did not do anything, it just kinda shuffled things around and there are a lot of examples like that People spending money partly to make a splash and the support of basic research is harder and harder It gets really hard to say look, I wanna support A mathematician working on Lie groups for the solution of partial differential equations, you say, what the hell?

It’s not gonna make the New York Times tomorrow, or even in 100 years from now And so, if you want to splash, and I think, increasingly, there’s this splashiness that’s out there and it’s a trend You should face it, and I guess you’d say ride the bull And you can still make your splash and keep going But I think there is a sense that basic research is having a hard time I don’t know if you think that’s true It’s basically in social science, but even in mathematics, the funding in mathematics and basic physics has really shrunk State support has really fallen off, and it’s partly because the budgets from the states have fallen off And the federal government is not substituting for that lost state support >> Question? >> Hi, I’m an undergrad student learning econ and I’m thinking of going to grad school But one thing you mention a lot about today it’s the data analyze thing that you can matrix The more and more data coming into fill makes the industry is changing Then what is the bigger thing that distinguish economics from like a data analyst or the education, why should I go to grad school to learn economics instead of learning data analyst? >> Well, I mean there’s a difference between kinda summarizing data and finding empirical regularities and interpreting data And the trouble is you could become overwhelmed I mentioned this Frisch quote That’s the danger, you can have lots of empirical regularities, what do you make out of them? I can read to you after quite a while, the New York telephone directory, name by name, and so forth So what, I mean what do I get from that? I guess what I think economics, the role of economics, it has some interpretive frameworks In the end, we are trying to interpret the world, and maybe even change it When we think about changing it, we wanna think about causal models We wanna think about models that will guide us towards policies that have not yet been implemented or are being proposed now And so I think a big role for social science, and especially economics, is to guide us in thinking about how to interpret the data And to look at anomalies in a way that’s constructive So it’s very easy In fact, there’s a danger of a flood If everybody has, if we run hundreds of experiments here, there and everywhere, what do we learn from all those experiments? What’s the common overriding theme? And that’s the danger So these facts kind of get lost in space It’s kind of like sending a signal out to Saturn or something It’s headed out somewhere Who is listening? God knows What’s the significance? God knows I think we wanna try to make those signals kind of cohere I think that’s pretty much the goal of most human beings is to try to have a story And the story is a coherent story And I think social science allows us to tell coherent stories So a story sounds like I’m making something up, but I mean coherent explanations So you look at empirical regularities, I think it’s really helpful See the danger in, would be, if you start thinking that each time you get a fact, you make up a new model I don’t know if you ever read much Aristotle, you ever read his physics, okay Aristotle sounded pretty circular, why did something, i’t’s of the nature of the thing that it would do that Well, what does that mean? Nothing and so we really wanna understand what the nature is and what parts of the nature matter So I think what you really wanna do is think about so I think it’s the boiling down That’s in the end what we value And that’s actually while Malcolm Gladwell is as popular as he is He boils it down I think he may be boils it down a little too much But that’s another whole issue but the point is that people want simple answers And I think that the value of social science in particular, economics, is that it does provide some simple answers and frameworks But it also provides the nuance So we don’t just kind of say, we wanna do this or that and just kinda go making policy based on some empirical regularity they don’t really understand I think that’s what I see is the value >> Thank you >> So I think that’s a good place for us to stop I wanna, everybody, please join me in thanking Professor Heckman >> [APPLAUSE] >> And the Pence family who sponsored our event today >> [APPLAUSE] >> And we look forward to this being the first of many challenging opportunities to engage with some pretty sharp and inquisitive people

So thanks for being here today >> Okay >> Thank you >> [APPLAUSE]