Economist, profession on the rise: theory, data and a lot of “I think” that can give a strong boost to national development

Faced with a “widely favorable” situation that brings “a boom of opportunities” for economists, the SEU (Uruguayan Society of Economists) works for greater access to data that makes it possible to improve the quality of research, stimulate young professionals to research and strengthen ties with a “very prestigious” diaspora, which can continue to add value to the country. Lorenzo Caliendo, president of the SEU, is part of that long and prestigious list of economics professionals scattered around the world. Professor and researcher at Yale, Caliendo, together with Mariana Zerpa, Flavia Roldan, and Leandro Zipitria (members of the board of directors), took the initiative to bring public institutions, academia and private consultants closer together, in order to target a greater use of the information generated in the country. Tomorrow Tuesday 21 is the annual meeting of the SEU and in this framework young researchers will be recognized through an award that bears the name of an outstanding founder: Daniel Vaz. The activity also includes two international exhibitors: Igal Hendel (Uruguayan, Northwestern University) and Cristina Arellano (Ecuadorian, from the Minneapolis Federal Reserve). Coming up a summary of the interview.

—The development of data science has created a huge opportunity for other professions — in the case of economists — to promote research. How do you observe this phenomenon?

—From an idea by Juan Dubra, a data commission (made up of Bergolo, Cubas, Dubra, Fernandez, Gandelman, Roldan and Zipitria) was established in the SEU to advance in this area. In general, governments tend to be reluctant to show data; but we are not detectives, we are not digging to see what we find, what you do is try to understand the effects of changes in policies or shocks in the economy; Take the pandemic as an example. How much could we learn about changes in the labor market, effects on companies, at this juncture? But for that we need data. Uruguay has a significant volume of microdata …

-Missing?

-Two things. We met with the INE authorities and found a very good receptivity. But there is a lack of resources within the institution to work in this field. An important aspect: you have to anonymize the data and for this you need a technical development and important human work. In addition to the INE, let’s think about BPS or DGI. It is important to know the trajectory of the individuals, but not to identify them; therefore, you have to identify them with a number, and be able to track them through their entire career, for example.
The second point is to identify who unifies all the data. DGI, BPS, INE, all with very good databases, but it is necessary to unify that information. Systematize it so that it can be accessed centrally.

—Does the management of information continue to be an issue that, culturally, generates resistance to sharing and disseminating it?

“This happens in much of the world.” I do not know whether to define it as zeal, I have no explanation, but it is a reality. And where it exists, you have to overcome it, because the more you work with data, the more you can solve the problems of a country.
Based on data, you can always be more efficient, use inference methodologies, to understand how and why different variables evolve.

—In short, making data available and working with them from the academy is win-win …

“That is essential.” I personally experienced it working with data from Denmark. Why did Dale Mortensen (2010 Nobel Laureate in Economics) spend summers in Aarhus, Denmark, affiliated with Aarhus University? He settled there because Denmark shares all the historical data of all Danes and all companies, and that allowed him to test economic theories about the labor market. And now there are a significant number of high-level researchers learning about the elasticity of labor demand or the effects of policies on unemployment in the Danish economy. This allows us to understand more, at an aggregate level, about the economic effects of policy changes. And in turn, policy makers in Denmark now have a lot of information generated by these researchers, free to the country. But in addition, researchers must be affiliated with an institution for that information to be shared, therefore, the university also wins. And all these externalities, starting from a relatively small economy, on a scale of ours, are generated from having powerful, systematized and available information.

– What level of commitment did they find to advance?

—In addition to the INE and the Central Bank, all the universities are interested in participating and we are receiving the same from the consulting firms. It benefits everyone.

—As a sample of what can be done, there is the case of the works presented for the Master Thesis Prize 2021 Edition “Dr. Daniel Vaz ”that organized the SEU …

-Exactly. The young professional who won (Joaquín Paleo) did an excellent job, using theory and existing data in the country. His thesis “The allocation of apartments in housing cooperatives: An approach from Market Design” evaluates the allocation mechanisms of housing cooperatives in Uruguay in order to find mechanisms that are not manipulated by cooperatives. More than a dozen works were submitted for the Award. We could learn a lot from this research, as we have better access to data. And we all win.

—What is the challenge of the economics professional of the 21st century, when his work intersects with data, behavioral analysis, with other social sciences?

—The profession of the economist is increasingly characterized by using theory, data and computer tools, with a lot of “I think”. And I am not saying that it is insured with respect to the changes imposed by automation, but compared to other activities, it tends not to be replaced by technology.
One important thing is that the career development of the economist is not subject to specific regulations in local markets. Economists, regardless of where they graduate, will learn on bases that will allow them to work anywhere in the world tomorrow. And that universe, today, in the case of the researcher, is no longer just the academy or state institutions. Today it is the large corporations that compete with the best economists to do research for them. Amazon already has practically a university, Microsoft has a campus.
Our students, when they graduated from Yale for their doctorate, were generally destined for another prestigious university; now, the giants Facebook, Uber, Amazon, among others, compete on par for them.

– More and more, data analysis at the center of research …

—Analysis, interpretation, and something very crucial for the economist, which is causality; not correlation. Understand what is the exogenous variation that allows me to identify the causal effect of a change in policy, evaluate the effect of the economic shock. Think on the margin, always.

—For society, many times the economist is one who only tries to predict a data for the future. Have strategies been proposed to strengthen the image of the economist in the community?

—It’s true… many times they see us exclusively as a predictor. An economist uses models trying to understand how important certain variables are; It can be used to predict, but the main objective is to understand what is the mechanism so that a change in policy can lead to, for example, lower unemployment. The models developed by a researcher are open and can be used by any other economist, once validated, to predict. But in reality, we do not know how to predict, the career of the economist is not essentially for that. Of course, based on this study, it can be used to project a certain evolution of a variable: it is not bad since it serves to guide. But the central thing is to understand.

—With the award instituted, do you seek to encourage younger professionals to launch into research?

—There is an award for the economist who is encouraged to use theory and data and answer questions based on it. Obtaining recognition is clearly an impulse for them to continue training, to access PhDs. But also, an award can be an important highlight when looking for a job in the private sector. Stimulate research, identify outstanding professionals, give them recognition and generate a signal in the market about what we can do here. All that.

—There are many economics professionals working abroad, in very prestigious positions. You are a clear example. Is taking advantage of that talent scattered around the world to link it to the country, is it also an objective?

– We would like a partner who is abroad to give courses to our young economists. Today we do not have the resources to face it, but we have several interested in doing it, happily. It is a goal.
The annual meeting also goes in that direction. It is the instance where Uruguayan economists from all over the world come to exchange their research and update us in terms of which are the main topics discussed in the profession. We do it in December because that is when many of our compatriots come to the country.
Like soccer players, Uruguayan economists, coming out of our universities, play in the best leagues in the world. There are Uruguayans who are professors at the best universities in the world, working in the best consulting firms, large companies, banks, financial sectors, the World Bank, IMF, IDB, CAF, with doctorates at universities such as Chicago, Harvard, MIT, Yale, Berkeley, LSE, etc. And not only the Macroeconomist (which by the way we have some of the best), but also economists specialized in international trade, labor economics, economic theory, econometrics, finance, inequality, urban economics, industrial organization, economic development, etc.

– Are there enough communication channels to keep them linked to the country?

-Clearly. They don’t need to be here. On the contrary. When I did my doctorate in Chicago, I was struck by the presence of several Mexican students, granted scholarships by their government, who were not obliged to return to the country. Why did the Mexican government have incentives to grant scholarships to students who later stayed in the United States? There are other benefits that a student who grows and develops professionally abroad provides. Generate links with economists in your country, but also link them, and the institutions, with other professionals and the international academy. There are exchange programs as well. There are many benefits of having Uruguayan professionals all over the world at a high level. And many will return.
Per Capita, we are much more represented than the vast majority of countries. It is a subject to study and find out why.

-Which is the answer?

—I don’t know, we have to study it more. One, surely it is the quality of our institutions, our training is good. I teach some courses at various universities in the country and I can assure you that, a very pleasant surprise, many students are at the level of those to whom I teach the course at the Yale doctorate.