Wednesday, August 5, 2020

Sowell review

Coleman Hughes writes a wonderful review of Thomas Sowell's life and work in City Journal. Savor it.

My first Sowell book was Knowledge and Decisions, and I am heartened to see Hughes put that foremost as well. Sowell takes up where Hayek left off, how the price system is the network like our neurons communicating information across a complex economy. This remains a verbal part of the economics tradition, resisting formal modeling so far, and is thereby too often glossed over in graduate training. Read it. 

Sowell of course has written masterpieces on race, a collection of impeccably documented uncomfortable truths to the progressive left. My first, The Economics and Politics of Race is just one of nearly a dozen meticulous books, from Black Education: Myths and Tragedies (1972) to Discrimination and Disparities, second edition (2019). Hughes reviews important points in Conquests and Cultures, Migrations and Cultures, and Race and Culture.

The American Economic Association, in its instructions to its members on how to think, speak, act, and write about matters related to race tells us

We encourage all economists to seek out existing scholarship on race, stratification economics, and related topics. To get us started, our AEASP and CSMGEP colleagues and students are compiling a reading list on racism and the experience of Black Americans. Members of the AEA Executive Committee have pledged to continue to educate themselves in part by reading works from the list and to seek to integrate work by diverse authors in course syllabi, and we ask all economists to make the same pledge.

Tom Sowell appears nowhere on the American Economic Association list. Nor does Glenn Lowry. Nor does Roland Fryer, all topnotch economists who are, incidentally, Black, and who use economic tools to understand matters of race. (The list emphasizes social and political commentators, with a striking absence of economics for an AEA reading list, but no Clarence Thomas nor Shelby Steele nor ... well, you get the picture.)  One cannot escape the conclusion that the American Economic Association is commanding specific narratives, not scholarly study of racial issues or even inclusion of Black authors per se. At a minimum, it's an interesting sign of the times that our professional association no longer feels the need to even appear politically or ideologically neutral, to go through the motions of mentioning two or more sides to a scholarly question.  

By starting with and emphasizing economics and other contributions (slow learning children, for example), Hughes disclaims the stereotype advanced by so many progressive economists that, beyond the commandment that only Black authors may write about race (Gary Becker and Bob Fogel are missing from the list too),  Black authors must write about nothing else. There is something subtly denigrating about the idea that Black economists shouldn't do game theory. It implies that maybe they can't. If your department has finally been able to hire Black economists, but they are all isolated in a group that studies discrimination against African-Americans in the US, I submit we still have a problem. (How about Don Brown for a hero?)  Indeed, Sowell is greatest first and foremost as an economist. 

Sowell, at age 90, just finished another masterpiece, Charter Schools and Their Enemies. Perhaps the current moment of covid-19 school dysfunction will finally teach the progressive left that teacher's unions have devastated a generation of children, disproportionally Black and other minority, fueling the school-to-prison pipeline, and that charter schools, very popular in the Black community, offer often dramatic opportunities. Perhaps not, as they have studiously ignored Sowell's other work, but it's another uncomfortable truth. 

It is the season that the Nobel committee gets down to work. Let me humbly offer the suggestion that recognizing the extraordinary scholarly achievements and impact of this great economist might be a good, well-timed and long overdue move. 

Sadly, I have to report I don't know Tom well personally. He didn't hang out much at Hoover, and he certainly does not do so now. Maybe not wasting time chatting with people like me is how he writes so many books! 
 
(Tom's Website is a great place to lose yourself for a while.) 


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Note to blog readers. I'm still here! I've been focusing on getting a draft of the Fiscal Theory of the Price Level finished, but the blog is just dormant not dead. 

And there seems to be little point in writing about covid. America got tired of it around Memorial Day. The young went out to protest, and everyone went out to party.  We're not going to use the technology we have -- testing -- to stop the virus in its tracks, which is easily accomplished for a lot less than the $5 trillion and counting the Congress is going to spread around. Reopening schools is going to be a disaster. So we wait for Deus Ex Machina vaccine to save us, and hope that will be implemented with something like the bureaucratic competence so completely absent in testing. Ah well.  

18 comments:

  1. I have been working on the literature about formalizing the "price system is the network like our neurons communicating information across a complex economy". In our paper (https://drive.google.com/file/d/1oY3CXlPhioXT_jZzTFqPnItLu-R3-E6P/view) we have been discussing on how to get the informational efficiency of price taking behavior without perfect competition. It is very scarce literature but it exists, a lot can be done in this field to formalize the existing insights.

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  2. The first Tom Sowell book I read was Ethnic America. What an eye opener! Well worth reading -- today.

    As for the AEA, 2020 was my last dues payment year. I know it doesn't matter, but that it makes me feel good! :-)

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  3. Great commentary. The observation that Tom Sowell is not recognised by the 'progressive left' is again an indication that they are more interested in pursuing their own political agenda with little genuine interest in improving racial equality and social mobility. So hypocritical!

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    1. I've debated with enough progressive leftists. They genuinely care but they are so wedded to their worldview that they are unwilling to entertain such arguments. they can always claim that the data is wrong or cherry-picked or the other side is intentionally misleading things; which is basically what I was being accused of.

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    2. That's the limitation of the so called 'progressive leftists' as their arguments ignore the historical contexts and downplay scientific evidence and reasoning.

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  4. The recent surge in COVID-19 cases indicates that the SARS-CoV-2 virus remains viable in the American population. In an earlier blog, you suggested that the shut-down should be lifted for all except the most vulnerable members of the community to allow the economy to return to some semblence of normality. You cited the economic cost of the shut in support of that proposition. Apparently, a majority of state governments agreed and the lock-down was eased significantly (pre-maturely in the view of some). The result is a resurgence of cases and in some states which were not initially hit as hard as others were in the early going hospitals are now being overwhelmed and patients have to be transported miles to hospitals that have unused capacity. This was predictable and expected if the lock-down was lifted too early.

    The virus is now running its course freely. The proportion of susceptibles is still too high to end the epidemic in the near term. Government support in the way of social benefit transfers have risen to $5.6T in the 2nd Quarter from $3.2T in the 1st Quarter of 2020, replacing $1.0T in lost employee compensation and other income in the 2nd Quarter, for a net increase in total personal income of $1.38T in the 2nd Quarter. The federal and state governments have over-compensated employment and other income losses by roughly 38% in the 2nd Quarter of 2020. The personal savings rate jumped to 25.7% in the 2nd Quarter from 9.5% in the 1st Quarter of 2020--'jumped' is the correct verb in this case, as the 9.5% savings rate is in line with the average compound increase of 2.7% per year in the personal savings rate from the 1st Quarter of 2005 (3.4%). The 'consumer' economy (as measured in 'real' GDP) has pulled back significantly in the face of the SARS-CoV-2 virus--from a seasonally-adjusted $19.14T per calendar quarter in the 4th Quarter of 2019 to a seasonally-adjusted $17.21T per calendar quarter in the 2nd Quarter of 2020, a decline of 10.6%. It is easy to see where the federal and state government deficits in this period originate. The state governments are the more vulnerable and the most likely to take measures that exacerbate the 'pain' as they struggle to maintain their resources in compliance with a zero-budget deficit constraint imposed by their constitutions. The federal government is better placed insofar as it can borrow, run deficits, and monetize those deficits in coordination with the Federal Reserve Bank ("old money bags"). Now is the time for the "FTPL" to 'rise and shine' and demonstrate that it is something more than just an econometrician's mathematical musings. Tie together the pandemic's economic effects and the state and federal government deficit financing to illustrate the theory in action. The state governments lack the 'power of the purse' but to a significant extent control the course of the virus's impact through their shut-down power, while the federal government holds the 'power of the purse' and influences the money supply growth implicitly but lacks a significant hold over the course of the virus. To ease the pressure on the state governments and to avoid distress amongst the population, the federal government should spend freely during this period while at the same time requiring the states to moderate their drive to open their economies in reutrn. This is the proper avenue to get a grip on the virus--use the power of the federal fisc. Tuum est!

    [n.b.: data source-- https://blogs.wsj.com/economics/2020/07/30/newsletter-special-gdp-report-unhealthy/]

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  5. John I wish you would write a blog post about what what policies you would favor during this in-between state of phases.

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  6. This is mostly a hunch but I suspect most academic economist lean progressive because research topics are naturally about market failures and policy recommendations needed to correct them.

    In a way I feel this does more harm than good because for every one useful market correcting policy, we have nine other policies that are unquestionably awful. In point of fact, I wish more economists would stress the virtues of a flawed market economy, as Sowell does.

    Too often, nuanced research on tech monopolies, discrimination, and stimulus get used to push wide sweeping agendas.

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  7. The American Economic Association has to understand that it's not okay to just endorse a reading list some committee of crazies puts together without acting reading it. I don't think the AEA leadership has read the list, but if they have, that's even worse. I've listed the officers below, from https://www.aeaweb.org/about-aea/leadership/officers .
    Are you officers really endorsing this? What you look like is a set of university administrators who have some troublemakers so you put them on a committee and let them publish their ideas under the university name, in the belief that publications and ideas don't matter, only budget, and letting the crazies control the message is better than giving them any cash or telling them to just go away.
    I am not renewing my AEA membership. How can I belong to an organization like this?

    JANET L. YELLEN, The Brookings Institution
    DAVID CARD, University of California-Berkeley
    JANICE EBERLY, Northwestern University
    OLIVIA S. MITCHELL, University of Pennsylvania
    ADRIANA LLERAS-MUNEY, University of California-Los Angeles
    BETSEY STEVENSON, University of Michigan
    MARTHA BAILEY, University of Michigan
    SUSANTO BASU, Boston College
    LISA D. COOK, Michigan State University
    MELISSA SCHETTINI KEARNEY, University of Maryland
    OLIVIER BLANCHARD, Peterson Institute for International Economics
    BEN S. BERNANKE, The Brookings Institution
    ESTHER DUFLO, Massachusetts Institute of Technology
    AMY FINKELSTEIN, Massachusetts Institute of Technology
    STEVEN DURLAUF, University of Chicago
    ENRICO MORETTI, University of California-Berkeley
    BENJAMIN OLKEN, Massachusetts Institute of Technology
    ERZO F.P. LUTTMER, Dartmouth College
    SIMON GILCHRIST, New York University
    LEEAT YARIV, Princeton University
    PETER L. ROUSSEAU, Vanderbilt University

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  8. The post is fantastic, and great to see you back over here; there is just one sentence that I disagree with "Maybe not wasting time chatting with people like me is how he writes so many books!"

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  9. The obvious question is why the AEA did not include these accomplished economists. My conjecture; the soft bigotry of low expectations. All the more contemptible given scholarly work authored by Thomas Sowell, et al.

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  10. Another great post by Professor Cochrane on an important topic. Your reference to Gary Becker prompted me to go to the Nobel website to re-read the announcement of Becker's Nobel prize and, more specifically to his work on discrimination (which I have copied below). I am baffled and disappointed by the absence of any reference to the work of Thomas Sowell and Gary Becker in the AEA's statement. I thought my profession was better than that.

    Economic Discrimination
    Another example of Becker’s unconventional application of the theory of rational, optimizing behavior is his analysis of discrimination on the basis of race, sex, etc. This was Becker’s first significant research contribution, published in his book entitled, The Economics of Discrimination, 1957. Discrimination is defined as a situation where an economic agent is prepared to incur a cost in order to refrain from an economic transaction, or from entering into an economic contract, with someone who is characterized by traits other than his/her own with respect to race or sex. Becker demonstrates that such behavior, in purely analytical terms, acts as a “tax wedge” between social and private economic rates of return. The explanation is that the discriminating agent behaves as if the price of the good or service purchased from the discriminated agent were higher than the price actually paid, and the selling price to the discriminated agent is lower than the price actually obtained. Discrimination thus tends to be economically detrimental not only to those who are discriminated against, but also to those who practice discrimination.

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    1. Anonymous, good point re Becker. Sowell and other black economists are conspicuous by their absence.Their scholarly work on discrimination flies in the face of ham-handed government policies designed to remedy discrimination. I believe Becker is also excluded for the same reason.

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    2. "...dehumanization is at the heart of this capitalist enterprise called slavery.." Eddie Glaude Jr. wrote re: Baldwin's “The White : Problem” essay https://www.vox.com/21318825/james-baldwin-america-eddie-glaude-jr . 'Slavery as a capitalist enterprise' requires a deeper dive than Becker et al...

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  11. I was wondering why you capitalize the "B" when using the word black in reference to a person but not the "W" in white?

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  12. An excellent essay, I've posted it on my FB page as it is pertinent to many current issues, but on a higher level than the FB to-and-fro.

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  13. Cochrane writes, "One cannot escape the conclusion that the American Economic Association is commanding specific narratives, not scholarly study of racial issues or even inclusion of Black authors per se."

    But note these phrases contained in the AEA statement: 1. "To get us *started* ...", and 2. " ... has pledged to continue to educate themselves ...". That sounds open minded and receptive, not commanding a specific narrative.

    Has Cochrane petitioned the AEA committee to include works by Sowell?

    If he can report that he did so and was rebuffed, I'll withdraw my challenge to what otherwise appears to be an unwarranted prejudgment.

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  14. Also Tom Sowell has the best sounding voice of any economist ever. He could record himself reading the phone book and I would listen to it.

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