It is a bit unfair to blame Levitt, even tongue in cheek. It is more important to ask who is the customer for economic research.
Industry: Tends to focus on what is going to happen in the near future, or on producing research to get politicians to make rules in their favor. Hospitals don't want to know why they are expensive; they already know this. What they want is something that shows politicians and voters why they should be given more money.
Academics: If you are trying to get and secure a job at a university you need to signal that you can attract students and money with your work, and that you believe the right things. All are satisfied by being a sociologies: students want to learn how to fix the world by making people do what they want (leave people alone is popular only with a few), money comes in via donations from groups and governments that want reasons to get people to do what they want, and of course the dominant religion revolves around making people do what you want them to do.
Government: The government does not generally want to know why its schools are awful, because it made them that way. Likewise with every other aspect where the fix is "stop messing with it."
Laypeople: Like economics that explains what they see and doesn't upset their worldview much, and they don't generally see interest rates and the like very often. Unfortunately they generally also share the worldview of the universities they attended.
It is extremely difficult to have an academic job without doing research with a paying customer. It is very difficult to do research without an academic job. Add in a dash of "I don't want to leave the office, so lets just use available datasets," a sprinkle of "I have never worked for an actual business, and there you go, a recipe for most economists having no idea how businesses and markets function and little incentive to find out.
For medical cost structure I would simply do a study comparing outpatient surgery costs at the Surgery Center of Oklahoma with an arbitrary “insurance” hospital. I suspect most of the “cost” of surgery is simply excess charges to make up for unfunded government mandates combined with rent seeking.
Perhaps a meta research question for economists would be why aren't those topics being researched?
Back when I was a student, I remember folks saying something to the effect of there's no research showing immigration is has any negative effects. I pointed out that there was actually very little serious research done on the topic. The response was, basically, "of course, you'd never get published if you researched that nazi populist crap!"
The more things change, the more they stay the same. People know the answers to these questions already. People don't say them for the same reasons they don't yell into the wind.
I can understand why so many economists like doing social science research and it may not even be a net negative for academia even if it is for economics. It seems like a form of arbitrage. Economists tend to be more analytical, quantitative, and rigorous than sociologists, so many an economist probably realizes that, while competition is intense in traditional economic research, he can outperform the sociologists on their own turf. Something similar happens with physicists (and occasionally mathematicians) in the life sciences. There are a lot of interesting mathematical or computational questions biologists aren't equipped to handle, so a physicist often finds he can more easily do high impact original research there than in his own field.
I suspect economics also has the advantage of being less politically homogeneous and a less 'activist' discipline. Even left-of-center economists still often unabashedly publish research that contradicts left-wing politics (Doleac's research on policing; Natasha Sarin's finding that wealth inequality hasn't increased much; Finkelstein's finding that Medicaid access doesn't improve health). A typical academic sociologist is probably much less likely to even consider conclusions that fly in the fact of their field's ideology. Part of why I say this trend might not be a net bad, as it probably means better sociology research than we'd get if left to the sociologists.
A very strange statement: "But to me it looks like they are irrationally willing to tolerate low returns now." People--e.g., me--are mostly small savers/investors; we are price-takers, accepting whatever the market offers. The market is offering low interest rates (absent outsized risk); what alternative do you imagine we have?
Amazon/Walmart are killing independent retailers, but they've created over a million dependent retailers in the form of third-party sellers. These businesses are fundamentally retailers, but they hook into Amazon/Walmart's network to reach customers affordably.
You blame Steven Levitt about his sociology, but then turn around and say "There are interesting economic questions concerning “green” technology". Levitt may not have a Ph.D. is sociology, but you don't have a Ph.D. in STEM that is required to even understand "green" technology.
It is the lack of real technological knowledge which makes most of the "green" policies and discussions such nonsense. Then we wonder why the programs don't work and become just more rent-seeking games.
Levitts sociology knowledge appears much greater that environmental activist STEM knowledge.
On the “Demographic Reversal” - it isn’t even obvious to me that this means interest rates will rise. Countries that seem to be further along in this process (e.g. Japan) still have very low interest rates.
Of the questions Arnold listed, two strike me as most important - the healthcare system and interest rates. And I would add a third important question (see below). The healthcare system is barely recognizable to economists, that is, the "laws" of supply and demand, or markets, barely function in the industry as we now know it. The overarching question is how can we make the healthcare system function more efficiently? Perhaps Arnold's questions will inform that issue.
Regarding interest rates, put another way, his question is about the level of so-called R-star (r*), the equilibrium risk-free, real rate of interest. It's a tough question and economists have been wrestling with it forever. (A similar question concerns quantifying the equity premium and explaining why it has been so large in the past.)
A third important issue is to determine sustainable levels of federal debt and to forecast the consequences of our current debt level (approximately 100% of GDP), which I would argue is dangerously unsustainable. Moreover, this 100% debt-to-GDP ratio includes only debt held by the public, thus ignoring the present discounted value of net liabilities for Medicare, Medicaid, Social Security, veteran healthcare and pension obligations and other "entitlements." Some have argued these net federal liabilities could be tens of trillions of dollars, that is, several multiples of GDP.
Good questions. I'd like to see more cost-benefit analysis of regulatory policies. What kind of CBA led to the plethora of sub-optimal COIVID interventions, for example.
Nearly all medicine is in one way or another paid for by the government or the government is heavily involved in determining what someone else will pay.
In my experience, the government incentive structure looks like this:
1) If cost goes up, nothing bad will happen to us.
2) If we get a lot of complaints something bad might happen to us, or at a minimum it's a hassle.
3) There is no reward for discriminating between legitimate and illegitimate complaints.
The net result of this is a bias towards medical cost trend running higher than inflation. Maybe because of prices, maybe because of utilization, but always in combination one way or another.
I don't see a way out.
Ironically, one of the worst things government has done is try to restrict insurance profits to some arbitrary % of revenue. The net result of this is that the only way to make more money is to drive revenue up (increase medical cost trend). I've got a product I've been pitching for that would decrease medical spending, but the problem I keep running into is that its "too profitable". Getting enough margin to cover admin on 15% of such low revenue is difficult. It's easier to just code people up for medical conditions they don't have and give them treatments they don't need.
A recent presentation by John Haltiwanger titled "Surging Business Formation in the Pandemic: Causes and Consequences" partially addresses the changing structure of small business.
To your last point, I believe we are mismeasuring the productivity and inflation statistics. I think the natural rate of interest is lower than many expect and can stay there for longer.
It is a bit unfair to blame Levitt, even tongue in cheek. It is more important to ask who is the customer for economic research.
Industry: Tends to focus on what is going to happen in the near future, or on producing research to get politicians to make rules in their favor. Hospitals don't want to know why they are expensive; they already know this. What they want is something that shows politicians and voters why they should be given more money.
Academics: If you are trying to get and secure a job at a university you need to signal that you can attract students and money with your work, and that you believe the right things. All are satisfied by being a sociologies: students want to learn how to fix the world by making people do what they want (leave people alone is popular only with a few), money comes in via donations from groups and governments that want reasons to get people to do what they want, and of course the dominant religion revolves around making people do what you want them to do.
Government: The government does not generally want to know why its schools are awful, because it made them that way. Likewise with every other aspect where the fix is "stop messing with it."
Laypeople: Like economics that explains what they see and doesn't upset their worldview much, and they don't generally see interest rates and the like very often. Unfortunately they generally also share the worldview of the universities they attended.
It is extremely difficult to have an academic job without doing research with a paying customer. It is very difficult to do research without an academic job. Add in a dash of "I don't want to leave the office, so lets just use available datasets," a sprinkle of "I have never worked for an actual business, and there you go, a recipe for most economists having no idea how businesses and markets function and little incentive to find out.
For medical cost structure I would simply do a study comparing outpatient surgery costs at the Surgery Center of Oklahoma with an arbitrary “insurance” hospital. I suspect most of the “cost” of surgery is simply excess charges to make up for unfunded government mandates combined with rent seeking.
Perhaps a meta research question for economists would be why aren't those topics being researched?
Back when I was a student, I remember folks saying something to the effect of there's no research showing immigration is has any negative effects. I pointed out that there was actually very little serious research done on the topic. The response was, basically, "of course, you'd never get published if you researched that nazi populist crap!"
The more things change, the more they stay the same. People know the answers to these questions already. People don't say them for the same reasons they don't yell into the wind.
I can understand why so many economists like doing social science research and it may not even be a net negative for academia even if it is for economics. It seems like a form of arbitrage. Economists tend to be more analytical, quantitative, and rigorous than sociologists, so many an economist probably realizes that, while competition is intense in traditional economic research, he can outperform the sociologists on their own turf. Something similar happens with physicists (and occasionally mathematicians) in the life sciences. There are a lot of interesting mathematical or computational questions biologists aren't equipped to handle, so a physicist often finds he can more easily do high impact original research there than in his own field.
I suspect economics also has the advantage of being less politically homogeneous and a less 'activist' discipline. Even left-of-center economists still often unabashedly publish research that contradicts left-wing politics (Doleac's research on policing; Natasha Sarin's finding that wealth inequality hasn't increased much; Finkelstein's finding that Medicaid access doesn't improve health). A typical academic sociologist is probably much less likely to even consider conclusions that fly in the fact of their field's ideology. Part of why I say this trend might not be a net bad, as it probably means better sociology research than we'd get if left to the sociologists.
Arnold,
How about a cost/benefit analysis of Taxation?
Should be at the top of the list given its relevance and urgency.
A very strange statement: "But to me it looks like they are irrationally willing to tolerate low returns now." People--e.g., me--are mostly small savers/investors; we are price-takers, accepting whatever the market offers. The market is offering low interest rates (absent outsized risk); what alternative do you imagine we have?
Amazon/Walmart are killing independent retailers, but they've created over a million dependent retailers in the form of third-party sellers. These businesses are fundamentally retailers, but they hook into Amazon/Walmart's network to reach customers affordably.
You blame Steven Levitt about his sociology, but then turn around and say "There are interesting economic questions concerning “green” technology". Levitt may not have a Ph.D. is sociology, but you don't have a Ph.D. in STEM that is required to even understand "green" technology.
It is the lack of real technological knowledge which makes most of the "green" policies and discussions such nonsense. Then we wonder why the programs don't work and become just more rent-seeking games.
Levitts sociology knowledge appears much greater that environmental activist STEM knowledge.
Arno-nomics
On the “Demographic Reversal” - it isn’t even obvious to me that this means interest rates will rise. Countries that seem to be further along in this process (e.g. Japan) still have very low interest rates.
I think you have to ask first this: "Who benefits from not having these questions asked and answered?"
Of the questions Arnold listed, two strike me as most important - the healthcare system and interest rates. And I would add a third important question (see below). The healthcare system is barely recognizable to economists, that is, the "laws" of supply and demand, or markets, barely function in the industry as we now know it. The overarching question is how can we make the healthcare system function more efficiently? Perhaps Arnold's questions will inform that issue.
Regarding interest rates, put another way, his question is about the level of so-called R-star (r*), the equilibrium risk-free, real rate of interest. It's a tough question and economists have been wrestling with it forever. (A similar question concerns quantifying the equity premium and explaining why it has been so large in the past.)
A third important issue is to determine sustainable levels of federal debt and to forecast the consequences of our current debt level (approximately 100% of GDP), which I would argue is dangerously unsustainable. Moreover, this 100% debt-to-GDP ratio includes only debt held by the public, thus ignoring the present discounted value of net liabilities for Medicare, Medicaid, Social Security, veteran healthcare and pension obligations and other "entitlements." Some have argued these net federal liabilities could be tens of trillions of dollars, that is, several multiples of GDP.
Good questions. I'd like to see more cost-benefit analysis of regulatory policies. What kind of CBA led to the plethora of sub-optimal COIVID interventions, for example.
Nearly all medicine is in one way or another paid for by the government or the government is heavily involved in determining what someone else will pay.
In my experience, the government incentive structure looks like this:
1) If cost goes up, nothing bad will happen to us.
2) If we get a lot of complaints something bad might happen to us, or at a minimum it's a hassle.
3) There is no reward for discriminating between legitimate and illegitimate complaints.
The net result of this is a bias towards medical cost trend running higher than inflation. Maybe because of prices, maybe because of utilization, but always in combination one way or another.
I don't see a way out.
Ironically, one of the worst things government has done is try to restrict insurance profits to some arbitrary % of revenue. The net result of this is that the only way to make more money is to drive revenue up (increase medical cost trend). I've got a product I've been pitching for that would decrease medical spending, but the problem I keep running into is that its "too profitable". Getting enough margin to cover admin on 15% of such low revenue is difficult. It's easier to just code people up for medical conditions they don't have and give them treatments they don't need.
A recent presentation by John Haltiwanger titled "Surging Business Formation in the Pandemic: Causes and Consequences" partially addresses the changing structure of small business.
To your last point, I believe we are mismeasuring the productivity and inflation statistics. I think the natural rate of interest is lower than many expect and can stay there for longer.
Sorry I missed the webinar last night.
https://leebressler.substack.com/p/productivitymath?r=8516r&s=w&utm_campaign=post&utm_medium=web&utm_source=direct