Archive for the ‘US policy’Category

Taxi conversations (caution: low external validity)

I will try not to generalize too much — a la Thomas Friedman — from conversations with taxi drivers to entire cultures or the state of nations, but I thought these three were worth sharing:

  • In Zambia in October, I was asked “In America, who pays the the other family for a wedding, the man’s family or the woman’s family?” He was aghast that the answer was “neither,” although on further discussion of American wedding rituals I conceded that the bride’s family does pay more of the costs. This then led to many interesting conversations throughout my work in Zambia.
  • In Kenya this week, I listed to a 20-minute explication on US foreign policy on the International Criminal Court. This lopsided knowledge, where non-Americans almost always seem to know more about US policy than Americans know of other countries’ policies, is always a bit surprising, but also an indication that US decisions are felt around the world.
  • In Tanzania last week, I was asked where I’m from. I respond “the US,” and often get “which state?” but “Arkansas” yields blank stares. So, I typically say “Arkansas… it’s next to Texas” or “Arkansas… it’s where Bill Clinton was governor before he became president.” This time I went with the latter explanation. The driver paused, and said “Bill Clinton… Yes, I think I know that name. He is Hillary Clinton’s husband, yes?”  Progress, there.


02 2014

Formalizing corruption: US medical system edition

Oh, corruption. It interferes with so many aspects of daily life, adding time to the simplest daily tasks, costing more money, and — often the most frustrating aspect — adding huge doses of uncertainty. That describes life in many low-income, high-corruption countries, leading to many a conversation with friends about comparisons with the United States and other wealthy countries. How did the US “solve” corruption?

I’ve heard (and personally made) the argument that the US reduced corruption at least in part by formalizing it; by channeling the root of corruption, a sort of rent-seeking on a personal level, to rent-seeking on an institutional level. The US political and economic system has evolved such that some share of any wealth created is channeled into the pockets of a political and economic elite who benefit from the system and in turn reinforce it. That unproductively-channeled share of wealth is simultaneously a) probably smaller than the share of wealth lost to corruption in most developing countries, b) still large enough to head off — along with the threat of more effective prosecution — at least some more overt corruption, and c) still a major drain on society.

An example: Elisabeth Rosenthal profiles medical tourism in an impressive series in the New York Times. In part three of the series, an American named Michael Shopenn travels to Belgium to get a hip replacement. Why would he need to? Because health economics in the US is less a story of free markets and  more a story of political capture by medical interests, including technology and pharmaceutical companies, physicians’ groups, and hospitals:

Generic or foreign-made joint implants have been kept out of the United States by trade policy, patents and an expensive Food and Drug Administration approval process that deters start-ups from entering the market. The “companies defend this turf ferociously,” said Dr. Peter M. Cram, a physician at the University of Iowa medical school who studies the costs of health care.

Though the five companies make similar models, each cultivates intense brand loyalty through financial ties to surgeons and the use of a different tool kit and operating system for the installation of its products; orthopedists typically stay with the system they learned on. The thousands of hospitals and clinics that purchase implants try to bargain for deep discounts from manufacturers, but they have limited leverage since each buys a relatively small quantity from any one company.

In addition, device makers typically require doctors’ groups and hospitals to sign nondisclosure agreements about prices, which means institutions do not know what their competitors are paying. This secrecy erodes bargaining power and has allowed a small industry of profit-taking middlemen to flourish: joint implant purchasing consultants, implant billing companies, joint brokers. There are as many as 13 layers of vendors between the physician and the patient for a hip replacement, according to Kate Willhite, a former executive director of the Manitowoc Surgery Center in Wisconsin.

If this system existed in another country we wouldn’t hesitate to call it corrupt, and to note that it actively hurts consumers. It should be broken up by legislation for the public good, but instead it’s protected by legislators who are lobbied by the industry and by doctors who receive kickbacks, implicit and explicit. Contrast that with the Belgian system:

His joint implant and surgery in Belgium were priced according to a different logic. Like many other countries, Belgium oversees major medical purchases, approving dozens of different types of implants from a selection of manufacturers, and determining the allowed wholesale price for each of them, for example. That price, which is published, currently averages about $3,000, depending on the model, and can be marked up by about $180 per implant. (The Belgian hospital paid about $4,000 for Mr. Shopenn’s high-end Zimmer implant at a time when American hospitals were paying an average of over $8,000 for the same model.)

“The manufacturers do not have the right to sell an implant at a higher rate,” said Philip Boussauw, director of human resources and administration at St. Rembert’s, the hospital where Mr. Shopenn had his surgery. Nonetheless, he said, there was “a lot of competition” among American joint manufacturers to work with Belgian hospitals. “I’m sure they are making money,” he added.

It’s become a cliche to compare the US medical system to European ones, but those comparisons are made because it’s hard to realize just how systematically corrupt — and expensive, as a result — the US system is without comparing it to ones that do a better job of channeling the natural profit-seeking goals of individuals and companies towards the public good. (For the history of how we got here, Paul Starr is a good place to start.)

The usual counterargument for protecting such large profit margins in the US is that they drive innovation, which is true but only to an extent. And for the implants industry that argument is much less compelling since many of the newer, “innovative” products have proved somewhere between no better and much worse in objective tests.

The Times piece is definitely worth a read. While I generally prefer the formalized corruption to the unformalized version, I’ll probably share this article with friends — in Nigeria, or Ethiopia, or wherever else the subject comes up next.


08 2013

An uphill battle

I took this photo in the NYC subway a few days ago. My apologies for the quality, but I thought it’s a great juxtaposition:

In the top of the photo is an ad from the NYC Department of Health, advising you to choose food with less sodium. (Here’s an AP story about the ads.) But to the bottom right is an ad for McDonald’s dollar menu, and those are everywhere. While it doesn’t mean we shouldn’t run such ads, it’s worth remembering that the sheer volume of food advertising will always dwarf opposing health messages. 


04 2013

The greatest country in the world

I’ve been in Ethiopia for six and a half months, and in that time span I have twice found myself explaining the United States’ gun culture, lack of reasonable gun control laws, and gun-related political sensitivities to my colleagues and friends in the wake of a horrific mass shooting.

When bad things happen in the US — especially if they’re related to some of our national moral failings that grate on me the most, e.g. guns, health care, and militarism — I feel a sense of personal moral culpability, much stronger when I’m living in the US. I think having to explain how terrible and terribly preventable things could happen in my society, while living somewhere else, makes me feel this way. (This is by no means because people make me feel this way; folks often go out of their way to reassure me that they don’t see me as synonymous with such things.)

I think that this enhanced feeling of responsibility is actually a good thing. Why? If being abroad sometimes puts the absurdity of situations at home into starker relief, maybe it will reinforce a drive to change. All Americans should feel some level of culpability for mass shootings, because we have collectively allowed a political system driven by gun fanatics,  a media culture unintentionally but consistently glorifying mass murderers, and a horribly deficient mental health system to persist, when their persistence has such appalling consequences.

After the Colorado movie theater shooting I told colleagues here that nothing much would happen, and sadly I was right. This time I said that maybe — just maybe — the combination of the timing (immediately post-election) and the fact that the victims were schoolchildren will result in somewhat tighter gun laws. But, attention spans are short so action would need to be taken soon. Hopefully the fact that the petition on gun control already has 138,000 signatures (making it the most popular petition in the history of the website) indicates that something could well be driven through. Even if that’s the case, anything that could be passed now will be just the start and it will be long hard slog to see systematic changes.

As Andrew Gelman notes here, we are all part of the problem to some extent: “It’s a bit sobering, when lamenting problems with the media, to realize that we are the media too.” He’s talking about bloggers, but I think it extends further: every one of us that talks about gun control in the wake of a mass shooting but quickly lets it slip down our conversational and political priorities once the event fades from memory is part of the problem. I’m making a note to myself to write further about gun control and the epidemiology of violence in the future — not just today — because I think that entrenched problems require a conscious choice to break the cycle. In the meantime, Harvard School of Public Health provides some good places to start.


12 2012

Obesity pessimism

I posted before on the massive increase in obesity in the US over the last couple decades, trying to understand the why of the phenomenal change for the worse. Seriously, take another look at those maps.

A while back Matt Steinglass wrote a depressing piece in The Economist on the likelihood of the US turning this trend around:

I very much doubt America is going to do anything, as a matter of public health policy, that has any appreciable effect on obesity rates in the next couple of decades. It’s not that it’s impossible for governments to hold down obesity; France, which had rapidly rising childhood obesity early this century, instituted an aggressive set of public-health interventions including school-based food and exercise shifts, nurse assessments of overweight kids, visits to families where overweight kids were identified, and so forth. Their childhood obesity rates stabilised at a fraction of America’s. The problem isn’t that it’s not possible; rather, it’s that America is incapable of doing it.

America’s national governing ideology is based almost entirely on the assertion of negative rights, with a few exceptions for positive rights and public goods such as universal elementary education, national defence and highways. But it’s become increasingly clear over the past decade that the country simply doesn’t have the political vocabulary that would allow it to institute effective national programmes to improve eating and exercise habits or culture. A country that can’t think of a vision of public life beyond freedom of individual choice, including the individual choice to watch TV and eat a Big Mac, is not going to be able to craft public policies that encourage people to exercise and eat right. We’re the fattest country on earth because that’s what our political philosophy leads to. We ought to incorporate that into the way we see ourselves; it’s certainly the way other countries see us.

On the other hand, it’s notable that states where the public has a somewhat broader conception of the public interest, as in the north-east and west, tend to have lower obesity rates.

This reminds me that a classmate asked me a while back about my impression of Michelle Obama’s Let’s Move campaign. I responded that my impression is positive, and that every little bit helps… but that the scale of the problem is so vast that I find it hard seeing any real, measurable impact from a program like Let’s Move. To really turn obesity around we’d need a major rethinking of huge swathes of social and political reality: our massive subsidization of unhealthy foods over healthy ones (through a number of indirect mechanisms), our massive subsidization of unhealthy lifestyles by supporting cars and suburbanization rather than walking and urban density, and so on and so forth. And, as Steinglass notes, the places with the greatest obesity rates are the least likely to implement such change.


11 2012

Weekend reading: race in America

Ta-Nehisi Coates is one of my favorite writers — I highly recommend his memoir, The Beautiful Struggle, about growing up in Baltimore. His writing has a riveting flow even on the most innocuous subjects, so when he writes about something serious it really kills. He has a long and excellent cover story in The Atlantic this month on Barack Obama: “Fear of a Black President”. It’s the best thing I’ve read this month:

What black people are experiencing right now is a kind of privilege previously withheld—seeing our most sacred cultural practices and tropes validated in the world’s highest office. Throughout the whole of American history, this kind of cultural power was wielded solely by whites, and with such ubiquity that it was not even commented upon. The expansion of this cultural power beyond the private province of whites has been a tremendous advance for black America. Conversely, for those who’ve long treasured white exclusivity, the existence of a President Barack Obama is discombobulating, even terrifying. For as surely as the iconic picture of the young black boy reaching out to touch the president’s curly hair sends one message to black America, it sends another to those who have enjoyed the power of whiteness.

Read it.


08 2012

Obesity in the US

One of my classmates whose primary interest is not health policy posted this graph on Facebook, saying “This is stunning… so much so in fact that I’m a bit skeptical of its accuracy.”

The graph compares obesity rates by state in 1994 vs. 2008, and unfortunately it is both terrifying and accurate. (I can’t find the original source of this particular infographic, but the data is the same as on this CDC page.)

I think those of who study or work in public health have seen variations on these graphs so many times that they’ve lost some of their shock value. But this truly is an incredible shift in population health in a frighteningly short period of time. In 1994 every state had an adult population that was less than 20% obese, and many were less than 15% obese. A mere 14 years later, Colorado is the only state under 20%, and quite a few have rates over 30% — these were completely unheard of before.

I did a quick literature search, trying to understand what causal factors might be responsible for such a rapid shift. It’s a huge and challenging question, so maybe it should be unsurprising that I didn’t find an article that really stood out as the best. Still, here are three articles that I found helpful:

1. Specifically looking at childhood obesity in the US (which is different from the rates highlighted in the map above, but related): “Childhood Obesity: Trends and Potential Causes” by Anderson and Butcher (JStor PDF, ungated PDF). Their intro:

The increase in childhood obesity over the past several decades, together with the associated health problems and costs, is raising grave concern among health care professionals, policy experts, children’s advocates, and parents. Patricia Anderson and Kristin Butcher document trends in children’s obesity and examine the possible underlying causes of the obesity epidemic.

They begin by reviewing research on energy intake, energy expenditure, and “energy balance,” noting that children who eat more “empty calories” and expend fewer calories through physical activity are more likely to be obese than other children. Next they ask what has changed in children’s environment over the past three decades to upset this energy balance equation. In particular, they examine changes in the food market, in the built environment, in schools and child care settings, and in the role of parents-paying attention to the timing of these changes.

Among the changes that affect children’se nergy intake are the increasing availability of energy dense, high-calorie foods and drinkst hroughs chools. Changes in the family, particularly increasing dual-career or single-parent working families, may also have increased demand for food away from home or pre-prepared foods. A host of factors have also contributed to reductions in energy expenditure. In particular, children today seem less likely to walk to school and to be traveling more in cars than they were during the early 1970s, perhaps because of changes in the built environment. Finally, children spend more time viewing television and using computers.

Anderson and Butcher find no one factor that has led to increases in children’s obesity. Rather, many complementary changes have simultaneously increased children’s energy intake and decreased their energy expenditure. The challenge in formulating policies to address children’s obesity is to learn how best to change the environment that affects children’s energy balance.

2. On global trends: “The global obesity pandemic: shaped by global drivers and local environments” by Swinburn et al. (Here’s the PDF from Science Direct and an ungated PDF for those not at universities.) Summary:

The simultaneous increases in obesity in almost all countries seem to be driven mainly by changes in the global food system, which is producing more processed, affordable, and effectively marketed food than ever before. This passive overconsumption of energy leading to obesity is a predictable outcome of market economies predicated on consumption-based growth. The global food system drivers interact with local environmental factors to create a wide variation in obesity prevalence between populations.

Within populations, the interactions between environmental and individual factors, including genetic makeup, explain variability in body size between individuals. However, even with this individual variation, the epidemic has predictable patterns in subpopulations. In low-income countries, obesity mostly affects middle-aged adults (especially women) from wealthy, urban environments; whereas in high-income countries it affects both sexes and all ages, but is disproportionately greater in disadvantaged groups.

Unlike other major causes of preventable death and disability, such as tobacco use, injuries, and infectious diseases, there are no exemplar populations in which the obesity epidemic has been reversed by public health measures. This absence increases the urgency for evidence-creating policy action, with a priority on reduction of the supply-side drivers.

3. Finally, on methodological differences and where the trends are heading: Obesity Prevalence in the United States — Up, Down, or Sideways?(NEJM, ungated PDF). Evidently there’s some debate over whether rates are going up or have stabilized in the last few years, because different data sources say different things. Generally the NHANES data (in which people are actually measured, rather than reporting their height and weight) is the best available (and that’s what the maps above are made from). An excerpt:

One key reason for discrepancies among the estimates is a simple difference in data-collection methods. The most frequently quoted data sources are the NHANES studies of adults and children, the BRFSS for adults, and the CDC’s Youth Risk Behavior Survey (YRBS)4 for high- school students. Although sampling strategies, response rates, age discrepancies, and the wording of survey questions may account for some variability, a major factor is that in calculating the BMI, the BRFSS and YRBS rely on respondents’ self-reported heights and weights, whereas the NHANES collects measured (i.e., actual) heights and weights each year, albeit from a considerably smaller sample of the population. Since people often claim to be taller than they are and to weigh less than they actually do, we should not be surprised that obesity prevalence figures based on self-reported heights and weights are considerably lower than those based on measured data.

I would greatly appreciate any suggestions for what to read in the comments, especially links to work that tries to rigorously assess (rather than just hypothesize on) the relative import of various drivers of the increase in adult obesity.


05 2012

Group vs. individual uses of data

Andrew Gelman notes that, on the subject of value-added assessments of teachers, “a skeptical consensus seems to have arisen…” How did we get here?

Value-added assessments grew out of the push for more emphasis on measuring success through standardized tests in education — simply looking at test scores isn’t OK because some teachers are teaching in better schools or are teaching better-prepared students. The solution was to look at how teachers’ students improve in comparison to other teachers’ students. Wikipedia has a fairly good summary here.

Back in February New York City released (over the opposition of teachers’ unions) the value-added scores of some 18,000 teachers. Here’s coverage from the Times on the release and reactions.

Gary Rubinstein, an education blogger, has done some analysis of the data contained in the reports and published five posts so far: part 1, part 2, part 3, part 4, and part 5. He writes:

For sure the ‘reformers’ have won a battle and have unfairly humiliated thousands of teachers who got inaccurate poor ratings. But I am optimistic that this will be be looked at as one of the turning points in this fight. Up until now, independent researchers like me were unable to support all our claims about how crude a tool value-added metrics still are, though they have been around for nearly 20 years. But with the release of the data, I have been able to test many of my suspicions about value-added.

I suggest reading his analysis in full, or at least the first two parts.

For me one early take-away from this — building off comments from Gelman and others — is that an assessment might be a useful tool for improving education quality overall, while simultaneously being a very poor metric for individual performance. When you’re looking at 18,000 teachers you might be able to learn what factors lead to test score improvement on average, and use that information to improve policies for teacher education, recruitment, training, and retention. But that doesn’t mean one can necessarily use the same data to make high-stakes decisions about individual teachers.

Fluoride in New Jersey

I saw this poster at a bus stop on campus a couple weeks ago:

If you can’t read it, the title reads: “Stop the New Jersey Public Water Supply Fluoridation Act” and it goes on to say “Fluoride is a toxic chemical even in the smallest doses and when pumped into our water supply it is impossible to control the level of consumption.” (emphasis added)

I took a picture but didn’t think about it again until I saw this article on Friday: “In New Jersey, a Battle Over a Fluoridation Bill, and the Facts” (NYT) by Kate Zernike. I appreciate that she calls the fearmongering what it is — a conspiracy theory:

While 72 percent of Americans get their water from public systems that add fluoride, just 14 percent of New Jersey residents do, placing the state next to last… A bill in the Legislature would change that, requiring all public water systems in New Jersey to add fluoride to the supply. But while the proposal has won support from a host of medical groups, it has proved unusually politically charged.

Similar bills have failed in the state since 2005, under pressure from the public utilities lobby and municipalities that argue that fluoridation costs too much, environmentalists who say it pollutes the water supply, and antifluoride activists who argue that it causes cancer, lowers I.Q. and amounts to government-forced medicine.

Public health officials argue that the evidence does not support any of those arguments — and to the contrary, that fluoridating the water is the single best weapon in fighting tooth decay, the most prevalent disease among children.

But they also say they are fighting a proliferation of misleading information. While conspiracy theories about fluoride in public water supplies have circulated since the early days of the John Birch Society, they now thrive online, where anyone, with a little help from Google, can suddenly become a medical authority.

The whole article is worth a read. I think it’s a pretty good journalistic take on a charged issue that is a political controversy but not a scientific one. It gives some context as to why people are against it — a few misleading studies amplified by word of mouth and the Internet — but also emphasizes which side the evidence base (overwhelmingly) backs up.

Further, there are some echoes here of the anti-vaccine movement,  in that a move to reduce the threshold of acceptable fluoride levels  by HHS was taken to be an acknowledgment that the worst fears of the fluoridation foes were vindicated. That parallels how any mention of efforts to improve vaccine safety (a good thing) is misshapen by antivaccine activists into an acknowledgment that their theories have been vindicated. In short, I’m looking forward to Seth Mnookin‘s take on all this.


03 2012

Up to speed: microfoundations

[Admin note: this is the first of a new series of “Up to speed” posts which will draw together information on a subject that’s either new to me or has been getting a lot of play lately in the press or in some corner of the blogosphere. The idea here is that folks who are experts on this particular subject might not find anything new; I’m synthesizing things for those who want to get up to speed.]

Microfoundations (Wikipedia) are quite important in modern macroeconomics. Modern macroeconomics really started with Keynes. His landmark General Theory of Employment, Interest and Money (published in 1936) set the stage for pretty much everything that has come since. Basically everything that came before Keynes couldn’t explain the Great Depression — or worse yet how the world might get out of it — and Keynes’ theories (rightly or wrongly) became popular because they addressed that central failing.

One major criticism was that modern macroeconomic models like Keynes’ were top-down, only looking at aggregate totals of measures like output and investment. That may not seem too bad, but when you tried to break things down to the underlying individual behaviors that would add up to those aggregates, wacky stuff happens. At that point microeconomic models were much better fleshed out, and the micro models all started with individual rational actors maximizing their utility, assumptions that macroeconomists just couldn’t get from breaking down their aggregate models.

The most influential criticism came from Robert Lucas, in what became known as the Lucas Critique (here’s a PDF of his 1976 paper). Lucas basically argued that aggregate models weren’t that helpful because they were only looking at surface-level parameters without understanding the underlying mechanisms. If something — like the policy environment — changes drastically then the old relationships that were observed in the aggregate data may no longer apply. An example from Wikipedia:

One important application of the critique is its implication that the historical negative correlation between inflation and unemployment, known as the Phillips Curve, could break down if the monetary authorities attempted to exploit it. Permanently raising inflation in hopes that this would permanently lower unemployment would eventually cause firms’ inflation forecasts to rise, altering their employment decisions.

Economists responded by developing “micro-founded” macroeconomic models, ones that built up from the sum of microeconomic models. The most commonly used of these models is called, awkwardly, dynamic stochastic general equilibirum (DGSE). Much of my study time this semester involves learning the math behind this. What’s the next step forward from DGSE? Are these models better than the old Keynesian models? How do we even define “better”? These are all hot topics in macro at the moment. There’s been a recent spat in the economics blogosphere that illustrates this — what follows are a few highlights.

Back in 2009 Paul Krugman (NYT columnist, Nobel winner, and Woodrow Wilson School professor) wrote an article titled “How Did Economists Get It So Wrong?” that included this paragraph:

As I see it, the economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth. Until the Great Depression, most economists clung to a vision of capitalism as a perfect or nearly perfect system. That vision wasn’t sustainable in the face of mass unemployment, but as memories of the Depression faded, economists fell back in love with the old, idealized vision of an economy in which rational individuals interact in perfect markets, this time gussied up with fancy equations. The renewed romance with the idealized market was, to be sure, partly a response to shifting political winds, partly a response to financial incentives. But while sabbaticals at the Hoover Institution and job opportunities on Wall Street are nothing to sneeze at, the central cause of the profession’s failure was the desire for an all-encompassing, intellectually elegant approach that also gave economists a chance to show off their mathematical prowess.

Last month Stephen Williamson wrote this:

[Because of the financial crisis] There was now a convenient excuse to wage war, but in this case a war on mainstream macroeconomics. But how can this make any sense? The George W era produced a political epiphany for Krugman, but how did that ever translate into a war on macroeconomists? You’re right, it does not make any sense. The tools of modern macroeconomics are no more the tools of right-wingers than of left-wingers. These are not Republican tools, Libertarian tools, Democratic tools, or whatever.

A bit of a sidetrack, but this prompted Noah Smith to write a long post (that is generally more technical than I want to get in to here) defending the idea that modern macro models (like DSGE) are in fact ideologically biased, even if that’s not their intent. Near the end:

So what this illustrates is that it’s really hard to make a DSGE model with even a few sort-of semi-realistic features. As a result, it’s really hard to make a DSGE model in which government policy plays a useful role in stabilizing the business cycle. By contrast, it’s pretty easy to make a DSGE model in which government plays no useful role, and can only mess things up. So what ends up happening? You guessed it: a macro literature where most papers have only a very limited role for government.

In other words, a macro literature whose policy advice is heavily tilted toward the political preferences of conservatives.

Back on the main track, Simon Wren-Lewis, writing at Mainly Macro, comes to Krugman’s defense, sort of, by saying that its conceivable that an aggregate model might actually be more defensible than a micro-founded one in certain circumstances.

This view [Krugman’s view that aggregate models may still be useful] appears controversial. If the accepted way of doing macroeconomics in academic journals is to almost always use a ‘fancier optimisation’ model, how can something more ad hoc be more useful? Coupled with remarks like ‘the economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth’ (from the 2009 piece) this has got a lot of others, like Stephen Williamson, upset. [skipping several paragraphs]

But suppose there is in fact more than one valid microfoundation for a particular aggregate model. In other words, there is not just one, but perhaps a variety of particular worlds which would lead to this set of aggregate macro relationships….Furthermore, suppose that more than one of these particular worlds was a reasonable representation of reality… It would seem to me that in this case the aggregate model derived from these different worlds has some utility beyond just one of these microfounded models. It is robust to alternative microfoundations.

Back on the main track, Krugman followed up with an argument for why its OK to use both aggregate and microfounded models.

And here’s Noah Smith writing again, “Why bother with microfoundations?”

Using wrong descriptions of how people behave may or may not yield aggregate relationships that really do describe the economy. But the presence of the incorrect microfoundations will not give the aggregate results a leg up over models that simply started with the aggregates….

When I look at the macro models that have been constructed since Lucas first published his critique in the 1970s, I see a whole bunch of microfoundations that would be rejected by any sort of empirical or experimental evidence (on the RBC side as well as the Neo-Keynesian side). In other words, I see a bunch of crappy models of individual human behavior being tossed into macro models. This has basically convinced me that the “microfounded” DSGE models we now use are only occasionally superior to aggregate-only models. Macroeconomists seem to have basically nodded in the direction of the Lucas critique and in the direction of microeconomics as a whole, and then done one of two things: either A) gone right on using aggregate models, while writing down some “microfoundations” to please journal editors, or B) drawn policy recommendations directly from incorrect models of individual behavior.

The most recent is from Krugman, wherein he says (basically) that models that make both small and big predictions should be judged more on the big than the small.

This is just a sampling, and likely a biased one as there are many who dismiss the criticism of microfoundations out of hand and thus aren’t writing detailed responses. Either way, the microfoundations models are dominant in the macro literature now, and the macro-for-policy-folks class I’m taking at the moment focuses on micro-founded models (because they’re “how modern macro is done”).

So what to conclude? My general impression is that microeconomics is more heavily ‘evolved’ than macroeconomics. (You could say that in macro the generation times are much longer, and the DNA replication bits are dodgier, so evolving from something clearly wrong towards something clearly better is taking longer.)

Around the same time that micro was getting problematized by Kahneman and others who questioned the rational utility-maximizing nature of humans, thus launching behavioral economics revolution — which tries to complicate micro theory with a bit of reality — the macroeconomists were just  getting around to incorporating the original microeconomic emphasis on rationality. Just how much micro will change in the next decades in response to the behavioral revolution is unclear, so expecting troglodytesque macro to have already figured this out is unrealistic.

A number of things are unclear to me: just how deep the dissatisfaction with the current models is, how broadly these critiques (vs. others from different directions) are endorsed, and what actually drives change in fields of inquiry. Looking back in another 30-40 years we might see this moment in time as a pivotal shift in the history of the development of macroeconomics — or it may be a little hiccup that no one remembers at all. It’s too soon to tell.

Updates: since writing this I’ve noticed several more additions to the discussion: