Dalibor Rohac has a great profile on Deirdre McCloskey in the WSJ.
I invoked McCloskey on a similar point yesterday in a post at Bleeding Heart Libertarians, where I will be guest blogging throughout the spring term. One of the topics I was thinking I might address, and now definitely will address, is all the recent work on human sociability. If you go back over my syllabi and supplemental reading list for my advanced topics course that I posted the other day, you will see that we have a week where we are talking about Larry Samuelson's review essay on this topic from the JEL. But in addition to the work he discusses, there are new books -- one by David Rose, The Moral Foundations of Economic Behavior and the other by Paul Zak, The Moral Molecule that I'd like to discuss in relation to Smith-McCloskey, as well as Mises's discussion of social cooperation.
The editors at ppe have selected the top 10 papers published over the last 10 years in the journal. The selection gives you a view of the breadth and depth of the topics discussed in this area of research and scholarship.
I am always excited to get back to school. This term I am teaching two graduate courses --- Econ 828 -- Constitutional Economics, which is basically a course in social and political philosophy for economists --- and Econ 895 -- Advanced Topics in Austrian Economics --- which is the third course available to PhD students, and we are focusing on the themes of creativity, complexity and coordination.
For 828, we begin the course discussing the relationship between public finance, public choice, and political economy and social philosophy. I highly recommend to all who care about these issues to read the book Public Finance and Public Choice, which contains contrasting lecture transcripts from Richard Musgrave and James Buchanan. It really sets up the reasons why political economists must cross over from the field of public finance/public economics, to the field of political philosophy before coming back again to provide reasonable answers to questions about the scale and scope of government from an economic point of view.
Given the purpose of 895, and the background of the students, there is a supplemental reading list that will serve as the basis for possible arbitrage opportunities within the journals:
Change Within Permanence: Why Austrian Economics Matters for the Science of Economics
Kirman, “The Intrinsic Limits of Economics” (1989)
Opacity and Human Action: The Future is Unknowable But Not Unimaginable
Coddington, “Creaking Semaphor and Beyond” (1975)
Samuelson, “Modeling Knowledge in Economic Analysis” (2004)
Rationality and All That
Anand, “The Philosophy of Intransitive Preferences” (1993)
Gode and Sunder, “Allocative Efficiency of Markets with Zero-Intelligence Traders” (1993)
The Marvel of the Market
Fisher, “Stability, Disequilibrium Awareness, and the Perception of New Opportunities” (1981)
Gode and Sunder, “What Makes Markets Allocationally Efficient?” (1997)
Beyond Magical Markets
Makowski and Ostroy, “Perfect Competition and the Creativity of the Market” (2001)
Axtel, “The Complexity of Exchange” (2005)
Studying Human Action Once More
Koppl, “Rational Choice Hermeneutics” (2004)
Samuelson, “Foundations of Human Sociality: A Review Essay” (2005)
Analytical History as Social Science
Elster, “Rational Choice History: A Case of Excessive Ambition,” (2000)
Bates, et al, “The Analytic Narrative Project” (2000)
The Theory of Complex Phenomena
Rosser, “On the Complexities of Economic Dynamics” (1999)
Durlauf, “Complexity and Empirical Economics” (2005)
Institutional Diversity and Social Cooperation
Ostrom, “A Behavioral Approach to the Rational Choice Theory of Collective Action” (1997)
Ostrom, “Beyond Markets and States” (2010)
Heterogeneity, Multiple Specificity and Economic Calculation
Dixit, “Investment and Hysteresis” (1992)
MacLeod, “Reputations, Relationships, and Contract Enforcement” (2007)
On the Manipulation of Money and Credit
Selgin, et al, “Has the Fed Been a Failure?” (2012)
Diamond and Rajan, “Illiquid Banks, Financial Stability, and Interest Rate Policy” (2011)
Robust Political Economy
Acemoglu, “Constitutions, Politics, and Economics,” (2005)
Rauch, “Getting the Properties Right to Secure Property Rights” (2005)
Creativity, Complexity and Coordination
Markose, “Computability and Evolutionary Complexity” (2005)
Koppl, “Thinking Impossible Things” (2008)
Also, I am the director of the Workshop in Philosophy, Politics and Economics, which starts this Friday. The PPE workshop serves as the center piece of our weekly research activities for those of us interested in Ausrian economics, political economy, and classical liberalism, and has been in continuous operation since I moved to GMU in 1998. If you are visiting the DC area and are interested in attending, please contact me at email@example.com to double check about time, place and availability.
Thanks to being linked on reddit a few months ago, my LearnLiberty video on the gender wage gap is now close to 300,000 views on YouTube. The video was one of four designed to rebut commonly held economic myths. In this case, the myth is that women earn 75% of what men do because of labor market discrimination. What’s been interesting about the reaction to the argument there is that both “left libertarians” and “right libertarians” have criticized it. That reaction tends to be a sign that I probably got it pretty much correct! However, I do want to clarify a few points I was trying to make there, and have probably made better in longer presentations of the argument at IHS seminars and other venues over the years, so that my basic points are clear. In other words, let’s tackle three myths about my argument that the claim that women earn 75% of what men do is a myth.
1. Myth: Horwitz was arguing that labor market discrimination plays no role at all in the gender wage gap.
The point of the video was not to argue that labor market discrimination has nothing to do with wage differentials, but rather to point out that there are a lot reasons and pretty good evidence to suggest that when we control for human capital, compensating differentials and the like, most of the gender wage gap disappears. The most reliable studies I know put the “unexplained residual” at 5% or less. No study I’m aware of, other than ones of very specific markets, concludes that human capital and compensating differentials and other economic factors explain the entire gap. Folks are welcome to see my Economics of Gender syllabus where we tackle human capital, compensating differentials, and discrimination models in one chapter each.
Yes, other disciplines might provide arguments and evidence for a larger role for discrimination. Great, let’s have at it. Economists need to take them seriously and they need to look at the economic evidence. Let’s see where it goes. So for my left-leaning critics:
Reality: Horwitz was arguing that only a small part of the gender wage gap remains unexplained by the factors discussed in the video, and that remainder may well be due to discrimination.
2. Myth: Horwitz thinks sexism is not causally related to the gender wage gap.
It seems like some people didn’t watch the last minute of the video as they think I was denying the existence of sexism or that sexism plays any role in economic outcomes. If you watch all the way through, I point out at the end that sexism in how children are socialized into gender roles can indeed affect economic outcomes. If it’s true that girls really are discouraged from math, for example, or if they grow up believing that certain jobs are “women’s jobs,” then they will acquire their human capital accordingly, and may well earn less than the very men they went through school with whose human capital looks different.
It also matters that men don’t do as much as women do with respect to household production. Equalize the second shift more and you’ll likely make wages more equal in the process. Why men don’t contribute more is a matter of serious contention, but it’s certainly possible that misogyny is part of the story. So yes, sexism matters.
However, that is not the same thing as saying that the gender wage gap comes from labor market discrimination. It is not labor markets that are the problem here, but the socialization of children that comes before they enter the labor market. Change the socialization and labor markets outcomes will pattern differently by gender. So yes, some portion of the gender wage gap might be due to sexism, but not necessarily or only in the labor market but elsewhere in society and the culture. If we think that sexism is bad, or if we want to see more equality in wages, then attack the sexism in the places it has the most influence, but don’t imagine that labor market interventions such as anti-discrimination laws or worse, comparable worth, are going to solve the problem. So for my left-leaning friends again:
Reality: Horwitz thinks sexism is causally related, but mostly via the socialization processes that influence the choices people make as they acquire their human capital before they enter the labor market, with labor market discrimination playing a (much) smaller role.
3. Myth: By accepting the argument that misogyny in the culture indirectly explains the gender wage gap, Horwitz is tacitly endorsing interventionist solutions, not to mention making nice to the evil feminists.
From the right side of the libertarian spectrum comes the charge that all this talk of socialization and discouraging girls from math and science is all a bunch of lefty PC talking points that aren’t really true. And from some quarters is the suggestion that if one believes that stuff, one is somehow tacitly endorsing government-enforced solutions to them. For what it’s worth, I’m persuaded by the evidence I know of outside of economics (gasp!) that those problems are real, at least to some degree. I would agree that they continue to lessen over the years, but they have not totally disappeared. And there’s no doubt about the evidence on men’s contributions to household production being low. Data from 2004 had women doing twice the hours as men. Granted that’s down from 8 times the hours 40 years earlier, but if economic theory is right in suggesting that hours spent on household production should be in inverse proportion to the relative wages of the couple (think opportunity costs), then unless the average woman is making half of the average man, men are under-contributing in the household. Again, there’s a number of possible reasons why, but the fact is there for all to see.
Accepting that sort of evidence hardly means one sees interventionist public policy as the way to deal with it, although changing some polices, such revamping the tax code to end the secondary earner bias by instituting a nice low, flat tax would sure help. Sexism is a cultural problem and there are plenty of ways to try to work on the cultural side of matters to address it. It may also cure itself as younger generations adopt different views from their parents, and the trends of the last 40 years indicate that this seems to be happening. One can be hard-headed about the market generally not being a source of discrimination, while being soft-hearted about changing the culture in ways that might lead to different, and more equal, market outcomes. Not every problem demands a political solution and persuading men that it’s a good thing to take more responsibility for raising their kids and washing the dishes is a non-policy way to address that sexism, as is more generally persuading recalcitrant men to look at women in the workplace as equals. So for my right-leaning friends:
Reality: The feminists are not only not evil, they are right about a number of the problems, but wrong about the role markets play in causing them and that the state plays in potentially remedying them. Acknowledging the existence of sexism doesn’t ipso facto commit you to any particular way of dealing with it.
Michael McFaul is the US Ambassador to Russia, and he is causing a stir. In the early 1990s, while a fellow at the Hoover Institution I spoke regularly with Michael about the Russian transition to democracy and the market economy.
I just returned from a conference where we read and discussed Mises's "Economic Calculation in the Socialist Commonwealth". That essay is full of insight, and one could argue anticipated many of the ideas later developed by Hayek and Kirzner, and the theory of the entrepreneurial market process. I'd like to emphasize one particular passage that relates to the importance of the institutional context for framing human behavior. Again, the important point to remember is that the Austrian epistemic argument evolved within a debate as they sought to grant charitably the assumptions of their intellectual opponents. And the epistemic point is not an information theoretic argument. It is not that the information is too costly to gather, it is that the knowledge required to make the rational calculations does not exist outside the context of the private property market economy.
As Mises writes:
"The entrepreneur's commerical attitude and activity arises fro his position in the economic process and is lost with its disappearance. When a successful business man is appointed the manager of a public enterprise, he may still bring with him certain experiences from his previous occupation, and be able to turn them to good account in a routine fashion for some time. Still, with his entry into communal activity he ceases to be a merchant and becomes as much a bureaucrat as any other placeman in the public employ. It is not knowledge of bookkeeping, of business organization, or of the style of commercial correspondence, or even a dispensation from a commercial high-school, which makes the merchant, but his characteristic position in the production process, which allows of the identification of the firm's and his own interests."
Chris Coyne and I have provided an overview of the literature in entrepreneurship that focuses on the importance of institutional context in our monograph --- Context Matters --- and Emily Skarbek, Nick Snow and I have a paper in Advances in Austrian Economics that attempts to explain the debate context within which this emphasis on contextual knowledge by Mises, Hayek, Kirzner and Lavoie evolved (emphasis is on Hayek in that article), and the Austrian theory of the entrepreneurial market process emerged.