Arnold Kling  

Tyler Cowen on Masonomics

Poster Child for U.S. Health C... Kling on the State of Macro...

He spoke at a lunch today. I didn't take notes, so I may have some things wrong.

Six attributes of Masonomics:

1. Signalling and self-deception
2. _____ and neuroeconomics
3. Markets always fail
4. Politics is not about policy
5. cultural relativism
6. Try to connect economics to life. As a researcher, you want your research to influence your own opinions and approach to life.

Also, what Masonomics is not: evolutionary biology (don't try to reduce everything to "that's how we evolved as hunter-gatherers"); Austrian economics (don't try to reduce every topic to what some iconic Austrian figure said about ; if you listen to some self-proclaimed Austrians, it too often sounds as though there is nothing new to learn or study)

He sketched a pyramid, taken from his latest book, with the human mind at the bottom, beliefs in the middle, and economic behavior on top. Traditional economics only looks at the top of the pyramid. Masonomics wants to look at all of it, which means ignoring boundaries between economics and other disciplines, including sociology, political science, and psychology. I think that Tyler's pyramid would fit well with Doug North, who in turn would credit Hayek.

Point 1 says that human behavior is not primarily motivated by the desire to consume goods and services. Rather, people try to obtain good inner states (it seems to me that in the first volume of Skidelsky's biography of Keynes, Keynes and the other Cambridge apostles are much influenced by a philosophy like this), which in turn depends a lot on how they believe they are perceived by others and how they can perceive themselves. Life is a big theater, and we are putting on performances to impress various audiences and to benefit our own self-concept (devotees of Adam Smith will tell you that he anticipates some of this thinking). Most people think that they are more well-liked than they really are, that they are smarter than they really are, that they are better drivers than they really are, etc.

Points 1 and 2 say that behavioral economics should not just start with classical rationality and draw up a catalog of interesting small deviations. Instead, appreciate rationality where you find it, but don't assume that it is the default.

Point 3 says not to assume that markets are close to perfect or that they need only a few tweaks to make them perfect. Again, appreciate markets when they work, but don't assume that markets working is the default. Of course, don't assume that government works well, either.

Point 4 comes from Robin Hanson. Tyler argued that politics is about determining what sorts of groups have high status in a society. I think this can relate to the idea that people are motivated to feel good about themselves and to believe that others think highly of them. Think of political identity as like religious identity or musical identity. Tyler pointed out that it's pretty easy to predict what music will be on the iPod of an upper middle class sophomore girl at Brown will like certain music, and it is pretty easy to predict the musical tastes of a 25-year-old male gas station mechanic in Grand Rapids, Michigan, and those are quite different. You might not get as high an R-square predicting political affiliations, but you could still do pretty well.

Point 5 about cultural relativism is both descriptive and prescriptive. I think we know by now that imposing western institutions on post-Soviet Russia or post-colonial Africa has different results than those institutions produce in the west. Tyler says that researchers should spend time with the culture where they do research. Do not expect American culture to react to single-payer health care the way other cultures react.

I think that the term "cultural relativism" has too much baggage to be helpful here. I prefer Tyler's other expression, "cultural thickening." The sense it conveys is that culture is thick and dense, and you cannot move it around so easily with laws, policies, or constitutions. So I would replace the phrase "cultural relativism" with the phrase "cultural thickening matters."

Point 6 is the one that gave me the most trouble. Tyler was ready to accuse other economists of believing one thing at a theoretical level and acting differently. He felt very strongly about this, but he did not give enough specific examples to enable me to understand. For example, suppose that Eugene Fama managed his personal portfolio by day-trading and trying to pick winners and losers. That would strike me as not living your research. But in fact I think that most economists who are heavy into efficient market theory do in fact use index funds.

In general, I take the view that humans have diverse tastes. So suppose we had happiness research that told us that the average person is happier doing X than Y (and I don't even think the research reliably tells us that much). That does not tell me that I am happier doing X than Y. The average person may find TV a good way to relax. Not me.

Anyway, on the issue of integrating research into one's life, I am not convinced that I do it any more than a typical non-Mason economist, or that Tyler does for that matter. I need to know more about what he means.

During the discussion, Veronique De Rugy said that she was somewhat dispirited by Tyler's talk. Her problem appeared to be that Masonomics breaks the simple connection between policy analysis and policy, particularly with point 4. So why be a policy analyst? Tyler's answer was more or less to just shrug. My answer was to say that the work she does has a 50.02 percent chance of leading to something better and a 49.98 chance of leading to something worse, and that's probably about the best one can hope for in a complex world that we poorly understand and which therefore is filled with unintended consequences.

Here is much more on Masonomics.

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CATEGORIES: Economic Methods

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The author at Scarcity and Inequality in a related article titled Markets Always Fail? writes:
    Tyler Cowen gave a talk; Arnold Kling condensed. Amongst the condensation can be found this tender droplet: “Markets always fail.” Arnold qualifies that statement with: “Point 3 says not to assume that markets are close to perfect or... [Tracked on September 18, 2009 8:03 PM]
COMMENTS (15 to date)
Tyler Cowen writes:

In #2, "cultural economics" is the missing piece. On politics being about the relative status of different groups, I would say that Robin and I developed this together. On #6, I would say a key point is that if you are agnostic on a question, or set of questions, at the research level, your personal political behavior should be equally agnostic. In any case, thanks for the coverage!

Luke G. writes:

I find Masonomics a perpetually fascinating subject, especially since I read so many GMU econbloggers avidly. Thanks for this very interesting post.

fundamentalist writes:

"3. Markets always fail..." do what? That's what I always want market failure proponents to answer. What do you think markets are supposed to do? Only then can we determine if they fail or not.

According to Austrian theory, the market is a process and doesn't have any goals or purpose. Only people have purpose. The market is a process that enables people to achieve their goals, their purposes. Of course, Tyler is an Austrian, so clearly he thinks the market is an entity in itself existing outside of humanity with its own purpose and goals. I would like to know what those are.

fundamentalist writes:

I would like to modify my statement above. If markets have a purpose at all, it is to implement property rights. Property rights are abstract unless people are free to dispose of their property as they wish. Free markets instantiate property rights. I can see no other purpose for them.

Grant Gould writes:

In the matter of policy analysis, I think a distinction needs to be made between policies that the major cultural and ideological "teams" have already affiliated with and those that they have not.

The former case is your 50.02% vs 49.98% case -- people don't want to let down "their team" over something as silly as its being factually wrong in a policy matter. As Tyler's #4 points out, that's just how politics and policy work.

But on issues so new that the teams haven't yet affiliated with one side or the other, there is a real opportunity to make a difference. I would point to the internet as a perfect example here -- it was on the stage before anyone could decide whether it was affiliated with "team red" or "team blue" and so decisions and analyses made early on (prior to 1995 or so, say) really made a difference.

To put it another way, the single point at which path-dependency is greatest is the moment before the teams pick sides on a given issue. All policy analysis before that point is potentially important. Essentially all policy analysis after that point is useless.

dWj writes:

Is this "cultural thickening" supposed to emphasize an ongoing process? The way I'm understanding it, I'd think "cultural thickness" would make more sense. Or is "thicken" being used as a transitive verb here -- that culture "thickens" institutions?

another bob writes:

to your point, fundamentalist;

3. Markets fail...

1. enable you to achieve your preferred inner state.

and of course your inner states are not stable and your preferences change after the fact. ("i want inner state A. i achieve inner state A. oh, but, wait, really i wanted inner state B. therefore, someone or something must be to blame for my undesired inner state.)

tom writes:

1. Is item 6 a 'Create Your Own Economy' plug? And it completes a circle back to item 1 on individual signalling and self-deception.

2. Tyler's views on the purpose of politics make me question why he is now starting really to engage on health care on MR. Should his speech yesterday lead me to a cynical conclusion?

fundamentalist writes:

another bob, that sounds more like religion than markets. Religion and philosophy deal in inner states; markets deal in goods and services.

Dan in Euroland writes:

But with the exception on Hanson and your recent paper, is masonomics producing any papers?

The ideas are interesting but I would like to see more meat on the bones.

Publish or Perish!

Fenn writes:

At one point you floated the idea of a Masonomics book.

Is that happening?

Steve Sailer writes:

So, where does Masonomics go from here?

The most obvious low-hanging fruit is to begin to incorporate within economics a 100-year-old field of study with a much stronger track record of predictive power about many major issues of today than economics itself: IQ research.

At present, most economists are as ignorant as a box of rocks about IQ. George Mason recently hired one IQ-savvy economist, Garett Jones. If you hired more, and brought in psychometricians and the like from outside economics, you could really have something within a decade that would make George Mason stand out.

But, do you have the courage?

Peter Twieg writes:

Arnold -

As a GMU student interested in Masonomics, I'm interested in what you would consider the most important foundational works for Masonomics are. A canon of sorts, I guess. It seems like there should be one, but there isn't, and oftentimes it feels like "Masonomics is whatever Bryan/Robin/Tyler/etc. are working on at the moment." Obviously the criteria you set out here are less vague, but there doesn't seem to be a clear trajectory to where Masonomics is headed to me.

I think that Tyler's pyramid would fit well with Doug North, who in turn would credit Hayek.

Although somewhat later than Hayek, Maslow and McGregor and the general systems theory crowd embraced this view in psychology and organizational theory in the 1950s and 1960s.

Brent Davis writes:

Rather than "cultural relativism" or "cultural thickening" perhaps just saying that there is a culture factor (or vector) in research and policy analysis that cannot be ignored. How can you measure the "thickness" of culture or talk about it for that matter? Such a term seems frought with imprecision. You may be able to take into account a certain direction, tendency caused by a cultural norm that skews outcomes in a consistent way. You might also be able to show how these cultural factors can be changed over time and take this temporal element into account in analyzing potential changing outcomes over time.

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