BANKING AS ART
On the history of economists in central banks
A recent paper by FRANÇOIS CLAVEAU and JÉRÉMIE DION applies quantitative methods to the historical study of central banks, demonstrating the transition of central banking from an “esoteric art” to a science, the growth of economics research within central banking institutions, and the corresponding rise in the dominance of central banks in the field of monetary economics. From the paper:
“We study one type of organization, central banks, and its changing relationship with economic science. Our results point unambiguously toward a growing dominance of central banks in the specialized field of monetary economics. Central banks have swelling research armies, they publish a growing share of the articles in specialized scholarly journals, and these articles tend to have more impact today than the articles produced outside central banks.”
Link to the paper, popup: yes which contains a vivid 1929 dialogue between Keynes and Sir Ernest Musgrave Harvey of the Bank of England, who asserts, “It is a dangerous thing to start giving reasons.”
ht to the always-excellent Beatrice Cherrier who highlighted this work in a brief thread popup: yes and included some visualizations, including this one showing the publishing rate of central banking researchers:
- Via both Cherrier and the paper, a brief Economist article on the crucial significance of the central banking conference in Jackson Hole, hosted by the Federal Reserve Bank of Kansas City: “Davos for central bankers.” Link popup: yes. (And link popup: yes to an official history of the conference.)
- Another paper co-authored by Claveau looks at the history of specialties in economics, using quantitative methods to map the importance of sets of ideas through time. “Among our results, especially noteworthy are (1) the clear-cut existence of ten families of specialties, (2) the disappearance in the late 1970s of a specialty focused on general economic theory, (3) the dispersal of the econometrics-centered specialty in the early 1990s and the ensuing importance of specific econometric methods for the identity of many specialties since the 1990s, and (4) the low level of specialization of individual economists throughout the period in contrast to physicists as early as the late 1960s.” Link popup: yes.
Behavioral economics in policy
From Elsevier’s upcoming Handbook on Behavioral Economics, a chapter by DOUGLAS BERNHEIM and DMITRY TAUBINSKY includes an illuminating overview of different concepts of welfare, then an in-depth overview of the use of behaviorial economics (“nudges” and much more) in policy.
“This handbook chapter summarizes the emerging field of BPE [Behavioral Public Economics]. A comparison with Bernheim and Rangel (2007), which assessed the state of the nascent field roughly a dozen years ago, reveals that progress has been dramatic. Our focus is on the normative questions that have historically played central roles in the field of Public Economics; we are not primarily concerned with research that only aims to describe the positive effects of government policies. There are at least two ways to organize such a chapter: we could focus on substantive policies, considering relevant behavioral phenomena in each instance, or on behavioral phenomena, describing the various policy implications in each instance. Consistent with our substantive focus, we adopt the first of these approaches. The challenge for BPE that we seek to highlight throughout this chapter is the need to maintain the tight link between empirically measurable statistics and welfare estimates, while moving beyond the revealed preferences assumption.”
- Stefano DellaVigna is also contributing a chapter to the handbook, on “the role of structural estimation in behaviorial economics.” “As the policy application of behavioral ideas goes mainstream in the policy world, and as its ideas are used by governments on the right and on the left, in the academic literature there still are remarkably few cases of welfare evaluations of policy applications of behavioral findings. Yet, welfare evaluations are important, just as they matter within standard economics, and in fact even more, given the conceptual difficulties of handling, for example, multiple selves in self-control models, or individuals with wrong beliefs. I review here some of contributions in six areas in which there are relevant insights from a welfare evaluation based on structural estimation.” Link popup: yes to NBER; link popup: yes to free copy.
- Richard Thaler’s personal history of behavioral economics, a modified version of his Nobel Prize speech from 2017, is full of anecdotes from a lifetime of study. “We were only trying to discern what citizens consider to be unfair; that is, we were after a descriptive model of fairness. Put simply, what actions by firms make people angry? One key factor is whether people think the firm is taking away something to which people believed they were entitled; such actions are coded as losses. We learned that many subtleties influence whether an action is considered to be imposing a loss.” Free copy available here popup: yes.
Brad DeLong on Chinese economic history
On his blog, BRAD DELONG has been posting outtakes from Slouching Towards Utopia?, his upcoming book popup: yes. He writes at great length on the frequently-asked question, “Why was the 20th century not a Chinese century?”
“The fact is that, outside the charmed circles created by the extraterritorial foreign concessions, and to a slight degree the immediate span of control of the few modernizing governors, modern industries did not develop and modern technologies were simply not applied in late imperial China. The typical Qing bureaucrat was hostile. But the typical Qing bureaucrat was also interested. There was rough equilibrium in how much money Qing bureaucrats were expected to squeeze from landlords (not that much), merchants and traders (significant but limited), and others who needed government action (as much as they could grab).”
- Tangentially related, Mark Dincecco and Yuhua Wang’s recent paper, “Violent Conflict and Political Development Over the Long Run: China Versus Europe popup: yes,” looks to history to explain why China did not develop representative government. The paper elicited a response from the Scholar’s Stage: “The problems comes when you attempt to apply Tilly’s famous framing outside the European experience. War is a constant of human history. Strong states are not. Strong states with representative institutions are even more difficult to find. If Tilly’s ‘bellicist’ model of state formation is valid, then why doesn’t it work outside of Europe?” Link popup: yes.
- For a brief look at more recent history, Julian Gewirtz takes stock of the 40-year anniversary of “Reform and Opening”: “Xi envisions China becoming a superpower with the Party firmly in control over all aspects of life.” Link popup: yes.
- Breyon Williams finds that the effects of student aid differ for high-income and low-income students. “Among merit-aid recipients, student aid benefits low-income students only, increasing their GPAs and graduation prospects. These students may respond to the additional aid by working less.” Link popup: yes. ht Barry
- Annie Lowrey writes about Opportunity Zones: “Across the country, states, mayors, and development officials have scrambled to identify those in-between places and figure out how to shepherd the private dollars that might get spent in them.” Link popup: yes.
- Tim Dutton rounds up national AI strategies. There’s huge variation between nations, but many countries are preparing guidelines, frameworks, or regulations around ethics. Link popup: yes. ht Margarita
- Student debt’s impact on entrepreneurship: “Our results document a significant adverse effect of student loans on a crucial engine of economic growth–high impact, venture capital backed startups–highlighting a major policy-relevant concern related to student loans.” Link popup: yes. ht Will
- From Gabriel Zucman popup: yes et al, further work on the macro evidence and impact of offshore tax havens: “The equivalent of 10% of world GDP is held in tax havens globally, but this masks a great deal of heterogeneity… We use these estimates to construct revised series of top wealth shares in ten countries, which account for close to half of world GDP.” Link popup: yes.
- At Data & Society, danah boyd and Michael Golebiewski describe “data voids,” how search engine results can be manipulated or misleading. Link popup: yes. ht Lauren
- Diane Coyle writes about three way regulation can improve an economy. Link popup: yes.
- An upcoming study from Tatjana Meschede, Joanna Taylor et. al. continues an examination of racial wealth disparities among college grads, focusing on the cost of attaining a college degree and the impact of intergenerational “transformative asset” transfers (i.e. inheritance). Link popup: yes. ht Jack
- “Can investing in children who faced adverse events in early childhood help them catch up?” New evidence using data from the PROGRESA experiment looks at the (ameliorative) effects of cash transfers on outcomes for children in agrarian communities who suffered from adverse rainfall early in their lifetimes. Link popup: yes.
- “We study the causal connection between trade and development using one of the earliest massive trade expansions: the first systematic crossing of open seas in the Mediterranean during the time of the Phoenicians.” Link popup: yes.
Each week we highlight research from a graduate student, postdoc, or early-career professor. Send us recommendations: firstname.lastname@example.org.