Economics Lecture Podcasts at LSE

London School of Economics has been podcasting its public lectures and events for free since October, 2006. Audiences can easily get access to the lecture slides and even transcripts of those lectures.

Harvard Economist, also the co-founder of the promising incomplete contract theory, Oliver Hart delivered a lecture titled Contracts Reference Points and the Theory of the Firm this February. In this lecture, Hart discussed how his recent work with John Moore on contracts as reference points can be used to shed light on the theory of the firm.

Identity and Economics: The Missing Motivation?

Is identity the missing motivation of economics? UC Berkeley's George Akerlof and University of Maryland's Rachel Kranton certainly think so. I blogged earlier this month that George Akerlof asserted a missing motivation in economics in his AEA presidential address, and from his recent lecture at LSE, it seemed that this big idea emerged a decade ago. Akerlof explains how this interest arose:

In the spring of 1996 Rachel wrote me a letter which said that my previous paper, on Social Distance, in Econometrica, had missed the concept of identity. She also said that concerns regarding identity were a serious omission from economic theory.

Initially I was not pleased to receive this letter, which said that my previous paper was all wrong. I also thought that Rachel was in error. I thought that identity was just an aspect of people’s tastes. As a result, I also thought that standard utility theory already took full account of it. But after we talked it over for a great deal of time we discovered that identity really does have a meaning. We decided also that it is a major factor missing from current economics.

Rachel and I have now written four lengthy papers on this subject, and now we are trying to summarize it in a book. ...this lecture is a summary of where we have gotten to date on that book.

In this Stamp lecture Akerlof provides the wider argument, spanning all four papers. Both the Powerpoint (PDF) and transcript (PDF) from Akerlof's Stamp Lecture on 'Economics and Identity', delivered at the London School of Economics on April 25, are now available. This body of work is certainly starting to influence economic debates.

Many of us would agree that the neoclassical model of human behaviour is incomplete. To what extent does the Akerlof-Kranton thesis help complete the picture? I'm not yet sure. But I think it's certainly worthwhile for me to read all four papers below.

Further reading:
* Economics and Identity (PDF), Quarterly Journal of Economics CXV(3), August 2000, pp. 715-733.
* Identity and Schooling: Some Lessons for the Economics of Education (PDF), Journal of Economic Literature, 40(4), December 2002, pp.1167-1201.
* Identity and the Economics of Organizations (PDF), Journal of Economic Perspectives, Fall/Winter 2004; a longer version with the modelling is available here (PDF).
* The Missing Motivation in Macroeconomics (PDF), AEA Presidential Address, January 2007

Pioneers of Industrial Organization

Pioneers of Industrial Organization: How the Economics of Competition and Monopoly Took Shape is the title of a new volume edited by Henk de Jong to be published this month by Edward Elgar. Here is the synopsis of the book:

This encyclopaedic work celebrates the scores of leading pioneers who created the modern economic field of industrial organization, at the heart of which lie competition and monopoly, the two great forces that drive modern markets. Their pioneering work has shaped the field’s growing research as well as the past, present and future debates in Europe and America since 1880. This landmark book includes authoritative entries on all the major figures in both Europe and North America. “Pioneers of Industrial Organization” also reveals how public policies such as antitrust and regulation - and deregulation since the 1970s - can promote, or impede economic results and progress. Readers will find the intellectual pioneers, the theories and policies, and the debates, in all their variety. Some pioneers have been free-market advocates, others have been more protective of popular values, but all have strained to make the economic engine promote more wealth, progress and fairness. This book presents the people, ideas and debates with careful neutrality, and also with clear, concise writing. For all those interested in modern economic progress and its problems, this book provides deep insight as well as great personal colour. It will be an essential source of reference for students, researchers and professors of economics as well as those concerned with the historical foundations and the most recent developments in industrial organization.

From Organizations and Markets blogged by Nicolai Foss and Peter Klein.

Innovative Story Telling With Data

Hans Rosling debunks myths about the so-called "developing world" using extraordinary animation software developed by his Gapminder Foundation.

In this lecture, with interesting images and communicative visualizations, he explores the techniques in order to show the story in the data. It's worth your time watching it because of two reasons - learning something new and seeing how to make an impressive presentation.

You can use some of the tools at his Gapminder site.

Will China Really Overtake America?

Here is a story from Financial Times.

Interestingly, Martin Wolf, FT's chief columnist, points out that if China were to achieve the GDP-per-capita levels of Portugal – the poorest country in western Europe – its overall GDP will be larger than that of the US and the European Union combined.

Infamous last words

I served as an interpreter for an EMBA class named Strategic Management of Technological Innovation for three straight days - from June 14th to June 16th. Thanks to George Farris, our eloquent and humorous lecturer, we learned many serious concepts and ideas that can be used to formalize our strategic thinking in the decision making processes. But what I want to mention here are some amusing anecdotes from his lecture - some infamous last words made by some notable geniuses but they ALL turned out to be WRONG！

"I think there is a world market for maybe five computers." Thomas Watson, chairman of IBM, 1943.

"This telephone' has too many shortcomings to be seriously considered as a means of communication The device is inherently of no value to us," Western Union internal memo, 1876.

"The concept is interesting and well-formed, but in order to earn better than a C, the idea must be feasible." A Yale University management professor in response to Fred Smith's paper proposing reliable overnight delivery service. (Smith went on to found Federal Express.)

"Heavier-than-air flying machines are impossible." Lord Kelvin, president, Royal Society, 1895.

"Stocks have reached what looks like a permanently high plateau." Irving Fisher, professor of economics, Yale University, 1929.

"There is no reason anyone would want a computer in their home." Ken Olson, president, chairman and founder of Digital Equipment Corp., 1977.

"Everything that can be invented has been invented." Charles H. Duell, commissioner, U.S. Office of Patents, 1899.

The Making of an Economist Redux

David Colander has published a new version of his critique on graduate education in economics. As he himself emphasizes, his critique is quite different from his critique of 20 years ago. Here are some interesting findings, some of which are quite different from his previous study.

Again, through survey and interviews with graduate students at seven top-ranking graduate economics programs, he finds out that students in different schools, albeit have distinct views on economics, world economy, and the profession, their perceptions are converging. The breakdown by schools shows less difference among schools in this study compared with the previous. Part of the reason is the definition of mainstream economics today. Since neoclassical economics has incorporated many elements that previously were considered heterodox in developments in fields such as behavioral economics and evolutionary game theory, economic opinions at different schools could have exhibit some extent of consistency. Further more, economics today has become more consciously empirical than it was, and the mathematics that it uses is more likely to be applied mathematics rather than pure mathematics.

Another interesting result is that different schools can shape different political orientation. Princeton brings in conservative students and turns them into liberals, while Chicago brings in liberal students and turns them into conservatives. By the way, The response to what skills put students on the fast track also differed by schools. Stanford students see problem solving as most important, MIT students think of empirical research as most important, Princeton students regard excellence in mathematics as most important, and Columbia students see having a thorough knowledge of the economy as being most important.

Finally, he makes futher suggestions on economics education, particularly on core courses. Eliminating macro from the core would free up resources in the core, which could be advantageously used in a number of different ways, such as in another econometrics and statistics course. Another potential problem is that the core focuses more on depth, not breadth. Students have little sense of background to the debates or the techniques and do not understand why they developed, and what use they are. It seems reasonable that the core courses should focus on creativity and economic reasoning and not technique.

Good Old Days

Deaths, taxes, competition, weakness in public system, and faculty split are threatening the Department of Economics at UCLA. Almost half of its senior economists are leaving or about to leave.

"It's a long way from UCLA's former glory, when its applied microeconomics earned the joke that UCLA stood for the University of Chicago at Los Angeles. Professors whose names contributed much to UCLA's luster include Armen Alchian, Robert Clower, Harold Demsetz, Arnold Harberger, Jack Hirschleifer, Michael Intriligator, Axel Leijonhufvud, Jacob Marschak and Lloyd Shapley. "

"UCLA is a mess...". Will Berkeley be the next one, since its department, in particular, is besieged by offers as well?

Here is the whole story.

The Source of Innovation

Eric von Hippel, a prestigeous professor at MIT Sloan School of Management, has focused his research on developing strategies to identify new ideas and innovations systematically and quickly. He coined the term of "lead users" and pioneered the thinking of user innovation, as opposed to the conventional view of manufacturer-centric innovation in his well known book, The Source of Innovation. Another book from him, named Democratizing Innovation, has documented how the internet and improvements in computing have changed the innovation process. Now users have much more power.

Since I have neither read the books entirely nor engaged in exploring this as far as professor Hippel and his students do, some of my doubts below are quite lay.

Well, it seems to me that "users" can be the (or may be the only) source of innovation, particularlly in the pre-manufacturing stage in human history. Although some of his researches have shown to us with convincing evidence that the innovative ideas originate from the experiences of users, intuition still tells me that innovative ideas are quite possibly coming from those people with professional knowledge who can benefit from commercializing those ideas. Manufacturers can think as creatively as users, sometimes they themselves are users. Since we can not easily compare the magnitude of different kinds of incentives confronted by users and manufacturers, the real source of innovative process is still hard to reveal.

If we can dichotomize innovation into radical and incremental innovation, then my proposition would be like this: users may serve as a major source of incremental innovation while professional manufacturers can mostly bring forward radical changes.

A final point. As to whether the innovation process is manufacturer centered or user centered, it likes the old debate of whether demand creates supply or supply has its own demand.

Quote of the Day

Jacob Viner is one of the greatest thinkers in the Chicago school economics. He once talked about the relationship between interests and training in pursuing a professional career, and it went like this,

"...men are not narrow in their intellectual interests by nature; it takes special and rigorous training to accomplish that end.."
-- Jacob Viner, "A Modest Proposal for Some Stress on Scholarship in Graduate Training" (PDF)

By the way, as you may already know, Viner had a reputation as being one of the toughest professors at Chicago, and Milton Friedman was a student of Viner.

The Making of an Economist

David Colander's The Making of an Economist: Redux was recently published by Princeton University Press, which may serve as a version 2.0 of his 1987 paper in the Journal of Economic Perspectives.

In The Making of an Economist version 1.0, Colander and his co-author Klamer provided some empirical data from the graduate students at six top-ranking economics department, which allow us better to understand the process that shapes economists. Some results are still worthy of mentioning.

Specifically, there was a significant variety of opinions among graduate economics students and among the schools in the survey, and there definitely seemed to be a Chicago school of economics. While Chicago definitely constituted a specific school, Harvard students appeared to be most skeptical, and Stanford students place themselves in the spectrum of opinions between Chicago and MIT students.

There were also tensions between the emphasis on techniques and the desire to do policy-oriented work. Techniques were put far more emphasis on than the understanding of the economy or economics literature.

This paper partly supported the views of critical economists such as Wassily Leontief and John Kenneth Galbraith, "Departments of economics are graduating a generation of idiots savants, brilliant at esoteric mathematics yet innocent of actual economic life."

Orthodox Economics = Mafia?

I have posted several articles on some criticism of orthodox economics, such as Mark Blaug's Ugly Currents in Modern Economics, Lester Thurow's The Strengths and Weaknesses of Economists and The Rhetoric of Economics by D. N. McCloskey. Even the new president of the American Economic Association, Nobel medallist George Akerlof, gave what was in many senses a radical presidential address this year, attacking some of the discipline's most basic assumptions about what drives human economic behavior.

The latest debate over the above issue is that, whether the neoclassical economics is becoming more and more like a mafia? A controversial article from The Nation says yes, because heterodox and non-neoclassical approaches are unduly ignored.

You can read more comments on this ongoing debates. And as far as I know, the world's largest association of heterodox economists will meet today in Salt Lake City(link).

If We Knew How to Do That, We Would Not Be Poor

Just when I got interests in a book review written by Eric Maskin the other day, many more are out there talking about Samuel Bowles's masterpiece.

"..Like the overnight train that left me in an empty field some distance from the settlement, the process of economic development has for the most part bypassed the two hundred or so families that make up the village of Palanpur. They have remained poor, even by Indian standards: less than a third of the adults are literate, and most have endured the loss of a child to malnutrition or to illnesses that are long forgotten in other parts of the world. But for the occasional wristwatch, bicycle, or irrigation pump, Palanpur appears to be a timeless backwater, untouched by India’s cutting edge software industry and booming agricultural regions.

Seeking to understand why, I approached a sharecropper and his three daughters weeding a small plot. The conversation eventually turned to the fact that Palanpur farmers sow their winter crops several weeks after the date at which yields would be maximized. The farmers do not doubt that earlier planting would give them larger harvests, but no one the farmer explained, is willing to be the first to plant, as the seeds on any lone plot would be quickly eaten by birds. I asked if a large group of farmers, perhaps relatives, had ever agreed to sow earlier, all planting on the same day to minimize losses. "If we knew how to do that," he said, looking up from his hoe at me, "we would not be poor."..."

-- Samuel Bowles, Microeconomics: Behavior, Institutions, and Evolution