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Hat tip to A Blank Slate Blog for this interesting snippet. Racial segregation has been a serious interest of mine, and sparked an exploratory study on the experience of students of color at predominantly white colleges, which essentially became my undergraduate thesis. What my co-collaborator and I found were very much along the same lines.

Hope you find it interesting.

Hat tip to El Canasto Mini

From the_amandas photostreamI majored in sociology and anthropology in college.  A couple of weeks before graduation, my academic adviser asked me, “What is the most significant thing that the major has taught you?”  

Of course, he had to ask the question in a public venue, so I felt obligated to provide an intelligent-sounding answer (I believe I spouted off some B.S. about the role of identity in decision-making).  However, I knew that I didn’t really know.  And so did my adviser, who informed me that my answer was unsatisfactory.  The question has stuck with me since.

Now, in my defense, his question was entirely unfair.  Nobody could provide a really good answer to such a fundamental question without some perspective.  I’ve been thinking lately that my study of economics may be providing just that.

As I learn more about traditional economic theory and its corresponding mathematical models and methods, I can’t help but envision a set of perfectly crafted boxes.  These boxes are elegant and glossy.  They are well structured, with clean lines and a logical size and form.  And they are strong, capable of withstanding virtually any weight or impact.  

These boxes have a single purpose in life – to get your personal possessions from point A to point B – and these boxes are designed to carry out that mission optimally, assuming the items in your home conform to particular “standards” and common assumptions.  When that’s the case, all of your items will fit in the minimal number of boxes, while also being maximally protected from damage during the move. 

But your home doesn’t quite fit the standard.  It’s full of third generation hand-me-downs, like your grandmother’s kitchen table, and all of those unsolicited wedding gifts (ooh, another crystal bowl!).  It includes various-sized mementos from international vacations and the six months you spent overseas in India after graduating from college (you were a child of the 60’s, after all).  And then there’s the antiquated microwave – oh, and those baseball trophies from your high school glory days will need to come, too.

In this world, the econ boxes break down.  You try your hardest to shove your belongings inside them, but despite their seemingly perfect design, their size and shape feels awkward and unaccommodating.  Not only that, but a number of your items aren’t even well-suited to boxes.  Some plastic bubble wrap and duct tape would do just fine.

This is the world where sociological and anthropological theoretical models and methods thrive.  As moving boxes, they come in all kinds of odd shapes and sizes.  Some are neat, new, and glossy. Others you collected from the local grocery; they are a bit dirty inside and smell of rotting fruit, but they fit your old college textbooks just right.  Several more you’ve been saving in your basement since your last move, as they worked perfectly for that mismatched set of pots and pans in the kitchen.  

In this way, theoretical models and methods in social sciences like sociology and anthropology often lack the grace, elegance, and appearance of perfection in engineering of their economics counterparts. Yet, the “boxes” in which these disciplines organize their thinking and interpretations of human behavior are often better-suited to our messy and unpredictable world.  Not only that, but the lack of a true canon in these fields makes problem-solving and research a much more creative and inductive, rather than prescriptive and deductive, process.  

It’s that open-ended manner of thinking and approach to understanding the world that makes these “other” social sciences so valuable, and why I am ultimately proud to have undertaken that course of study.

As the current economic and financial crisis is showing us, traditional economic theory is fragile, at best.  While the mathematical rigor that economists bring to their work is admirable, it will only be through the intersection with “messier” social sciences that economics will truly realize its potential.  I hope to be part of that movement.

I just finished Thaler and Sunstein’s Nudge.  Though my enthusiasm faded a bit as the book wore on, I have to admit that the concept of choice architecture that they explore is one of the most exciting ideas that I’ve encountered in a long time.  So exciting, in fact, that I would consider making a career of it (in some ways I already am).

Enthusiasm aside, as I finished the last chapter on “Objections” tonight, I was struck by one of the authors’ comments.  

They discuss the objection that policymakers should always attempt to be neutral.  Well, the premise of the book rests largely on the fact that many of us are choice architects, even though we may not realize it.  We are involved in designing the environments in which people make decisions.  Therefore we influence decisions, whether we like it or not.  So we might as well be intentional in how we go about our design.

What struck me about the neutrality discussion was the assumption that neutrality somehow denotes innocence.  For some reason, as a society we forgive neutrality and punish or reward intentionality (depending on how things turn out).  So if I kill someone unintentionally – in a car accident, for example – I am treated differently than if I kill someone in a premeditated fashion.  The first is likely to somehow be a result of negligence, while the second is a result of something much more insidious.  In this way, they are different.  Yet, both result in the same outcome.  

Along the same lines, choice architects who drive us toward stupid decisions unintentionally are somehow innocent.  Yet, those who drive us toward bad decisions intentionally are somehow evil because they game the system.  

This seems a bit strange to me.  Maybe it shouldn’t.  But  I would prefer a set of cultural norms that places slightly greater emphasis on personal awareness and responsibility.  

If you drive, you drive safely.  If you nudge, nudge intentionally.

From liccle_minxs photostream

From liccle_minx's photostream

WordPress’s Tag Surfer feature I’m finding very handy.  This morning it served up an interesting post from The Guru Investor on the myth that it took it took investors 25 years to recoup their investment after the great crash of 1929.

Here’s a snippit, but do check it out:

“While many have cited the fact that the Dow Jones Industrial Average took 25 years to get back to its pre-Great-Depression highs as reason to worry that the coming market recovery could take a upwards of 10 or even 20 years, Hulbert says the 25-year Depression recovery figure is misleading for a number of reasons. In reality, he says, it took only four-and-a-half years after the Depression bottom for investors to recapture their losses.”

This is a bit of an old reference in internet time (from > month ago), but this is a new blog, so who cares.

Below is a link to one of the better bits I’ve heard on the reality and dangers of deratives trading, how the trade was allowed to grow and thrive over the years, and how the lack of transparency leant itself to the eventual collapse.

“Frank Partnoy directs the University of San Diego’s new Center for Corporate and Securities Law.”  He’s also a former derivatives trader.

Enjoy!

Frank Partnoy on NPR’s Fresh Air

Whether you are an avid follower and interpreter of the financial crisis or just trying to figure out why you lost your job, look no further. 

Lots of good analysis from Simon Johnson, former IMF chief economist and MIT professor, and his co-authors, James Kwak and Peter Boone.

The Baseline Scenario.

Top Diatribes

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