Time for Economists to Put Down Their Hammers and Put on Their Glasses (and Listening Caps)

Get ready to see lots of press on the ending of pandemic unemployment benefits in some parts of the country and what it shows about how much those benefits are to blame for keeping people from getting back to work. See, for example, this Wall Street Journal story which offers this analysis:

The number of workers paid benefits through regular state programs fell 13.8% by the week ended June 12 from mid-May—when many governors announced changes—in states saying that benefits would end in June, according to an analysis by Jefferies LLC economists. That compares with a 10% decline in states ending benefits in July, and a 5.7% decrease in states ending benefits in September.

Eric Morath and Joe Barrett, “Americans Are Leaving Unemployment Rolls More Quickly in States Cutting Off Benefits,” Wall Street Journal, 6/27/21

But the dollar value of benefits paid and the number of people claiming unemployment benefits of course will decline in places that are ending benefits. This is mostly a direct effect on government and household budget constraints, rather than the (indirect) effects of the policy change on the marginal incentives people have to go back to work–the economist’s theory being that what matters is (simply) the generosity of unemployment benefits one can receive by remaining unemployed relative to the level of wages they can earn by going to work for their “highest bidder.”

The current mismatch between the demand for leisure/hospitality workers and the available and willing supply of workers to these businesses is far more complicated than the marginal incentives story economists like to tell. In my first piece for Avison Young, I focus on the apparent surge in consumer demand for restaurants vs. the apparent lack of workers looking for work across certain localities, based on Google search data. Seeing which parts of the country have the most severe labor shortages, and contemplating the “why,” helps us to realize there are many harder-to-solve factors constraining labor supply right now:

(i) the ongoing suspension of “seasonal” work visas for foreign visitors;

(ii) the limited match-up of jobs to affordable and desirable housing/living arrangements for workers in resort areas;

(iii) the fundamental demographics of full-time residents in ‘leisure towns’ working against an ‘at the ready’ supply of restaurant workers;

(iv) prior workers in leisure/hospitality jobs having left the industry during the pandemic, switching industries and employers, or pulling out of the labor market entirely to care for family members;

(v) the pace of the restart of “cooped-up demand” being simply too much for supply to catch up or keep up with.

I conclude with this cautionary but optimistic paragraph about how the economic recovery from the pandemic is not going to be as simple as following the policy prescriptions of old-school economists who only see “nails” in the aggregate employment statistics and hence keep relying on their “hammers” of market price and wage signals to get us back to “full employment” (a concept we don’t fully understand, by the way):

With the 4th of July holiday just around the corner, our “summer of freedom” (as President Biden has called it) will be in full swing. We will continue to see increases in leisure/hospitality consumer spending and businesses struggling to hire enough workers to fully meet their demand. Many businesses will respond by making those leisure/hospitality jobs more desirable (higher wages, more benefits, greater flexibility). We shouldn’t interpret the current excess demand for restaurants and other leisure/hospitality spending as a sign of an undesirable “overheating” of the entire economy, but rather as demonstration of the inevitable difficulty of quickly rebuilding and restarting a supply side of our economy that has not only been shut down for so long but has gotten smaller. (Remember, we’ve lost a lot of immigrant workers and working women—which were two of the fastest-growing segments of our U.S. workforce pre-pandemic.) The economic “recovery pains” we’re currently experiencing signal that the post-pandemic economy will likely be quite a bit different. To bring back the full potential of our economy will require giving more people more reason to participate—creating a truly more inclusive (and therefore more resilient) economy. And that’s a good thing.

Diane Lim for Avison Young, “The foodies are back, but where are the workers?” 6/24/2021

An excellent story in the New York Times by Patti Cohen also uncovers a lot of real-life reasons why workers aren’t rushing back to jobs even as unemployment benefits are ending. How did Patti learn these real-life reasons? She talked with people, one at a time:

Among job seekers interviewed at job fairs and employment agencies in the St. Louis area the week after the benefit cutoff, higher pay and better conditions were cited as their primary motivations. Of 40 people interviewed, only one — a longtime manager who had recently been laid off — had been receiving unemployment benefits. (The maximum weekly benefit in Missouri is $320.)

Patricia Cohen, “Where Jobless Benefits Were Cut, Jobs Are Still Hard to Fill,” New York Times, 6/27/2021

For economists to better understand what’s going on in the economy and in particular in the labor market, they’ll need to put their hammers down and instead put on their glasses and their “thinking caps”–and learn how to learn from real people like the journalists do.

What I Learned While on My First Post-Pandemic Vacation

Beach in Rodanthe, NC – June 3, 2021

I spent Memorial Day week down in the Outer Banks (“OBX”) of North Carolina, with my husband and our dogs, my sister-in-law, and my younger two kids—including the youngest of my four children, my son who just graduated from William & Mary summa cum laude with a double major in economics and business analytics (#proudmama). My daughter brought along her boyfriend, and my son brought along his girlfriend plus 13 more of his teammate friends from the W&M track team, making this first “post-pandemic” beach week for our family also a graduation present to my son.

The vacation turned out to be a learning trip for me, not because I was trying to make it one, but just because it happened that way. Below are a few things my week at the beach told me about what’s been special about all of us living through the pandemic year and how we’re starting to emerge on the other side. The pandemic recession was not just disruptive but enlightening and transformational for the U.S. economy, because of the changes people have made in their lives, and the inability or lack of desire to just get back to the way things were. The OBX provides a vivid illustration, because it is so specialized in certain kinds of economic activity and is geographically isolated (difficult to get to).

Work v. Life became Work & Life. In the OBX, vacation homes have been nearly fully booked up since they reopened last May, even back when local leisure and hospitality business operations were still greatly restricted. With work and school no longer “place based” for many Americans, families were forced to manage on their own under their own roofs, and while some struggled to make it work, others thrived. Collecting usual salaries while avoiding the usual commuting and child care costs, some families had the financial means to move out of their smaller dwellings in the cities to larger homes further out. Even if family-centered “pod” life might have been stressful at first, as the pandemic wore on, many people have decided they like being able to better combine their work with the rest of their lives. Even when offices and schools are fully reopened, it’s not likely that everyone will go back to their pre-pandemic office and school settings.

Leisure/Hospitality jobs disappeared, and the workers moved on. The OBX completely shut down to non-owner visitors at the start of the pandemic, for two months from mid-March to mid-May 2020. Even when they reopened to non-owner visitors in May 2020 (and my family traveled down there at that first opportunity), the few restaurants that had reopened were only offering takeout, as business restrictions dictated. Workers who lost their jobs here had no choice but to go on unemployment, or to move to other places and other kinds of work. The longer the pandemic continued, the more likely it became that OBX leisure/hospitality businesses lost their connections to their previous employees and would not be able to just “call them back” once the pandemic was over. And so it goes in the OBX this summer: restaurants can now operate at full capacity, but they don’t have the staff to handle their usual summer-season volume. The short supply of workers in the OBX is due to both: (i) a lack of an adequate number of “home-grown” workers (there are hardly any young people best suited for leisure/hospitality jobs who live full time in the OBX), and (ii) the ongoing suspension of the temporary work/visit visa programs which bring young worker-visitors over from other countries and are how beach resort areas would normally match the summer surges in demand.

The unleashing of the “cooped-up demand” for going out is happening all over. It’s not just the OBX that is currently experiencing a “supply chain” problem of demand for labor outpacing supply of labor in the leisure/hospitality sector. Locationally-precise Google Trends data illustrate this is happening across the country as a whole, with searches for “restaurants near me” accelerating well ahead of searches for “jobs near me” over the past few months as vaccination rates rose and business restrictions lifted.

Google Trends data on searches for “restaurants near me” vs. “jobs near me” – pulled 6/13/21 for past 12 months

(I’m going to elaborate on this simple indicator of labor demand vs. supply by looking more closely at (and sharing) these trends in Google searches from different local parts of the country in the next couple weeks. The “ground-level” stories are revealing about the “why” these labor shortages and the challenges to alleviating them.)

The “gift” of pandemic quarantine has been like the “Gift from the Sea.” As you’ve heard over and over during the pandemic, the economic recession caused by the pandemic is often called the “She-cession” because of how dramatically it reduced female employment and the wake-up call we’ve received about how participation in the market economy depends not just on what the demand for one’s work is in the market economy, but what the competing demands for one’s time (and unpaid work) at home might be. The pandemic recession forced many women to drop out of or cut back on market work when they took on the “primary caregiver” role at home as schools and daycare centers and eldercare facilities were closed or became unsatisfactory options. Many of these women bore tremendous stress early in the pandemic as they first juggled and multitasked in their work and family roles, but as the pandemic lingered, they gradually recalibrated as they went along. But women having to work so many jobs (whether paid or unpaid) is nothing brand new; the pandemic has just shone a spotlight on it and made others in the family and in the workplace more keenly aware of it. And in some ways this reality has been put on pause or at least slow motion—and has given women more time to be at peace with it, or to get to being at peace with it.

This brings me to the ideas in a favorite book of mine, Gift from the Sea by Anne Morrow Lindbergh, which I brought with me to my OBX vacation, re-reading it for the first time in probably 10-12 years. (Written in the 1950s and reprinted in the 1970s for its 20th anniversary, I still own my mother’s hard copy which she bought from Book of the Month Club back when I was only a young teenager.) Spending some intentional alone time away from her usual frenetically hectic life as a (famous) wife and mother, Lindbergh writes in her “Moon Shell” chapter about the need for some solitude and inner reflection in every person’s life:

Every person, especially every woman, should be alone sometime during the year, some part of each week, and each day. How revolutionary that sounds and how impossible of attainment. To many women such a program seems quite out of reach. They have no extra income to spend on a vacation for themselves; no time left over from the weekly drudgery of housework for a day off; no energy after the daily cooking, cleaning and washing for even an hour of creative solitude. Is this then only an economic problem? I do not think so. Every paid worker, no matter where in the economic scale, expects a day off a week and a vacation a year. By and large, mothers and housewives are the only workers who do not have regular time off. They are the great vacationless class. They rarely even complain of their lack, apparently not considering occasional time to themselves as a justifiable need…the answer is not in the feverish pursuit of centrifugal activities which only lead in the end to fragmentation…
…Woman must be the pioneer in this turning inward for strength. In a sense she has always been the pioneer. Less able, until the last generation, to escape into outward activities, the very limitations of her life forced her to look inward. And from looking inward she gained an inner strength which man in his outward active life did not as often find. But in our recent efforts to emancipate ourselves, to prove ourselves the equal of man, we have, naturally enough perhaps, been drawn into competing with him in his outward activities, to the neglect of our own inner springs. Why have we been seduced into abandoning this timeless inner strength of woman for the temporal outer strength of man? This outer strength of man is essential to the pattern, but even here the reign of purely outer strength and purely outward solutions seems to be waning today. Men, too, are being forced to look inward—to find inner solutions as well as outer ones. Perhaps this change marks a new stage of maturity for modern extrovert, activist, materialistic Western man. Can it be that he is beginning to realize that the kingdom of heaven is within?

Anne Morrow Lindbergh, Gift from the Sea, 1955

Whether we’ve gone on our own retreat to the sea or not, this past year living through the pandemic has taken us away from the usual nature of our lives where we tend to compartmentalize our roles at home versus at work, and where we tend to lose sight of our “inner springs” when we tap into only our “outer strengths” at work. A forced “pause” in the usual pace and practices of our lives has gone on for so long that it has likely permanently altered our course going forward. Women and men are rethinking how they want to make their work lives more compatible with their personal lives. Employers will have trouble bringing workers back to the same old 9-to-5 office hours away from home.

I’ve personally spent almost a year without a full-time job. I took a “voluntary separation” offer and resigned from my last job in July of 2020, thinking at the time that it would be easy to find a new full-time job that would be a better fit for me than the last. But even the few jobs I interviewed for where I was a “finalist” candidate did not result in any job offer. Although I periodically became quite discouraged, throughout the past year I’ve continued to study and write about issues I’ve cared about, not only despite not being paid to do it, but really because no one had to pay me to do it. Since the last job offer I did not get—a month or two ago—I have both become more ok with not having a full-time job, and have taken on some part-time independent consulting roles that seem ideally suited to my interests and skill set and my internally-generated (rather than externally-directed) perspectives on the pandemic and recovering economy. I view this as a huge personal silver lining of the pandemic for me and my work: that if not for my failure to find the next full-time job quickly, I would not have arrived at the place of peace and fulfillment where I am able to do the work I love to do while living the life I love to live. I suspect that a lot of you out there have similarly found this past year of juggling your work and your personal lives personally enlightening and transformative, and, like me, you might be fortunate enough to have survived and emerged on the other side in a different and better place than you otherwise would have been had the pandemic never happened.

[ADDED 6/14:] And let me close with a couple of the closing paragraphs from Gift from the Sea, the final chapter of the book called “The Beach at My Back” —and it is amazing to recall that this was written in the 1950s about American life more generally, not in 2020-21 about lessons from the pandemic economic experience!

Perhaps we never appreciate the here and now until it is challenged, as it is beginning to be today even in America. And have we not also been awakened to a new sense of the dignity of the individual because of the threats and temptations to him, in our time, to surrender his individuality to the mass–whether it be industry or war or standardization of thought and action? We are now ready for a true appreciation of the value of the here and now and the individual.

The here, the now, and the individual, have always been the special concern of the saint, the artist, the poet, and–from time immemorial–the woman. In the small circle of the home she has never quite forgotten the particular uniqueness of each member of the family; the spontaneity of now; the vividness of here. This is the basic substance of life. These are the individual elements that form the bigger entities like mass, future, world. We may neglect these elements, but we cannot dispense with them. They are the drops that make up the stream. They are the essence of life itself. It may be our special function to emphasize again these neglected realities, not as a retreat from greater responsibilities but as a first real step toward a deeper understanding and solution of them. When we start at the center of ourselves, we discover something worthwhile extending toward the periphery of the circle. We find again some of the joy in the now, some of the peace in the here, some of the love in me and thee which go to make up the kingdom of heaven on earth.

Anne Morrow Lindbergh, Gift from the Sea, 1955

Building Back Better the Ultimate “Supply Side” of the Economy

Image from Resilience.org, “A Care Economy” (https://www.resilience.org/stories/2017-06-29/a-care-economy/)

Economists are used to talking about treating recessions with policies that generate demand-side multipliers for the interdependent relationships we can see and measure in the market economy. But they never talk about “supply-side multipliers” which are about the interdependent, interpersonal relationships that affect people’s ability and availability and choice to supply labor to the market economy, which are largely invisible because that potential labor is still stuck at home, in unpaid household work, or held back from its full potential in underpaid market work.

Economists don’t know the income and price elasticities that would tell us what kind of policies would draw more of the people who currently don’t work in the market economy into the economy (and into GDP). But there’s clearly something way higher-order and more fundamental/foundational than the normal market sensitivities/responses going on when it comes to the potential role government could play in supporting the caregiving economy, in increasing not just economic activity but our economic potential (as in potential GDP).

If quality caregiving is available and affordable to families, that gives more freedom for mothers (or fathers, or adult children of elderly parents) to choose to stay at home or go to work. Government support of caregiving (subsidies to the “care economy”) should be made unconditional on who provides the care (the family or the market) to qualifying family members—children or elderly or the otherwise infirm.

Because we’ve never seen an economy with all those “supply-side multipliers” on, it’s silly for economists to scoff at the notion of “caregiving infrastructure” or suggest that investing in it would “overheat” the economy. We can’t overheat parts of the economy that haven’t even made it to the stovetop! Economists simply do not know how much our economy is capable of producing when all people could be unconstrained and encouraged by government policy the way white men’s work has always been. The “baseline” built into all our models of the economy is based on the white-male-dominated market economy we are used to seeing. (White people dominate population-based economic measures like the unemployment rate because they’re still the vast majority of the population; white men (and their roles in the economy) dominate dollar-based economic measures like GDP because they earn the highest incomes.) A Politico story on the Biden infrastructure plan highlights this “white man ignorance”:

And former New Jersey Gov. Chris Christie snickered about the vast federal outlays on child and elder care. “Now the ‘care economy’ is infrastructure,” he said on ABC’s “This Week.” “The care economy. I don’t even know what the hell the care economy is.”

https://www.politico.com/news/2021/04/07/biden-build-back-better-bill-479522

This recession has been like no other due to the adverse effects via the supply side, not just the demand side, of the economy. If we want a robust recovery that actually takes our economy to a better place in the longer run—perhaps even better and stronger than if we had not gone through the pandemic—we need to fire up the “supply-side multiplier“ policies and stop viewing policies that support families as simply the old demand-side stimulus tools.

I recently spoke on a NABE webinar (video link here) about the Biden Administration’s “American Jobs Plan” (aka the “infrastructure” package) and was asked ahead of time to talk about a couple things I like best about the plan and a couple things I don’t like. What I like:

  • The focus on infrastructure spending as something good for expanding the supply-side, productive capacity of the economy and not just a quick way to create jobs and increase demand for goods and services;
  • The recognition that this kind of government spending that has longer-term economic benefits should be worth paying for, either through higher taxes now or higher debt that would require higher taxes later.

And two aspects that I’m less happy about:

  • That the notion of “infrastructure” investment in at least this first part of the recovery and rebuild package is mostly limited to building structures (things) rather than investing in people. This seems stuck on the old economists’ notion that “if we build it, the people will come.” But it’s the “people will come” part that’s been severely curtailed in the pandemic recession. I would have rather seen the Biden Administration lead with the investments in people who are the ultimate source of economic productivity. We have to have human capital before we generate other kinds of capital, and cultivating and moving human capital is far more challenging than attracting financial capital and building (mere) “things.” Could we work on the hard part first, and let the easy part follow?
  • That economists and policymakers are so focused on the main downside of the package being the tax increases that could reduce incentives for private-sector economic activity rather than recognizing the tax increases will pay for public investments with greater positive economic benefit than the tax cuts were. That old-school, old-model view (based on the white-male-dominated economy) is that marginal tax rate increases are bad and public spending has no benefit. But the white-male-dominated parts of the economy are already living up to (or extremely close to) their potential. They are maxed out and cannot do much better. The less successful, more constrained, underserved parts of our society are operating far from their economic potential, where the marginal gains to be had are still high.

In today’s economy, and importantly for tomorrow’s potential economy, investing more in people (and care for kids and elders, no matter how it’s provided) is not just being “nice” to families. It’s being smart about what will take our economy to its full potential. A more inclusive and equitable economy is a larger, stronger, and more resilient economy. In the Biden Administration’s “Build Back Better” plan, it is the emphasis on the investments in people—all people, not just the ones who have been most successful in our economy thus far—that will not just get our economy back to where it was pre-pandemic, but actually to a better place. The pandemic has been a terribly challenging time, but in the process we’ve also learned a lot about how our economy works, or doesn’t work—and how much the market economy (in all times) relies on unpaid or underpaid and largely “invisible” caregiving work.

The (Desperate) Need for Economists to Consider “Intersectionality” and Our “Multiple Identities” in Our Work

This fascinating article by Duke psychology professor Sarah Gaither in the July 2019 issue of the American Psychological Association came across my radar because it was featured in the Behavioral Science & Policy Association e-newsletter I subscribe to.  As Sarah introduces her work:

“We all have multiple identities — race, gender, age, sexual orientation, occupation — the list goes on and on. However, psychology research has traditionally focused on the effects stemming from one identity (i.e., race OR gender), rather than trying to measure how belonging to multiple groups may actually shift our behavior or even perhaps change our results. The question I asked — does thinking about one’s self from a multifaceted angle shift your flexible thinking?”

Apparently being aware of one’s multiple identities (as opposed to where you might peg into a mono-dimensional category) makes a person more flexible and creative in one’s thinking.  As Sarah explains, it also reminds a person—even a child—that there a “more social categories in their world beyond just race and gender” and encourages the person “to move beyond their default thinking of either/or categories.”

This got me to thinking about one of my complaints about the economics discipline, that we economists are too often focused on “social well-being” as an aggregate concept (as if it could be representative of the well-being of any single one of us), or on the “distributional effects” of economic policies as a mere divvying up of the aggregate economic pie.  In economic analyses, even when we try to look more deeply at how a trend or a policy may affect some people differently from other people, we almost always only consider one dimension/attribute at a time—e.g., the distribution of the income tax burden by categories of household income levels (rich vs. poor), how government deficits and debt affect older people vs. younger people, how trade wars affect one country’s GDP or well-being over another country’s, how immigration policy affects immigrant vs. native-born employment and wages, how labor-market discrimination manifests itself in a gender pay gap (as in, only by gender and only according to pay).  Too often these analyses will only fuel a taking-sides phenomenon as soon as we are led to put ourselves into the “us” or the “them” category in the “us vs. them” dichotomy.  And we’re off to the partisan, polarized, combative, competitive races, where protecting one’s own interests means squashing someone else’s—or at least covering your ears or turning a blind eye to them.

What if economists could help people understand that in our society—and even in our dollar-measured economy—we each hold multiple roles and identities?  I am an Asian (Korean and Chinese) American, a professional economist, a volunteer English teacher, an adjunct professor, a part-time yoga teacher, a taxpayer, a mother of four 20-somethings, a daughter of immigrants, a (newly-remarried) wife, a middle-aged “baby boomer,” a northern Virginian, a native of Michigan, a consumer, a homeowner, a dog owner/lover.  I think about the economy and public policy—and lots of other things that affect my life—from all those perspectives, even more than based on where I got my Ph.D. or what political party I tend to vote for.  Expressing the full intersection of my perspectives, the full complement of identities in me, with the standard economist’s toolkit has always been challenging, and I find myself turning increasingly to qualitative descriptions expressed in words (which might make other economists view me as not as “technical” or “rigorous” as I was in my younger years when I built beautifully mathematical economic models).  Yet people of all types seem to be more likely to listen to and engage with my stories which highlight that I have an identity (or several identities) that maybe they have, too than to pay attention to any quantitative analysis of mine that shows precise debt-to-GDP ratios with calculated effects on aggregate GDP or even the economic income or “well-being” of one’s particular age cohort or income category. Being a mom has always been a more persuasive and compelling identity of mine than being an economist. (As the Wall Street Journal put it 10 years ago in featuring my blog: “How can you quibble with EconomistMom? What would your mother say?”)

Could economic analysis become more “relatable”—more often?  Could we do better at highlighting (and even measuring/quantifying) the commonalities, synergies, and interdependencies among and across people’s many and intersecting identities, so that we could become more likely as a society to pursue economic policies that are truly in our greatest individual and mutual interests?  Could we stop wasting resources and pursuing counter-productive policies with all our rhetoric and YELLING?

There’s plenty of evidence that people are more likely to be prejudiced, discriminatory, or outright hostile and hateful to “other” groups of people the less experience they have interacting with these “other” types of people.  (See factor #9 in this article, for example.)  But that “otherness” is often just the most superficial, obvious characteristic that makes someone appear very different from you (their race, their age, their gender, their social-media-posted politics).  People of different superficial categories can have many common identities as parents, community members, workers in a particular industry or occupation, etc., so maybe it’s not so much that we need more interactions with “other” people (“them”) but that we need to recognize that in the grand scheme of life, those “others” are us–and we are “them.” We are all in this together.

Sarah Gaither concludes her article, pitched mainly to her own psychology discipline, with this (my emphasis added):

“With rises in immigration, increases in interracial marriage, and shifts in language surrounding biracial and transgender populations, it is essential for research to acknowledge that we are all lots of things at the same time. Therefore, my work has both theoretical and practical relevance in highlighting that belonging to multiple groups — and acknowledgement of that membership — not only impacts our behavior and perceptions of others, but it also suggests that that variability that exists both between and within groups may have been overshadowed in research. By considering our multiplicity of belonging that has always existed we can push our fixed thinking about social groups to be more reflective of the flexibility that we all possess. Thus, I argue that as we continue to study behavior within this evolving cultural landscape, we must be aware of how multiple identity mindsets may impact our findings.”

Yes, it’s a far bigger reach to push this perspective of flexibility, intersectionality, and multiple identities onto economists, but it’s something I’d like to try.

My “Somewhat Irreverent View” on Economics and Economists

The alternative title on the Behavioral Economics course I teach at both George Washington University and Georgetown University has always been “Economics in Theory and Practice: A Somewhat Irreverent View.” I then spend the whole course going through the behavioral insights that in my mind expose key weaknesses in and limitations of traditional Economics—not just in the “purist” economic theories (which seem like “straw men” to me (wink)), but also in the way economists tend to “test” their theories and measure the size, features, and movements in the economy. I was never a student in a behavioral economics course, as I graduated college in 1983, and even in graduate economics programs throughout the 80s, the only class I took that had what is now labeled “behavioral” content was a financial economics course where I read Kahneman and Tversky’s “Prospect Theory” paper (published in 1979). But over the 30+ years of experiencing the “practice” of economics in my mostly non-academic career, I had become familiar with at least the most publicized parts of the behavioral field as they applied to the areas of public policy that I worked in. It was when I began to relate these behavioral concepts to my everyday life that I began to see that what drew me to the behavioral field was that it offered a huge caution to economists about the disconnect between how economics, in theory, is taught to us in school, and how economics should be practiced, in real life, to be most useful. And so, here is an elaboration on my “somewhat irreverent view” on both the discipline of economics and the economist profession. My critique is not really a behavioral economist’s take (because I’m not actually a formally trained behavioral economist, remember) but rather just a living, breathing, practicing economist mom’s reflection or “humble opinion” on how the economics profession has evolved the way it has—and how it will have to change to become more relevant and useful to our society.

First, some “excuses” for/rationalizing about how these faults and flaws in Economics (in theory and practice) came to be:

Economics was invented by a man. Adam Smith is often labeled the “father of economics” and his Wealth of Nations the “bible of capitalism.” He was a man who never married nor had children, and his mother took care of him and his house for free. It’s understandable that a man with little of his own social and family life would develop faith in and see the beauty of the “invisible-hand” forces of a market economy in steering a society’s resources to their highest valued purposes. As economics developed as an academic discipline, it was men in economics who led the way to distinguish economics from other social sciences by making it more quantitative (“mathy”) and rational, less qualitative and social/psychological. Economists became snobs to other social scientists, and Economics really became the discipline that explained the behavior of rational economic man (“homo economicus”)—emphasis on man.
Neoclassical economic theory and empirical science developed before computers. In the beginning, economists had to put pen to paper(!), and the ideas in their heads became the economic theories that served as the starting point in their research. When you start with a strong belief about how the world works, and then walk out into the world looking for evidence to support your belief, you will find it! Even after computers arrived, for decades the ability for economic research to process and analyze lots of data points was very limited. (The model I built and ran for my dissertation research—in the late 1980s—had to run overnight as a “batch job” on a mainframe computer.) Given the limited ability for an economist to both stay at his desk (yes, what he wanted and what made economists different from sociologists and anthropologists) yet somehow study the real-world workings of the economy, economists had to greatly simplify the research process. We were trained in grad school to first write down a theoretical model, then look to official government data (typically very aggregate and low-frequency) to run (usually simple linear) regressions that would “test” the theoretical model. Economists were not inclined to go out and gather the data ourselves (what, talk to people?!), and so we really did not have a lot of real-world, ground-level evidence on what was actually taking place in the economy. Hypothesized and often idiosyncratic (and ideological!) theories became the dog that wagged the “evidence” tail. This is just how we were taught economic research is done.
Economics prided itself in our main “schtick”—the beautiful and simple efficiency of the price system. Unlike other social sciences that were studying lots of different relationships and behaviors that are oh-so messy and too complicated to “model” (or fit into a one-size-fits-all description), economics had this elegant theory of the perfectly-competitive, perfectly-functioning market economy where prices were the wonderfully impersonal way to coordinate the decisions of all individuals in society such that selfish decisions would magically, thankfully lead to allocations of resources that maximized the common, social good. All our theories (as taught from principles courses onward) start with the presumption that the “invisible hand” gets the job done, and only when we have investigated and conclusively found a potential “market failure” (or demonstrated and convinced the majority of citizens of an egregious inequity) is there possibly a role for government to help get the economy and society to get to a better outcome than the free market produces.

Those are some historical reasons why Economics has become what it is. If you’re not already totally turned off by and wanting to tune out economists, I appeal to you to consider that many economists (including myself) went into economics not to be type cast into the caricatured mold described above (to become a shining example of “homo economicus”!)—but because we wanted to study society and social behavior (yes, economics is still labeled a social science) while using more analytical tools and skills. It doesn’t mean we economists all lack social or “people skills.” It doesn’t mean we are all bad at communicating economic concepts to ordinary people. And it doesn’t mean economists (all of us) can’t do better.

For economists to “do better” as a profession and to better understand and be better understood by real people, I have a few suggested caution flags/warning labels/motivational posters(?) to place around you as you do your work:

What you can see/measure is not all that there is. Nor all that matters. Stop assuming that measurable market outcomes are all that we need to pay attention to in our society and economy to understand if we’re doing our best and if there is a role for better (and more informed) public policies or better (and more informed) business and household behaviors. (Big “hat tip” or rather “hug” to Nancy Rose of MIT who called this “all you see is all there is” attitude of many economic researchers the “economic hubris” of our profession at an Aspen Institute economic meeting earlier this week.)
• People’s “objective function” (what they want to do/achieve) is not always—not usually even—objective. Or “well behaved” as the graduate textbooks often describe the utility functions characterizing people’s preferences. What does a “well behaved” utility maximization problem look like? Just some features:

–a utility function and budget constraint defined over continuous (not discrete) quantities and combinations of goods and services (or whatever quantifiable thing one cares about);
–the utility function and budget constraint apply to the entire universe of feasible options—and there’s nothing special about your current position/starting point (what economists like to label the “initial endowment”);
–starting assumption is that what contributes to individual utility is only individual consumption and that people are selfish and make individual decisions for individual gain;
–the utility function and budget constraint apply to a long, multiperiod (ultimately lifetime) time horizon rather than sequential, short horizons), the components of which and market prices on which are known and accounted for with perfect certainty.

In behavioral economics we spend a lot of time reading literature—and just reflecting on our own common sense—about why these theoretical assumptions about how people make economic decisions are unrealistic. Breaking out of the theoretical straitjacket and relaxing these assumptions is really a necessary first step before an economist can claim their analysis is real-world useful to policymaking.

Traditional economic statistics provide only a (necessarily) limited view of the economy. Official government statistics on the economy are limited in detail because the budgets made available to the government statistical agencies (via Congress) have been very limited. The data is thus necessarily low frequency and highly aggregated (and not just for privacy reasons). They tell us about economy aggregates or averages, but not enough detail closer to the individual household or business level to help us understand what drives the movements in these aggregates. The data also come with a long lag/wait. Even at whatever level of disaggregation the data are available, the measures are based on market outcomes (hours actually worked and wages actually earned, number of employees actually employed, levels of output actually produced, etc.)—i.e., the market equilibria that represent the (mere) intersection of supply and demand—and we have no ability to “see” the entire supply side (supply “curve”) and entire demand side (demand “curve”) in each market that interacted to produce those observable market outcomes. It’s as if we are looking at the economy through a really narrow viewfinder that takes only static snapshots of things once they are neatly in place (posing!), rather than a panoramic video camera that is constantly recording the movements in and out of and back into equilibrium.
The economist’s assumption/presumption that maximizing market income is a close proxy for maximizing utility (or happiness more broadly) leads to a poor understanding of human decision-making. The real-world choices people make are based on much wider considerations which just happen to have economic implications. If we start our economic analysis presuming people are behaving to maximize market income when many of them are not, we cannot possibly come up with good policy prescriptions, even as we claim we are doing “evidence-based” policymaking.
• Social welfare economics needs to be more than about how to “divide up the pie”; economists should recognize that how well people live and work together jointly determines how large the total pie can be. The economics profession doesn’t seem to study and measure how collaborative and cooperative relationships among people (or organizations or sectors or countries) can make overall productivity and well-being greater. Organizational behavior is something taught in business schools to help businesses organize and manage their staff to maximize their productivity and success. But the proven concept that the quality of interpersonal relationships improves worker productivity at the firm level surely applies to higher-order relationships as well. “Resource allocation” as a label to a central problem to solve in economics leads to a notion or tone of “dividing up” more than “joining forces”—as if the stock of resources is fixed. The apolitical emphasis in any economic “distributional analysis” on different ways that alternative policies divide the pie up may inadvertently worsen the already divisive and polarized social climate (the “us versus them” mentality) which has been so counterproductive to being the best we can be.
• All of the above about the origins, foundations, and various assumptions in our discipline suggests that traditional economics implicitly argues that men are superior to women. Men are more likely to conform to the caricature of “economic man”/homo economicus—and therefore to behave in ways that lead to higher/better market-based outcomes. And men’s superior market outcomes are perceived by society as deservedly so, because (as Katrine Marçal’s book “Who Cooked Adam Smith’s Dinner?” so well and cynically argues): they work harder (longer hours), they are more efficient at linear processing (single-pointed focus on tasks), they know how to seek and achieve their highest (market) valued uses of their time, they have more competitive drive, they don’t let emotions or soft feelings get in the way of their productivity at work, etc.

When economists choose to study the economy through the narrow lens of traditional economic theory, they end up viewing, assessing, and analyzing the economy in, frankly, sexist ways. It is just how our science was built and how it is still (for the most part) taught. It has led to a male-dominated profession and one that tends to conclude that men are deservedly the most successful and productive participants in our economy. This is just from my own (somewhat irreverent?) point of view. I do not at all hate my profession nor my many, many male colleagues. I have just gotten remarried, to another Ph.D. economist, who, like my first husband, earns far more than me in market income—and I believe deservedly so. But I believe the current state of our male-dominated and male-biased profession is preventing our profession from being the best we can be and contributing the most wisdom that we likely have to the broader social good.

Here are some of my ideas on how we economists, as a profession trained in our discipline, can change and do better:

• Get more real. Stop the naïve thinking about how the economy works and how economic decisions are made. Use common sense and relate it to your own personal life and ask if your assumptions in your own analysis pass your own personal “smell test.” My dissertation on “lifetime tax incidence” relied on a general-equilibrium model of tax policy that assumed people maximized lifetime utility subject to a lifetime budget constraint, with perfect knowledge of future labor income and market prices, and would respond to changes in a marginal tax rate by changing their labor supply and savings behavior and readjusting choices over the rest of their lifetime. Over the years I kept adjusting the degree of behavioral response in the model downward. I also realized that I myself: (i) was not sure what my marginal tax rate would be in the current tax year that I wouldn’t be filing a tax return for until next April, and (ii) could not just walk into my employer and explain that my marginal tax rate was going up and therefore I would like to work some odd fraction of my weekly hours less each week. (Right, I am very much not like Greg Mankiw who would surely reduce the “supply of Mankiw” in response but the link to that quip I cannot find right now.)
• Get more granular and qualitative. In gathering evidence, don’t just look or wait for the official government or other publicly-available data to come out on your topic of interest, go out and find more of exactly what you need for your analysis yourself. These days we have big data analytical tools such as Google Trends (which draw from Google search data) and it’s relatively easy to conduct one’s own online surveys—as well as to pick up the phone or laptop to do interviews with key informants and influencers on your topic. Combining quantitative analysis of official government statistics with online search data, surveys and qualitative methods to dive deeper into not just what choices are made and outcomes achieved, but the “how” and the “why” about those decision contexts and processes, will help economists better understand the economy from the bottom (or ground-level) up. (Remember, the macroeconomy is the adding up and interacting of many, many individual household- and business-level decisions.)
• Get more women. I mean in top economist roles! (Yes, this sounds self-serving.) Probably the most reliable way to encourage more female participation in our profession is to provide role models and mentors who are successful and inspiring women in economics. (Alice Rivlin was mine.) There is an unfortunate but common phenomenon in general organizational settings where it is difficult to get promoted in an organization where most people above you in the hierarchy look different from you (or rather you look different from them). It is not because these old white guys are intentionally biased or bigoted (not always at least), but because these leaders have a natural affinity toward those junior to them who remind them of younger versions of themselves. But the main reason why the economics profession needs more women is not for more balanced representation on a pure counting standpoint, but because women economists do tend to understand and practice economics differently from men. My critiques of our discipline’s theory and practice are more commonly recognized by women than men, because women are (and yes, I’m broadly generalizing): more maternal in instinct (concerned for the greater good and future generations), collaborative more than competitive, good at multi-tasking and considering several goals and factors at once, and have more personal experience with real-world tradeoffs that real people face daily—not all of which are seen in economic data.
• Get more personal. Dig deeper into what matters to people and what motivates and goes into their everyday decisions. Because of our own personal experiences, women may know better what to ask people about their circumstances and thought processes, and are more interested in asking (even a stranger) “how happy are you?” and “what makes you happy?” The basic concept of maximizing happiness subject to all kinds of social, familial, time, and (yes) budget/financial constraints still applies and is useful to remind policymakers of the tradeoffs that every person and society as a whole must make—that there are never really “free lunches” but rather costs that are not always visible or measureable.
• Get more helpful with public policy. Stop assuming that people will react to policy in the “rational man” way and recognize that the way a policy is designed and presented/explained to people can actually teach people how to make decisions that are best for them, whatever their objective function contains. Design policy with input/feedback from real people (via focus groups and pilot projects/test cases), not just based on what policy experts “know” (what “the literature says”) about what the effects of the policy will/should be. Think of this as analogous to how a consumer product manufacturer would develop and roll out new products to consumers to make sure it will do well in the market. (They are motivated by market share and profit maximization; public policy economists should be motivated by social impact and public net-benefit maximization.)

I hope this piece has been provocative but also gets people in our profession—male and female—to think about how we can remodel and refresh the way we do our work. Our discipline can have so much more positive impact on society if we stretch ourselves beyond how we were formally trained in grad school and how we have been stereotyped and typecast so far. We need to use a wider variety of research methods that come from other social science disciplines and remember that we are supposed to be a social science. We need to talk more with others and collaborate more across disciplines, organizations, and policy areas. We need to not just do our economic analyses but do better at communicating insights of our analyses to policymakers and the general public—because work that doesn’t engage or isn’t understood cannot have impact. And we need to introduce economics in this more “woke” and human form to students who will be inspired to join our profession.

It’s Mother’s Day, and I’m back!

Mother’s Day 2019: I started a blog on this site on Mother’s Day, 2008 (when my four kids were ages 9 1/2 to 16)–when I was working for the Concord Coalition–and wrote nearly every day for nearly 5 years (until I left for the Pew Charitable Trusts in early 2013). I’m back after a 6 1/2 year hiatus, my kids now ages 20 1/2 to 27. I’m (still) a Ph.D. economist living and working in the DC Metro Area. After a 20+ year first marriage (to another economist), I decided I wanted a divorce. A decade later I am getting remarried (and to another economist!)–something I never would have predicted would have happened if you had asked me 5-10 years ago. But I have learned a lot of things over my nearly 30 years of motherhood–more than I have learned over my 35 years of working as an economist. I like to think that the part of me that is “just a mom” gives me a unique perspective on the economy, because I am constantly testing the wisdom of economic theories and the usefulness of the economist’s standard analytical toolbox against what I see and experience in real life. Most of what I will do here is make observations and reflect on my own experiences, while also relating them to the various issues that economists and other social scientists study. I hope my musings will resonate with some of you–whether because of the economist in me or (maybe more likely) because of the mom in me. Thanks for reading, and Happy Mother’s Day to all fellow moms out there. (Please follow me on Twitter to keep up with my new posts here.)