What do economists do all day?

Economics is a pretty varied field. And yet, external impressions of the field still paint it as quite homogenous, often focused primarily on macroeconomics (in the case of the general public), or on a narrow, dogmatic neoclassical microeconomics (in the case of some sociologists). So, in the spirit of trying to explore the heterogeneity of modern economics, here are short descriptions of three papers from the most recent issue of the American Economic Review that caught my eye as showing off the diversity of interesting things you might not expect to see in economics. Note, even more than usual, reference here is not endorsement.

First up, we have a paper based on the Sapir-Whorf hypothesis! Rather than posting the abstract, I’ll post the first paragraph because it much more clearly articulates the argument of the paper:

The Effect of Language on Economic Behavior: Evidence from Savings Rates, Health Behaviors, and Retirement Assets
Languages differ in whether or not they require speakers to grammatically mark future events. For example, a German speaker predicting rain can naturally do so in the present tense, saying: Morgen regnet es which translates to “It rains tomorrow.” In contrast, English would require the use of a future marker like “will” or “is going to,” as in: “It will rain tomorrow.” In this way, English requires speakers to encode a distinction between present and future events, while German does not. Could this characteristic of language influence speakers’ intertemporal choices?

The paper uses survey data on cultural traits (the World Values Survey!), cross-country regressions, cites linguists (including explicitly invoking the Sapir-Whorf hypothesis), and so on. Cool right? And in a top econ journal!

Next up, a paper on the meeting point of post-WWII US economic and political imperialism:

Commercial Imperialism? Political Influence and Trade during the Cold War
We provide evidence that increased political influence, arising from CIA interventions during the Cold War, was used to create a larger foreign market for American products. Following CIA interventions, imports from the US increased dramatically, while total exports to the US were unaffected. The surge in imports was concentrated in industries in which the US had a comparative disadvantage, not a comparative advantage. Our analysis is able to rule out decreased trade costs, changing political ideology, and an increase in US loans and grants as alternative explanations. We provide evidence that the increased imports arose through direct purchases of American products by foreign governments.

The paper relies on recently released CIA documents to identify exactly when CIA influence was exercised. According to the authors’ analysis, following a CIA intervention, the foreign government would increase its purchases of US goods. Even better, the goods bought by the new government tended to be things which the US was comparatively bad at producing, the opposite of what is predicted by purely economic theories of trade (that is, even if you expected an increase in trade following the installation of a new regime that was pro-trade, in the absence of some political machinations, that trade would be in the things the US has a comparative advantage in and vice versa). So, score one for political power and imperialism driving economic behavior!

Finally, a shorter paper by the ever-controversial Steven Levitt (and co-author Fryer) on race and intelligence:

Testing for Racial Differences in the Mental Ability of Young Children
Using a new nationally representative dataset, we find minor differences in test outcomes between black and white infants that disappear with a limited set of controls. However, relative to whites, all other races lose substantial ground by age two. Combining our estimates with results in prior literature, we show that a simple model with assortative mating fits our data well, implying that differences in children’s environments between racial groups can fully explain gaps in intelligence. If parental ability influences a child’s test scores both genetically and through environment, then our findings are less informative and can be reconciled with a wide range of racial differences in inherited intelligence.

Rather than the large, approximately one standard deviation, differences found in intelligence tests among older children, Fryer and Levitt find a minuscule .0055 standard deviation difference among children between 8 and 12 months old. That is, all of the difference in intelligence pops up after the first year. The results for different models after that are somewhat inconclusive, but the data do suggest that you don’t need any genetic difference between racial groups to explain racial gaps in intelligence tests at older ages.

So, three papers, about the role of language in shaping economic behavior, about the role of political and military imperialism in shaping trade, and on the (non)role of genetics in shaping racial disparities. Welcome to economics, 2013?*

*Ok, to be fair, there’s plenty of stuff that looks exactly like what you’d expect (asset pricing, job search over the business cycle, fiscal and monetary policy models, etc.). My point is just that there’s a lot more than that too!

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1 Comment

  1. Economics does it best work when it goes into “non-economic” areas. Ironically, I use a good amount of economic journal articles in my “non-economic” sociology courses (Race & Ethnicity; Organized Crime) but use only one or two in my “economic” course (Soc of the Financial Crisis).