The bubble of the economists: the diversity deficits of the economy and its consequences

Dani Rodrik (Istanbul, 1957), professor of international political economy at Harvard, is well known for the globalization trilemma: a triangle whose vertices are economic globalization, national sovereignty and democracy. The problem? You can only choose two, and the liberal Democrats have tried to have all three at the same time, causing the discontent of their voters. In this collaboration he questions the bubble in which economic analysis is usually enclosed, which prevents seeing the world in all its variety and making the right decisions. This warning is pertinent at a time when an economic policy is being implemented to control inflation by raising interest rates, forcing workers to accept lower wages with the addition of unemployment. Is it the only possible policy?

conversation about history

Dani Rodrick*

Although economists are finally addressing the racial and gender imbalances of their profession, economics will not be a truly global discipline without greater representation of voices from outside of North America and Western Europe.

Early in his career, economist Joseph E. Stiglitz spent an extended stay in Kenya, where he was struck by various oddities in the workings of the local economy. Sharecropping was one of those anomalies. If farmers were required to hand over half their harvest to landlords, Stiglitz wondered, wouldn’t this be a very inefficient system, equivalent to a 50% tax on the worker’s activity? Why does this system persist?

Stiglitz’s quest to resolve this paradox led him to develop his fundamental theories of asymmetric information, for which he would later receive the Nobel Prize in economics. “My time in Kenya,” he recalls, “was instrumental in developing my ideas about the information economy.”

Similarly, the economist Albert O. Hirschman was in Nigeria when he observed behavior that he found puzzling. The railroad company, long a public monopoly, had begun to face competition from private truckers. But instead of responding to this pressure by addressing its many glaring inefficiencies, the company simply deteriorated further. The loss of customers, Hirschman reasoned, had deprived the state-owned company of valuable feedback. This observation on rail transport in Nigeria was the seed that gave rise to his phenomenal and influential book Exit, Voice, and Loyalty [Salida, voz y lealtad]. (Hirschman also fully deserved a Nobel Prize, but never got one.)

Albert O. Hirschman (1915-2012)

These stories testify to the value of being able to see the world in all its variety. The social sciences are enriched when received wisdom confronts ‘anomalous’ behavior or outcomes in unfamiliar settings, and when the diversity of local circumstances is fully taken into account.

This observation should be unanswerable. However, we would not know from the way the economics discipline is organized. The leading economics journals are predominantly populated by authors based in a handful of rich countries. The guardians of the profession come from academic and research institutions in those same countries. The absence of voices from the rest of the world is not merely an inequity; discipline impoverishes.

When I recently became president of the International Economic Association, I searched for data on the geographic diversity of contributors to economic journals, but found comprehensive and systematic information to be surprisingly sparse. Fortunately, data collected recently by Magda Fontana and Paolo Racca, from the University of Turin, and Fabio Montobbio, from the Università Cattolica del Sacro Cuore in Milan, offer some surprising first results.

As he suspected, his data shows an extreme geographic concentration of authorship in the major business journals. Almost 90% of the authors of the top eight journals are in the United States and Western Europe. Furthermore, the situation seems similar with the members of the editorial board of these publications. Given that these rich countries only account for about a third of global GDP, the extreme concentration cannot be fully explained by insufficient resources or lower investment in education and training in the rest of the world, although these factors surely must play a role.

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Harvard Business School (left), Harvard. Wikipedia

Indeed, some countries that have made great economic progress in recent years are still grossly under-represented in high-profile magazines. East Asia produces almost a third of the world’s economic output, but the region’s economists contribute less than 5% of the articles in major journals. Similarly, the percentages of publications from South Asia and Sub-Saharan Africa are negligible, and considerably less than the already low weight of these regions in the world economy.

Beyond resources and training, access to networks is key in the generation and dissemination of knowledge. Whether a research paper is taken seriously depends critically on whether the authors have been to the right schools, met the right people, and traveled the right lecture circuit. In economics, the relevant networks are based predominantly in North America and Western Europe.

The predictable objection here is that many of today’s leading economists come from developing countries themselves. It is true that, in a way, the economy has become more international. The number of foreign-born researchers in leading economics departments and research networks in North America and Western Europe has increased. As a student from Turkey who first came to the United States at age 18, there is no doubt that I benefited from these networks.

Researchers in advanced economies have also paid more attention to developing countries, reflecting that development economics has become a much more prominent field within the discipline. In the master’s program in development economics that he directs at Harvard University, for example, only a minority of the professors come from the United States. The rest are from Peru, Venezuela, Pakistan, India, Turkey, South Africa and Cameroon.

But none of these positive developments can fully replace local knowledge and insight. Foreign-born Western economists are often absorbed in an intellectual environment dominated by the problems and concerns of rich countries. The visiting economist’s exposure to various local realities remains limited to chance and coincidence, as in the stories about Stiglitz and Hirschman. Just think of all the important ideas that go undiscovered because researchers on the academic fringe lack a receptive audience.

The economy is currently going through a period of soul-searching regarding its racial and gender imbalances. Many new initiatives are underway in North America and Western Europe to address these issues. But geographic diversity remains largely absent from the discussion. Economics will not be a truly global discipline until we have also addressed this deficit.

*He is Professor of International Economic Policy at the John F. Kennedy School of Harvard University. He is the author of One economy, many recipes. Globalization, institutions and economic growth (FCE, Mexico City, 2011) and The paradox of globalization. Democracy and the future of the world economy (Antoni Bosch, Barcelona, ​​2011).

Font: Project Syndicate according to New Society, September 2021 (original title, «The diversity deficits of the economy and its consequences»

Front page: New Society

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The bubble of the economists: the diversity deficits of the economy and its consequences