Pursuit of Truthiness

my gut tells me I know economics

Archive for February 2013

Why Pay Research Administrators?

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I’m not actually trying to kill my employment prospects by following up a post on politics with a post on academic politics, its just a side effect of expressing despair and a poor sense of humor (last post) along with mystification (this post).
I worked in a university research office for a few months doing intern-type things, and so have benefited from universities deciding to pay the salaries of the research administrators. But I still can’t figure out why they do. When I walked into the office at my current university and saw all the cubicles, all I could think was “we could hire one more professor for each 2 of these people we fire”. Here are my best guesses so far:

Legally required Bureaucracy:
Some of this is no mystery at all: federal laws require some oversight of research on animals and human subjects. This doesn’t explain why these committees tend to enforce the regulations more strictly than is required- wouldn’t you expect regulators to be very lenient if they were employees of the company then regulate?

Funder-required Bureaucracy
Many funding agencies want the university to oversee the grant, so professors actually use it for what they said they would rather than just getting a new Lexus (or more likely, Prius). Like the federally-required bureaucracy, the intention is to be like chemotherapy: yes, it will kill some good projects, but we hope it will kill more bad ones.

“Pre-award”

The real mystery to me is why the university requires all professors to get permission from research administration when applying for grants. The last time I talked to someone in research administration, he went out of his way to tell me this would be required if I ever applied for a grant, but he never even attempted to explain why, instead only saying “its just one more hoop to jump through”. I have two theories about possible benefits:
Tracking:
The central administration of the university wants to know who is doing research and how much money they are getting. This requirement is a way for them to find out.
Paternalism:
The research administration office has enough knowledge about the grant process that they can help professors improve their chances of winning; professors don’t realize this and so must be required to work with them. This makes sense only for large funders (that the office has experience with) and new professors (who lack their own experience applying). Which suggests the real reason is:

Rent-seeking
People want to get paid, and a make-work job is better than none, so they push to expand the work of their office. Bureaucracies tend to keep expanding: “the bureaucracy is expanding to meet the needs of the expanding bureaucracy”. This is especially severe when the organization lacks outside competition forcing it to cut costs, and it is indeed very difficult to start a new university. However, this theory doesn’t explain why administrators have been so successful in expanding their jobs over the last 40 years while professors have not. This trend generally, along with its specific instantiation in research offices, continues to mystify me.

Written by James Bailey

February 13, 2013 at 2:01 pm

Ignoring Economics: Tactics for Beginners and Advanced Practitioners

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President Obama called for an increase in the minimum wage to $9 in last night’s State of the Union speech. A lot of economists will take this as a personal affront, wondering how people still think this is a good idea after we explain in every MicroEcon 101 class how it will backfire and result in poor people losing their jobs and losing non-wage benefits. If you are determined to support a minimum wage, you could simply ignore all these arguments, but this beginner tactic will leave you looking ignorant.

A more advanced tactic for not having to change your mind about the minimum wage allows you to know two things instead of none. You can know the Econ 101 arguments, and also know about Card and Kreuger’s 1996 empirical study showing how the minimum wage might not affect unemployment. Pull out your pocket copy of Card and Kreuger’s paper whenever someone brings up the topic.

Be careful, though, not to take this whole “acquiring new information” thing too far. Remember that your goal isn’t to understand how the world works, but rather to keep the beliefs you started with. Don’t develop a general rule of looking at the academic literature on a subject: this would lead you to do things like read other papers about the minimum wage, but the vast majority suggest problems with it. Don’t decide that David Card and Alan Kreuger are the most trustworthy economists- this would mean you need to take their other work seriously, and then you would have to change your mind about immigration or occupational licensing. Remember, reasoning works by starting with a conclusion you like, and then looking for information that supports it. Otherwise you might have to admit you were wrong!

Obviously this is my poor attempt at a joke. More seriously, as a researcher I worry that even when people do seem to be interested in your work, it is only because it confirms their prior beliefs. Alan Kreuger is a great econometrician and managed to become an advisor to the President. This could be a great opportunity for his work to inform which policies to choose, but instead his work is either ignored or used as a decoration for policies that would be pushed anyway. So, depsair.

Written by James Bailey

February 13, 2013 at 1:22 pm

Marx and Dilbert, Economists

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I taught Marx in my History of Thought class today and realized a few things.
One is that, about half the time I want to point a finger at Marx’s flaws, there are two fingers pointed back at the rest of economics.
For instance, Marx thought that wages would be pushed to subsistence. We could laugh at him for being wrong, but David Ricardo thought the same thing and never gets laughed at by economists. Marx thought huge firms would bump off all the little ones, but so did Schumpeter.

Marx’s writing was longer, more dense, and more mathematical that it needed to be to get the point across, and he did this partly in order to bolster his intellectual credentials so his policy and political ideas would be taken more seriously. Many modern economists do exactly the same thing.
I came up with two criticisms of Marx’s system that I think are valid, I am wondering if anyone else has read enough to know how (or if) he answered them. Most basically, he seems to be assuming that all industries exhibit increasing (or at least constant) returns to scale, which is blatantly false in the real world. Relatedly, he seems not to consider the specific inefficiencies that arise as firms get bigger: it is hard to get information about what is happening in every part of the firm and its market, and the incentives of workers and managers tend to get less and less aligned with that of the firm. This is a force pushing firms to get smaller even if the production process itself exhibits increasing returns.

This same criticism of Marx’s prediction that firms would keep growing also applies to governments trying to centrally plan: information and incentive problems will bedevil them.

On the other hand, we can partially rescue Marx in two ways on the firm size thing. One is that he got the direction of the future right even if he extrapolated too far: the next 50 years would see bigger firms and more monopolies. Also, imagine if he had been right about firm consolidation: if the efficient organization of the economy really were one huge firm, it is at least plausible that the government should heavily regulate or nationalize it.

I realized how Dilbert explains all of this. It is a classic example of how workers get alienated in big firms. But it also shows the bureaucratic forces and incentive and information problems that make big firms horribly inefficient and vulnerable to smaller competitors.

Finally, everyone should check out Joan Robinson’s hilariously condescending letter poking fun at Marxists (but not Marx) and explaining model-based thinking. Excerpt:

“When I say I understand Marx better than you, I don’t mean to say that I know the text better than you do. If you start throwing quotations at me you will have me baffled in no time. In fact, I refuse to play before you begin.

What I mean is that I have Marx in my bones and you have him in your mouth… suppose we each want to recall some tricky point in Capital, for instance the schema at the end of Volume II. What do you do? You take down the volume and look it up. What do I do? I take the back of an envelope and work it out.”

Imagine she is talking about grad school here:

“They had no time to think about the big question, or even to remember that there was a big question, because they had to keep their noses right down to the grindstone, working out the theory of the price of a cup of tea.”

Written by James Bailey

February 4, 2013 at 9:36 am