Fraser Forum

William Watson: What do economists do? What don’t they do!

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A question we economists often get from non-economists—after they’ve asked where interest rates are going—is: what is it exactly that economists do?

The answer is we do lots of different things, many not having very much at all to do with dollars and cents, the things people naturally associate with economics. Just how different came to mind a couple of days ago when I received my weekly email notice describing the latest research offerings from the National Bureau of Economic Research, a major—and by now venerable, as it was founded in 1920—consortium of 1,400 North American economics and business professors.

According to the NBER email, the new working papers are pretty wide-ranging, covering:

• Racial segregation in U.S. cities
• Inequality of family incomes and its relation to changing family structure
• Vaping vs. smoking
• Tax policy toward low-income families
• Why there’s actually less foreign investment in most countries than there should be
• Copyright enforcement
• Uber and the disruptive changes it’s bringing about in the taxi business
• Overbilling by doctors in U.S. Medicare, government-provided health care for seniors

There’s nothing on Donald Trump or ISIS but the subject span is pretty considerable nevertheless. Another common denominator is that the results, judging by the abstracts, are usually very interesting and (this is the contribution of economics) often not what might be expected.

• Thus three per cent of U.S. doctors with substantial Medicare billings have billed the system for more than 100 hours a week. (It would be good to have such data for Canadian Medicare.)

• Thus UberX drivers have much higher productivity than taxi drivers, in the sense that they spend a much higher proportion of their time actually driving passengers, which is not all that surprising when you consider how efficiently the Uber app puts drivers and potential passengers in touch with each other.

• Thus trade barriers may impede international capital mobility, thus helping explain the longstanding puzzle of why capital markets don’t efficiently equalize rates of return across countries.   

• Thus the benefits of the U.S. Child Tax Credit disproportionality go to higher-income households.

• Thus “vapers” are in it mainly for the health benefits, though some people both vape and smoke, while others take up vaping to save costs or to escape from smoking bans.

• Thus the fact that marriage is more common and more successful among university graduates may be that it’s a useful “commitment device” to “facilitate intensive joint investments in their children,” investments of the kind non-graduates may not be so interested in making, a divide between graduates and non-graduates that may increase inequality over the decades.
•    “White flight,” rather than racist institutions, was a major reason for the segregation of major American cities starting 100 years ago.

I don’t ask anyone to buy into these results. I won’t until I’ve read the respective papers. But judging simply from the abstracts it does seem safe to conclude that economists—certainly the subset associated with the NBER—work on subjects that, if not quite “ripped from the headlines,” are things lots of ordinary folk would be very interested in.

Of course, fans of the Fraser Institute probably knew that already.  


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